Customer Relationship

Management
Sub Code - 628

Developed by
Prof. Pali Shukla

On behalf of
Prin. L.N. Welingkar Institute of Management Development & Research
! 

Advisory Board
Chairman
Prof. Dr. V.S. Prasad
Former Director (NAAC)
Former Vice-Chancellor
(Dr. B.R. Ambedkar Open University)

Board Members
1. Prof. Dr. Uday Salunkhe
 2. Dr. B.P. Sabale
 3. Prof. Dr. Vijay Khole
 4. Prof. Anuradha Deshmukh

Group Director
 Chancellor, D.Y. Patil University, Former Vice-Chancellor
 Former Director

Welingkar Institute of Navi Mumbai
 (Mumbai University) (YCMOU)
Management Ex Vice-Chancellor (YCMOU)

Program Design and Advisory Team

Prof. B.N. Chatterjee Mr. Manish Pitke

Dean – Marketing Faculty – Travel and Tourism
Welingkar Institute of Management, Mumbai Management Consultant

Prof. Kanu Doshi Prof. B.N. Chatterjee

Dean – Finance Dean – Marketing
Welingkar Institute of Management, Mumbai Welingkar Institute of Management, Mumbai

Prof. Dr. V.H. Iyer Mr. Smitesh Bhosale

Dean – Management Development Programs Faculty – Media and Advertising
Welingkar Institute of Management, Mumbai Founder of EVALUENZ

Prof. B.N. Chatterjee Prof. Vineel Bhurke

Dean – Marketing Faculty – Rural Management
Welingkar Institute of Management, Mumbai Welingkar Institute of Management, Mumbai

Prof. Venkat lyer Dr. Pravin Kumar Agrawal

Director – Intraspect Development Faculty – Healthcare Management
Manager Medical – Air India Ltd.

Prof. Dr. Pradeep Pendse Mrs. Margaret Vas

Dean – IT/Business Design Faculty – Hospitality
Welingkar Institute of Management, Mumbai Former Manager-Catering Services – Air India Ltd.

Prof. Sandeep Kelkar Mr. Anuj Pandey

Faculty – IT Publisher
Welingkar Institute of Management, Mumbai Management Books Publishing, Mumbai

Prof. Dr. Swapna Pradhan Course Editor

Faculty – Retail Prof. Dr. P.S. Rao
Welingkar Institute of Management, Mumbai Dean – Quality Systems
Welingkar Institute of Management, Mumbai

Prof. Bijoy B. Bhattacharyya Prof. B.N. Chatterjee

Dean – Banking Dean – Marketing
Welingkar Institute of Management, Mumbai Welingkar Institute of Management, Mumbai

Mr. P.M. Bendre Course Coordinators

Faculty – Operations Prof. Dr. Rajesh Aparnath
Former Quality Chief – Bosch Ltd. Head – PGDM (HB)
Welingkar Institute of Management, Mumbai

Mr. Ajay Prabhu Ms. Kirti Sampat

Faculty – International Business Assistant Manager – PGDM (HB)
Corporate Consultant Welingkar Institute of Management, Mumbai

Mr. A.S. Pillai Mr. Kishor Tamhankar

Faculty – Services Excellence Manager (Diploma Division)
Ex Senior V.P. (Sify) Welingkar Institute of Management, Mumbai

COPYRIGHT © by Prin. L.N. Welingkar Institute of Management Development & Research.

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NOT FOR SALE. FOR PRIVATE CIRCULATION ONLY.

1st Edition, July 2018

 CONTENTS

Contents

Chapter No. Chapter Name Page No.

1 Introduction 4-48
2 Customer-Centric Enterprise 49-84
3 Types of CRM 85-109
4 Customer Life Cycle Management 110-129
5 E-CRM 130-147
6 CRM in Various Industries 148-168
7 Customer Relationship Management through IT 169-184
Tools
8 Database Management in CRM 185-211
9 Implementing CRM 212-239
10 CRM Evaluation 240-264
11 Privacy, Ethics and the Future of CRM 265-297
12 HRM in CRM 298-309
13 CRM in Marketing 310-338
14 Marketing Research and CRM 339-357
Case Studies 358-374

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 INTRODUCTION

Chapter 1
Introduction
Objectives

The objectives of this chapter are to know about:

• What is CRM?
• Why CRM?
• Evolution of CRM
• Definition of CRM
• CRM strategy
• Significance of CRM
• Obstacles in CRM implementation and success

Structure:

1.1 Definition
1.2 History and Evolution
1.3 Why CRM?: Rationale and Importance
1.4 CRM Strategy and Strategic Objectives
1.5 Features of CRM
1.6 CRM Drivers
1.7 CRM Techniques
1.8 CRM Solutions
1.9 Aspects of CRM
1.10 Obstacles in Success
1.11 Misunderstanding about Customer Relationship Management (CRM)
1.12 Summary
1.13 Self Assessment Questions
1.14 Multiple Choice Questions

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 INTRODUCTION

Customer Relationship Management is the most potent and scientific

approach in maintaining and forging bonds with customers. It’s a strategy
used to learn more about the customers’ needs and behaviours in order to
develop stronger relationships with them. Good customer relationships are
the very foundation of business success. It is a company-wide business
strategy designed to reduce costs and increase profitability by solidifying
customer satisfaction, loyalty, and advocacy.

Customer Relationship Management has at its core the focus on Customer

Relationships as opposed to one-time transactions signifies a paradigm
shift that has revolutionized marketing.

Customer Relationship Management (CRM) has attracted the expanded

attention of practitioners and scholars. More and more companies are
adopting customer-centric strategies, programs, tools, and technology for
efficient and effective customer relationship management. They are
realizing the need for in-depth and integrated customer knowledge in order
to build close cooperative and partnering relationships with their
customers.

The emergence of new channels and technologies is significantly altering

how companies interface with their customers, a development bringing
about a greater degree of integration between marketing, sales, and
customer service functions in organizations. For practitioners, CRM
represents an enterprise approach to developing full knowledge about
customer behaviour and preferences and to developing programs and
strategies that encourage customers to continually enhance their business
relationship with the company. Marketing scholars are studying the nature
and scope of CRM and are developing conceptualizations regarding the
value and process of cooperative and collaborative relationships between
buyers and sellers. Many scholars with interests in several 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 relationships with
customers. They are interested in strategies and processes for customer
classification and selectivity; one-to-one relationships with individual
customers; key account management and customer business development
processes; frequency marketing, loyalty programs, cross-selling and up-
selling opportunities; and various forms of partnering with customers

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 INTRODUCTION

including co-branding, joint-marketing, development, and other forms of

strategic alliances.

Scholars from other academic disciplines, particularly those interested in

the area of information systems and decision technologies, are also
exploring new methodologies and techniques that create efficient Front-line
Information Systems (FIS) to effectively manage relationships with
customers. Several software tools and technologies claiming solutions for
various aspects of CRM have recently been introduced for commercial
application. The majority of these tools promise to individualize and
personalize relationships with customers by providing vital information at
every point in the interface with the customer.

Techniques such as collaborative filtering, rule-based expert systems,

artificial intelligence, and relational databases are increasingly being
applied to develop enterprise level solutions for managing information on
customer interactions.

1.1 Definition

CRM has been defined in a variety of different ways. For some, CRM is a
way to identify, acquire, and retain customers. For others, it is a way of
automating the front-office functions of sales, marketing, and customer
service. For some vendors, whatever their current product may be, that is
CRM.

This diversity of definitions is a result of differences in perspectives. The

first is based on a business perspective of increasing competition that is
driving companies to focus on their customers. The second is based on the
relatively new phenomenon of the integration of previously separate
applications such as Sales Force Automation and Customer Service Support
into Enterprise Applications. The third is a result of software vendors
repositioning their information technology products and services under the
CRM umbrella, to take advantage of the fast growth of the CRM market.

Further still, CRM is a technology-enabled business strategy whereby

companies leverage increased customer knowledge to build profitable
relationships, based on optimizing value delivered to and realized from
their customers.

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 INTRODUCTION

A rather comprehensive definition that includes all elements that make up

CRM supporting infrastructure and all involved functions is:

CRM is the strategic use of information, processes, technology and people

to manage the customer’s relationship with the organization (marketing,
sales, services and support) across the whole customer life cycle. – Kincaid
(2003)

This definition of CRM is quite broad and covers many, but not all, of the
company’s activities. CRM is limited to activities that take place in the
customer-facing functions, including marketing, sales, customer services,
and product support. CRM does not equal customer-centricity. Frankly,
although it’s harder, one can implement a CRM program even in a company
that is not customer-centred. CRM is not all-inclusive. An organization may
choose to develop a customer-centred R&D process, but this new process
would not be part of the CRM program. CRM is limited to the front-office
functions. However, there is no doubt that the new R&D program would
need customer information, which is generated by the CRM functions.

Let’s see the main elements of the definition:

CRM focuses on strategic impact rather than operational impact. Benefits

are generally long term rather than immediate (future increased profit
rather than immediate cost reduction). This doesn’t mean that one
shouldn’t focus on the cost-benefit aspect. It means that one needs to
understand where the benefits will really occur and set realistic
expectations.

CRM is a total discipline. To understand CRM, one must consider it as

having the same components as any manufacturing business. It uses a
machine (CRM technology) and power (people) to turn raw material
(customer information) into products (processes and interactions that build
customer loyalty).

CRM includes all the functions that directly touch the customer throughout
his entire lifetime with the organization. It touches multiple organizations
and crosses boundaries. Functions usually included in a CRM effort are
marketing, sales, customer services, and product support (whether internal
or through a channel partner, whether on or off the web).

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 INTRODUCTION

The Components of CRM

As per the above definition, the CRM infrastructure is made up of four key
components: information, process, technology, and people. Each of these
components is critical to achieving a successful CRM program. These four
components are described in the below table:

Table 1.1: The Components of CRM:

Component Description

Information Information is the raw material of CRM. Below types of

information are useful to CRM:

• Identification Data: Name/address/phone data collected

from customers to complete a business transaction

• Marketing data: Descriptions/traits/preferences collected

from customers during a transaction (either by asking
questions or tracking behaviour)

• List data: Names/addresses collected by a third party, which

can be bought or leased

• Overlay data: Customer profile data collected by a third

party, which can be leased and appended to existing
customer records

Process Customer-centred processes are the “product” of CRM. Some

examples are:

• All current/future processes that directly touch the customer

• Touchpoints, or means by which we interact with customers,

such as phone, e-mail, etc.

• Identifying and eliminating process disconnects and white

space

• Integrating and rationalizing processes from the customer’s

point of view

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 INTRODUCTION

Technology Technology is the machinery that enables CRM to work. These

are examples of technologies that CRM may find useful:

• Software products (process automation tools, analysis tools,

website development, and management tools)

• Networking and integrating applications and databases

• Databases, either purchased solutions or home-grown,

central or distributed

• Security features, such as encryption tools and firewalls

People People are the lifeblood of CRM. The energy source must be set
to the right “setting” for the entire system to work. People are
“reset” through various change management tools and support
mechanisms, such as:

• Training and education

• New tools

• Measurements and rewards

1.2 History and Evolution

Many market forces drove the organizations to lay such emphasis on

Customer Relationship Management.

Firstly, technological advances in Information Technology made CRM

feasible by enabling organizations to keep a record of each and every
transaction and engage with their customers.

Secondly, the growth of Direct Marketing initiatives enabled more

organizations to enter a one-on-one relationship.

Lastly, businesses realized that acquiring customers was only the first step
in the Marketing Cycle and then retaining customers and improving the
Service Standard were bigger challenges. Customer Retention was the key
to business profitability and downward migration was a bigger reason of
losses.

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 INTRODUCTION

For many, it primarily denoted a basic address book of customer or client

contacts, and prospects. Over time, the concept evolved as technology
grew more advanced and added such functionality as history tracking,
opportunity management and customer service automation.

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Fig. 1.1: CRM through the Decades

We can analyze the evolution of CRM through the decades better with the
aid of specific developments:

• Personal Information Management (PIM): It all began with the

introduction of the Rolodex (a rotating file device used to store business
contact information) in the late 1950s, which centralized contact
information that was used on a frequent basis. PIM at this time was
restricted to static, discrete records. It didn’t offer a lot of related
customer information except for a note or two at the bottom of the card
that contained the record. For additional information, businesses often
had to resort to cumbersome filing systems.

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 INTRODUCTION

• Contact Management Software (CM): An outcome of the concept of

Personal Information Management, contact management software
products such as ACT, TeleMagic and Outlook made their presence in the
late 1980s and early 1990s. They offered a value-added system of
tracking sales process stages. Businesses could add notes, and even link
contacts to one another in a basic manner. These linkages were the first
hints of what was to come in CRM.

• Customer Relationship Management (CRM): Companies began to

truly expand their relationships with customers in the late 1990s. New
technologies allowed them to view information three dimensionally and,
more importantly, to exploit it to the hilt. CRM was eventually broken
down into divisions like Operational CRM, Sales Force Automation,
Marketing and Customer Service CRM. As a result of this segmentation,
targeted products were created that dealt with sales, customer service
and customer retention. In many cases, companies would end up
purchasing either a very expensive suite of applications that attempted
to cover all these categories, or several products that needed to be
integrated.

1.3 Why CRM?: Rationale and Importance

The rise in appeal of CRM has stemmed from enhanced competition, which
has been felt by companies irrespective of the industry and size. Adding to
the market challenges are:

• An increasingly sated market,

• Replaceable products with short product cycles,
• High customer standards and
• Customer expectations regarding market transparency.

Transforming Customer Knowledge into Customer Value can create a

significant competitive advantage. High Value Customers are identified,
their needs are anticipated and values are created for them which were
non-existent before. This results in customer loyalty which in turn
translates into higher profitability.

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 INTRODUCTION

The advantages of carrying out a proper business CRM are many and
varied:

First of all, it is a good way to expand the customer’s base. By contacting

prospects, it is most likely that many of them are interested in the
company activity, in its products and services. It is clear that if the
company does not initiate a process to reach out to the customer, then the
customer will not come to the company, unless he faces a specific and
urgent need.

CRM offers the advantage of gaining customer loyalty. As stated above,

loyalty is less costly for a company and the loyal customer becomes a great
mouthpiece of the company and its services. Further, the company can
promote the work it has done for its customers in order to approach
prospects. It is always more convincing to present a work carried out
rather than to rely on one’s own theoretical expertise.

A good CRM associated with a good tool ensures companies to have a good
view over the list of customers and prospects, to know where it stands with
relationship management, when to contact them again, etc. Furthermore,
an improved customer and prospect insight ensures a better and more
targeted communication.

CRM also ensures enhanced productivity. By fostering customer’s loyalty,

the company spends lesser time acquiring new customers and saves the
time on other aspects.

Some of the major benefits of CRM are:

1. Centralized Data
CRM allows access one centralized database for a complete view of all
customer interactions, from sales and marketing to customer service and
support. As the organization grows, this enables all employees – whether
they are responding to a customer query or conducting personal sales calls
– to have a complete, up-to-date view of each customer.

2. Marketing Automation
Organizations use robust automation tools to segment customers and
prospects, automate campaign activity scheduling and follow-up activities
and track response rates. Workflow capabilities for lead routing ensure that

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 INTRODUCTION

no leads fall between the cracks. And, revenues can be tied to specific
campaigns so that it’s easy to analyze a campaign ROI to increase
marketing efficiency.

3. Customer Service and Support Solutions

With Service and Support solutions, the organization can track and resolve
customer questions, issues and technical support inquiries for an
outstanding customer experience. In addition, Web Customer Portals
empower customers to find the answers they need by allowing them to
view, add or edit service and support tickets.

4. Advanced Account and Opportunity Management

While contact management applications may allow for company or account
hierarchies, they do not provide the ability to track leads from a campaign,
through the opportunity cycle, to close. Advanced opportunity management
allows for tracking by probability of the close, products, lead source, status
and competitors. In addition, proposals that include products, pricing and
discounts can be created for each opportunity.

5. Robust Forecasting and Reporting

Accurate, timely revenue forecasts help sales close more deals, increase
profitability for the company and support expenses with revenue growth.
Forecasting also gives companies acute visibility into future product and
service demand trends.

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 INTRODUCTION

!
Fig. 1.2: CRM Effectiveness

In addition to the above broad benefits, the introduction of customer

relationship management has many advantages. By focusing on the
customer, the organization becomes more aware of customer needs and
the company focuses on those elements that create value for customers
and for the company. We have a number of benefits of customer
relationship management:

Benefits of CRM for Customers

• More attention to customer needs and customer requirements.

• Better service by focusing on the value created for customers.

• Personal attention at the right time through better use of customer data.

• Relevant advice and suggestions based on an integrated customer view

and activation of customer data.

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 INTRODUCTION

• A positive customer experience through better service and clear

expectation management.

Benefits of CRM for Management

• Enhanced attention to customers by clear prioritization.

• More overview and insight into customer interaction processes through

targeted reports, surveys and analysis.

• Better understanding of what customers and customer segments are

profitable and which are not.

• Better understanding of the activities and business units create value.

• Timely updating through structured management information.

• Cost savings by supporting or automating administrative tasks and

standard processes.

• Efficient and effective structuring of customer interaction processes.

Benefits of CRM for Marketing

• Improved lead generation by feedback of results and conversion of score

opportunities.

• Better lead nurturing to continue a relationship with prospects and they

play to sales at the best moment.

• Better planning by anticipating customer needs based on historical data.

• Personal marketing specifically targeted to the needs of the customer.

• More involvement of customers in the development of new or improved

products and services.

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 INTRODUCTION

Benefits of CRM for Sales

• Effectiveness by focusing on the most profitable customers and cost-

effectively deal with unprofitable customers.

• Better identify customer needs and specific customer requirements.

• Better scoring opportunities by undertaking at the right time at the right

relationships the right actions.

• Effective cross-sell of other products on the basis of a better

understanding of the customer.

• Reduce time spent on non-sales activities.

• Shorten the sales cycle by better view of the stage where the customer is
located and what is needed for the next marketing step.

• Better sales management through better understanding of all commercial

activities.

1.4 CRM STRATEGY AND STRATEGIC OBJECTIVES

CRM can be defined as the ongoing process of
value with individual customers, and sharing
association. It involves the understanding
collaboration between suppliers and selected
creation and sharing.
identifying and creating new
the benefits over a lifetime
and managing of ongoing
customers for mutual value

We can use this definition as a basis for providing some direction for a CRM
strategy:

1. Identify the best Customers, and the Worst

A business relationship requires that one identifies good customers, ones

that likewise want a relationship with over a longer period—and team up
with them to create new value that will benefit both parties over the long
term. First, then, who are the customers with whom one should form a
meaningful relationship? Just the biggest? Or the most profitable? Or the
ones that will be most profitable tomorrow? Or those that are most

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 INTRODUCTION

responsive to a relationship with us? Or perhaps even other customers?

Deciding which customers to focus on and which ones to neglect is the first
and most important strategic decision.

2. Distribute Value Differently to Different Customers

A company should determine which are its best, average and worst
customers and ensure that each receives appropriate value. Absurd though
it sounds, most companies reward the worst customers and penalize the
best by giving both groups average value. This is sometimes the result of
not fully allocating all customer costs, including those that occur after a
gross margin, such as inventory carrying costs, late payments, customer
communications and merchandise returns.

3. Compete on Scope

One way of discriminating among customers is to become more relevant to

each one. For many companies, this means broadening the range of
products, services or solutions, whether or not the company makes them.
Firms can collaborate with third parties to ensure that the customer
receives the value each wants, rather than insisting that the customer buy
what the company makes. This is a major strategic departure from the old
belief that growing larger would give the company the economies it needed
to succeed. In a world of individual customers, unique value must be
created for each one. Being larger may not offer the opportunity to be
more relevant. Frequently, the opposite is true. Larger companies can be
less able to cater to individual needs, especially where their technologies
and processes have been engineered for efficiency rather than
effectiveness.

4. Focus on Strategic Capabilities

Managers sometimes do not want to plan because they fear that their plan
will become rapidly outdated (it will), or that some of their strategies will
be wrong. Rather, in the age of CRM, strategies should be framed in terms
of strategic capabilities rather than strategies per se. Base a plan on the
range of capabilities that the company should have, including process,
technology, people and knowledge/insight. CRM initiatives could prove
difficult if technology is the only focus and people and their organizations
receive insufficient attention. Stakeholders such as suppliers, employees

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 INTRODUCTION

and channel intermediaries form a chain of relationships, and the end-

customer relationship can only be as strong as the weakest link.
Organizations must plan to create durable bonds with these stakeholders,
too. For example, when considering employees, attention is to be paid to
the link between relationship management and performance reviews,
recruitment, training and compensation.

5. Wining through Customer-centric Innovation

Creating new and mutual customer value, the core of CRM, means that
companies need to have a process for customer inclusion and collaborative
innovation. Most firms continue to innovate in the old style, using offline
research and product definition, rather than by involving the customer
throughout the process. The challenge is to involve customers as the
company works with each one of them to define and create new value.

Integrating the customer’s technology, people and business processes with

those of the organization. If one can differentiate where the organization
ends and the customer’s starts, then probably one has not yet fully
implemented relationship marketing.

6. Measure Customer Performance

Focus on customer profitability with the goal of improving it, rather than
the tradition of only measuring the product, product line and divisional
profitability, customer costs and customer value perceptions. It is quite
beneficial in order to sell products at a loss if the relationship is profitable
and/or strategic.

7. Unlearn and Relearn

We need to unlearn the principles of “mass” everything if the company is to

reWe need to unlearn the principles of “mass” everything if the company is
to realize the benefits of CRM. Unlearning is really needed if a company is
to shed what made it successful in the past, but which now threatens its
ability to adapt and rise to new heights. And unlearning may be hard to do,
since it means changing entrenched attitudes throughout the chain of
relationships to achieve the end result of a delighted customer.

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 INTRODUCTION

Inside most companies, there is tension between those who “get” CRM and
those who do not. If CRM is to take root and move the company into new
territory, the group that doesn’t “get” CRM will need to learn or relearn
what it is and the potential it has. In particular, the top brass should
become involved in the visioning exercise; their commitment is most
important if the plan is to work.

8. Redefine the Focus

Many leaders encourage their firms to “focus,” by which they often mean
focus on products or services. The company using CRM should instead see
“focus” in terms of customers, not products or services, and should
welcome the very significant changes that this redefinition will force. In
particular, the CRM organization will have to make significant change in its
processes as it begins to supply what customers want rather than what the
company makes. This disruption can undermine the initiative in the early
going, unless the changes have been anticipated and presold to internal
managers.

9. The New Competition

The old rules of marketing are mostly broken and ineffective, providing a
poor basis for making the company a winner. After all, there are only so
many good customers to go round and all competitors want them. The 4Ps
of marketing made little or no provision for this reality, nor did they create
an opportunity for adjusting each aspect of product, price, promotion and
distribution according to the unique preferences of the customer. In the era
of CRM, customers target companies even more than vice versa. The 4Ps
do not address this much newer reality.

In the era of CRM, competing has taken on a new meaning. Increasingly,

companies will be competing for six things:

1. Obtaining preferential access to the best customers.

2. Becoming the “lowest-time” producer, or taking up as little as possible

of the customer’s most precious resource.

3. Winning the right new employees, especially those who “get” CRM,
whatever their functional job titles.

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 INTRODUCTION

4. Aligning and collaborating with a selected group of companies, both

competitors and non-competitors.

