CRM CRM (Customer Relationship Management) has been growing steadily for the last few years and is now seen as the way forward for any business wishing to thrive in the “e-future’.
CRM concentrates on the retention of customers by collecting all data from every interaction, every customer makes with a company from “all’ access points whether they are phone, mail, web or field. The company can then use this data for specific business purposes, Marketing, Service, Support or Sales whilst concentrating on a customer centric approach rather than a product centric. Every business is different and therefore needs a different approach to CRM. Every company also has different legacy systems and has various levels of data integration within the company.
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This is why CRM is so hard to define as it is all things to all companies. Customer Relationship Management (CRM) is developing into a major element of corporate strategy for many organisations. CRM, also known by other terms such as relationship marketing and customer management, is concerned with the creation, development and enhancement of individualised customer relationships with carefully targeted customers and customer groups resulting in maximizing their total customer life-time value.
Industry leaders are now addressing how to transform their approach to customer management. Narrow functionally-based traditional marketing is being replaced by a new form of cross functional marketing – CRM. The traditional approach to marketing has been increasingly 2 Customer Relationship Management questioned in recent years. This approach emphasised management of the key marketing mix elements such as product, price, promotion and place within the functional context of the marketing department.
The new CRM approach, whilst recognising these key elements still need to be addressed, reflects the need to create an integrated cross- functional focus on marketing – one which emphasises keeping as well as winning customers. Thus the focus is shifting from customer acquisition to customer retention and ensuring the appropriate amounts of time, money and managerial resources are directed at both of these key tasks. The new CRM paradigm reflects a change from traditional marketing to what is now being described as “customer management’.
CRM-DEFINITION In many companies there is still confusion as to what CRM is all about. To some it is about a loyalty scheme, to some it is about a help desk. To others it is about a relational data base for key account management and for others it is about mass profiling the customer base without undertaking detailed segmentation. Relatively few organisations have implemented an integrated approach, which addresses all the key strategic elements of CRM.
Only a small number of businesses have a clear idea what should be done with information technology in order to successfully implement CRM. The core theme of all CRM and relationship marketing perspectives is its focus on cooperative and collaborative relationship between the firm and its customers, and/or other marketing actors. Such cooperative relationships as being interdependent and long-term oriented rather than 3 Customer Relationship Management eing concerned with short-term discrete transactions. The long term orientation is often emphasized because it is believed that marketing actors will not engage in opportunistic behavior if they have a long-term orientation and that such relationships will be anchored on mutual gains and cooperation. Another important facet of CRM is —customer selectivity”. As several research studies have shown not all customers are equally profitable for an individual company.
The company therefore must be selective in tailors its program and marketing efforts by segmenting and selecting appropriate customers for individual marketing programs. In some cases, it could even lead to —outsourcing of some customers — so that a company better utilize its resources on those customer it can serve better and create mutual value. However, the objective of a company is not to really prune its customer base but to identify appropriate programs and methods that would be profitable and create value for the firm and the customer.
Thus Customer Relationship management can be defined as: —Customer relationship management is a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value for the company and the customer. ” 4 Customer Relationship Management OBJECTIVE OF MY STUDY • The objective of my project is to understand the concept of CRM and its benefits that organization if implemented and practiced. • To undertake details study of CRM in Hotel industry in general and more specifically at Hotel Leela Venture Ltd. To study the cost factor involved in practicing CRM. • To study the actual benefits of CRM to the organization in terms of customer satisfaction, market share and to meet the anticipated future requirements of hotel industry. 5 Customer Relationship Management LIMITATIONS OF MY STUDY •Due to time constrain I was not able to visit many service organizations practicing CRM in Mumbai city therefore I have analyzed the relevance of CRM in Hotel industry (Hotel Leela Venture Ltd. •The study is based on actual information provided by the management of Hotel industry, particularly Hotel Leela Venture Ltd. Part of the information sought for my study was either not provided or was partly provided as it was considered confidential information. •Since CRM is a vast concept I have concentrated on some points namely the definition, CRM process, Impact of Globalization on CRM, Customer Knowledge Management and tools for CRM. 6 Customer Relationship Management EMERGENCE OF CRM PRACTICE
Customer relationship has historical antecedents going back into the pre-industrial era. Much of it was due to direct interaction between producers of agricultural products and their consumers. Similarly artisans often developed customized products for each customer. Such direct interaction led to relational bonding between the producer and the consumer. It was only after industrial era’s mass production society and the advent of middlemen that were less frequent interactions between producer and consumer leading to transactions oriented marketing.