5. Developing more customer data, knowledge and insight than

competitors, and moving faster than them down the “customer’s
knowledge curve,” to position the company and its products when and
where the customer is most likely to buy.

6. Creating the best new strategic capabilities.

CRM is a business strategy and therefore more than a functional strategy

alone. It affects the organization as a whole: Marketing, IT, Service,
Logistics, Finance, Production and HR. It needs to provide direction to each
department or employee that maintains contact with the customers. The
employees and management’s customer-oriented approach needs to
improve. However, the back office whose job it is to fulfil the promises
made by the front office will ultimately have to learn to cater to individual
customers. Processes will have to become well-defined and would have to
be executed flawlessly and efficiently.

1.5 Features Of CRM

Customer Relationship Management is a strategy which is customized by

an organization to manage and administrate its customers and vendors in
an efficient manner for achieving excellence in business.

It is primarily entangled with following features:

1. Customers’ Needs
An organization can never assume what actually a customer needs. Hence,
it is extremely important to interview a customer about all the likes and
dislikes so that the actual needs can be ascertained and prioritized.
Without modulating the actual needs, it is arduous to serve the customer
effectively and maintain a long-term deal.

2. Customers’ Response
Customer response is the reaction by the organization to the queries and
activities of the customer. Dealing with these queries intelligently is very
important as small misunderstandings could convey unalike perceptions.
Success totally depends on understanding and interpreting these queries

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 INTRODUCTION

and then working out to provide the best solution. During this situation, if
the supplier wins to satisfy the customer by properly answering to his
queries, he succeeds in explicating a professional and emotional
relationship with him.

3. Customer Satisfaction
Customer satisfaction is the measure of how the needs and responses are
collaborated and delivered to excel customer expectation. In today’s
competitive business marketplace, customer satisfaction is an important
performance exponent and basic differentiator of business strategies.
Hence, the more is customer satisfaction, more is the business and the
bonding with customer.

4. Customer Loyalty
Customer loyalty is the tendency of the customer to remain in business
with a particular supplier and buy the products regularly. This is usually
seen when a customer is very much satisfied by the supplier and revisits
the organization for business deals, or when he is tended towards rebuying
a particular product or brand over times by that supplier. To continue the
customer loyalty, the most important aspect an organization should focus
on is customer satisfaction. Hence, customer loyalty is an influencing
aspect of CRM and is always crucial for business success.

5. Customer Retention
Customer retention is a strategic process to keep or retain the existing
customers and not letting them to diverge or defect to other suppliers or
organization for business. Usually, a loyal customer is tended towards
sticking to a particular brand or product as far as his basic needs continue
to be properly fulfilled. He does not opt for taking a risk in going for a new
product. More is the possibility to retain customers, the more is the
probability of net growth of business.

6. Customer Complaints
Always there exists a challenge for suppliers to deal with complaints raised
by customers. Normally raising a complaint indicates the act of
dissatisfaction of the customer. There can be several reasons for a
customer to launch a complaint. A genuine reason can also exist due to
which the customer is dissatisfied but sometimes complaints are launched
due to some sort of misunderstanding in analyzing and interpreting the
conditions of the deal provided by the supplier regarding any product or

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 INTRODUCTION

service. Handling these complaints to ultimate satisfaction of the customer

is substantial for any organization. Hence, it is essential for them to have
predefined set of process in CRM to deal with these complaints and
efficiently resolve it in no time.

7. Customer Service
In an organization, Customer Service is the process of delivering
information and services regarding all the products and brands. Customer
satisfaction depends on quality of service provided to him by the supplier.
The organization has not only to elaborate and clarify the details of the
services to be provided to the customer, but also to abide with the
conditions as well. If the quality and trend of service go beyond customer’s
expectation, the organization is supposed to have a good business with
customers.

Let it be a newly brought up enterprise or a well-established organization,

the above aspects prove to be of prime importance in dealing with a
genuine customer through a well-organized CRM system.

1.6 CRM DRIVERS

A number of factors have contributed to the growing relevance of CRM as a

source of competitive advantage. They can be subdivided into four classes:

i. Market Drivers
ii. Customer-related Drivers
iii. Business Drivers
iv. Technological Drivers

An evaluation of impact by way of company can be made for each of the

above classes.

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 INTRODUCTION

The creation of customer relationship strategy is the very first step in a

CRM project. It requires various steps:

a. Knowledge: It is necessary to identify the most profitable customers.

b. Listening: The emphasis is on customer loyalty; therefore, it is

imperative to find out key values and needs for each customer class.

c. Growth: Through communication and value production in the most

suitable way for each customer class, the company is able to develop a
relationship with its customers.

d. Results evaluation - Again to face these stages properly, the company

has to review and integrate its infrastructure and business process,
paying particular attention to two crucial factors: Communication and
Knowledge sharing.

As for Communication, four main classes can be identified:

1. Mass communication: It has a great impact, though it is generally not

aimed at a particular market, and it is brought about through by media
and traditional channel advertising.

2. Communication per market segment: The company seeks the

optimum combination of channel and their respective frequency of use,
so as to reach specific segments.

3. Direct Marketing: Aimed at a particular portion of a specific market

segment, using tools such as mail, e-mail and telephone.

4. One-to-one communication: Based on direct interaction between the

company and customer via e-mail, telephone, mail or sales agents. It is
usually supported by CRM systems.

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 INTRODUCTION

Table 1.4: CRM Drivers

Market Drivers Impacts

Competitive environment, An effective CRM strategy is nowadays a

standardization of products and critical factor in achieving objectives such
services, reduced switching costs, as differentiation and customer loyalty.
aggressive price competition, and
saturation/maturity of markets.

Customer Drivers Impacts

End of Mass Marketing, growing As a consequence of the end of Mass

importance of one-to-one Marketing, today “The Customer is the
relationships. king”. Customers have access to a wide
range of personalized products and
services, can better evaluate purchase
convenience, and can demand high level
post-sales assistance. In short, the
traditional four Ps of the marketing mix
have been replaced by the four Cs of the
rational marketing: Cost, Convenience,
Communication and Customer Needs and
Wants.

Business Drivers Impacts

The 80/20 rule (80 per cent of Production of added value for customers is
profits are produced by 20 per the real source of a company’s competitive
cent of customers); acquiring new advantage.
customers is much more expensive
than maintaining existing ones:
“loyal” customers are more
profitable than new ones: a longer
customer relationship brings
higher profits

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 INTRODUCTION

Technology Drivers Impacts

Development of interactive IT and internet allow the use of new

communication tools such as call channels to enhance the retention rate of
centres, development of front- profitable customers while reducing the
office solutions of data mining service cost of the less profitable ones.
etc.

Communication has an important role, as the level of company-to-

customer dialogue shows the degree of CRM strategy reached by the
company.

For instance, if an organization maintains a superficial relationship with its

customers, the relationship with its customers will be concerned merely
with product-based aspects (such as features, price). If on the contrary,
the company implements fully a customer-oriented strategy, it will be able
to develop a deep and lasting relationship. The depth of the relationship,
customer value in time and the investment in the maintenance of
relationship become critical factors of success.

Another important issue is customer knowledge sharing. The organization

needs to develop systems that enables it to:
• Gather information on customers,
• Organize data so as to perform effective analysis
• Use the customer knowledge gathered to implement value-creating
initiatives
• Share knowledge with the customers within the company

Since good customers are a scarce resource, it is important for the

organization to manage all contact points effectively, to gather all
necessary information, and to attain ideal customer knowledge. It must be
borne in mind that each contact or communication has to be regarded as
positive from the customer’s point of view. Every bit of data or information
about the customer has to be preserved and processed to improve the
organization’s corporate knowledge.

All the information gathered must then be made available to all the
company employees, so that everyone can have a full understanding of the
customer’s characteristics and thus be able to offer a customized service

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 INTRODUCTION

answering specific needs. The value of knowledge can be measured as the

difference between the cost of acquiring a new customer and the cost of
maintaining an existing one. An important issue for the organization is to
be able to increase the value of the customer and possibly reduce customer
loss. All this becomes possible only when a CRM program is made up of
strategies, CRM information systems and process re-engineering plans.

1.7 CRM Techniques

CRM-Techniques and Strategies for Customer Retention

The business scenario is in constant evolution with the empowered

customer accessing unlimited information through the media and internet.
The digital revolution has marked a shift in power from the hands of
business heads to the customers are highly aware of the competitive
scenario and hence are entitled to freedom of choice amongst their
products.

It is essential to maintain a healthy on-going relationship with client. For

that, the objective should shift to develop a customer centric framework,
which inculcates insights that cater to customer’s needs and requirements.
Therefore, the business leaders have to start thinking more on the
thought-processes of marketers to boost up the revenue scale. One needs
to engage buyers into latest trends in the market to offer maximum benefit
and here is where CRM is of great value.

The basic objective of a CRM solution is to improve customer retention. Its

secondary objective is to increase customer acquisition at a low cost,
without jeopardizing existing customer relations and ensuring the smooth
transition of a new customer to a loyal, long-term client.

Here are a few ways in which CRM aid in customer retention:

1. Builds up a comprehensive viewing of “customer journey” map.

Gathering data on customer is essential, as it helps keep tabs on the

impacts of the marketing strategy, in regards to consumer interaction.
Also, needs and demands of the target audience can be tracked. The raw
data is not enough to communicate the experiences of customers. Mapping
the customer journey helps in jotting down focal points of customer’s

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 INTRODUCTION

experience: from initial contact (awareness), through the process of

engagement (urging the customer to purchase) and into a long-term
relationship (post purchase involvement). Customer relationship
management tools helps in providing an insight into the touch points of
consumer interaction and post-purchase engagement, in collation with data
of the journey map. This will help you asses the strengths and weaknesses
of your marketing strategy and also provide guidelines to re-engage the
customer, if the rate of engagement has been less.

2. Targets customers through tailor-made offers.

Every customer has a purchase/ consumption pattern, through which one

can extract the point of interaction suitable to engage for further loyalty.
CRM software gathers customer’s media consumption and purchase history
to plot what kind of offers will be appealing to each individual and in turn
add relevancy, which will keep the brand recognition value high. Identifying
ways to convert customer interest into an actual purchase is the main onus
here, which can be achieved through providing discounts and offers to add
value to the experience. This helps in building a proactive customer
relationship, where repeat purchase would be possible due to smart target
centric offerings to enhance the value.

3. Helps create Loyalty programs.

Every brand has its share of loyal customers, whose experience urges them
to revert back on frequent basis. Information gathered in CRM software
can bring out the varied levels of engagement by the customers, revealing
which of the accounts are responsible for the most revenue. This
information helps you create loyalty programs for those valued customers.
This ensures a proactive relationship with these profitable customers,
creating a memorable experience for them and also referrals from these
loyal customers, to extend target reach. You can create a list of your most
profitable customer, through CRM software. After which, you can start to
follow up by letting them know about the rewards and incentives, so that
they continue to stay as your most profitable customers.

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 INTRODUCTION

4. Personalizing the interactions.

A relationship is something that is established between people. CRM

software helps you see your customer beyond the rotes of revenue. The
effects of personalization is of great impact to not only purchase but post-
purchase relationship, where it is equally essential to reach out to the
customers on a frequent basis, to increase the value of your service. As
recent research in the UK found that personalization, user preferences and
other relevant information found in CRM software delivers a high impact
ROI, with a greater extension in outreach and new target-base covered.
This often happens as the optimized experience urges satisfied customers
to refer the services on various platforms, hence increasing the point of
interest in untapped sections. When finalizing the information fields for
registering a contact, use personal details such as birthday, hometown so
onto personalize your outreach. Armed with this information, you can
adjust your follow-up strategies accordingly.

5. Helps assess performances

Feedbacks are essential for conceiving and executing a successful

marketing campaign. One needs to be aware of the success rate and the
shortcomings of his strategy to proceed in making it more effective.
There’s no better place to obtain it, than the customers themselves. CRM
can be utilized here through dashboards to review service execution and
pinpoint areas for improvement. Also, metrics to identify repeated support
problems examine the percentage of issues are being resolved in a single
call. Use this insight to develop incentive schemes that reward staff for
outstanding performance in key metrics.

Conclusion

As an organisation, one is always in search of ways to improve customer

service, keeping insights in helm. CRM aids in merging relevant business
information from various departments into a single easy–to–access
database. CRM monitors the activities around customer engagement, not
solely for customer retention itself.

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 INTRODUCTION

1.6 CRM Solutions

CRM applications automate certain customer-facing processes and provide
solutions around key functional areas to enable companies to interact with
customers in a more consistent, structured approach. The solutions are
described in the table below.

Functional Area Description

Sales Force Improves sales performance by allowing sales

Automation (SFA) representatives to track and share opportunities, manage
and up-sell into existing accounts, coordinate activities
across teams, monitor pipeline stages through dashboards,
and work offline with mobile solutions.

Customer Support Improves customer relationships by helping support

representatives track customer cases, manage product
problems, respond to customer inquiries, and share
customer service information across the entire organization.

Marketing Allows companies to develop, launch, and track campaigns

Automation and other marketing offers to customers. Marketing
automation integrates closely with Sales Force Automation
to ensure leads are effectively passed between the
marketing and sales departments.

Collaboration Improves employee communications by integrating

calendars, shared tasks, documents, product information,
contracts and other customer materials in a single location
and making them accessible to employees in various
departments.

Reporting Reporting tools capture the activities and business results of

different lines of business and presents them to
management in a readily understandable set of charts and
reports. This provides company leaders with the information
they need to make intelligent decisions.

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 INTRODUCTION

1.7 Aspects of CRM

There are three aspects of CRM, each of which can be implemented in

isolation. They are:

Operational CRM
It provides support to front-office business processes that involve direct
interaction with customers through any communication channel, such as
phone, fax, e-mail, etc. The details of every interaction with customers,
including their requirements, preferences, topics of discussion etc., are
stored in the customers’ contact history and can be retrieved by the
organization’s staff whenever required.

Thus, it presents an unified view of customers across the organization and

across all communication channels. Examples of Operational CRM
applications are Sales Force Automation (SFA), Customer Service and
Support (CSS), Enterprise Marketing Automation (EMA), etc.

Analytical CRM
Analytical CRM is concerned with capturing, storing, extracting, integrating,
processing, interpreting, distributing, using and reporting customer-related
data to enhance both customer and company value.

Analytical CRM builds on the foundation of customer-related information.

Customer-related data may be found in enterprise-wide repositories: sales
data (purchase history), financial data (payment history, credit score),
marketing data (campaign response, loyalty scheme data) and service
data. To these internal data can be added data from external sources: geo-
demographic and lifestyle data from business intelligence organizations, for
example. With the application of data mining tools, a company can then
interrogate these data. Intelligent interrogation provides answers to
questions such as:

a. Who are our most valuable customers?

b. Which customers have the highest propensity to switch to competitors?
c. Which customers would be most likely to respond to a particular offer?

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 INTRODUCTION

A n a l y t i c a l C R M h a s b e c o m e a n e s s e n t i a l p a r t o f m a ny C R M
implementations. Operational CRM struggles to reach full effectiveness
without analytical information about customers. For example, an
understanding of customer value or propensities to buy underpins many
operational CRM decisions, such as:

1. Which customers shall we target with this offer?

2. What is the relative priority of customers waiting on the line, and
3. What level of service should be offered?
4. Where should I focus my sales effort?

Analytical CRM can lead companies to decide that selling approaches

should differ between customer groups. Higher potential value customers
may be offered face-to-face selling; lower value customers may be
contacted by telesales. Furthermore, the content and style of customer
communications can be tailored, perhaps for a particular segment, using
customer analytics. This enhances the probability that a given offer will be
accepted by the customer.

From the customer’s point of view, analytical CRM can deliver timely,
customized, solutions to the customer’s problems, thereby enhancing
customer satisfaction. From the company’s point of view, analytical CRM
offers the prospect of more powerful cross-selling and up-selling
programmes, and more effective customer retention and customer
acquisition programmes.

It enables to analyze customer data generated by operational CRM

applications, understand the customers’ behaviour, and derive their true
value to the organization. This helps to approach the customers with
pertinent information and proposals that satisfy their needs. The analytical
customer relationship management applications use analytical marketing
tools like data mining to extract meaningful information like the buying
patterns of the customers, target market, profitable and unprofitable
customers, etc., that help to improve performance of the business.

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 INTRODUCTION

Collaborative CRM

Collaborative CRM is the term used to describe the strategic and tactical
alignment of normally separate enterprises in the supply chain for the
more profitable identification, attraction, retention and development of
customers. For example, manufacturers of consumer goods and retailers
can align their people, processes and technologies to serve shoppers more
efficiently and effectively. They employ practices such as co-marketing,
category management, collaborative forecasting, joint new product
development and joint market research. Collaborative CRM uses CRM
technologies to communicate and transact across organizational
boundaries. Although traditional technologies such as surface mail, airmail,
telephone and fax enable this to happen, the term is usually applied to
more recent technologies such as Electronic Data Interchange (EDI),
portals, e-business, Voice over Internet Protocol (VoIP), conferencing, chat
rooms, web forums and e-mail. These technologies allow data and voice
communication between companies and their business partners or
customers. Collaborative CRM enables separate organizations to align their
efforts to service customers more effectively. It allows valuable information
to be shared along the supply chain.

Some CRM technology vendors have developed Partner Relationship

Management (PRM) applications that enable companies to manage complex
partner or channel ecosystems and reduce the costs of partner or channel
management. PRM applications are often used to manage partner
promotions. A manufacturer of consumer goods might have a dozen or
more different cooperative advertising programs running simultaneously.
PRM allows companies to manage the distribution of funds, plan and
control promotions and measure outcomes. Sometimes, the term
collaborative CRM is used to describe the application of these same
technologies to internal communications, for example across sales,
marketing and service functions.

It allows easier collaboration with customers, suppliers, and business

partners and, thus, enhances sales and customer services across all the
marketing channels. The major goal of collaborative customer relationship
management applications is to improve the quality of services provided to
the customers, thereby increasing the customer’s loyalty. Examples of
Collaborative CRM applications are Partner Relationship Management
(PRM), customer self-service and feedback, etc.

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 INTRODUCTION

1.10 Obstacles in Success

CRM is no panacea, nor something that can work in silos. Understandably,

it needs to be ingrained in the Organizational DNA. There are various
factors that affect the success of CRM in an organization. Without a sound
thought given to each of these, CRM would be just another management
fad and its effective implementation an exercise in futility. Prominent
challenges to CRM are:

Lack of Guidance
Companies would never construct their offices without a blueprint.
According to Gartner, however, more than 60 per cent of companies that
have implemented CRM did not have mutually agreed upon goals for their
projects prior to the installation. Like a building without a bearing wall, a
CRM initiative without goals will collapse.

The project leader must start by crafting a valid business case for CRM
before selecting a vendor, upgrading software, or launching a new project.
Assemble a cross-functional team to determine specific, measurable goals
for the initiative. Areas to consider include automating processes that will
improve user productivity and boost customer satisfaction, streamlining
marketing and sales processes, giving customer-facing employees access
to a 360-degree view of customer information, and supporting contact
centre agents with the tools to cross-sell and up-sell.

After deciding on a project, organizations should create a phased

implementation plan. Conduct smaller, more manageable implementations
that can be completed within 30, 60, or 90 days. Smaller projects also
enable customers to change things as they go. It can be compared to
home remodelling: "When you remodel a house, once you do the kitchen,
you might decide you want to do something different with the living room."

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 INTRODUCTION

Integration Woes

Today, there is no killer application that solves all integration problems.

Most large-scale implementations require some customization. This may
lead to problems that put vendors and consultants at odds with customers.

Many vendors and consultants maintain that most customers expect

integration to happen like plugging a light fixture into a socket and flipping
a switch, when in fact it is an evolutionary process.

For this reason, experts say, it pays to work with a vendor consultant on
large, complex installations. Not only are they extremely proficient in their
own technology, they often include fixes to the problems faced in their
company’s next software upgrade.

No Long-term Strategy

Believing that CRM is a technology solution is still a tremendous obstacle

for far too many firms. The fact remains that CRM is a business process
change, often supported by technology. But there continues to be a
tendency to look to technology as a sort of business panacea. Business
leaders who do so are often disillusioned by CRM, because they don’t align
their business processes to meet specific goals. Issues like job roles and

! !34
 INTRODUCTION

responsibilities, accountability, and incentives are required for CRM to

succeed.

A call centre manager, for example, may want his agents to switch from
general, undifferentiated roles handling all sorts of calls to specialists. This
transition from a homogeneous environment to a heterogeneous one
requires a skills-based routing solution. But before implementing the
technology, the manager must determine the various job qualifications for
the different support tiers. He must also determine the training and career
path options for customer service reps in these new roles.

For a long-term business process change to be effective, having members

of the CRM implementation team spend time in the field to determine how
the CRM system will help employees.

Inaccurate Data

An often-overlooked, yet insidious hurdle is wrong data, or inaccurate and

old information. Data is the lifeblood of a CRM system, and incorrect
numbers, spelling mistakes, and outdated contact information can infect
that system if it is left unchecked.

Organizations experience high percentage of data duplication rates. There

are two main reasons for this: customer touchpoints have multiplied, and
the speed at which people can enter data has increased thanks to the
Internet.

Inaccurate data can not only cost companies millions in wasted direct
marketing spend, but it can severely hinder CRM adoption rates.

Lack of Employee Buy-in

It’s natural to resist change. Top salespeople may ask, for example, why
should we be forced to change our working habits, when those very habits
helped us become so successful? On the other hand, poorer performers
may fear the outcome of their managers having a window into their bad
habits. Failure to convince these and other employees of the benefits of
CRM often results in passive resistance and low employee-adoption rates.

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 INTRODUCTION

Effectively communicating the benefits of CRM to users should bolster their

confidence in and comfort levels with the new system. It’s crucial to “sell”
those benefits internally both before and during a CRM initiative.
Companies must not only create buy-in, but must also maintain the users’
enthusiasm.

No Accountability

Driven by fear of the unknown, resistance also spills into the managerial
level in the form of avoidance, or lack of accountability. There is
unwillingness in top management to assign accountability to project
leaders. But CRM’s success depends on that accountability. There is a high
correlation between lack of success and lack of accountability.

The fact is, if accountability is not taken at the uppermost managerial level,
there will only breed negligence among those who should be using the
system, but aren’t, making failure inevitable.

The better approach, suggest some CRM specialists, is for organizations to

have a single project manager, preferably a senior business executive who
owns both pieces of the project, and can then drive change on the business
and IT side of the company.

Poor Executive Sponsorship

Launching a CRM program can be a lot of work for the implementation

team and for all impacted employees in the weeks after launch. Things will
not be perfect out of the gate, and there may be a frustrating period of
refining the processes and application and ramping up. Some employees
may be tempted to revert to old ways of doing things and may resist using
the CRM application. If these employees are high performers, for example,
top salespeople, managers may be tempted to look the other way. This is
corrosive—sending the message to others that CRM is “optional,” and
diminishing the value of the program by putting some customer
information and interactions outside the CRM processes and CRM
application.

The CRM executive sponsor must be prepared to tackle adoption challenges

of this type. The sponsor must continually sell the vision of CRM
throughout the organization, emphasize its value, and hold everyone

! !36
 INTRODUCTION

accountable to fully participate in the CRM program. At the same time, this
person must work to keep the CRM program nimble and to incorporate
employee feedback to eliminate issues and drive improvements into the
program so that all employees benefit.

Not Engaging “Doers” as Stakeholders

There are many CRM projects where it has become apparent that
management is disconnected from how work actually gets done by
customer-facing employees. Engaging customer-facing employees in the
design and development of the CRM program is needed for many reasons:

1. Sometimes only the customer-facing employees — the salespeople and

customer service staff—know how processes actually work and how
tools are actually used. The foundation of any kind of process
improvement or CRM application design is a clear understanding of how
things work today.

2. CRM processes will be executed and CRM applications will be used by

these employees, so it is only logical that they have a voice in how they
are designed. They offer a unique, valuable perspective that managers
and executives cannot provide.

3. They provide a usability “check” during the design of the CRM

application. A business analyst may want 50 different data attributes to
be captured about a customer to allow the analyst to segment and
analyze the customer base. A representative of the sales employees can
push back based on usability concerns, knowing what is truly feasible
based on who the sales people are speaking with and what information
is available to them.

4. Ultimately, the success of the CRM program will hinge on the adoption of
the CRM processes and applications by the customer-facing team. If
these employees feel as though their voices were heard during the
design and that these are “their processes” and “their application,”
rather than something foisted on them by IT or senior management,
they will have more buy-in and will be stronger supporters of the
program. They will also be more vocal in providing positive feedback to
help improve it.

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 INTRODUCTION

Implementing a CRM Program without a Clear Roadmap

“Measure twice, cut once.” What is true for carpentry is true for CRM
programs. Preparation and careful planning will yield a more successful
CRM program with greater employee satisfaction. Fundamentally, it is
about thinking critically and strategically about the CRM initiatives that will
provide the most benefit to the organization, considering other factors such
as synergies between different initiatives, and laying out and
communicating a phased plan.

Proceeding without a roadmap has the potential to be inefficient (not

necessarily addressing the highest value areas first), confusing (people
can’t look forward to understand what is happening when and why), and
expensive (often areas need to be reworked and redesigned as they are
impacted by subsequent initiatives).

Providing Inadequate Training

Training is an area that, for whatever reason, executives tend to focus on

when trying to reduce the costs of a proposed CRM project. “Our people
are smart” or “This is not rocket science” are comments that often precede
slashing budgets for training. For project managers planning a CRM
initiative, the training effort is often addressed as an afterthought and does
not get the same level of planning, preparation, and focus as the other
project components.

In fact, effective training is a key driver of user adoption and overall

program success. Training should be role-tailored and scenario-based and
should blend process and application training so that employees learn how
the process works and how to use the CRM application to support it. A
hands-on component is valuable to keeping trainees engaged. In addition
to initial prelaunch training, it is wise to plan for follow-on training and
informal question-and-answer sessions to help the CRM team monitor the
success of the employees in adopting the CRM processes and tools and to
provide employees with many opportunities to get their questions
answered.

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 INTRODUCTION

Skipping Data Migration or Data Cleanup

Programmatically, migrating clean data into a new CRM application prior to

launch adds value in a number of ways. It reduces data entry work for
employees; it reduces or eliminates the occasions where users need to go
back to their old tools, helping to cement the switch to the CRM
application; and it allows for meaningful reports that compare post-CRM
data with pre-CRM data to be run more easily from within the CRM
application.

However, data migration is an area of considerable effort, expense, and

complexity in most CRM initiatives and is therefore often an attractive
target for budget cutting. Executives should consider eliminating this work
only after a thoughtful and realistic assessment of the impact on the CRM
users to make sure they are balancing cost saving with program risk
appropriately.

Not Providing Value to All Stakeholders

The CRM program will naturally provide value in different ways to the
different stakeholder groups. Managers and executives will look to CRM
reports and analytics to gain insight into their business and customers to
help them make better decisions and better predict future performance.

Customer-facing employees should find that the CRM application helps

them stay organized and be more productive and helps minimize the
administrative overhead associated with their job function.

It’s possible to craft an initial CRM project that focuses on delivering value
for one group and fails to deliver value for another. This is a hazardous
approach and one to be avoided at all costs. Careful attention should be
paid during the planning for your CRM roadmap to make sure each group
engaged in a project is getting at least some value from it.

Trying to Do Too Much at Once

Many a times, clients attempt to roll their entire roadmap into a single
project—this “big-bang” approach seeks to launch the CRM program for all
planned departments and all business functions in one shot. Although this
approach appears to have the advantage of achieving all the organization’s

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 INTRODUCTION

CRM goals in the shortest possible time, it is high-risk and has a number of
disadvantages when compared to a multi-project, roadmap approach.
Most of these projects collapse under their own weight—there are too
many stakeholders with conflicting priorities, there are too many
interconnections that paralyze every decision, and the project duration is
too long, resulting in team member and sponsor burnout and turnover.

The multiple-project approach, by contrast, offers a number of key

advantages:

a. Shorter, sequential projects translate to less time before the

organization starts to see value from CRM, helping to build momentum
behind the program.

b. Getting some processes and departments live while working on others

allows for lessons learned to be fed into future projects, increasing the
overall program quality.

c. Small, focused projects are easier to execute successfully—there are

few people and fewer “moving parts,” and the project objectives are
fewer and can be more closely aligned.

1.11 Misunderstanding About Customer Relationship

Management (CRM)

Many companies have misconceptions about CRM in regard to assessing

customer satisfaction in order to enhance business. There are several
misunderstandings in Customer Relationship Management to be checked
otherwise these may cost the organization revenue and profits.

1. Identifying CRM with a software system

CRM is a business strategy which consists of people and business processes

in addition to technological implementations. A successful implementation
of CRM is not possible without each one of them. So, CRM is not an IT
issue only to be simply equated to software. It would be improper to have
a successful business purely ‘technology-centric’ ignoring the importance of
people and processes. Software is only an enabling or a facilitating device.
The process is implemented and enabled by the software only when it is
properly designed and developed by people. Then only it can deliver

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 INTRODUCTION

customer and company value. Therefore, the right implementation

sequence has to be followed and it must include proper competencies and
people’s attitudes, the right business strategies and then the right IT
implementation.

2. CRM is a complicated system, difficult to understand

The meaning of CRM is simple – to fetch customers, retain them and

maximize profitability. Because of the fast developing technology, there is
pressure on IT professionals to cope up with the recent developments. So,
‘how’ part of implementing CRM may be felt difficult. But ‘why’ part of the
CRM concept is also not difficult to understand. If we go back to the times
when there was no IT implementation, still customer relationships were
being managed by keeping in mind a customer database. Now, in the
present times, technology is more advanced and the quality of customer
management have been entirely changed. But the core of CRM and the
target remain the same – to maximize business profits. Keeping this
perspective in mind, proper techniques must be employed to access its
utility.

3. CRM is expensive and unaffordable by small enterprises

It is a myth that IT maintenance cost is unaffordable by small and medium

class entrepreneurs. Nowadays, Application Service Providers with simple
and limited functions have been introduced to provide CRM at affordable
prices. Its operation is easy without involving expensive IT professionals.
Therefore, to target good results, emphasis should be on people and
procedure strategies and utilize software at the end part only.

4. Wrong assessment for the Return on Investment in CRM

In CRM implementation, Return on Investment means the evaluation of

returns with the costs incurred. CRM is sometimes regarded as giving a
poor ROI? It is the wrong way to think so. In fact, the probability of poor
ROI is more if CRM is not deployed and the opportunity costs are more.
The main causes of poor ROI are ignoring people and procedure strategies,
absence of quantified benchmarking to measure the results, lack of vision
in strategic acquirement of opportunities, etc. These are the points to
ponder before implementing a CRM.

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 INTRODUCTION

5. Who is responsible for CRM implementation?

The Marketing, Sales, Customer Service, or IT officials? It is not at all

advisable to lay the responsibility on all of them individually. The result will
be that none of them will feel his responsibility. The responsible person
should be the CEO who is the leader of the enterprise and it is he who
formulates and manages the business strategies. Why the other person
should be pressurized? In order to have a better success index, the CEO
and his immediate deputy should be well educated and trained for a better
implementation of CRM.

A better understanding of different dimensions of CRM therefore is a must

to potentially enhance the benefits of CRM implementation.

1.12 Summary

Building sustainable and successful relationships with a large customer

base is not the easiest thing to do and will have a direct impact on many
core operational processes from product development to debt recovery. It
is not purely a technical issue. It is not only about software
implementation. And it is not just about sales. It is about the interactions
of the entire business with the customers.

In its broadest sense, CRM covers all interaction and business with
customers. A good CRM program allows a business to acquire customers,
provide customer services and retain valued customers.

CRM applications often track customer interests and requirements, as well

as their buying habits. This information can be used to target customers
selectively. Furthermore, the products a customer have purchased can be
tracked throughout the product’s life cycle, allowing customers to receive
information concerning a product or to target customers with information
on alternative products once a product begins to be phased out. Repeat
purchases rely on customer satisfactions, which in turn comes from a
deeper understanding of each customer and individual needs. CRM is an
alternative to the “one size fits all” approach. In industrial markets, the
technology can be used to coordinate the conflicting and changing
purchase criteria of the sector.

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 INTRODUCTION

One business rule that has remained constant from the past, “The
Customer reigns supreme”. Successful organizations never lose sight of
their customer’s demands and are careful to keep track of their needs as
they change and evolve.

An organization can attract and retain customers by knowing and

delivering what they want, when they want and how they want it and
making it easy and hassle-free for them to interact with the customers.
Thus CRM solutions have become strategic requirements in a customer-
centric economy..

Companies want 360-degree View of Customers: Lindsey Armstrong

Shelley Singh, ET Bureau, Dec. 23, 2009, 12.26 a.m. IST

!
Lindsey Armstrong
Customer Relationship Management (CRM) remains one of the toughest
challenges for companies, even as they try hard to fathom what the
customer wants. Salesforce.com, the $ 1 billion provider of CRM products,
seeks to help companies understand the customer better. The company
offers CRM on cloud (web-based) and sees social networking media
impacting performance of brands. Salesforce.com has about 68,000
customers worldwide, including Rolls Royce and Cisco, and a few India
companies such as Bajaj Auto Finance, Apollo Hospitals and Indiabulls Real
Estate. In an interview with ET, Lindsey Armstrong – President,
International Field Sales, Salesforce.com talks about changes in CRM,
challenges before companies in managing brands and so on. Excerpts:

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 INTRODUCTION

How does CRM offered by Salesforce.com helps companies?

Large companies such as Cisco, Symantec, Merril Lynch as well as mid-

sized and small enterprises look for a 360-degree view of the customer.
They want to capture information and be able to segment their customer
database with high degree of granularity. CRM helps align sales effort with
marketing effort and helps target marketing dollars much more effectively.

With Salesforce.com, companies can create customized dashboards to

throw up information such as: What deals I’m closing this week, what
customers I need to pay attention, which country is doing well, which
representative is doing well, gaps in my products, and a whole bunch of
other metrics.

For instance, Rolls Royce is almost like a private bank with a very small
number of customers. It wants to offer highly-customized service with very
intimate relationship with its customers. So, it seeks enormous amount of
detail about its customers. such as their likes and dislikes so that it can
market itself properly to its unique customers. It is like a one-to-one
relationship, very different from mass market. We enable them to interact
with the niche customer base and deliver very customized services.

Today, the customer is often giving product feedback on the web,

on mobile etc. How does CRM track that? How is the service center
evolving?

Service centre is undergoing a dramatic change. The brick and mortar

operations with people waiting for the phone to ring and then everybody
leaping into action is a thing of the past. We believe that the conversations
around services are happening elsewhere—not over the phone, but on the
web, on Google, on Facebook on Twitter. Today, telephone is generally the
last port of call. Our system enables customers to track what’s going on in
the social networking media. That’s where your brand is being shaped
without your participation. CRM software helps pull that information into
traditional service centre environment, create cases out of it and is able to
communicate back and forth with what’s going on in Facebook, Twitter or in
Google, and leverage the wisdom of crowds on the web into the service
centre. There is going to be a lot of change in the future as to what the
service centre will look like.

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 INTRODUCTION

You mean, there’ll be a virtual service centre.

Physically, it could be the same. But the data feed will be completely
different. Right now, the service centre has two data feeds—telephone and
e-mail. Service centre of the future will be able to communicate with
different data feeds and be both proactive and reactive—push out
information about a product to Facebook and Twitter and pull out
information from there.

Service centre of the future will turn the wisdom of crowds into knowledge,
constantly updated into a Knowledge Management System. For example,
my BlackBerry went out in Melbourne. I put out a Tweet, saying
‘BlackBerry working fine, no idea what happened, went out suddenly’.
Someone suggested trying a different battery as sometimes if you use a
different power supply in a country, it doesn’t work. That didn’t come from
the service centre, but from someone who had gone through a similar
situation. Wouldn’t it be great if that information Tweet was pulled back by
and fed to me by the company?

Can you tell us about the cloud computing architecture to offer

CRM?

Cloud computing is not only a different way of building applications, it’s

also a different architecture for hosting applications. And at the heart of
that architecture is multi-tenant. There’s a single infrastructure in which
everybody has their own security down to field level and block level
security—it’s highly secure with shared infrastructure. It’s like an
apartment block with your own apartment in it. You lock the door and
secure it, but you share water and electricity and pay as you use. That is
the key operating principle of cloud computing and CRM on the cloud.

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 INTRODUCTION

1.13 Self Assessment Questions

1. Define CRM, explaining its various components.

2. What reasons do you attribute to the growing significance of CRM in

business organizations?

3. “Superior Customer Service would be the only differentiator in the

coming days.” Comment.

4. What are the challenges in the success of CRM?

1.14 Multiple Choice Questions

1. Customer Relationship Management is the most potent and _________

approach in maintaining and forging bonds with customers.
a. Technological
b. Scientific
c. Strategic
d. Personnel

2. Businesses realized that acquiring customers was only the first step in
the Marketing Cycle and then retaining customers and improving the
Service Standard were bigger challenges.
a. True
b. False

3. Which of the following is the major benefit of customer relationship

management?
a. Centralized Data
b. Marketing Automation
c. Customer Service and Support Solutions
d. All of the above

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 INTRODUCTION

4. The _________ must start by crafting a valid business case for CRM
before selecting a vendor, upgrading software, or launching a new
project.
a. Call Center Manager
b. CRM Executive
c. Project Leader
d. Stakeholders

5. Which of the following crucial factors are paying particular attention in

various stages that the company has to review and integrate its
infrastructures and business process?
a. Communication
b. Knowledge sharing
c. Both (a) and (b) of the above
d. None of the above

Answers:

1. (b), 2. (a), 3. (d), 4. (b), 5. (c)

References

• Dyche Jill (2006): The CRM Handbook, Pearson Education, Delhi.

• BCGsystems.com: The Evolution of CRM.

• Rai Alok Kumar (2012): Customer Relationship Management: Concept

and Cases, PHI Learning Private Limited.

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 INTRODUCTION

REFERENCE MATERIAL
Click on the links below to view additional reference material for this
chapter

Summary

PPT

MCQ

Video Lecture - Part 1

Video Lecture - Part 2

Video Lecture - Part 3

Video Lecture - Part 4

Video Lecture - Part 5

Video Lecture - Part 6


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Chapter 2
Customer-Centric Enterprise

Objectives

The objectives of this chapter are to know about:

• The Concept of Customer-centricity

• What defines a Customer-centric Organization
• Transition to Customer-centricity

Structure:

2.1 Customer-centric Enterprise

2.2 Customer-centricity Concept
2.3 Customer-centricity: A Hot Topic – Surprisingly – With Many Meanings
2.4 Characteristics of Customer-centricity
2.5 Benefits of Customer-centricity
2.6 Components of a Customer-centric Strategy
2.7 From Product-centric to Customer-centric – Taking the Plunge
2.8 How Do You Become Customer-centric?
2.9 Customer-centric – Myths
2.10 Transition to CRM: Processes, People and Technology
2.11 Consequences of Not Transforming to a Customer-centric
Organization
2.12 Success Factors to Becoming a Customer-centric Enterprise
2.13 Summary
2.14 Self Assessment Questions
2.15 Multiple Choice Questions

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2.1 Customer-Centric Enterprise

A growing number of organizations have come to accept that their

performance depends on applying a more customer-centric approach to
serving customers. This represents an evolutionary shift from focusing
merely on product sales and delivery to focusing more explicitly on
satisfying the needs and wants of today’s customers.

Definition:

Customer-centricity is a strategy that aligns a company’s development and

delivery of its products and services with the current and future needs of a
select set of customers in order to maximize their long-term financial value
to the firm.

While we would be discussing the various aspects of this definition, but the
one aspect which is basically the essence of Customer-centricity is: a
fundamental acknowledgment that not all customers are created equal, a
commitment to identify those customers who matter most; and a
willingness to dedicate disproportionate amounts of resources not only to
understand what those customers want – and by extension, create a
stable, lucrative and a profitable enterprise.

Then why it is that so few organizations actually practice Customer-

centricity. Customer-centricity requires that an organization be willing to
change their organizational design, performance metrics, and employee
and distributor structures to focus on the long-term creation and delivery
process. The challenges that come with the adoption of a truly customer-
centric approach are not insignificant. Customer-centricity requires major
organizational, structural, strategic and cultural changes.

Customer-centricity is a relatively new concept, dating only to a decade

ago. To a degree, we can already see the origins of the thinking behind
customer-centricity in the seminal articles of the mid-1990s which
described the ‘service profit chain’ for the first time. Sears was described in
the Harvard Business Review as having introduced a ‘change in the logic
and culture of the business’ by rebuilding the company around its
customers and ‘developing a business model’ (the employee-customer-

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profit model) that changed the way managers and employees think and
behave.

In the same year, the elements of the ‘service-profit chain’ were further
elucidated, describing the ‘propositions’ in the chain that linked employee
satisfaction, loyalty and productivity to customer loyalty in one direction,
and to company profitability in the other direction. Already these articles
presaged one key aspect of customer-centricity – the focus on employee
empowerment and flexibility at the front line of service delivery.

Also in the mid-1990s, Peppers and Rogers published their concept of ‘one-
to-one marketing’, the idea that companies should analyze the precise
needs of every customer and deliver a product or service personally
tailored to those needs, which presages another concept contained in the
customer-centricity movement; that of mass customization.

However, it was in 2000 that an influential academic in the marketing field

wrote a paper on the subject of customer-centric marketing and the term
thenceforth entered the vocabulary of popular management writers.
Customer-centric marketing as also defined as ‘understanding and
satisfying the needs, wants and resources of individual consumers or
customers rather than those of mass markets or market segments’. It is
argued that up to that point, organizations had placed the product at the
start of the planning process; customer-centric marketing on the other
hand places the customers’ needs and wants at the start. Drivers for this
shift in focus included the low productivity of the marketing department,
the increasing diversity of the market, and the advent of enabling
technologies.

Significantly, it is also pointed to a consequence of this shift for

organization structure and culture, as well as strategy. The customer-
centric organization would be one in which all the activities of a firm – both
customer-related and non-marketing functions – are aligned around
customer value-adding work. They also argued that the dominant ‘DNA’ of
the organization may have to shift from its origins (for example,
engineering or technology) to become customer-centric; and the dominant
leadership style would be crucial in adopting such a focus.

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Their original definition and analysis of the customer-centric organization

has been expanded by the industry of consulting and expert commentating
that has proliferated over the years. Of course, in many cases (and an
accusation frequently levelled at customer-centricity), it has merely
become synonymous with management fads around caring for the
customer.

Understanding what customer-centricity is, how to make it work and how

to make it pay back are very important issues for CEOs today. Perhaps
doubly so now that a ‘groundswell’ of customers are getting involved with
companies, talking about them to their friends, and serving themselves
and others on the Internet.

2.2 Customer-Centricity Concept

So what is customer-centricity and what is it of such importance? Rather

than create another long, wordy definition of customer-centricity, it makes
more sense to describe customer-centricity in simple terms and to show
the capabilities you need to put in place to become customer-centric.

To put it simply customer-centricity is:

1. Co-creating value with customers: It captures the fact that it is a

collaborative thing together with customers. It also captures the fact
that it is about mutual value creation for customers and the company.
But it doesn’t capture what you need to do to become customer-centric
and how it co-creates value with customers. That requires that we look
at the five core capabilities which together provide a foundation for
customer-centricity. And that may even provide you with a temporary
competitive advantage in a corporate world struggling with the move
away from product-centricity.

2. Deep understanding of customer outcomes: It goes without saying

that customer-centricity requires a deep understanding of customers’
needs, wants and expectations. But these insights are notoriously
difficult to get and even more difficult to apply. Fortunately, there is a
better way. Customer-centricity only requires that you understand what
‘jobs’ customers are trying to do and what ‘outcomes’ they are looking
to get done. And what better way to get them than through engaging
with customers directly in customer-driven innovation. Customers who

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are pushing the boundaries of what your products were originally

intended for are often surprisingly willing to engage with business,
particularly in co-creation. And as innovation giant 3M has shown,
engaging with lead customers in this way often produces better
products, that are easier to make and are more profitable than
internally-developed ones. These customer-driven insights provide the
starting point with which to start on the journey towards customer-
centricity.

3. Mass customization of products, services and experiences:

Customers tend to want exactly what they want. Nothing more and
nothing less. That can be difficult if your products aren’t exactly right.
One way round this impasse is to adopt a mass customization approach
to products. Rather than specify the final product in the usual take-it-or-
leave-it way, each of the individual components which make it up and
how they can be fitted together dynamically to make the final product
are specified instead. With the right configuration system, customers
can customize products just how they want them from a catalogue of
components and automatically price the final product.

4. Dynamically, reconfigurable delivery system: Not only do

customers want exactly what they want, but they are forever changing
their minds too. Companies need to be able to reconfigure their delivery
systems dynamically to respond to customers’ changing needs or to
structural changes in the business environment. This requires not only
that you look at a company as a collection of capabilities, but also, that
you dynamically reconfigure them as things change. As Stephen Haeckel
describes in his book ‘Sense and Respond’, this enables the company to
sense, adapt and respond to changes before competitors can do.

5. Lean business support systems: All of these sounds expensive. But it

needn’t be if you adopt a lean approach to capability building. That
means building business support systems that enable customers to
control product delivery exactly as they want it, where they want and
when they want it, rather than producing products for stock. This not
only reduces increased satisfaction all round, as customers are in charge
of their own destiny, it also reduces non-value-adding waste to a
minimum. This can be as much as 40 per cent of all activities in most
companies. Industries from manufacturing, through telecoms, to

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healthcare are all profiting from applying lean thinking to their business
support systems.

6. Customer value management across the customer portfolio: As

George Orwell might have said about CRM, “all customers are equal, but
some customers are more equal than others”. This applies to customer-
centricity too. Customers with a high-value should be managed
differently to customers with a lower value. That doesn’t mean treating
low-value customers badly (anyone from Sprint listening?), but it does
mean giving them different mass customization options and charging for
them accordingly. But managing customers individually by their value
isn’t enough. Customer-centricity also means managing the portfolio of
customers for value as a whole. And balancing business activities to
maximize the value of the whole portfolio of customers, not just the
obvious high-value ones.

2.3 Customer-Centricity: A Hot Topic – Surprisingly – With

Many Meanings

According to the researchers, various terms like customer service, contact

centers and, well, customer-centricity, the term customer-centricity is
extremely popular nowadays as if it’s something new and even hyped.
Shock! The topic Customer-Centricity lately, to our surprise observed that
it turned out that the “topic” is hot once again.