The production and consumption functions got separated leading to marketing functions being performed by the middlemen. And middlemen are in general oriented towards economic aspects of buying since the largest cost is often the cost of goods sold. In recent years however, several factors have contributed to the rapid development and evolution of CRM. These include the growing de- intermediation process in many industries due to the advent of sophisticated computer and telecommunication technologies that allow producers to directly interact with end-customers.
For example, in many industries such as airlines, banks, insurance, computer program software, or household appliances and even consumables, the de-intermediation process is fast changing the nature of marketing and consequent making relationship marketing more popular. Databases and direct marketing tools give them the means it individualize their marketing efforts. As a result, producers do not need those functions formerly performed by the middlemen.
Even consumers are willing to undertake some of the responsibilities of direct ordering, personal merchandising, and product use related services with little help from the producers. 7 Customer Relationship Management Another force driving the adoption of CRM has been the Total quality movement. When the company embraced Total Quality Management (TQM) philosophy to improve quality and reduce costs. It became necessary to involve suppliers and customers in implementing the program at all levels of the value chain.
This needed close working relationships with customers, suppliers and other members of the marketing infrastructure. Thus, several companies, such as Motorola, IBM, General Motors, Xerox, Ford, Toyota, etc. Other programs such as Just- In-Time (JIT) and Materials requirement Planning (MRP) also made the use of interdependent relationships between suppliers and customers. With the advent of the digital technology and complex product, systems selling approach became common.
This approach emphasized the integration of parts, supplies, and the sale of services along with the individual capital equipment. Customers like the idea of systems integration and sellers were able to sell augmented products and services to customers. The popularity of system integration began to extend to consumer packaged goods, as well as services. This measure created intimacy and cooperation in the buyer-seller relationships. Instead of purchasing a product or service, customer were more interested in buying a relationship with a vendor.
Such programs have led to the foundation of strategic partnering within the overall domain of customer relationship management. Similarly, in the current era of hyper-competition, marketers are forced to be more concerned with customer retention and loyalty. As several studies have indicated retaining customers is less expensive and perhaps more sustainable competitive advantage than acquiring new ones. On the supply side it pays more to develop closer relationship with a 8 Customer Relationship Management few suppliers than to develop more vendors.
In addition several marketers also concerned with keeping customers for life, rather than marketing one- time sale. There is greater opportunity for cross-selling and up-selling to a customer who is loyal and committed to the firm and its offerings. Also customer’s expectation has rapidly changed over the last decades. Fueled by new technology and growing availability of advanced product features and services, customer’s expectations are changing almost on a daily basis. Customers are less willing to make compromises or trade-off in product and service quality.
In the world of ever changing customer expectations, cooperative and collaborative relationship with customers seem to be the most prudent way to keep track of their changing expectations and appropriately influencing it. Today, many large internationally oriented companies are trying to become global by integrating their worldwide operations. To achieve this they are seeking cooperative and collaborative solutions for global operations from their vendors instead of merely engaging in transactional activities with them.