Organisation-Centric Culture Customer-Centric Culture

What Products Can We Sell To What Does Our Client Need To Get
Our Clients? Done Now And How Can We Help?
What Services Can We Sell To What Relationship Do Our Clients
Our Clients? ! Expect Us To Establish With Them?

What Relationships Do We Need What Value Do Our Clients Need To See

To Establish With Our Clients? Before They Are Willing To Pay?
How Can We Make Money From
Our Clients?

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The message is clear: organizations are advised to become more

customer-centric, much more. And apparently, there are big bucks involved
in helping them to be. So, it should be on the priority list of executives
across the globe. And, as you probably know, it is, along with the customer
experience.

Customer-centricity and customer experience is in vogue at the moment.

All the major consulting houses have large expensively assembled practices
dedicated to it and every organisation seems to have stated strategies or
ambitions to deliver customer-centricity. The obvious place to do some
fact-checking: Google Trends. And, indeed, customer-centricity seems to
trend.

Why is customer-centricity “hot” (again)?

A question that immediately comes to mind is of course why now or better:

why only now? We know the answer. It has to do with a shift in control; it
has to do with an increasingly digital customer, increasing expectations,
the fact that people like you and me want consistent experiences. The
latter, simply said, means that, as mentioned, they don’t want to
experience the organizational silos and disconnects that can make life so
exhausting. They see a business as a whole and they want to be seen as a
whole as well. Not as an email address or a segment or a series of
interactions with various departments that don’t speak to each other with
the frustrating consequences we all know. This is the kind of stuff that
people who have been customer-centric before digital tools existed or call it
customer-oriented which some say is not the same and people who care
about customers and all sorts of digital marketing and user experience
folks, etc. know since quite some time now. It’s what the call center agents
that cared enough to let angry customers shout because they knew it
mattered and could make a big difference know since decades. It’s
common sense. But common sense and business aren’t exactly synonyms.

Customer-centricity, after having known a peak period in the days when

Customer Relationship Management became popular and CRM vendors
promised everyone they would be more customer-centric buying with this
great new software but we know what happened, right?, today is hot
again.

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2.4 Characteristics of Customer-Centricity

There are many companies who have adopted this approach to customer-
centricity. One of which is sports equipment company Adidas. It has
brought together all of these capabilities in its ‘mi adidas’ portal. Not for
the cost-conscious customer, mi adidas allows customers to mass
customize a range of high-performance sports shoes to their own
specifications. And this co-creation doesn’t stop there. Adidas continuously
learns from its customers as they use their shoes and feedback their
changing requirements to the company, creating a sticky ‘learning
relationship’ with their most demanding customers. With high-performance
athletes getting through sports shoes at a rate of one pair every two to
three months, this is a learning relationship that serves both Adidas and its
customers well.

Every organization says its customer-centric; many even go as far as to

include words in their mission statement saying how customer-centric they
are.

Sadly ‘customer-centric’ is one of those terms that have been devalued.

Here are 15 of the characteristics of truly customer-centric organizations.

Characteristics of Customer-centric Organisations

• The organization is designed from the outside in to help make a client’s

interactions with the organization easier, cheaper, faster or more
enjoyable.

• The needs of the client come first.

• The internal mindset is to support sales whenever possible.

• The organization’s people are engaged with the organization and its
business and morale is high.

• People who deal directly with clients are empowered and valued.

• Customer service and retention has equal priority with sales.

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• People whose roles are not normally customer-facing are willing to take
part in the sales process.

• Customer satisfaction and feedback are taken very seriously.

• Products and services are described in terms of how they help clients.

• The organization is happy to match its selling process to the client’s

buying process.

• Progress reviews with sales look forwards in a supportive way rather than
backwards to allocate blame.

• Motivation and incentive schemes support every function engaged in

client development.

• People recognize the explicit or implicit promise that exists between the
supplier and client and they hurt when this promise is unfulfilled.

• Everybody in the organization from the top to the bottom shares these
principles.

• The organization’s working environment and practices support people to

work in the client’s best interests..

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2.5 Benefits of Customer-Centricity

Transforming a business into a customer-centric organization requires more

than effective alignment with customer demands. Success stems from the
ability to demonstrate rapid flexibility and the ability to innovate even the
most mundane of organizational touchpoints. If organizations can
demonstrate this flexibility, they stand to reap numerous benefits that
include the following:

1. Fulfilling the brand promise and delivering the right value at the right
price.

2. Increasing profitability by delivering a cost-beneficial experience based

on customer value.

3. Delivering a competitively superior customer experience.

4. Increasing revenue by targeting the right prospects and customers.

5. Improving the accuracy of revenue and profit forecasts.

6. Improving sales conversion rates.

7. Increasing customer satisfaction and loyalty.

2.6 Components of a Customer-Centric Strategy

Developing a customer-driven workforce is one of the key roles of

customer service leaders and managers – but how can they successfully
achieve this? Turning a customer service strategy into reality is a key
challenge for organizations. Today, most senior managers realize that
customer service is the competitive strategic weapon but achieving this is
sometimes a major challenge. Organizations are their people, and
developing a customer-driven workforce has to be the key role of customer
service leaders and managers… so how can they do this?

Peter Drucker famously said: “The purpose of business is to create and

keep customers,” so every business needs to organize its service delivery
system around the needs of its customers. This means firstly designing a
customer service strategy that will put customers at the heart of your

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business. Senior managers need to ask themselves, “Are we doing

everything we can to create the best possible experience for our
customers?” Perhaps some senior managers assume that because their
marketing departments communicate that the organization’s service
delivery “exceeds customer expectations,” that they actually do. Such
attitude is suicidal for businesses.

Employees are the ones to leave a first impression – and a lasting

impression – on your customers. They also intimately understand
customers’ frustrations and they often know how issues can be resolved,
but are not empowered to make the necessary changes.

In India, we are now predominantly a service economy, so we increasingly

need high performance people to keep our customers loyal. Poor customer
service is not acceptable as companies that increase customer interaction
investments during a recession can improve profit margins, sales and
market share over complacent competitors. It is critical for organizations to
retain every customer and maximize their lifetime value.

Research shows that organizations with a reputation for service excellence

have on average a 24% higher net profit margin than same-sector rivals
who do not have the same standing – and they can achieve up to 71%
more profit per employee. Are businesses listening?

Let’s assume there are still many organizations out there that still do not
know how to establish a strong customer base, so what do they have to
do? Lets get customer-centric and here are ten key components, tried and
tested, which will help organizations get started.

Components of Customer-centricity

• Customer insight: Get to know the customers and understand what

they expect from the organization. How many organizations conduct
mystery shopper activities for themselves? Where they do it can be scary
but enlightening. Get to know the internal customers too – the
workforce. Customer service managers need to focus on all their
customers consistently and there are many ways of gathering customer
intelligence. This does not mean the odd customer satisfaction survey;
not because most organizations disregard the feedback or do not
interpret them properly, but because many organizations create them

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with a primary intention of achieving good results! They sometimes only

ask the questions that will highlight their good practices.

Also, where satisfaction surveys are concerned doesn’t the customer

experience depend a lot on customer expectations in the first place?
Deccan Air might score highly because we have low expectations, but we
might score Jet Airways lower because we have high expectations.
Organizations need more reliable methods of evaluating the customer
experience and they need their people to make this happen.

• Create the service vision or service personality: This is an

identifiable set of service characteristics that define how an organization
service proposition is different from that of its competitors. Some
organizations have their own credo, others have a service promise or a
customer charter but whatever method one has of communicating one’s
service standards to one’s customers it is important to make sure those
promises are achievable and shared by all teams in the organization.

• Develop a customer service strategy: This determines the overall

direction of the organization, and, in particular, how the organization will
go about delivering customer service excellence. This is a high level plan
that communicates to everyone involved with the organization how it will
develop relationships with its customers, in order to maximize customer
satisfaction and customer loyalty, and achieve business success. It is
commonly used to prevent non-aligned and disjointed activities between
departments and drives everyone towards the same service goals. It
includes a service/operational plan to ensure that strategic objectives are
met and this should be shared with employees as everyone is going on
the same journey. Communication is key; if you do not keep your people
informed, rumours and gossip spread fast which can lead to negativity
and once embedded it is hard to eliminate.

• Build an appropriate customer service framework: A learning and

development framework will help identify how the organization is going
to go about delivering service excellence. Reward and recognition,
celebrating success are key motivators for employees so use them to
deliver your service strategy. Customer service performance will improve
when organizations provide support through valued reward and
recognition systems. This level of recognition results in higher levels of

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employee satisfaction which translates into better customer service for

your customers.

• Deploy executive service leaders and managers who will become

the organization’s service champions: Service leaders and managers
can make or break an organization’s values; a leader who successfully
creates a customer-focused culture will have a huge impact on business
success through employee retention and customer loyalty. Ensure that
your leaders and managers have the right skills, dedication and are
passionate about service excellence, customer-focused and are results-
driven. Leaders should possess strong business acumen, be strategic, but
lead by example, inspiring trust and embedding a no-blame culture
within the organization. Critically, they must encourage positive
teamwork.

• Recruit high-performance, intelligent and well-motivated people

with a ‘can-do attitude’: You want people with a customer-focused
mindset. Once in place, develop their knowledge and skills for delivering
service excellence against competencies that are customer-focused –
good communication skills, tolerance, empathy, good judgment and the
ability to interpret service issues and respond appropriately according to
the organization’s rules.

• Create innovative products and services with the support of all

your people: Inspire your organization to develop a culture of
continuous improvement and innovation for the benefit of your
customers. Employee suggestion schemes have helped many
organizations implement change which has improved service delivery for
customers but even those organizations that have the answers today
cannot assume they know what their customers will want tomorrow.
Customer’s expectations have become demands and successful
organizations will already be anticipating customer’s demands tomorrow
to stay ahead of the competition.

• Design and implement customer-centric processes that make

purchasing easy for customers: Processes should be seamless,
designed from the customer’s viewpoint and be consistently reviewed to
make transactions simple and stress free. This includes making it easy
for customers to complain, remember complainants are your most loyal
ambassadors if their complaints are handled professionally. Organizations

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seldom achieve competitive advantage through their technology and

processes alone; it may add value but only if there is a parallel
investment in their people who have to work with the technology to
assist customers.

• Create performance metrics so that the organization can

routinely and accurately assess its effectiveness for customers:
Use appropriate tools, proven methods, for measuring your customer
satisfaction, remember that customer service as a whole includes a wide
range of specific service characteristics and there are many touchpoints
where customer transactions take place. It is important to check on
customers’ perceptions of your service levels at each of these
touchpoints and compare the results with what actually takes place. In
other words, identifying your gaps!

• Manage customer relationships: Products and service alone will not

develop relationships with customers. The organization must deliver
something of value to ensure loyalty. Loyalty is created when you provide
a level of service that exceeds expectations and which delights your
customers. Managing customer relationships is about establishing,
maintaining and enhancing relationships with customers for mutual
benefit. This takes us back to the beginning, to learning more and more
about our customers in order to deliver what they expect. If your people
can be encouraged, not only to deliver the promise, but also to go the
extra mile, this goes a long way towards sustaining a fantastic
relationship with your customers. You will reap the rewards in loyalty,
increased reputation and business success. One can emphasize at this
point that although CRM is a term given to the management of customer
relationships in high volume consumer services, its prime objective is to
collect data from different departments to enable the tracking and
analysis of customer’s transactions and trends. Although particularly
valuable, it does not replace the personal touch.

By successfully implementing all these components, you will begin to

create a customer-focused culture. There is no quick fix, but eventually you
will influence the behaviours of all your people so that when new recruits
join the organization the service culture dictates: “This is the way we do
things around here”. The customer determines what Best Practice is and
they expect the highest possible service, the most innovative products at
the right price and they want them now.

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To achieve service excellence, organizations must make excellent service a

priority and ensure that their service leaders and customer service
managers possess the necessary skills to support all customer-facing
teams, whether front office or back office; they should all interact in a
carefully designed way to ensure that the customer has a fantastic
experience with your organization.

It is no longer appropriate to simply focus on product and/or services.

Instead, organizations must truly understand the emotional interactions
between their team leaders and managers, employees and customers,
because this is what determines whether an organization achieves business
success or not.

Example: Club Mediterrane on the Airport

A group of vacationers was completely ready for a great vacation, when

they found out their flight had a 6 hours delay. On top of that, two extra
stops were added to the flight, which made the journey last 10 hours
longer than expected.

This amount of delay wasn’t foreseen, and therefore there was too
little food and drinks on the airplane. All vacationers turned really moody
and directly started talking about compensating claims.

When this news reached the Club Mediterrane’s director, he directly went
to the airport, armed with a part of his crew. Straight after the airport
customs, they installed themselves with food and drinks. Afterwards,
vans brought all guests to the resort where a huge banquet was awaiting
them, followed by a party.

This made the guests’ total experience much better than when this had
never happened. The director didn’t have to arrange all this, after all this
was the airline’s fault, not his. But he would’ve had grumpy guests that
wouldn’t enjoy their stay, and they would probably never return to his
resort again. After such a fantastic experience, many guests returned the
next year and recommended the resort to others: many more new
guests!
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2.7 From Product-Centric to Customer-Centric – Taking

the plunge

Despite their best intentions, many product-centric companies have been

unable to successfully transform into customer-centric organizations.
Research of successful and unsuccessful organizations highlight what is
among the greatest challenges facing attempts to become customer-centric
– the “inherent conflict.”

Fig. 2.1 below illustrates this challenge. The circle on the left hand side
depicts a classic product-centric ecosystem with the product or service at
the center of operations. These operations focus on everything relating to
the product including product development, channel distribution and a host
of related issues. The two gravitational forces affecting business operations
are how to increase margins and reduce costs.

The right hand side of the graphic highlights a customer-centric ecosystem

with the customer at the center of operations. In such organizations, all
business decisions include an analysis of the impact on the customer.
Everything from the customer’s state of mind, needs, hopes and dreams

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are taken into account when designing experiences for customers. In these
customer-centric organizations, the two gravitational forces affecting
business operations are how to increase a customer’s experience
satisfaction and lower costs. To lower costs while increasing experience
satisfaction, companies must increase the relevance of their customer
experiences. The “inherent conflict” lies between these two ecosystems.
For product-centric companies, lowering costs often equates with lowering
the quality of the customer experience – leading to customer demands for
lower prices. Past experiences confirm that product-centric companies
often accelerate their own commoditization by failing to understand the
customer ecosystem, and opting to make business decisions based upon
their gravitational forces rather than those of their customers.

Closing the experience gap between customer-facing and back-office

functions is not merely a philosophical discussion but represents a pressing
operational challenge. While sales, marketing and customer service
continually strive to increase the experience variability according to the
customers’ unique needs and challenges, back-office touchpoints
continually strive to decrease the experience variability through six sigma
and related methods.

What many organizations fail to recognize is that these two approaches

cannot coexist without damaging the customer relationship. Since
employees in back-office functions act as experience enablers where their
actions enable their counterparts in customer-facing functions to deliver
high quality experiences to customers, it is incumbent upon organizations
to ensure that both the back-office and customer-facing functions work
collaboratively to ensure the consistency and quality of the experience.
However, until back-office functions develop a performance platform that
allows them to treat each customer individually, the organization will
operate on a product-centric model leading sales and marketing personnel
to make promises that they will be unable to fulfill.

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2.8 How Do You Become Customer-Centric?

To really move towards a customer-centric approach, you need

responsibility and ownership. Someone needs to be responsible to create
that culture with apologies to the anthropologists, identify the gaps, and
connect what needs to be connected, define customer-centric KPIs, watch
over them and, in the end, be responsible for the customer.

Some organizations try to do this with the new executive role such as the
Chief Customer Officer. Others hire a Chief Customer Experience Officer,
put another C-level exec in charge (sometimes the CMO) or create some
kind of committee or Center of Excellence with a board. Whatever way you
organize it, you need to make people responsible. Add customer-oriented
goals and KPIs to the scorecards or bonus plans in several cases because
change is not always easy nor is buy-in and you need to act as an
organization across all departments, processes and silos – ultimately.

Of course, before you get there, you also need to start somewhere. And,
although responsibility and ‘leadership’ are essential, we have also seen
some exceptions on that rule where the move towards customer-centricity
didn’t come from the top but was embraced by the top. The proof of the
pudding when improving the essence and low hanging fruit can help make
a big difference, especially when there’s room for passionate people to take
initiative.

By the way: the call to put someone in charge of an essential part of the
overall customer-centric picture, the customer experience, isn’t new. It’s
probably not a coincidence. We focus on larger organizations here, just as
it isn’t a coincidence we see most CCOs in larger organizations. They need
them.

A final note on responsibility and ownership: it’s not the same as ownership
in the sense of “sole responsibility”. What we noticed in the beginning of
the millennium when the concept of the CCO became reality was that very
quickly discussions started about to which department the CCO should be
below. We feel that’s exactly the kind of questions we don’t need to look at
first. It’s probably not a shock if they say that many divisions don’t really
trust, let alone know, each other. If you are in that situation and you say
the CCO has to be part of marketing, for instance, you just might have a
recipe for failure. So, assigning responsibility is key. A second crucial

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element, probably even more important, is to actually bring in the

customer but that’s for later.

9 Ways to be More Customer-centric

Do you really want to be a customer-centric company? It sure sounds

good. But if you’re an established company with siloed data, lack of
customer knowledge, and a rewards structure that prioritizes generating
revenue over meeting the needs of your customers, then you have some
work to do.

The list of potential opportunities to improve is a long one; this one isn’t.
That’s because it’s meant to get you thinking and developing your own
solutions specific to your organization.

1. Listen to your customers. We’re not simply talking about satisfaction

surveys or asking “the ultimate question” to track a Net Promoter score
—though this can be part of the equation. The issue with these solutions
is that they don’t point toward the problems or delights that drive those
scores. Listening to your customer means asking them what they think
—and why. Then acting on it.

2. Remember: Customer perception is reality. The quality of your

customer experience lives in one place: the mind of your customer. No
matter how well you think you’re doing, the gap between customer
expectations of experience and their perceptions of actual experience is
the reality you need to understand and address.

3. Make your customers part of the solution. Involving the customer

in the design process—experiences, services, products, or physical
environments--has been around for a long time. It boils down to this:
Don’t make decisions about what your customers might want or need
without taking their point-of-view into account.

4. Map your customer’s journey. A customer journey map allows you to

“walk in your customers’ shoes” by travelling with them as they interact
with your company. Research-based and focused on desired outcomes
from the customer’s perspective, you’ll see what their needs are at each
interaction, how well you meet them, and where opportunities for
improvement lie.

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5. Monitor customer interactions. Customer listening is just that:

listening. Monitoring is critical, as well, because only you know all your
touchpoints. Pulsed, planned, or transactional surveys, call-center logs,
complaint lines, web feedback and social media commentary, monitor
your performance in all of these places, and more. Set KPIs based on
customers expected and your planned experience, and monitor to see
how well you do.

6. Get your data together. Most established companies keep customer

data in silos across the enterprise: sales data in one bucket, marketing
data in another; product and service somewhere else, and digital data
another entirely. All of this customer data needs to be integrated and
easily accessible across your organization, so employees can truly “see”
the relationship between you and your customer, and make decisions as
a result. This is one of the greatest challenges faced by big companies,
and one of the most important to solve.

7. “See” your customers digitally. Every transaction between your

company and your customers generates data about that transaction.
Each online or mobile interaction generates “digital data trails” that can
be stored and analyzed. Looking at your customers through the lens of
your digital relationship will provide valuable insights into behaviour that
can help you radically improve customer experience.

8. Define your customer experience strategy. Customer experience

strategy flows from your company’s business and brand strategy. Just as
brand strategy creates and manages customer expectations of a brand,
your customer experience strategy is your plan to meet or exceed those
expectations. With implications for virtually every aspect of your
company, it’s the vehicle through which you can turn customer
expectations into reality.

9. Empower and reward your employees. In the quest to be more

customer-centric, your employees are the frontline. They boast a wealth
of insight about customers and internal operations, and can quickly
improve customer experience through one-on-one interactions and
behind-the-scenes decision-making. Yet many companies have reward
structures tied only to revenue, versus meeting the needs of customers.
They don’t empower employees to make the decisions required to meet
those customer needs.

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Now that you’ve known this list, where can you take advantage of these
opportunities in your own company and what further ideas can you add to
this list? Consider that the secret to customer-centricity is based on
designing your world around an understanding of your customers’ needs—
and a focus on actually meeting those needs.

2.9 Customer-Centric–Myths

Adopting a customer-centric business strategy requires a carefully planned

and executed organizational transformation. That kind of change alone is
difficult enough without the added pressure of unfounded fears and flawed
assumptions.

Customers at the center of their business strategy will help you build the
case for change by providing you with key data points to support your
initiative. New report dispels some of the common myths about
transformation or misconceptions that can lead marketers down the wrong
path by instilling either excess confidence or unnecessary fear.

We are sure there is a no other better time than right now to be in

marketing. Marketers can achieve more for their companies today than
they've ever been able to achieve in the past. The ability to do that and to
show that you can produce incremental production and incremental
revenue for your company is an imperative.”

The Myths

Myth # 1: “We don't need to waste time (and money) on planning.

We know what we want to do.”

Shortcuts can be dangerous in a customer-centric transformation initiative.

Invest in the time and resources required for up-front planning and
roadmap development. Set budgets, roles and responsibilities, and
measurement benchmarks.

Myth # 2: “Getting the technology right will be the hardest part.”

While the critical technology aspects of customer-centric marketing are

complicated, expensive, and ever-evolving, it turns out the most difficult

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challenges to conquer are the people-related factors. Lack of leadership

and organizational adoption will ultimately sink the initiative.

Myth # 3: “To make this initiative worthwhile, we need to go big.”

It’s important to see results quickly and build momentum toward the
desired state, but if your scope is too ambitious, the change can be
overwhelming and result in a breakdown. Learn from failures along the way
and be nimble enough to make adjustments to optimize the payoff.

Myth # 4: “It will be simpler to get this done by keeping the team
small.”

For transformation projects to succeed, they must span organizational

functions, channels, and product lines. Disparate teams must put aside
competing objectives and work in an integrated fashion toward common,
measurable goals.

Myth # 5: “We’re all set. Our executives are aligned with the plan.”

The philosophies of a customer-centric approach are so compelling; it’s

easy to gain executive support for the idea. The challenge is in the
commitment of leadership, time, money, and other resources that make
the transformation a reality. Move from permission to sponsorship.

Myth # 6: “We’re a smart group, we can do this ourselves.”

The most dramatic difference between the ultimate success and failure of a
transformation initiative is its likelihood of having a team with the right skill
set. Find the right combination of in-house capabilities and outside service
providers with deep expertise in the most complex and revolutionary.

Adopting a customer-centric business strategy requires a carefully planned

and executed organizational transformation. That kind of change alone is
difficult enough without the added pressure of unfounded fears and flawed
assumptions.

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2.10 Transition to CRM: Processes, People and Technology

CRM success requires the seamless integration of every aspect of business

that touches the customer—including people, process, and technology—
revolutionized by the Internet. Each component presents significant
challenges, but it is the ability to integrate all three that makes or breaks a
CRM system.

People

The people component is the most difficult component given the sensitivity
of users to change. CRM systems, which support and/or automate
integrated customer processes, often imply changes in the way users do
their day-to-day jobs. Users who have not properly understood the reasons
for the change, who did not participate in formulation of the change, who
did not receive sufficient information about the change, or who did not get
sufficiently trained on the change will often be adverse to that change. The
story of “the rotten apple spoiling the lot” is relevant here since negative
feedback can substantially harm a CRM system’s success.

Process

The process component of CRM is the most delicate because inappropriate

automation of the CRM business process will only speed up the errant
process. While most companies do have customer-facing business
processes in place (i.e., processes that directly interface with the customer
during the purchase, payment, and usage of the company’s products and
services), many times these business processes need to be updated or
even replaced.

To realize effective process change, a company needs first to examine how

well existing customer-facing business processes are working. Then the
company needs to redesign or replace broken or non-optimal process with
ones that have been created and/or agreed upon internally. In other words,
while it is not wrong from an educational perspective to look at built-in
processes within a CRM software package, new processes tend to stick
better when the process had been internally driven. Companies pursuing a
CRM initiative often make the dangerous mistake of trying to correct their
own customer-facing process deficiencies not by agreeing internally on how
users would like a process to be done, but rather by purchasing CRM

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software that contains one or more business processes that have been pre-
built by the CRM vendor and then forcing the “not-built-here” process upon
system users.

When reviewing your customer-facing business processes, use a structured

approach. For example, does each customer-facing business process have
clear ownership, goals, and measures?

Does each process have proper departmental interfaces that ensure that
the needed customer information flows across multiple departments?

Does each process have documented procedures?

Does each process have integrity (i.e., the process gets implemented the
same way regardless of who implements it and where)?

Technology

The technology component is the most overwhelming given the ever

expanding number of technology offerings and alternatives. There are two
issues related to technology: dealing with CRM software vendors and
staying on top of CRM technology trends.

CRM Software Vendors

Today’s CRM technology will address most, if not all, CRM user
requirements. Moreover, there are dozens of competent, financially sound
CRM vendors to choose from.

Nonetheless, can the CRM vendor’s offering deliver what it promises to

deliver? The response to this question is not always evident. Here are a few
examples. In one case, a leading CRM software vendor claimed its software
seamlessly integrated with all back-office systems. Only after the software
had been purchased did the purchasing company realize that the
integration was not so seamless and required an extremely expensive piece
of Enterprise Application Integration middleware to seamlessly connect to
its SAP back-office system.

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In another case, a leading CRM software vendor claimed that all CRM
system users needed to purchase their customer service base module if
users expected to exchange data between the sales, marketing, and
customer service functions. Fortunately, the purchasing company learned
that this was not necessary since all functions could easily draw and share
information from the common database regardless of the base module
used. The purchasing company came very close to paying a hefty sum for
unnecessary software.

Keeping Up with CRM Technology Trends

As concerns the second issue related to technology, namely staying on top

of CRM technology trends, this has become increasingly difficult as a result
of the proliferation of CRM technologies available in the marketplace.
Rather than making the error of trying to keep up with each new
technology, companies are well advised to track those technologies that
are most likely to impact the CRM industry’s future as well as their own
company’s CRM efforts.

This may include, for example, customer self-service applications built on

top of an effective knowledge base, e-marketing applications such as
permission-based direct marketing, wireless and voice recognition
capabilities, or the use of major framework tools to consolidate and
enhance n-tiered architectures within a CRM implementation. While it is
unreasonable to even imagine learning about every new technology trend
that is likely to impact CRM, try to keep up-to-date on the big ones.

Integrating People, Process, and Technology

Personnel responsible for delivering successful CRM initiatives acknowledge

the above people, process, and technology issues. More importantly,
though, these personnel understand that during the life of the CRM
initiative, the integration mix of people, process, and technology will
change.

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Table 2.2: Developing the Right Mix of People, Process and Technology

Key CRM Implementation Activities Most Relevant Components

Determining business requirements People, some process

Integrating legacy and other needed systems Technology

Customizing the CRM software People, process, technology

CRM system pilot People, technology

CRM system roll-out People, technology

CRM system support People, some process

Growing your CRM system People, process, technology

Table 2.2 provides a generic model for understanding how the people,
process, and technology mix changes for key CRM implementation
activities. This generic model needs to be adjusted for your company,
taking into account that different companies will realize key CRM
implementation activities at different speeds. Let’s look at a few of the CRM
implementation activities in Table 2.2 to better understand the dynamics of
getting the mix right. To determine business requirements, a company will
want to apply a structured process to ensure that user needs are properly
identified and prioritized. Most of the effort for determining business
requirements, however, will deal with people issues, namely working with
potential users to help them think through their existing and potential
business requirements, and to help them manage their expectations
concerning how the CRM initiative is likely to impact these requirements.
Technology plays a minor role at best in determining business
requirements.

Similarly, when a company is ready to set up their CRM project

management team, the people component plays a critical role (e.g.,
agreeing on who is responsible for which CRM implementation activities).
Process (how to optimally set up the project management team and sub-
teams) is also important.

Technology, however, plays a minor role at best in setting up the CRM

project management team.

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Yet when the company is ready to begin integrating legacy and other
needed systems, technology plays the critical role. The selection of an
appropriate Enterprise Application Architecture (EAA), agreement on
appropriate frameworks or the use of middleware toolsets, etc., will greatly
impact the effectiveness and efficiency of systems integration. People may
insist that their system needs to be integrated first, and there should be a
process for determining which systems to integrate and in which order, but
overall technology drives this activity’s success.

As a last example, when performing CRM software customization, all three

components play critical roles. Technology is the key for developing,
modifying, and deleting screens and for navigating between screens.
Process is important for driving workflow development (which, in turn, gets
built by technology). People are critical for ultimately judging how well the
customizations meet their needs as well as for commenting on how the
work flow impacts the overall user-friendliness of the system..

2.11 Consequences Of Not Transforming To A Customer-

Centric Organisation

The failure to adopt customer-centric business models comes with a steep

cost. In a world where customers demand individualized treatment,
companies that continue operating under product-centric business models
and treating customers through a one-size-fits-all (OSFA) prism will suffer
a number of adverse consequences:

1. Wasted Resources: Treating customers through a one-size-fits-all

model leads companies to unnecessarily waste valuable resources.
Organizations frequently fall into the trap of treating profitable and
unprofitable customers identically and do not allocate or prioritize
limited resources according to customer value. As a result, the best
talent and most expensive channels are often allocated to customers
who are often unprofitable while lower quality talent is unintentionally
allocated to or extensively used by profitable customers. This scenario,
so common among many organizations, has a debilitating affect on the
loyalty of profitable customers and the profitability of “lower-end”
customers.

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2. Sales Misalignment: Under a product-centric business model, sales

personnel pursue orders and respond to customer requests in a
disjointed fashion. Closely related to the aforementioned “wasting
resources” example, sales will often fulfill countless requests for
alignment meetings, escalations and on-site visits to satisfy their
customers, irrespective of customer value. Instead of pursuing
additional business and concentrating on their most profitable
customers, they treat all customers similarly and consequently, fail to
retain the current volume of business and generate new business from
new and existing customers. Aside from the effect on customer loyalty
and their own profit and loss, this leads to lower employee productivity
and morale.

3. Disappointed Customers: As customers increasingly seek

personalized experiences, they will ultimately reject a one-size-fits-all
value proposition. This disappointment will not be relegated to customer
satisfaction metrics in surveys but will manifest itself through decreases
in the size and frequency of purchases, higher attrition, negative word-
of-mouth and increased demands for discounts.

4. Unproductive Working Environment: The lack of coordination

between customer-facing and non-customer-facing business functions
often results in organizations constantly operating in “crisis mode”
characterized by a chaotic, frenzied and jaded environments adversely
affecting customers and employees alike. This chaos not only wastes
limited resources but demoralizes employees who are trying to perform
their jobs effectively and help customers. Moreover, chaotic work
environments impede an organizations’ ability to innovate the customer
experience and provide value to customers during each interaction.

5. Decreased Loyalty: One-size-fits-all treatment of customers ultimately

fulfills the needs of only a small portion of customers. Many companies
fail to recognize that there is no such thing as an “average” customer.
Each customer is different and needs to be treated as such or else he or
she will seek a competitive alternative that better fulfills his or her
needs. However, rather than focusing on the impact to customer loyalty,
executives focus on cost reduction initiatives and process redesign
programs – issues rarely of concern to customers. When these
executives finally recognize that they are not delivering the right value
to customers, they discover that improperly designed cost reduction

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initiatives and one-size-fits-all processes come at a steep price –

customer profitability and loyalty.

To cite an example, an External Consultant discovered that although a

number of customers had outstanding invoices that were overdue by at
least one year, sales personnel nonetheless continued taking orders and
approving product shipments to those clients. Similar scenarios take place
in many siloed companies where departments operate without visibility into
complete customer value and history, enabling customers to take
advantage of corporate blindness and continue receiving products without
paying for them.

2.12 Success factors to becoming a Customer-Centric

Enterprise

Successfully evolving into a customer-centric enterprise requires that

organizations incorporate several important elements into their customer
strategies. Speeches, proclamations and posters will, by themselves, never
suffice to drive organizational transformation. Organizations must develop
and implement detailed and substantive plans to usher in a customer-
centric environment that is so important for long-term success.

The primary elements that organizations need to adopt include the

following:

• Employee Skills: It is imperative that all employees, including those in

the back office, possess the skills to deliver an experience that fulfills the
organization’s brand promise. Internalizing the customer’s mindset and
learning appropriate communication skills must be (but, unfortunately,
rarely is) a prerequisite for every employee, particularly those in
customer-facing roles. These customer-centric skills should always
support the required skills for employees’ specific roles. Customer-centric
skills should be premised on the philosophy that each employee should
have the ability to treat every customer as an unique individual.

• Information: Customer information needs to be unified and shared with

all employees across the entire organization. While there will always be
some limits on information availability (e.g., social security numbers) for
privacy reasons, all other pertinent information such as interaction and
payment history, account notes, escalations and demands for discounts

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should be made available to all employees so that they can act as a

single organization and deliver higher quality experiences at more rapid
speeds to customers. It is imperative to understand that such
information should not be limited to what is required to close a sale, but
rather in-depth insight that will allow employees to deliver different
experiences to different customers based upon their value to the
organization.

• Measurements: Metrics need to evolve away from internally focused

operational concerns to externally focused customer-centric
considerations. While operational measurements (e.g., average handle
time in a contact centre) are important to identify underlying operational
challenges, they should never serve to reflect the successes or failures of
a given business function. Metrics that reflect customer behaviour and
that are endemic to specific functions (e.g., marketing click-through rate,
customer service cross- or up-sell conversion rates) are ideal to measure
the true success of organizational functions. Additionally, companies
must adopt unifying measurements (e.g., attrition, satisfaction) that are
shared by all business functions to create a sense of joint ownership of
the customer throughout the organization.

• Financial Metrics: Understanding the costs associated with delivering

different types of customer experiences and the overall economics of
customer experience is crucial if employees are going to make the right
decisions with customers. In the absence of such information, employees
may be reluctant to offer incentives or discounts to customers since they
would be unable to justify such decisions to their superiors. For example,
an employee would be more than happy to waive a small fee if he knows
that acceding to the customer’s request to escalate his request to a
manager will cost the company more money than the fee he is being
asked to waive. Only by documenting this information and sharing it with
employees will organizations be able to truly empower their employees to
make the right decision and deliver a desirable experience.

• Education: True customer-centric focus will be a new discipline for many

employees in an organization which has, hitherto, focused almost
exclusively on products and services. For this reason, companies need to
develop and deliver a customer education program to all employees,
regardless of their level. Employees will not be able to deliver the desired
experience if their only mandate is to “go do it.” They need thorough and

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extensive education covering the definition of customer experience,

desired customer memories, customer profiles and the manner in which
employees are to deliver the experience to ensure success. Furthermore,
education programs will require customization by function (e.g., sales,
customer service and finance) and by position (e.g., customer service
supervisor and sales manager) since the knowledge and skills they
require will be different by function and position.

• Line of Sight: The final and most important element to ensuring

customer strategy success is creating individual employee line of sight to
the desired customer experience. After hiring individuals with the right
skills, providing them with requisite customer information, establishing
appropriate metrics and measurements and delivering customer-focused
education, Suzie in accounting and John in customer service must be
able to articulate what they will do differently tomorrow morning.

Each function and individual employee needs to have a clear line of sight
regarding how they impact the customer experience and how they will
apply all of the aforementioned elements to their daily roles and
interactions to deliver the desired experience.

Amazon – A Customer-centric Business

Amazon seeks to be Earth’s most customer-centric company, where

customers can find and discover anything they might want to buy online,
and endeavours to offer its customers the lowest possible prices. Amazon
and other sellers offer millions of unique new, refurbished and used items
in categories such as beauty, health and personal care, jewellery and
watches, gourmet food, sports and outdoors, apparel and accessories,
books, music, DVDs, electronics and office, toys and baby, and home and
garden.

Contracting bandwidth from multiple vendors was an option for Amazon,

but the company decided, instead, to count on one reliable vendor for its
streaming delivery needs. By offloading special event traffic to Nine
Systems Amazon was able to deliver an optimal, hiccup-free media
experience to customers. This was confirmed by over 50 testers from
Amazon who pre-tested the quality of video streams, delivered by Nine
Systems for the company’s 10th Anniversary Concert, and gave each one a
stellar rating. With Nine Systems, Amazon got peace of mind to focus on

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work they needed to do for three blockbuster events while Nine Systems’
did exactly what they were tasked to do; in this case, delivering an optimal
end-user experience while syncing up and supporting multiple intricate
productions almost simultaneously.

The benefits of using Amazon are:

• Eligible for Super Saver Delivery and Amazon Prime – Customers love
FREE Super Saver Delivery and Amazon Prime. Fulfilment by Amazon
(FBA) listings on Amazon.co.uk and on other Amazon Marketplaces in the
EU feature the same delivery messaging we use for Amazon.co.uk
listings.

• Competitive Price Sorting – Your FBA listings on Amazon.co.uk and on

other Amazon Marketplaces in the EU get the same treatment that
Amazon gets; we sort them on the item price without the cost of
shipping, which also gives you an edge when competing for the Buy Box!

• Trusted Customer Service and Returns – FBA listings are displayed with
the “Fulfilment by Amazon” logo, so customers know that packing,
delivery, customer service and returns are all handled by Amazon.

• Fulfil orders on all of Amazon’s European Marketplaces – Your FBA

inventory can be listed for sale on all of Amazon’s European Marketplaces
using a single selling account. Orders from these marketplaces will be
fulfilled from your FBA inventory in the UK, using Amazon’s fast and
reliable European Fulfilment Network. It’s an easy and convenient way to
grow your business across borders!

• Fulfil Orders from Other Channels – You can fulfil your orders from other
channels using your inventory at Amazon. You maintain control over your
inventory and can have it returned at any time. This applies to orders on
your home marketplace and also from customers throughout the
European Union.

• FBA Export to EU – FBA products listed on Amazon.co.uk can now be

purchased by customers across the EU. Extend your market reach to
cover up to 26 other EU Member States and millions of potential new
customers at currently no extra cost to you.

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Overall Amazon is a great example customer-centric business because it’s

a place where customers can find and discover anything they might want
to buy online.

2.13 Summary

Becoming customer-centric is no longer an option or a secret. Companies

increasingly recognize the importance of transforming into customer-
centric organizations and are closely following competitors and companies
outside their industries that are making huge strides in the development of
their customer experiences. However, only a few ever manage to reach the
Promised Land. The key characteristic of truly customer-centric
organizations is their willingness to change. Companies that have
successfully transformed their organizations have been able to do so
because they abandoned their product-centric business models and placed
the customer at the heart of their entire business. Moreover, these
companies do not address the customer experience incrementally but view
the customer experience through a strategic prism requiring an
organizational wide commitment. These companies increasingly are leading
the race to delight customers!

2.14 Self Assessment Questions

1. What makes an organization truly customer-centric? Discuss.

2. What are the benefits of Customer-centricity?

3. “The failure to adopt customer-centric business models comes with a

steep cost.” Elaborate.

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2.15 Multiple Choice Questions

1. Customer-centricity need not require that an organization be willing to

change their organizational design, performance metrics, and employee
and distributor structures to focus on the long-term creation and
delivery process.
a. True
b. False

2. Which of the following criterias makes more sense to describe customer-

centricity in simple terms and to show the capabilities you need to put
in place to become customer-centric?
a. Co-creating value with customers
b. Deep understanding of customer outcomes
c. Lean business support systems
d. All of the above

3. Which of the following is not the characteristic of customer-centric

organizations?
a. The organization is designed from the outside in to help make a
client’s interactions with the organization easier, cheaper, faster or
more enjoyable.
b. The needs of the client come last.
c. The internal mindset is to support sales whenever possible.
d. The organization’s people are engaged with the organisation and its
business and morale is high.

4. _________ also, intimately understand customers’ frustrations and they

often know how issues can be resolved, but are not empowered to make
the necessary changes.
a. Customers
b. Entrepreneurs
c. Employees
d. Managers

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5. Until back office functions develop a performance platform that allows

them to treat each customer individually, the organization will operate
on a _________ model leading sales and marketing personnel to make
promises that they will be unable to fulfill.
a. Product-centric
b. Customer-centric
c. Both (a) and (b) of the above
d. None of the above

Answers:

1. (b), 2. (d), 3. (b), 4. (c), 5. (a)

References

1. www.sap.com

2. www.lancaster.ac.uk

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REFERENCE MATERIAL
Click on the links below to view additional reference material for this
chapter

Summary

PPT

MCQ

Video Lecture - Part 1

Video Lecture - Part 2

Video Lecture - Part 3


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Chapter 3
Types of CRM
Objectives

The objectives of this chapter are to know about:

• Strategic CRM
• Operational CRM
• Collaborative CRM
• Analytical CRM

Structure:

3.1 Strategic CRM

3.2 Operational CRM

3.2.1 Sales Force Automation
3.2.2 Enterprise Marketing Automation
3.2.3 Activity Management
3.2.4 Campaign Management
3.2.5 Service Automation

3.3 Collaborative CRM

3.4 Analytical CRM

3.4.1 Features of Analytical CRM
3.4.2 Analytics and Customer Life Cycle Management
3.4.3 Benefits of Analytical CRM

3.5 Summary

3.6 Self Assessment Questions

3.7 Multiple Choice Questions

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Customer Relationship Management (CRM) recognizes that customers are

the crux of a business and that a company’s success depends on effectively
managing relationships with them. CRM focuses on building long-term and
sustainable customer relationships that add value both for the customer
and the company.

CRM is a business strategy to select and manage customers to optimize

long-term value. CRM requires a customer-centric business philosophy and
culture to support effective marketing, sales and services processes.

The CRM system serves the need of a business small or large alike by
creating a focus on the customer’s database such as contact information,
purchase history or purchase behaviour. The different types of CRM
systems have the common goal of creating opportunities through the use
of technology to improve the quality of service provided by the business to
both current and new customers. The CRM system gathers the data
sources from marketing, sales, customer service and accounting records to
create a one, all-inclusive tool.

Operational CRM generally refers to services that allow an organization to

take care of their customers. It provides support for various business
processes, which can include sales, marketing and service. Contact and call
centres, data aggregation systems and websites are a few examples of
Operational CRM. If a company has a high customer turnover, or perhaps
high service costs, Operational CRM Solutions is a tool that can help it
solve its problems. The hi-tech expertise of CRM gives one access to
information about the customer as well as giving the management a clear
view of the customer’s needs.

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3.1 Strategic CRM

Strategic CRM – Maintains Long-term Relationship with Customers

The aim of strategic CRM is to concentrate and enhance the knowledge

about customers and use this knowledge to improve and customize the
interactions with customers to maintain a long-term relationship with
them.

Determining and development of CRM strategies involves following steps:

1. Amplify Commitment
Strategic CRM involves almost all the departments of an organization, e.g.,
finance, sales, manufacturing, distribution, marketing, etc. Hence, it is
essential to get support and use their important feedback while
determining strategies. For this, each and every department should be kept
informed about all the developments and implementation of processes
carried out or performed. Everyone should also be emphasized about the
positive approaches and end results of the strategies.

2. Building valuable project team

After organizational commitment is secured, the next important stage in
developing CRM strategies is building a determined and valuable project
team. Each and every member of this team should be experienced and
dedicated professional as these members will be the key decision makers
in the whole process. They will be responsible to communicate all the
related details and benefits of the CRM strategies to all the members of the
organization.

These members should be from the following work groups to ensure all the
aspects of strategies are addressed efficiently;

a. Management: Management professionals are responsible to provide

motivation, leadership and management at every strategic development
step especially when a change in business process or organizational
structure is expected.

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b. Technical: Automation of CRM strategies are important and must

involve experienced technical hands. Also technical professional provide
their useful contribution in building and managing software application
and determining their compatibility with existing software features.

c. Sales and Marketing: These are final users of CRM system once the
strategies are determined and implemented. The applied strategies are
supposed to be successful once these users feel comfortable and
satisfied by using all the CRM features. Being the end-users, these
people are also responsible to provide useful feedbacks on efficiency
and effectiveness while the strategies are in development phase.

d. Financial: The CRM strategies must also go through or evaluated under

financial aspects. The financial professionals of the team can provide
crucial analysis on assessment of enhanced productivity, evaluation of
operational and production cost and final estimated cost of the project.
They also help in assessing the investment cost per module or segment
so that the product is delivered inside the budget.

e. External Experts: Many times, some external consultants and other

CRM vendors are substantially helpful in strategy development. These
are people who are generally hired or outsourced for second fruitful
opinion or if the organization is lacking with sufficient CRM experts.
These professionals have vast experience in the same field and helps
analyzing organization’s actual business needs, work with other
professional to review and approve complex business structure and
even helps in formulating the team members according to the expertise
they possess.

3. Requirement Analysis
CRM strategies should always focus and concentrate on the actual business
requirements. This process involves a series surveys and questionnaires
with top level sales, marketing and financial managers to gather the actual
expectations regarding the strategies to be implemented and what results
these strategies will throw in the final stage. This is a very crucial factor in
the development of an effective CRM system because if the results are not
matching the actual requirement or if they diverge from focus points, then
that means it’s not achieving the desired goals.

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3.2 Operational CRM

Operational CRM describes the part of CRM that supports daily sales,
marketing or service tasks. Relying on the data stored in the system and
its analysis, operational CRM provides the tools for effective, targeted
customer relationship management.

As far as marketing is concerned, it can mean creating target groups based

on criteria revealed by the data analysis or managing event attendance
when organizing seminars. For sales, it mostly helps managing offers,
keeping track of follow-up and cross-selling tasks or planning customer
visits. As far as service is concerned, it guarantees the seamless dispatch
of service teams or makes sure that all customer history is used for
support activities.

It involves the areas where direct customer contact occurs. These are also
known as “touchpoints”. A touchpoint can be an inbound contact, e.g., a
call to a customer support helpline, or an outbound contact, e.g., an in-
person sales call or an e-mail promotion.

3.2.1 Sales Force Automation (SFA)

Sales Force Automation (SFA) software 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. Businesses may have a custom version developed specifically
for their needs, or choose from among the increasing number of sales
automation software products, such as Interact Commerce’s ACT! and
GoldMine Software’s GoldMine.

Sales Force Automation or Sales Force Management are information

systems that efficiently automate the sales process and management of
the sales force. SFA manages all stages of the sales process from initial
customer contact to closing the deal.

Effective SFA ensures full integration among all departments. The

salesperson is not the only person dealing with the customer, various other
departments such as marketing, customer service, accounts and technical
experts are also involved. If all these different departments are
communicating with the customer at the same time or worse still, sending

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duplicate information to the customer, it would lead to client frustration.