Such customers needs make it imperative for marketers interested in their business of companies who are global to adopt CRM programs, particularly global account management programs. Global Account Management is conceptually similar to national account management program except that they have to be global in scope and thus they are more complex. Managing customer relationships around the world call for external; and internal partnering activities, including partnering across a firm’s worldwide organization. Customer Relationship Management PRINCIPLES OF CRM CRM in effect implies building long-term relationship with your customers and understanding their needs and responding throughout multiple products and services through multiple channels. CRM should finally enable —a targeted beneficial profitable relationship with individuals and groups. ” A good CRM solution should allow for • Differentiating Customers- Most CRM systems allow for very little freedom customize to specific industry verticals.
Since the customer needs emerge from the products and offering of the industry, CRM system should respond to the customer needs. Understanding each customer becomes particularly important. And the same customer’s reaction to a cellular company operator may be quite different as compared to a car dealer. Besides for the same product or a service not all customers can be treated alike and CRM need to differentiate between a high value customer and a low value customer. What CRM need to understand while differentiating customers is? Sensitivities, tastes, preferences and personalities • Lifestyle and age • Culture background and education • Physical and psychological characteristics • Differentiating Offerings- A CRM solution needs to differentiate between a low value customer and a high value customer. • Low value customer requiring high value customer findings. • Low value customer with potential to become high value in near future. • High Value customer requiring high value service. • High value customer requiring low value service. 10 Customer Relationship Management Keeping existing customers- Grading customers from very satisfied to very disappoint shall help the organization in always improving its customer satisfaction levels and scores. As the satisfaction level for each customer improves so shall the customer retention with the organization. • Maximizing life time value- By identifying life stage and life event trigger point by customer, marketers can maximize share of the purchase potential. Thus the single adults shall require a new car stereo and as he grows into a married couple his needs grow into appliances. Increase loyalty- It is an endeavor of any corporate to see that its customers are advocate for the company and its products. Any company will like its mindshare status to improve from being a suspect to being an advocate. Company has to invent in terms of its product and service offerings to its customers. It has to innovate and meet the very needs of its clients/ customers so that they remain as advocates on the loyalty curve. Thus summarizing CRM cycle can be briefly described as follows: • Learning from customers and prospects Creating value for customers and prospects • Creating loyalty • Acquiring new customers • Creating profits • Acquiring new customers 11 Customer Relationship Management CRM PROCESS FRAMEWORK This framework suggests that CRM process comprise of the following four sub-processes: FORMATION MANAGEMENT AND GOVERNANCE PERFORMANCE Purpose – Increase Effectiveness – Improve Efficiency Team Structure Role specification Programs – Account Management – Retention Marketing – Co-op Agreements – Strategic Partnerships Planning Process Process alignment Monitoring process Relationship
Performance – Strategic – Financial – Marketing ‡Retention ‡Satisfaction ‡Loyalty Communication Partners – Criteria – Process Employee Motivation Employee Training Evolution – – Enhancement Improvement CRM Process Framework 12 Customer Relationship Management CRM FORMATION PROCESS The formation process of CRM refers to decisions regarding initiation of relational activities for a firm with respect to a specific group of customers or with respect to an individual customer with whom the company wishes to engage in a cooperative or collaborative relationship.
Hence it is important that a company is able to identify and differeiatiate individual customers. In the formation process, three important decision areas relate to defining the purpose (or objective) of engaging in CRM; selecting parties (or customer partner) for appropriate CRM programs; and developing programs (or relational activity schemes) for relationship engagement with the customer. • CRM Purpose-The overall purpose of CRM is to improve marketing productivity and enhance mutual value for the parties involved in the relationship.
CRM has the potential to improve marketing productivity and create mutual values by increasing marketing efficiencies and/or enhancing marketing effectiveness. By seeking and achieving operational goals, such as lower distribution costs, streamlining order processing and inventory management, reducing the burden of excessive customer acquisition costs, and through customer retention economics, firm could achieve greater marketing efficiencies.