SFA ensures that the right hand knows what the left hand is doing – all
departments have easy access to see what interaction the other has had
with the customer.

Ultimately, a successful CRM implementation’s sales force automation tools

should maximise the sales team’s efficiency, productivity and lead to
increased sales.

How Does SFA Enhance Performance?

Some of the key benefits for growing businesses from sales force
automation:

1. Contact management and diary management: Clear visibility for

accounts’ contacts through a centralized repository ion. The customer’s
contact information and details (name, address, telephone, e-mail, etc.)
are stored in a compact way and scheduling appointments and follow-
ups can happen easily with the calendar and diary application.

2. Account management: Holistic view of accounts with their related

contacts, contracts, cases, opportunities and much more. Keep track of
customer interaction, track the status of opportunities, view past sales
history and get a good idea of the likelihood of closing the next deal.

3. Driving leads and managing opportunities: Automated lead

conversions to accounts, contacts and opportunities with related
mapping for fields to reduce non-core activities. SFA systems pull
possible leads from various sources such as marketing communication,
e-mail campaigns, website visits or outbound calls. Once first contact
has been made with a prospect, this translates into a sales lead. The
system prompts the sales rep when new leads become available and the
rep can quickly and easily view all leads on a daily basis and schedule a
time to contact the prospects.

4. Generating quotes and managing orders: Streamlined quote

conversion to lead and sharing with others. The salesperson is now
enthusiastically making contact with all prospects and giving the sales
pitch. Once the customer expresses an interest, he is now ready to
provide a quote. It’s pertinent to note here that the faster he acts, the

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faster he can close the deal. Previously when the salesperson had to
wait until he got back to the office to type up a quote, today thanks to
CRM, he can produce a quote instantly while out on the road. Efficient
and impressive to the customer! The customer looks over the quote
and decides to order. Again, the rep quickly with the touch of a few
buttons converts his quote into an order. Smooth, seamless quote-to-
order conversion! In next to no time, the new customer will have his
product in hand and is impressed at how quick and efficient the
company is. And a happy customer is likely to become a loyal and
regular customer.

5. Sales forecasting: Effectively predict future sales with the tools

provided by SFA. The best predictor of future sales is past sales. SFA
measures past sales history, current trends, number of orders and
opportunities in the pipeline to provide an intelligent projection of future
sales.

6. Tracking competitors: Gaining an advantage over your competitors to

avoid churn and encourage customer advocacy. SFA helps monitor
trends and the reasons why a deal has been won or lost, and if lost – to
whom and why. To make effective use of this tool, the sales
representative has to be diligent in updating the records with the
reasons deals were lost or won and input relevant competitor
information. Reports pulled from this type of information will highlight
certain trends and problem areas and the business can take steps to
remedy the situation. Marketing campaigns can be adjusted or products
can be improved.

7. Reports and analytics: View system reports with real-time

information or create ad hoc reports. Generate accurate reports ranging
from a bird’s eye view of across the board sales to drilling down into
specific sales territories, per sales rep, geographical regions or
demographics. Easily create charts and graphics and export reports to
MS Excel or PDF. A Salesperson can even schedule the date and time
they want reports to be e-mailed to their sales managers or executives,
so that even if he is out of the office, the report will still get sent on
time. Valuable information is gleaned from the data in reports.
Information that will either tell executives that the business is doing well
– so don’t fix it, if it’s not broken, or, result in a re-evaluation of
business principles and change of direction, if it is not doing well.

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8. Mobile applications: Ensure customer information is available through

web-enabled phones from any location. Sales people spend most of
their time out in the field. In today’s world of smartphones, CRM
solutions have also become mobile. Field staff can now have instant
access to information and leads while being on the road, rather than
waiting until they are back in the office to access vital information about
customer interaction. This has changed the game quite significantly for
businesses.

What are the Common Pitfalls to SFA Success?

There are five primary pitfalls in Sales Force Automation (SFA) systems,
any of which can derail a software implementation or cause significant
problems. All too common problems include lack of buy in, improper or
incomplete data input, a non-responsive system due to slow network or
limitations of access to the system, poor training and lack of proper
customization.

Lack of sales management or sales staff buy-in are sure to doom an SFA
software implementation. Sales people can be a breed apart relative to
other more structured roles in the company. Their income is dependent on
sales and their processes are usually the least defined in the company.
Taking time to change the way they do business is generally not an easy
sell. If things do not go right, or sales people decide they are not willing to
change, complaining sales staff can wreak havoc. Resistance by a sales
manager is even worse. Their livelihood is directly dependent upon the
productivity of their sales force. To win the user adoption battle, key sales
staff must be offered early and broad involvement during both the software
selection and software implementation processes. Their input must be
seriously considered and the system must provide them demonstrable
advantages relative to their existing environment. SFA systems
implemented simply for or largely for management oversight will not win
the buy-in of the sales staff. It’s important to recognize that customer
relationships are touched by more than just the sales people. Support staff,
while generally not under the same commission-based compensation
pressure as sales staff, must also facilitate customer management by
contributing to the CRM application and keeping customer activities current
and complete.

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A slow or unresponsive CRM business system will certainly cause problems

with user adoption. CRM and SFA solutions are data intense. Queries and
reports sometimes join several different tables which can tax database and
application servers. Newer software as a service (SAAS) CRM systems can
be slow if not equipped with sufficient Internet bandwidth. Slow response
time, especially in the field for a salesperson is intolerable from their
perspective and will hinder sales efforts. It is also imperative that the
access to the system is available in the field and not just at the office.
Whether it is an offline application or wireless online, make sure managers
and sales people have ubiquitous customer information access.

Training is a frequently under-planned and under-invested effort in SFA

software implementations. There must be a strong comfort level with the
SFA system to support its usage. This is truly a case of garbage in, garbage
out. People that are not comfortable with a system, especially if their
livelihood depends on productivity, will not use the system. Many pitfalls of
SFA can be avoided with proper training. It is a good idea to make sure
that a self-paced training program is available well after system
implementation for sales staff which need a review as well as new sales
staff.

Forcing sales staff to modify their business processes in order to

accommodate rigid CRM or SFA software is a serious mistake which
generally increases user adoption challenges and often results in complete
implementation failure.

In order for a SFA system to work, you must have proper customization of
the menus, forms and fields. An example can be in seen in the ability to
track success. Most SFA systems have a campaign source field. Often
companies start with a few generic sources like call-ins, websites and
newspapers. However, as time progresses, those sources must become
specific and tie into reporting modules.

To summarize, sales force automation streamlines the sales team’s job,

making the end-to-end process faster. With the increased efficiency in
conversions and closing deals plus the reduced effort on non-core
activities, sales professionals can build better rapport with leads and
contacts, request referrals and cross-sell – increasing the bottom-line in
the short-term through quicker sales and in the long-term through
customer retention!

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3.2.2 Enterprise Marketing Automation

Enterprise Marketing Automation is part of the operational customer

relationship management module. Enterprise marketing automation can
also be independent software installed by the company. The main
function of the enterprise marketing automation module is to run
different marketing programs in the organization. The enterprise
marketing automation module also helps the given organization develop a
business plan.

An enterprise feeds from the customer data which is maintained by the

company. Therefore, the module helps the company to maintain, manage
and filter customer-related information.

When a company decides to start a marketing campaign for a particular

product, then the enterprise marketing automation tool provides the
company a shortlist of customers who could be interested in the product.
This filtration of customers is done based on customer segmentation.

Customer Segmentation

Customer Segmentation is an important parameter to consider while

designing marketing campaigns. Customer segmentation technique splits
the customer on various parameters. If the marketing campaign satisfies
those customer parameters, then enterprise marketing automation tool will
provide their list.

Parameters considered for Customer Segmentation are as follows:

a. Homogeneity within a particular customer segment.

b. Heterogeneity across different industry and customer segments.
c. Customers should respond in an identical manner to a particular
marketing campaign.
d. Customers should be reachable through the marketing campaign.
e. The Organization should be able to create a marketing strategy for the
group.

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Segmentation Strategy

An organization looks to target a particular segment for the following

reasons:

a. Organizations are better able to understand and satisfy needs of the

customer.

b. Organizations are able to generate higher profits through segmentation.

c. Segmentation provides a great opportunity of growth.

d. Segmentation can create a long and fruitful customer relationship.

e. Segmentation can lead to a higher market share.

However, to devise a successful segmentation strategy is difficult.

Organizations typically run into challenges around selection of variables to
define a segment. There is also a difficulty in identifying correct algorithms
for segmentation.

Components of Enterprise Marketing Automation

There are about five components of enterprise marketing automation. They

are as follows:

• Promotions: These are the activities undertaken by an organization to

increase their sales. Promotions can be categorized as cross-selling or
up-selling. In cross-selling, customers are offered similar products to one
they have already bought. The aim of cross-selling is to satisfy all the
customer requirements. In up-selling, customers are offered expensive
products as well as an upgrade to the existing products. Up-selling is
more profitable, and it is in top up of the existing sale.

• Event-based Marketing: This involves registering customers for a

seminar and in case of a web cast via the Internet. Companies look
forward to sponsoring events and include their products as part of the
marketing event.

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• Loyalty and Loyalty Programs: Loyalty is defined as continued

commitment of a customer to a particular product, brand or organization.
A Customer tends to maintain their loyalty if companies provide value to
them and/or it is much expensive to change a product brand or
organization.

• Partner Management: It is a marketing campaign. Here, an

organization joins hands to promote their and partner’s products. This
could also be referred to as joint promotion.

• Response Management: This gives flexibility in marketing campaigns

based upon the initial reaction from the customer. It is a response
management in real time.

3.2.3 Activity Management

Activity Management is an integral part of Customer Relationship

Management (CRM) and administers all activities undertaken by a
company’s employees. Any data saved in an activity is an important source
of information that needs to be accessed by all relevant employees.

It answers day-to-day questions, such as what appointments does an

employee have next week? When can one arrange a visit to a certain
customer? Who can cover for a sick colleague in external sales? A sales
representative can view the outcome of a telephone call made after an
initial customer visit, and the sales manager quickly and easily gains an
overview of all the activities that have taken place in the department
during a certain period of time.

Activity Management may be used at any time during the CRM life cycle.
The business activities keep a record of any interaction that has taken
place between the company and its customers. On the other hand, the
tasks provide a way for the employees to manage their own workload as
well as record any private appointments or reminders they may have.
Thus, everything undertaken by employees within a department or
company can be managed quickly and easily in one transaction.

Activities can be created as subsequent documents for a wide variety of

other business transactions, such as opportunities, leads, sales orders, or
contracts.

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For Example: If a contract is approaching its expiry date, one can create a
telephone call (activity) as a follow-up document to remind the concerned
employee to contact the customer and find out whether they would like to
renew the contract. The concerned employee receives the activity
automatically in their work list and therefore knows that one of his tasks
that day is to ring the customer.

Activity Management is integrated with CRM Mobile Sales as well as Mail

Management Software so that no matter where the employees are, they
can always keep track of their appointments and activities.

3.2.4 Campaign Management

In the past, Campaign Management referred to the planning and execution

of a single marketing campaign, by the way of telephonic or postal
services. The preparation encompassed several weeks or even months.
Nowadays, within the framework of CRM, campaign management
encompasses the multitude of campaigns that are planned and executed
through different channels so that a continuous marketing flow is created.
The goal of campaign management is to interact with prospects and
customers at the right moment, with the right offering and the right
message communicated through the right channel.

Campaign Management systems are characterized by the following

functionalities:

a. Opportunity Identification: The identification of contact opportunities

on the basis of events involving the supplier, the customer or those
occurring in the environment.

b. Relationship Planning: Indicating how the relationship with the

customers should be further developed in terms of the communication.

c. Campaign Management: Selection of the contacts, the development

and implementation of the campaign.

d. Customer Interaction: Supporting the contacts that follow the sent

messages.

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e. Measuring and evaluating: What are the effects of the campaign and
do they achieve the goals?

3.2.5 Service Automation

Service automation deals with managing organization’s service. The actual

interactions with customers such as contact, direct sales, direct mail, call
centers, data aggregation systems, web sites and blogs, etc. are examples
of operational CRM. Each interaction with a customer can be collected to
the client database generally known as ‘customer’s history’ and the
information can later be used wherever necessary.

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Anyone in the organization can have access to this information about

customer which gives a clear view of customers’ needs and important
information on the customer such as products owned, prior support calls,
etc. It naturally eliminates the need to obtain this information individually
from the customer. On the basis of the information, if required, the
customer can easily be contacted at right time at the right place.

Service Automation enables business to provide best quality of customer

service by automating the service process.

It includes various service modules like call management, case or incident

management, knowledge management, service level management.

a. Call Management automation helps to route customer call to the most

appropriate help desk person and retrieve all required information
related to the call.

b. Case/Incident Management helps the organization to assign

customers’ problems to the right person, provide solution within the
time limit, capture customer response and analyze effectiveness.

c. Knowledge Management captures information from various sources

and makes a proactive approach to give value addition to customers.

d. Service Level Management enables business to analyze quality of

service based on key performance indicators.

Increase sales and improve customers’ loyalty are two main purposes of
Operational CRM. There are lots of Operational CRM applications with
different features and platforms. So, before choosing any Customer
Relationship Management application, organization should have defined
goal and strategy to ensure success.

Operational CRM refers to services that provide support for various ‘front
office’ business processes in helping organization to take care of their
customers. Focus on customers’ value is important for a successful
operational CRM strategy. Different customers have to be treated
differently so that information on variables like customers’ ranking, actual
value and potential value is of strategic value.

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3.3 Collaborative CRM

Collaborative CRM deals with synchronization and integration of customer

interaction and channels of communications like phone, e-mail, fax, web
etc. with the intent of referencing the customers in a consistent and
systematic way. The idea is not only enhancing the interactions but also to
increase and improve customer retention and liberty.

Collaborative CRM entangles various departments of organization like

sales, marketing, finance and service and shares the customer information
among them to highlight better understanding of customers. For example,
the information of preferred products could be shared with the marketing
department so that analysis can be performed in this aspect to provide
preferred products to customers. The information regarding varied cost or
price of a particular product in a market defined by customers can be
delivered to the finance department so that strategies could be created to
match the product cost with similar products in the market and after
analysis bring an affordable and efficient product in the market. The
information regarding a specific service which is not installed in the
company’s environment and intimated by the customers can be transferred
to the service department to improve or install that particular service in-
house. All this is done efficaciously within the range of channels so that the
process automates the needs and minimal time is required for fulfilling
these needs.

Collaborative CRM can be broadly identified by two aspects:

Interaction Management: This management process deals with

designing the communication or interaction channel process within an
organization which is specific to customer interaction and finally enhancing
the extent of communication between both the parties. The communication
channel depends on the customers’ preference on how they require the
interaction to be dealt with. Some customers prefer to be contacted via
phone and e-mail because of more comfortability or non-availability of
manual interaction due to no time or unavailability of resources. Some of
them prefer to have a live online meeting or web meeting to reduce the
travel time and lack of time or maybe they prefer more clarified real-time
environment by sitting at their desk and transacting. Some of the
customers insist for agent conducted services which is often face-to-face
interaction as they believe that this way is more efficient and conclusive.

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Depending on these channels of interaction, it is very important for the

organization to fulfill these needs of customers and gather information
from them and implementing it into the CRM before interacting to enhance
the interaction power.

Channel Management: After analyzing and implementing the interaction

medium, it’s important to enhance the power of channels through which
the customers are interacted. By using latest technological aspects for
improving channel interaction could help to contact customers in an
efficient way and gather information from them to help organizations to
understand the customers. Hence, it is important for an organization to
clearly arrange the channel responsibilities and duties.

Below are advantages of Collaborative CRM:

1. Enables valued customer interaction across the channels.

2. Entangles web or online collaboration to cut down service cost of

customers.

3. Integrates customer interaction with call centers to enable multi-channel

interaction with customers and helps them make understand the overall
process values.

4. Describes a view of integrated customer’s details during interaction to

serve them in a better way.

This CRM solution brings customers, process, strategies and data together
so that organizations could serve and retain customers more efficiently.

3.4 Analytical CRM

Analytical CRM supports organizational back-office operations and analysis.

It deals with all the operations and processes that do not directly deal with
customers. Hence, there is a key difference between Operational CRM and
Analytical CRM. Unlike operational CRM, where automation of marketing,
sales force and services are done by direct interaction with customers and
determining customer’s needs, analytical CRM is designed to analyze
deeply the customer’s information and data and unwrap or disclose the

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essential convention and intention of behaviour of customers on which

capitalization can be done by the organization.

The Primary goal of analytical CRM is to develop, support and enhance the
work and decision-making capability of an organization by determining
strong patterns and predictions in customer data and information which are
gathered from different operational CRM systems.

3.4.1 Features of Analytical CRM

The following are the key features of Analytical CRM:

a. Seizing all the relevant and essential information of customers from

various channels and sources and collaboratively integrating and
inheriting all this data into a central repository knowledge base with an
overall organization view.

b. Determining, developing and analyzing inclusive set of rules and

analytical methods to scale and optimize relationship with customers by
analyzing and resolving all the questions which are suitable for
business.

c. Implementing or deploying the results to enhance the efficiency of the

CRM system and processes, improve relationship and interaction with
customers and the actual business planning with customers.

d. Combine and integrate the values of customers with strategic business

management of an organization and value of the stakeholders.

e. Analytical CRM is a solid and consistent platform which provides

analytical applications to help predict, scale and optimize customer
relations.

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Advantages of implementing and using an Analytical CRM are described

below:

a. Leads in making a more profitable customer base by providing high

value services.

b. Helps in retaining profitable customers through sophisticated analysis

and making new customers that are clones of best of the customers.

c. Helps in addressing individual customer’s needs and efficiently

improving the relationships with new and existing customers.

d. Improves customer satisfaction and loyalty.

3.4.2 Analytics and Customer Life Cycle Management

The power of CRM provides a lot of managerial opportunities to the

organization. It implements the customer information in an intelligent way
and creates views on customer values, spending, affinity and
segmentation. Analysis is done in every aspect of business as described
below:

• Customer Analytics: This is the base analytic used to analyze the

customer knowledge base. It provides a better view of customer
behaviour and by modeling, assessing customer values and assessing the
customer’s portfolio or profiles and creates an exact understanding of all
the customers.

• Marketing Analytics: This helps in discovering new market

opportunities and seeks their potential values. It also helps in managing
marketing strategies and scale and planning marketing performance at
the district, regional and national levels. Marketing analytics also focus
on campaign management and planning, product analysis and branding.

• Sales Analytics: Sales analytic provides an essential environment to

plan, simulate and predict sales volumes and profits by constantly
analyzing organizational sales behaviour. It helps in pipelining all the
selling opportunities in an efficient way by indulging and improving the
sales cycle.

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• Service Analytics: Analytical CRM has a major role in enhancing the

services which answers all the questions regarding customer satisfaction,
quality and cost of products, complaint management etc. It even helps in
improving and optimizing the services by sophistically analyzing the
service revenue and cost.

• Channel Analytics: This type of analysis helps to determine the

customer behaviour on channel preferences, like web channel, personal
interaction, telephone channel etc. This information is efficiently
integrated in the customers’ knowledge base so that they can be
contacted accordingly.

The essential results produced by an Analytical CRM system could diversely

help the organization to tackle customers based on values. It also helps in
determining which customer is best to invest in, which can be treated at an
average level and which should not be invested in.

3.4.3 Benefits of Analytical CRM

The main concern in CRM systems is to understand and make practical use
of customer information, and argue that with an enormous amount of data
stored in databases and data warehouses, it is increasingly important to
develop powerful tools for the analysis of such data and mining interesting
knowledge from it. The biggest threat to CRM is managements’ focus on
short-run profits rather than a long-term vision.

Managing customers with a gut-feel based on intuition can lead towards

assuming that increasing sales volume equates to success. Having a way to
value different types of customers is a powerful tool to develop customer-
centric strategies and subsequently determine with what level of priority
and effort to engage each customer segment. Based on customer analysis,
CI/CRM transforms customer expectations into personalized experiences to
acquire, retain, and service customers and on a large scale. Real-time
automated customer response analysis, regardless of the touchpoints,
means quick yet tailored adjustments to marketing campaigns.

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a. Information on the level of absolute and relative profit contribution that

the customer provides today and potentially in the future.

b. Information on the actionable steps that can economically increase each

customer’s profit contribution margin layer for a high payback.

c. Information on what the companies are doing and what is important to

companies.

d. Information on deciding factors for direct marketing and customer

planning is worth it or not.

e. Information on good customer profitability that leads to clearer thinking

about where to allocate one’s limited resources.

f. To analyze the right kind of increased total revenues.

g. Information on profitability measured by each customer or customer

segments regardless of the increase/decrease in sales and costs.

By using customer profitability data, the demarcation lines for ROI

cutoffs can be drawn, and the e-CRM systems can stop wasting
employees’ time and the company’s scarce resources on types of
customers that are not worth the effort it takes to pursue them. This
means, the analytical systems should be designed to send into the CRM
systems from e-CRM the information derived from the profitability data.

h. CRM systems are extremely customer-centric, whereas e-CRM is work

and process-centric. CRM cares about customer feelings and
preferences. e-CRM pays attention to how product and customer
diversity both require and consume greater resources. The information
available from these methods is essential to attain corporate goals and
strategies and to increase profitability. The company can diagnose,
understand, and alter its programs’ costs. As a bonus from analyzing
customer profitability, the costs of poorly designed internal processes
can be highlighted with the likelihood of removing profit-harming effects
otherwise undetected.

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i. Analytical CRM accomplishes in identifying, getting, keeping, and

growing right and relevant customers.

j. It maintains constant communication with customers, and also

promotes offers to targeted sale prospects.

k. It places the customer or target prospect experience at the center of the

organization’s priorities and to ensure that incentive systems,
processes, and information resources leverage the relationship by
enhancing the experience.

l. Analytical CRM helps attract new customers by first profiling existing

customers and testing their responses to promotions, and then
identifying sales prospects with similar characteristics.

3.5 Summary

CRM is a business strategy to select and manage customers to optimize

long-term value. CRM requires a customer-centric business philosophy and
culture to support effective marketing, sales and services processes.
There are three types of CRM.

Operational CRM: Operational CRM generally refers to services that allow

an organization to take care of their customers. It provides support for
various business processes, which can include sales, marketing and
service. Contact and call centers, data aggregation systems and websites
are a few examples of operational CRM.

Collaborative CRM: Collaborative CRM deals with synchronization and

integration of customer interaction and channels of communications like
phone, e-mail, fax, web etc. with the intent of referencing the customers in
a consistent and systematic way.

Analytical CRM: Analytical CRM supports organizational back-office

operations and analysis. It deals with all the operations and processes that
do not directly deal with customers.

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3.6 Self Assessment Questions

1. What are the types of CRM? Explain the functions of each type.

2. Explain the role of Operational CRM with suitable examples.

3. How does Analytical CRM help achieve business growth and win
customer loyalty? Elaborate.

4. Write short notes on:

(i) Collaborative CRM
(ii) Sales Force Automation
(iii) Enterprise Marketing Automation
(iv) Campaign Management.

3.7 Multiple Choice Questions

1. Relying on the data stored in the system and its analysis, _________
provides the tools for effective, targeted customer relationship
management.
a. Strategic CRM
b. Operational CRM
c. Collaborative CRM
d. Analytical CRM

2. _________ are information systems that efficiently automate the sales

process and management of the sales force.
a. Sales Force Automation
b. Sales Force Management
c. Both (a) and (b) of the above
d. None of the above

3. Which of the following is the component of enterprise marketing

automation?
a. Promotions
b. Event Based Marketing
c. Loyalty and Loyalty Programs
d. All of the above

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4. ________ is an integral part of Customer Relationship Management

(CRM) and administers all activities undertaken by a company's
employees.
a. Account management
b. Activity Management
c. Partner Management
d. Response Management

5. Sales analytic provides essential environment to plan, simulate and

predict sales volumes and profits by constantly analyzing organizational
sales behaviour.
a. True
b. False

Answers:

1. (a), 2. (c), 3. (d), 4. (b), 5. (a)

References

1. www.managementstudyguide.com

2. www.crmsolutions.crmnext.com: Top 8 Benefits of Sales Force

Automation for Growing Businesses.

3. Role of Analytical CRM in CRM Systems: Importance and Benefits –

White Paper by Jayanthi Rajan.

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REFERENCE MATERIAL
Click on the links below to view additional reference material for this
chapter

Summary

PPT

MCQ

Video Lecture - Part 1

Video Lecture - Part 2

Video Lecture - Part 3

Video Lecture - Part 4

Video Lecture - Part 5


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Chapter 4
Customer Life Cycle Management
Objectives

The objectives of this chapter are to know about:

• Customer Life Cycle Management

• Concept of the Customer Life Cycle value
• Relationship between customer service and CRM success
• Action Plan for enhancing the customer life cycle value

Structure:

4.1 CRM and Customer Life Cycle Management

4.2 Customer Lifetime Value
4.3 Stages of Customer Life Cycle Management
4.4 Customer Life Cycle Care: Fully Optimizing CRM
4.5 Shortcomings of Traditional CRM
4.6 Role of the Customer Service Organization in CLC/CRM Initiatives
4.7 CLC Action Plan
4.8 Summary
4.9 Self Assessment Questions
4.10 Multiple Choice Questions

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4.1 CRM And Customer Life cycle Management

CRM has made huge strides in the past few years. Starting out as simply
a contact management tool, then progressing to a sales automation tool, it
is now evolved into a full-blown customer satisfaction system. Businesses
have begun to realize that winning the first order is only a fraction of the
revenue and profit potential from that customer. Maximizing the full
potential of the customer requires careful management of each interaction
with the customer along the entire life cycle. At the end, managing the
stages of the customer relationship will build not only financial rewards,
but deeper customer loyalty.

What is Customer Life Cycle Management?

Your customer interacts with your business many times during the life of
your relationship. For example, they visit your website to learn about your
offering, they talk to a salesperson for more detail, attend a product
demonstration or webinar, they talk with support on questions or problems,
and they talk with service people to have their products repaired. Each of
these interactions is an opportunity to build loyalty, and to gain additional
revenues. Everyone knows that it is far easier and less costly to build
revenues from existing customers than to attract brand new prospects.
And, most importantly, it is easier to sell the customer a replacement/
upgrade when you know their needs, expected timetable, and level of
satisfaction.

Customer life cycle management is the process of managing each of these

interactions to produce a loyal, satisfied customer. The end result is
improved revenues and profits for your business.

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Let’s take a look at a typical customer life cycle:

1. Attract Traffic: This includes all of the activities that you do to

generate traffic for your products or services. These include items like
website traffic, advertising, webinars, email campaigns, and more.

2. Capture Leads: Once you have attracted traffic, it is critical to capture

their contact information. You need an offer that prospects will value,
and is worth their effort in completing the contact form.

3. Nurture Prospects: Once you have their contact information, you can
now begin the process of leading them towards a sale. Each prospect
can have a different need and a different timetable. CRM allows you to
segment prospects by need, by stage in the buying cycle, and by timing
of intentions to buy. You can effectively walk the prospect to a sale at
the pace they need.

4. Convert Sales: Once a prospect has become convinced of the need for
your products/ services, you need a mechanism to close the sale. This
can be automated with ecommerce, or handled by your expert sales
team.

5. Deliver and Satisfy: This is the stage where many companies fail to
realize the value of the customer life cycle. Your ability to deliver and
satisfy the customer will directly determine your success in up selling,
cross selling and replacement selling. What are you doing to make sure
that every new customer is completely satisfied by you? Do you have a
tool to know exactly how your customers are being treated?

6. Up-sell Customers: Since it is less costly to sell products to existing

customers, what are you doing to raise the level of existing customer
satisfaction and loyalty? Having a successful relationship with your
customer not only makes it easier to sell, but also provides intimate
knowledge of when they might buy.

7. Sell Replacement: The best signal that your customer life cycle
management is successful is a high incidence of replacement/upgrade/
add-on sales. This becomes a high vote of confidence that you are
satisfying all their needs with your products, services and delivery.

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8. Get Referrals: A last signal of your success in satisfying the customer

lies in the number of referrals that they provide you. No one refers a
product or service to a friend or colleague unless they are happy with it.

How Can Customer Life Cycle Management Help Sales Team?

Let’s discuss an example. A current customer is working through an

installation problem with your help desk. Your customer is concerned. Your
sales department is about to contact with the customer for additional units
of the same product. Would your approach be more successful if the sales
department knew about the installation problem? Might the salesperson
help to correct the situation through knowing about it?

Let’s take another example. Your service department has completed a

service order for a customer’s older piece of equipment. The service person
notes the equipment condition in an incident report. Do you think that
sending a periodic condition report to marketing might help them to focus
their efforts to sell replacements?

How Does Customer Life Cycle Management Help Customers?

Having a complete view of the customer can be invaluable in maximizing

your relationship. Offer them the types of products, services, and solutions
that make sense for them. Imagine taking a proactive stance, and offering
your customers solutions before they even knew they have a problem.
Imagine knowing everything about that customer no matter whom they
touch within your organization.

How Does Customer Life Cycle Management Improve Processes?

Another benefit of customer life cycle management is that it continuously

improves the processes of your business. Since it offers you a full picture
of every internal process, and how it impacts customer satisfaction, you
can quickly see where there are repetitive problems. You can catch
problem trends before they damage your company’s reputation.

For example, are customers repeatedly calling about an installation

problem on a particular product? What if you could update the installation
instructions and eliminate the problem before anyone else experiences it?
Is a service agent being non-responsive because of a lack of information?

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Good customer life cycle management can identify and resolve these
harmful situations.

3 Key Benefits of Customer Lifecycle Management (CLM)

Customer Lifecycle Management (CLM) is the measurement of multiple

customer related metrics (like Customer Lifetime Value) to help you create,
cultivate and continuously improve your customer relationships. It enables
the synchronizing of all business functions to focus on producing strategic
value for customers, creating enduring relationships that increase sales
and profitability.

Pursuing CLM Offers Three Key Benefits

The overall scope of a CLM program encompasses all functions or

departments of an organization, driving the coordination of data,
processes, and value-added services to produce unified, holistic business
decisions about customer acquisition and retention. It seeks to eradicate
the ‘silo’ thinking within businesses that degrades customer satisfaction
and hampers future profits.

CLM is more than a Marketing and Sales ‘CRM’ system. While customer
data from a CRM system can be a productive input, a CLM process is a
cross-functional tool that supports workflow across the business, removes
obstacles and creates a rich information source that can be interrogated in
real time. It facilitates a focus on solving problems wherever they occur in
the customer life cycle, and drives improvement in the customer
experience where it is needed most. This fosters a stronger collaboration
between your team and your customers, supporting current customer
needs and goals, while capturing information about future needs earlier.

1. Pursuing CLM is a business strategy. Its objective is to increase

sales and profitability by synchronizing all business functions around
producing value for the customer. It seeks to ensure that each member
of your team understands his or her role in producing this value. It
encourages your team to think beyond immediate customer satisfaction
by capturing information about future customer needs, sharing this with
other departments and then collaboratively assessing insights.

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2. CLM strengthens competitive advantage. With CLM capturing data

from customer interactions, Marketing and Sales can build a stronger
pipeline of recurring business. Customer intelligence and analytics are
enhanced as CLM helps identify patterns, unmet needs, ineffective
processes or communications, cost savings or R&D opportunities.
Decision making is expedited. The insights provided enable your team to
become so responsive and effective that customers learn to rely on you
and seek no alternatives.

3. CLM simplifies operations. Organizations often have so many

overlapping systems and databases, that the customer experience is
eroded by delays and inaccuracies. CLM drives a centralization of
customer data, simplifying data access and management. Marketing,
Sales and Operations all contribute to a single, comprehensive source of
customer intelligence data designed to deliver productive and profitable
customer outcomes.

Customer Life Cycle Management builds enduring customer relationships

and commitment from all stakeholders, increasing the potential to grow
sales and sustain profitability over time.

4.2 Customer Lifetime Value

CLV is a measure of the worth of a customer to the firm. Calculation of CLV

for all the customers helps the firms to rank order the customers on the
basis of their contribution to the firm’s profits. This can be the basis for
formulating and implementing customer-specific strategies for maximizing
their lifetime profits and increasing their lifetime duration. In other words,
CLV helps the firm to treat each customer differently based on their
contribution rather than treating all the customers same.

Calculating CLV helps the firm to know how much it can invest in retaining
the customer so as to achieve positive return on investment. A firm has
limited resources and ideally wants to invest in those customers who bring
maximum return to the firm. This is possible only by knowing the
cumulated cash flow of a customer over his or her entire lifetime with the
company or the lifetime value of the customers. Once the firm has
calculated CLV of their customers, it can optimally allocate its limited
resources to achieve maximum return. The CLV framework is also the basis
for a purchase sequence analysis and customer-specific communication

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strategies. CLV can be considered as the metric which guides the allocation
of resources for ongoing marketing activities in a firm adopting the
customer-centric approach.

Traditional CRM initiatives have been driven by sales, IT and/or marketing

departments. Such initiatives have had mixed results. Many of these CRM
initiatives achieve sub-par results because the quality of the data being
used isn’t very good. Others fail because customer-related processes
continue to be executed in departmental “silos,” preventing the benefits
that arise from cross-department synergies (such as increased up-sell and
cross-sell) from being realized. Often, the biggest problem with traditional
CRM initiatives is that the complexity of the whole system results in the
customer being treated more like a number than ever—which is exactly
what CRM should not be.

There is, however, an alternative to Traditional CRM: Customer Life Cycle

Care. Customer Life Cycle Care (CLC) aggressively leverages customer
service best practices to fully integrate CRM business processes across
sales, marketing and customer service departments. By doing so, CLC
ensures that customer interactions with any department work to the
advantage of all customers. CLC, therefore, yields better results more
rapidly and with less risk and cost than traditional CRM strategies.

The tenets of Customer Life Cycle Care are:

1. Give every customer-facing employee a 360-degree view of the

customer

2. Use customer data to optimize business processes and make better

decisions on both a tactical and strategic level

3. Maintain accuracy of customer data to maximize value

4. Increase revenue generated during post-sales interactions when

appropriate with customers throughout the lifetime of the relationship

5. Leverage customer data to improve customer satisfaction, retention,

loyalty and longevity

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4.3 Stages of Customer Life Cycle Management

Defining Customer Life Cycle Stages with Your CRM

Developing a successful customer relationship management (CRM) strategy

requires a keen understanding of consumers and their purchasing
behaviours. These behaviours vary greatly at the different stages within
the customer life cycle. It is important to identify these various life cycle
stages and to understand the needs of the consumer at each phase.

Below is a look at the five main stages with the typical customer life cycle.

1. Reach

This is the initial stage of the customer life cycle. The primary goal at this
phase is to bring awareness to your brand and to entice the consumer to
want to learn more about your goods or services. Ultimately, you want to
generate high-quality leads.

You should have a clearly defined brand messaging strategy and use a
variety of marketing techniques, such as social media marketing, banner
advertising and content marketing. It is crucial to analyze the effectiveness
of each marketing strategy during this stage. This analysis will enable you
to adjust your marketing strategies if necessary.

2. Acquisition

At this stage, you are able to obtain prospective customer's contact

information such as email addresses, phone numbers or social media
profiles. This signifies that the consumer is interested in your goods or
services but not quite ready to take the leap and make a sale. This is one
of the most critical points in the customer life cycle.

You can now start to foster relationships with the customers through
strategic engagement. Since you now have their contact information; you
can focus on targeted and personalized marketing strategies. Email
marketing, sales calls, social media marketing and content marketing all
work well at this stage of the life cycle. Don't solely focus on making a
sale. Instead, focus on building trust and fostering relationships.

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3. Conversion

This is the phase when you convert a prospective customer into an actual
paying customer. You have been able to convince the consumer that they
need your goods or services to the point that they make a sale. The most
important thing to focus on at this stage is to make sure your customer
has a pleasant buyer's experience.

Having customer-friendly processes in place such as an easy-to-use

website, a secure payment method and an efficient customer service
strategy are vital to enhancing the buyer's overall experience. This also is
the time to analyze the effectiveness of your marketing techniques up to
this point. Determine what strategies are working best to make this
conversion happen and where adjustment may need to take place.

4. Retention

Don't make the mistake of thinking that the customer life cycle stops once
the sale is made. The truth is that you are only halfway to your ultimate
goal. It is now time to continue building on the customer relationships
developed during the acquisition stage. Regular engagement with the
consumer will help to keep your brand fresh in their mind and to encourage
repeat purchases. Sales techniques like cross selling, up-selling and loyalty
programs are very effective at retaining customers.

5. Advocacy

Creating advocates for your company should always be your ultimate goal.
These are loyal customers who not only make regular purchases but also
are willing to promote your goods or services to others. They will refer
their friends and family members to your business and post positive
reviews online. This type of customer loyalty does no happen overnight.
You have to develop strong relationships throughout the entire customer
life cycle.

Defining the five main stages of the customer life cycle will allow you to
create an effective CRM strategy that attracts, converts and retains
customers, as well as transitions them into advocates for your business.
Whether you are focusing on marketing strategies, customer engagements

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or sales figures, understanding these five life cycle stages will help you
boost sales while fostering customer relationships.

4.4 Customer Life cycle Care: Fully Optimizing CRM

Companies that are truly customer-centric use every customer touchpoint

to stimulate interest, close business, satisfy a need and/or demonstrate
commitment to the relationship. And that’s exactly what Customer Life
Cycle Care does. It ensures that every touchpoint fulfills its value potential
—regardless of whether that touch happens in marketing, sales or
customer service.

CLC does this by capturing and delivering high-value information at every

touchpoint across the customer relationship life cycle. This 360-degree
perspective is important, because of the cross-departmental nature of
customer relationships in the real world.

Fig. 4.1: Customer Life Cycle Care

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The figure above depicts, in a somewhat simplified way, this 360-degree

view. Marketing discovers information about prospects and feeds them into
sales processes. Sales converts prospects into customers. Service cares for
customers so they can be kept in the cycle. Proactive communication keeps
customers engaged to drive more sales.

All of these business processes are supported by business analytics.

Business analytics tracks all life cycle processes in order to optimize
performance, quality and efficiency. At every touchpoint throughout the life
cycle, companies use existing information about the customer and capture
new information about the customer. The goal of CRM from a business
analytics perspective is to:

1. Effectively capture any and all useful information wherever it becomes

available in the life cycle and

2. Make any and all useful information available to any employee who
needs it anywhere in the life cycle.

If executed properly, this results in a true 360-degree view of the

customer.

CLC fulfills this goal by integrating the capture and delivery of information
across all departments. By doing so, CLC allows marketers, sales people
and service staff to treat customers as individuals—something customers
really like! With CLC, each of these groups can actively help generate more
revenue from every account. CLC also eliminates duplication of effort by
making sure no one has to capture the same data twice. And it ensures the
overall quality of the information that everyone is using by replicating best
data management practices across the company.

Effective CLC also optimizes use of all communication channels, giving

customers the freedom to use phone, e-mail, online self-service, chat, fax
and/or mail as they see fit at various points throughout the relationship life
cycle. In addition to catering to the customer’s needs, this approach
benefits the vendor by driving customer interactions to more efficient
channels.

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Simply put, CLC results in more revenue, greater profitability and happier
customers. And, perhaps best of all, it enables companies to realize the
benefits of CRM with less cost and risk than traditional CRM
implementations—which typically require significant process re-engineering
and major enterprise software implementations.

CLC accomplishes this by leveraging a powerful resource that CRM

initiatives have historically underutilized: the customer service
organization.

4.5 Shortcomings of Traditional CRM

CRM isn’t about strip-mining your customers. It’s about creating

relationships that yield maximum value over their entire lifetime by selling,
marketing and caring for customers based on their specific needs and
preferences.

Businesses initiate CRM projects for a variety of reasons. Many do so

because they can increase revenue by better understanding their
customers. By gaining insight into both individual customers and target
market segments, these companies can boost sales and optimize top-line
business performance.

However, CRM can do more than just improve sales. It can enhance
marketing efficiency by enriching the data used to design and execute
campaigns. It can reduce operational costs by eliminating redundant and/
or wasteful tasks. CRM, if properly executed, can also lead to significant
improvements in customer satisfaction.

The importance of customer satisfaction should not be underestimated.

Happy customers buy more than unhappy ones, and they do so for a much
longer period of time. They help companies win new customers, instead of
sending them to competitors as unhappy customers do. They’re also easier
to work with when problems arise—unlike chronically unhappy customers,
who will cost you money and cause you grief if you make even the slightest
mistake.

Traditional first- and second-generation CRM has not generally provided

this full range of business benefits. Many CRM vendors have focused
primarily on sales and account management, providing sales teams with

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data about their customers’ buying histories so that they can capitalize on
re-order opportunities and discover signs that a competitor has been
grabbing a piece of their business. Other vendors have come from an
Enterprise Resource Planning (ERP) background, where efficiency is king.
Unfortunately, the application of ERP principles to CRM often results in the
customer being treated like a number— exactly what you don’t want to
have happened in a customer relationship.

Such CRM initiatives have typically also failed to fully integrate customer-
facing business processes across all departments. Marketing, sales and
customer service tasks continue to be executed within their respective
silos. There is little synergy between departments, and duplication of effort
remains the norm. Worst of all, customers don’t notice any difference in
the way they are being treated. So, while sales people may in fact be given
some incrementally better data, the overall return on investment to the
business as a whole remains limited.

4.6 Role of the Customer Service Organization in CLC/CRM

Initiatives

One of the most noticeable differences between Customer Life Cycle Care
and traditional Customer Relationship Management is that the former
focuses on “Care,” while the latter focuses on “Management.” Actually, the
whole idea that customer relationships can somehow be unilaterally
“managed” by vendors/suppliers is a myth. Customers want to and can
exercise a great deal of control over their business relationships. They
don’t want to be “managed.” They want to be listened to, understood,
serviced and cared for.

That is what CSOs do best. And that is why CSOs have a critical role to
play in any company’s CLC-based CRM initiative.

Several factors make the CSO’s active participation in CLC implementation

particularly advantageous:

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1. CSOs Have the Most Experience Providing Staff with a 360-

degree View of the Customer

Customers have all kinds of questions. They may ask about an order they
placed a few weeks ago. They may need shipping information.

They may inquire about the terms of a service contract. Customers don’t
want to hear “I’ll get back to you on that” when they call for service. They
expect CSO staff to have the answers they need at their fingertips.

CSOs have therefore learned to provide their staffs with access to a diverse
range of business systems—including order entry, customer service
records, shipping, etc. Sales and marketing staffs, in contrast, typically
don’t look up shipping records as part of their daily practice. That’s why
CSOs have much to contribute when it comes to putting a true 360-degree
view of the customer at everyone’s fingertips. They’ve already spent years
addressing the challenges associated with giving staff access to multiple
systems. That experience is invaluable to any CLC/CRM effort.

2. CSOs Have the Cleanest Customer Data

If your name is spelled wrong on a promotional mailer you receive, you

probably don’t think twice about it. But if you call customer service and
they have your name wrong when they look up your customer record,
you’re likely to react pretty strongly. That simple example points out the
difference in the quality of data that marketing needs versus the quality of
data that customer service needs. CSOs have the most contact with
customers and can’t make mistakes with addresses or order histories. So,
they are constantly verifying and correcting their customer data.

The data management practices that CSOs have honed over the years are
highly applicable to enterprise CLC/CRM systems. If the data in these
systems isn’t accurate, it will undermine the entire CRM effort. That’s why
CSOs have such an important role to play in ensuring the quality and
completeness of data used in any CLC/CRM system.

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3. CSOs Have Proven their Ability to Get Non-sales Staff to Drive

Sales

Customer service personnel typically have no sales experience—and may

not even have much sales aptitude. Yet many CSOs have transformed
these employees into powerful producers of up- and cross-sell revenue.
They’ve accomplished this by giving those employees access to the right
data, clearly defining targeted sales opportunities and creating processes
that drive leads to sales. In some cases, they even use sales scripts to
close deals themselves.

This proven ability to pinpoint and act upon revenue opportunities is clearly
relevant to enterprise CLC. If one objective of CLC is to maximize revenue,
then it makes sense to leverage this ability across the entire organization.
After all, if CSO best practices can deliver revenue from people who aren’t
geared towards selling, imagine the impact those same best practices can
have on professional salespeople.

CSOs have many other important contributions to make to their company’s

CLC initiatives. For example, most have had to provision their multi-system
access without undertaking high-risk, high-budget IT projects—since the
CSO is typically managed as a cost center rather than a profit center. As a
result, CSOs know how to achieve results within the kind of constraints
that characterize today’s more conservative IT spending environment.

CSOs also play a critical role in customer “recovery,” which research

confirms is actually more important to customer success than the pursuit
of some impossible-to-attain goal of perfection.

CSOs know how to manage customer data. They know how to use that
data to maximum effect. And they have done so within pragmatic resource
constraints. These factors make CSO a key partner for CLC success.

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4.7 CLC Action Plan

Given the obvious importance of CRM success to corporate business

performance, what can managers do to get their initiatives off to the best
possible start?

1. Build Consensus around Customer Life Cycle Care

To avoid the pitfalls of traditional CRM, it’s important to build consensus

around a CLC strategy as early as possible. CRM should not be approached
as a linear, ERP-like process. Instead, the cyclical, cross-departmental
nature of customer-facing business processes should be clearly articulated,
and the “care-oriented” concepts of CLC should be aggressively advocated.
This has to happen from the very earliest stages of the initiative.

2. Ensure a Lead Role for the Customer Service Organization

A strong case should be made for maximum involvement of the CSO.

Customer service functions should not under any conditions be allowed to
become secondary components of any enterprise CRM implementation.
That is simply a recipe for disaster.

3. Enlist a Trusted Advisor

Few companies have in-house experience or expertise in the CLC strategy

or implementation. This makes it crucial to enlist the aid of an outside
partner to provide logistical, technical and political support. Such an
advisor is likely to come from the customer service marketspace rather
than ERP or sales.

In competitive markets, every customer is precious. Companies that treat

them that way will win. They must therefore be able to deliver
individualized care at every touchpoint in the relationship life cycle. This
can’t be accomplished with silo processes, bad data or inadequate business
practices. With a strong CLC-based strategy and the active involvement of
its customer service organization, however, every company can achieve
real CRM success.


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4.8 Summary

CLV is a measure of the worth of a customer to the firm. Calculation of CLV

for all the customers helps the firms to rank order the customers on the
basis of their contribution to the firm’s profits. This can be the basis for
formulating and implementing customer-specific strategies for maximizing
their lifetime profits and increasing their lifetime duration. In other words,
CLV helps the firm to treat each customer differently based on their
contribution rather than treating all the customers same.

Companies that are truly customer-centric use every customer touchpoint

to stimulate interest, close business, satisfy a need and/or demonstrate
commitment to the relationship. And that’s exactly what Customer Life
Cycle Care does. It ensures that every touchpoint fulfills its value potential
—regardless of whether that touch happens in marketing, sales or
customer service.

4.9 Self Assessment Questions

1. Elucidate upon the importance of Life Cycle Care in CRM.

2. What are the shortcomings of Traditional CRM?

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4.10 Multiple Choice Questions

1. _________ can be considered as the metric which guides the allocation

of resources for ongoing marketing activities in a firm adopting
customer-centric approach.
a. Customer Lifetime Value
b. Customer Life Cycle Management
c. Customer Life Cycle Care
d. Customer Life Cycle Value

2. Which of the following is the goal of CRM from a business analytics

perspective?
a. Effectively capture any and all useful information wherever it
becomes available in the life cycle.
b. Make any and all useful information available to any employee who
needs it anywhere in the life cycle.
c. Both (a) and (b) of the above
d. One of the above

3. Many CRM vendors have focused primarily on sales and account

management, providing sales teams with data about their customers’
buying histories so that they cannot capitalize on re-order opportunities
and discover signs that a competitor has been grabbing a piece of their
business.
a. True
b. False

4. CRM is about creating relationships that yield maximum _________

over their entire lifetime by selling, marketing and caring for customers
based on their specific needs and preferences.
a. return
b. service
c. loss
d. value

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5. Which of the following get their initiatives off to the best possible start
that manager can do; given the obvious importance of CRM success to
corporate business performance?
a. Build consensus around Customer Life Cycle Care
b. Ensure a lead role for the Customer Service Organization
c. Enlist a trusted advisor
d. All of the above

Answers:

1. (a), 2. (c), 3. (b), 4. (d), 5. (d)

Reference

1. www.rightnow.com

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REFERENCE MATERIAL
Click on the links below to view additional reference material for this
chapter

Summary

PPT

MCQ

Video Lecture - Part 1

Video Lecture - Part 2


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Chapter 5
E-CRM

Objectives

The objectives of this chapter are to know about:

• What is e-CRM?
• Benefits of e-CRM
• Strategy for e-CRM deployment

Structure:

5.1 What is e-CRM?

5.2 Difference between CRM and e-CRM
5.3 Benefits: Why e-CRM?
5.4 Barriers to e-CRM
5.5 Implementation Strategies for e-CRM
5.6 Applications of e-CRM
5.7 Future Trends in Multi-channel Approaches in e-CRM
5.8 Summary
5.9 Self Assessment Questions
5.10 Multiple Choice Questions

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5.1 What is e-CRM?

Over the last ten years, many companies and organizations have
implemented CRM (Customer Relationship Management) systems. In most
cases, these systems were designed to support call centre and e-mail
channels, and more recently Internet and Mobile channels. An increasing
number of companies are considering implementing e-CRM systems to
satisfy the growing expectation of customer service. e-CRM systems have
unique characteristics that support customer-business interactions that are
linked to internal business processes and systems across different areas for
operational and analytical purposes.

Although, originally, the term e-CRM was viewed as a form of CRM that
focused on e-Business channels or CRM applications that use ASP/SaaS
(Application Service Provisioning/Software as a Service) approaches
recently a broader view seems to be have emerged. e-CRM refers to a kind
of CRM that is channel independent in the sense that it uses one, company-
wide set of data and one set of business rules to manage customer
interaction via any channel at any time. In practice, web technologies are
used in most cases for process management and to provide
representatives with information and functionality.

The internet is a channel that will continue to increase in customer

relationship management and utilization for all companies both now and in
the future. The Internet is terminology which includes all of the following:

e-mail, world wide web, chat rooms, e-forums, blogs, and so forth. The
internet can provide an overall better and more consistent customer
experience, and also allows for increasing data collection and better
customer personalization experiences. This, in turn, all lead to increased
profitability from customers and greater customer loyalty (Freeland, 2003).
The research of Hamid and Kassim (2004) determines that “click-and-
mortar companies show a higher percentage of using the Internet
technology for CRM compared to pure dotcom companies. There is a
positive impact on the utilization of Internet technology on CRM”.

Electronic Customer Relationship Management (e-CRM) involves the

integration of web channels into the overall enterprise CRM strategy with
the goal of driving consistency within all channels relative to sales,
Customer Service and Support (CSS) and marketing initiatives. It can

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support a seamless customer experience and maximize customer

satisfaction, customer loyalty and revenue.

Put simply, e-CRM means CRM database access via the Web. It means
Intranet access for internal users, extranet access for business partners
and customers and of course, Internet access for the market at large.

e-CRM is an extension of the traditional CRM and is defined primarily by

the platform afforded by the internet. This platform provides tremendous
opportunities for enterprises in their drive to create good customer value,
strengthen customer relationships, cut down on the cost of providing
customer service as well as allow for a means of customizing and delivering
personalized messages to customers on a mass scale.

Examples of e-CRM include Frequently Asked Questions (FAQs), chat, e-

mail, mobile, sales force management and customer database. e-CRM
allows customers to access company services from more and more places,
since the internet access points are increasing day by day.

There are basically two kinds of e-CRM services:

• Reactive Service: This refers to the kind of service that allows the
customer to contact the company when he has a problem.

• Proactive Service: This refers to the kind of service which allows the
company to initiate contact with the customer in order to establish
communication and provide solutions to problems.

e-CRM operates at three distinct levels and these include the

following:

1. Foundational Services: These refer to those providing fundamental

services such as ensuring effective and responsiveness of websites as
well as taking and completing orders on the site.

2. Customer-centred Services: These services are a little more complex

than the basic ones and include tracking of orders, customization and
configuration of products and the security integrity of the site.

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3. Value-added Services: These go beyond the normal kind of services

and provide specialized options such as online auctions and training as
well as education.

There are a few things an enterprise has to consider before commencing its
e-CRM program:

1. Clear Visions and Definite Strategies for Developing Customer

Relationships: Vague visions are usually accompanied by non-
actionable strategies for achieving them. An enterprise must have a
very clear idea of the exact kind of relationship it desires to build with
its customers and then how to achieve it. These must precede any
investment in e-CRM programs and infrastructure.

2. Enterprise-wide Consensus: Successful planning and execution of

any e-CRM project is predicated largely on the alignment of such project
with overall organizational goals and then building of consensus within
the various departments in the enterprise. If this is not achieved, the
project will experience shortfalls in many areas leading to probable
failure.

3. Goals Must be Measurable: As a recent study in the finance sector

showed 60 per cent of the respondents admitted that they had no way
of measuring returns on the CRM project, while 50 per cent had no way
of establishing a reduction or increase in the customer churn rate sequel
to the implementation of the CRM project.

4. Establish Top Executive Support: It is crucial that all staff

understand the importance of the project to the company’s overall
business objectives and this will be established by the support shown by
the top executive of the enterprise.

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5.2 Difference between CRM and e-CRM

Differences between CRM and e-CRM are subtle, but important. They
concern the underlying technology and its interfaces with users and other
systems. Considering the strategic perspective, no differences between
CRM and e-CRM exist as both concepts have the overall goal of an
increased Customer Lifetime Value, and aim to increase customer retention
and decrease service costs but on the process level, several distinctions
between the two concepts become observable. While conventional
communication processes are often time delayed, e-CRM allow
organizations to always operate in real-time and more than that
interactions with customers are transparent so that organizations are able
to draw conclusions on customer behaviour and measure the success of
activities. Unlike conventional CRM processes, e-CRM processes imply high
automation of interaction.

The application programs in CRM are written with back-end operations in

mind; the emphasis is on data collection and the optimality of interface
with the user’s PC (client). Web-enabled CRM application involves
downloading applets to the client – a time-consuming process.

e-CRM expands the traditional CRM techniques by integrating technologies

of new electronic channels. e-CRM solution supports marketing, sales and
service and with the advancement of web-based technology, market
dynamics are driving companies to adopt e-CRM.

e-CRM cannot be separated from CRM. It needs to be integrated and

seamlessly. However, many organizations do have specific e-CRM initiatives
or staff responsible for e-CRM. Both CRM and e-CRM are not just about
technology and databases, it is not just a process or a way of doing things,
it requires, in fact, a complete customer culture.

e-CRM is more than technology. It requires socio-cultural efforts on the

part of the company to make it a reality. Also, every worker in different
department of a company should be saturated with e-CRM policy and
culture. If it is done this way, the company will have an e-CRM system that
makes impact on her customers and bring in consistent profit through
customers’ retainability and continual patronage.

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5.3 Benefits: Why e-CRM?

Dynamic Content: The contents of the knowledge base are limited only
by what is thought will not be asked. Therefore, self-help tools are often
very robust, cover a wide range of topics, and must be constantly updated
by adding new articles, and removing articles determined by user survey
as incomplete, incorrect, or not relevant.

Good Coverage: Many topics can be covered and many users can use the
tool.

Low Cost: Relative to other electronic interaction channels, the cost of

purchasing, implementing, and administering is low.

Fostering Relationship with Customers: Trust is one of the scarcest

commodities in dealing with customers and it is not easily obtained.
Traditionally, it was the practice to just acquire the preferences of the
customers but with the increased competition and demands coupled with
their awareness, it is now far more important to initiate proactive programs
to stimulate one-on-one communication with customers geared towards
fostering trust and loyalty. e-CRM enables enterprises to create trust, get
cooperation and then guarantee satisfaction with the customers.

Provision of Personalized Services: Although it is not an easy task to

achieve personalization successfully and sustain it, if achieved, it can result
in huge positive gains for the enterprise. This is because it is difficult for
competitors to replicate a successful program due to its uniqueness. It
furthermore drives more sales and ensures efficacy and efficiency.

Quality of Service and Delivery: Service delivery has become a major

determinant in the selection of service providers by customers. It is a
major factor in determining their retention and loyalty. Service quality
possesses five proportions; responsiveness, assurance, reliability, empathy
and reliability.

Transaction and Processing Speed: The backbone offered by the

internet has enabled enterprises to establish e-CRM platforms via which
they are able to cut down on the time taken for processing customer
queries, acknowledgment of their orders, information regarding their
payments as well as delivery of the orders. This has gained time which can

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be easily converted to other important issues thus resulting in higher

efficiency.

Convenience: The ability to provide a convenient option to customers to

access its services has become a major determinant for the selection of
service providers by customers. This is very common in the banking sector
as customers seek options which will ensure that they go through as little
stress as possible in accessing their accounts and carrying out their
transactions.

5.4 Barriers to e-CRM

Adding the internet to our CRM efforts makes lots of sense but it is not
necessarily clear sailing ahead. The top three concerns would need to be
addressed to persuade those not currently using the internet to participate
in e-commerce. They are privacy, security, and ease of use.

In addition to the three major barriers to adoption of e-CRM above, the

other factors like illiteracy and complacency can be a contributive barrier to
customer’s adoption of e-CRM. We have different customers with different
behavioural pattern and to really discover individual differences in order to
make electronic customer relationship management work, there will be
need for a company to embrace responsive e-CRM methodology by moving
closer to their customers in order to identify their needs.

5.5 Implementation Strategies for e-CRM

Once a company has identified the need for e-CRM, it has to plan for
implementation for which the following aspects need to be taken into
account.

1. Developing Customer-focused Business Strategies: The objective

of this step is not to try to change the customer to the company’s goals but
to listen to the customer and try to create opportunities beneficial to both.
It is important to offer customers what they are currently demanding and
anticipate what they are likely to demand in the future. This can be
achieved by providing a variety of existing access channels for customers,
such as e-mail, telephone and fax, and by preparing to provide for future
access channels such as wireless communication.

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2. Retooling Business Functions: Starting to do business via e-CRM

requires disruptive organizational change in order to determine which
departments/functions are truly servicing the customer and which ones are
only adding to overheads. After identifying and reducing surplus
manpower, administrative time and cost should come down. A major factor
here is that the changes needed during an e-CRM implementation will only
be possible with buy-in from the top levels of management and with
company-wide accountability of all stakeholders. Positive organizational
change will not simply materialize on its own. It is the responsibility of
senior management to ensure that all employees understand the need of
the changes, how the new structure will benefit from them, and how it will
enhance their ability to serve their customers better.

3. Work Process Re-engineering: Departmental role and responsibility

changes from restructuring business functions will need to adopt new work
processes. Choices here are to take the traditional step-wise approach or
an integrated one towards improving work efficiency. Under the step-wise
approach, departments are treated as separate efficiency entities. This
rarely produces good results because the goals of each department can
become too parochial, and departments tend to compete internally for their
own benefit at the expense of what’s best for the company.

4. Technology Choices: The focus here is to consider the company’s

industry, the company’s position within its industry, which e-CRM
implementations are good candidates for the company in particular. Criteria
for technology selections includes scalability of software, tool set flexibility
for customization, stability of the existing e-CRM application code,
compatibility of e-CRM application with legacy and Internet systems, level
of technical support available during and after implementation, upgradable
support, availability of additional modules and security.

5. Training and Implementation: This thrust area is apparently the

most important one in e-CRM implementation effort. Depending on the
number of users, training times will vary from company to company.
Training of employees should occur before the new e-CRM system has been
implemented to ensure a seamless transition for customers. Examples of
training include sending users to training facilities at considerable cost or
bringing in an on-site consultant. Anyone who requires access to the
system should receive full, appropriate and timely training. Training should
be an ongoing, managed activity as systems must continuously change and

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evolve. All training and tools used should be thoroughly documented for
existing, new and future employees. Without proper documentation, an e-
CRM system may not work.

A firm should plan to spend about 5-7 per cent of its total e-CRM
implementation on training.

Difficulties Commonly Encountered during Implementation

In an attempt to quickly implement e-CRM, too many companies start

spending huge sums before developing a comprehensive e-CRM strategy.
The following list outlines potential pitfalls with e-CRM implementation
process often encounters and needs to be overcome.

1. Mismatch between a company and the vendor’s CRM software.

Every effort must be made to find a vendor whose product is flexible
enough to emulate the company’s best practices and does not force the
company to adopt the vendor’s best practices. Realistically, no single
software solution will handle all e-CRM needs equally well. Therefore,
each company should select the solution that best handles the critical
customer-facing functions and maintains robust links to the existing ERP
system.

2. A poor understanding of the company’s business processes. Each

of the business processes should be reviewed, analyzed and
documented before shopping for a vendor.

3. e-CRM implementations that take more than 90 days have a high

failure rate. A company should be skeptical about implementations
that are considerably longer than the 90 days time period.

4. Vendor stability should be a criteria used in selection. Financial

stability of the vendor needs to be checked to assess whether or not it is
likely to be able to survive a softening economy.

5. Rejection by end-users is always a possibility when business

functions are restructured. If the new processes required for a
successful e-CRM implementation are not developed with the
knowledge, help and acceptance of the employees who will be relied
upon to use them, the project may fail.

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6. Size of the project. Some e-CRM implementations have failed because

their initial scope was too broad. The risk associated with a failed pilot is
much lower than for a full rollout, and it gives your company the
opportunity to evaluate the positives and negatives of the pilot as one
plans for a larger-scale implementation.

Unfortunately, avoiding these ‘pitfalls’ is, in many cases, easier said than
done. Often this is because sales and marketing teams are reluctant to
adopt the new, automated CRM systems.

5.6 Applications of E-CRM

e-CRM (electronic customer relationship management) is a derivation from

CRM techniques which influenced direct marketing technology and call
centre to promote massively created products and services to small sub-
segments of market.

When CRM techniques are incorporated in e-commerce environment, it

becomes e-CRM which involves building a strong and sustainable customer
relationship by using Internet.

It is a strategy which is purely based on Internet and software

development, it requires to create essential integrated software suite to
deal with all kinds of customer related issues like customer services, sales
and marketing field support.

The essential parts of e-CRM are to focus on building new customer base,
segmentation of high valued customers, enhancing the profitability of
existing customer and maximize the value and life of profitable customers.

The Intelligence of e-CRM Applications and Approaches on Online

Shopping Industry

e-CRM is advanced by internet. It provides features that are effectual to

the business organization and attractive to customers. There are very
delicate differences that lies between e-CRM and CRM, but it is important.
It is concerned with the interfaces with users and other systems and its
underlying technology. For instance, most of the e-CRM systems give the
opportunity to customers to place order, request additional information
about products, review purchase history, check order status, sends email

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and lots of other activities by providing them a self-service browser based

window.

These features give freedom to customers considering the place and time.
With e-CRM, customers are not bound to contact the company in the
regular business hours and companies are not obligated to give live
customer support for customer request and enquiries.

e-CRM is a new concept of Relationship Marketing. e-CRM systems allow

companies to develop one-to-one relationship with thousands of
customers. Companies provide value that is ongoing to its customers and
regularly gain their trust, loyalty and confident by the numerous
interactions made.

Companies now have the ability to practice it on an extraordinary scale

with minimum cost.

Five Engines of e-CRM

The e-CRM initiatives are increased and management of every major

company would have to formulate and implement an e-CRM strategy
quickly in order to have a competitive edge. Senior executives and general
managers drive the e-CRM activities in most of the companies because it is
an enterprise-wide concept.

Companies face the challenging problems to develop a strong technology

infrastructure in a limited time and minimum cost because e-CRM has the
important potential to build a sustainable customer relationship.

An immediate action is to buy standardized or mass-produced application,

associate and integrate database of online purchase information and web
traffic and implement the e-CRM initiative

A five engine comprehensive software platform is the more effectual and

sound approach that makes implementation of e-CRM effective in business
process. 


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These five engines are:

1. The Customer-centered Information Database: It involves

consolidation and integration of information about millions of customers
with permissions, preferences and useful information to the customers.

2. The Segmentation and Analysis Engine: To analyze the different

customer types and segment them according to their characteristics in
order to build a sound marketing campaign strategy.

3. The Personalization Engine: To customize the overall customer

experience; make preferred personalization by customers, providing
offers and messages to each customer.

4. The Transaction Engine: To facilitate the transaction of purchase or

return between customer and company or exchanging information about
transaction.

5. The Promotion Engine: It involves delivering information like new

deals and offers proactively to the customers via media of their choice.

Essence and Purpose of e-CRM

The concept of CRM provides the prospects of configuring and managing

the customers and their relative database. In other terms, we can define
CRM as an efficient backend operation which helps to predict customers
and their behaviour.

It is important to systematize the technology strategically. Therefore, an e-

CRM enables a group of individuals to work simultaneously which could
conserve time. It holds and organizes all the CRM functions with the use of
internet which includes resources set by an organization and marketing
strategies to drive sales.

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Comfort and Advantages of using an e-CRM

a. Projects a customer-centric face of an organization.

b. The advantage of acquiring customer track record in one click. In

parallel providing the same to respective concerns makes the sales
significantly less complicated.

c. Often, an e-CRM is used and combined with data warehousing of e-

commerce application. This allows providing a self-service portal to
manage inventory and their related opportunity.

d. With consolidate, data saved in an e-CRM gives the leverages to run

personalized marketing campaigns.

e. Easy to access data via electronic device anytime anywhere creating a

more personal direct connection with customers.

f. Opens multiple channels to communicate which includes live chats,

emails and web-based campaigns.

g. Designed to meet customer preferences to maximize the lifetime value

of each customer.

5.7 Future Trends in Multi-Channel Approaches in e-CRM

The future is wide open for companies to adopt multi-channel approaches

to customer relationship management. The multi-channel retailers that
utilize an e-CRM approach stand to benefit in multiple arenas by providing
targeted customer service as well as gaining operational and competitive
advantages. Technologies such as PDAs, mobile phones, and other wireless
technologies have not yet been as fully embraced as they can be in
assisting to maintain the customer relationship. Some companies, however,
have embraced text messaging to reach out to and keep their customers
informed of deals, info, and trends to assist in developing customer loyalty
and satisfaction.

The current trend for marketing is to include multi-channel communications

across many platforms all for the same message. For example, television is
no long a passive experience. Customers of cable companies and those

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who watch specific shows can participate through text messaging. Many
shows today allow customers to text in and possibly have their message
displayed on the television in real time. They furthermore can blog about
what they are seeing on the television on the show’s website, and they
interact with other customers who watch the same shows. This utilization
of different channels to create an overarching customer experience is truly
the future of multi-channel CRM marketing and customer relationship
development. Mobile technologies are safe, reliable, automatable and are
able to be customized and personalized with little additional cost. If
retailers are offering shoppers multiple channel options now, it is expected
that pressure will increase for all retailers to do so in the future. It remains
valuable for a company to utilize multiple channels because research has
proven that multi-channel shoppers spend more money than those who
utilize simply one channel. One company who has excelled in utilizing
multiple channels to assist with developing a strong customer relationship
marketing program is amazon.com.

e-CRM has evoked considerable interest about its effectiveness and risks
amongst many organizations and researchers. e-CRM remains a priority for
organizations, even as economic conditions cause IT budgets to be
scrutinized. e-CRM is not here to change the marketing but instead to
enhance it. In addition, customer-centric and corporate benefits of
implementing an e-CRM solution have been reviewed with the
understanding that e-CRM efforts will only succeed when organizations
make their customers win.

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5.8 Summary

Electronic Customer Relationship Management (e-CRM) involves the

integration of web channels into the overall enterprise CRM strategy with
the goal of driving consistency within all channels relative to sales,
Customer Service and Support (CSS) and marketing initiatives. It can
support a seamless customer experience and maximize customer
satisfaction, customer loyalty and revenue.

The benefits offered by e-CRM are:

1. Dynamic content
2. Good coverage
3. Low cost
4. Fostering relationship with customers
5. Provision of personalized services
6. Quality of service and delivery
7. Transaction and processing speed
8. Convenience

5.9 Self Assessment Questions

1. How has e-CRM impacted CRM? How is it different from CRM?

2. What are the benefits e-CRM offers to businesses?

3. What are the barriers to e-CRM success?

4. What are the best strategies for implementing e-CRM?

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5.10 Multiple Choice Questions

1. E-CRM refers to a kind of CRM that is channel independent in the sense

that it uses one, company-wide set of data and one set of business rules
to manage customer interaction via any channel at any time.
a. True
b. False

2. Which of the following is the kind of basic services of e-CRM?

a. Reactive Service
b. Proactive Service
c. Both (a) and (b) of the above
d. None of the above

3. E-CRM expands the _________ CRM techniques by integrating

technologies of new electronic channels. e-CRM solution supports
marketing, sales and service and with the advancement of web-based
technology, market dynamics are driving companies to adopt eCRM.
a. modern
b. traditional
c. advance
d. standard

4. Which of the following is the benefit of e-CRM?

a. Provision of personalized services
b. Quality of service and delivery
c. Transaction and processing speed
d. All of the above

5. Every effort must be made to find a vendor whose product is

_________ enough to emulate the company's best practices and does
not force the company to adopt the vendor's best practices.
a. expensive
b. technical
c. flexible
d. useful

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Answers:

1. (a), 2. (c), 3. (b), 4. (d), 5. (c)

References

1. “Effective Customer Relationship Management through e-CRM” –

Daminni Grover.

2. “ C r i t i c a l S t e p s t o e - C R M B e s t P ra c t i c e – W h i t e Pa p e r ” –
www.talisma.com.

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REFERENCE MATERIAL
Click on the links below to view additional reference material for this
chapter

Summary

PPT

MCQ

Video Lecture - Part 1

Video Lecture - Part 2

Video Lecture - Part 3


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