They can enhance marketing effectiveness by carefully selecting customers for its various programs, individualizing and personalizing their market offerings to anticipate and serve the emerging needs of individual customer, building customer loyalty and commitment, partnering to enter new markets and develop new products, and redefining the competitive playing field for their company. Thus, stating objectives and defining the purpose of CRM in a company helps clarify the nature 13
Customer Relationship Management of CRM programs and activities that ought to be performed by the partners. Defining the purpose would also help in identifying suitable relationship partners who have the necessary expectation and capabilities to fulfill mutual goals. It will further help in evaluating CRM performance by comparing results against objectives. These objectives could be specified as financial goals, marketing goals, strategic goals, operational goals and general goals. Relational Parties- Customer partner selection (or parties with whom to engage in cooperative or collaborative relationships) to another important decision in the relationship formation stage. Even though a company may serve all customer types, few have the necessary resources and commitment to establish programs for all. Therefore inn the initial phase, a company has to decide which customer type and specific customers or customer groups will be the focus of their CRM efforts.
Subsequently when the company gains experience and achieve successful results, the scope of CRM activities could be expanded to include other customers into the program or engage in additional programs. Although partner selection is an important decision in achieving CRM goals, not all companies have a formalized process of selecting customers. Some follow intuitive judgmental approach of senior managers in selecting customer partners and other partner with those customers who demand so.
Yet other companies have formalized process of selecting relational partners through extensive research and evaluation among chosen criteria. • CRM Programs- A careful review of literature and observation of corporate practices suggests that there are three types of CRM programs: continuity marketing, one-to-one marketing; and partnering 14 Customer Relationship Management programs. These take different forms depending on whether they are meant for end-consumers, distributors, or business to business customers.
The table below presents various types of CRM programs commonly developed for different types of customers. Obviously marketing practioneers in search of new creative ideas develop many variations and combinations of these programs to build closer and mutual benefecial relationship with their customers. CRM PROGRAMS CUSTOMER TYPES MASS MARKETS DISTRIBUTORS BUSINESS TO BUSINESS MARKETS •Special Arrangements sourcing Continuity • After-marketing marketing • Loyalty programs • Cross-selling PROGRAM TYPES •Continuous eplenishment •Efficient consumer response programs One-To- one marketing • Permission marketing • Personalization •Customer business •Key account development •Global account programs Partnering • Affinity partnering •Logistics partnering •Strategic partnering marketing • Co-branding •Joint marketing •Co-design •Co-development 15 Customer Relationship Management CRM GOVERNANCE PROCESS Once CRM program is developed and rolled out, the program as well as the individual relationships must be managed and governed.
For mass- market customers, the degree to which there is symmetry or asymmetry in the primary responsibility of whether the customer or the program sponsoring company will be managing the relationship varies with the size of the market. However, for programs directed at distributors and business customers the management of the relationship would require the involvement of both parties. The degree to which these governance responsibilities are shared or managed independently will depend on the perception of norms of governance process among elational partners given the nature if their CRM programs and the purpose or engaging in the relationship. These include decision regarding • Role specification- relates to determining the role of partners in fulfilling the CRM tasks as well as the role of specific individual or teams in managing the relationships and related activities. • Communication- with customer partners is a necessary process of relationship marketing.
It helps in relationship development, fosters trust and proves the information and knowledge needed to undertake cooperative and collaborative activities of relationship market. • Creating Common bonds- The marketers should create common bonds through symbolic relationships, endorsements, affinity groups, and membership benefits or by creating on-line communities. Whatever is the chosen mode, creating value bonding, reputation 16 Customer Relationship Management onding and structural bondings are useful process of institutionalizing relationship with customers. • Planning process- Involving customers in the planning process would ensure their support in plan implementation and achievement of planned goals. • Process alignment- Several aspects of the operating process need to be aligned depending on the nature and scope of the relationship. For example, operating alignment will be needed in order processing, accounting and budgeting process, information systems, merchandising process etc. Employee motivation- Several human resource decisions are also important in creating the right organization and climate for managing relationship marketing. Training employees to interact with customers, to work in teams, and manage relationship expectation are important. So is the issue of creating the right motivation through incentives, rewards, and compensation system towards building stronger relationship is desirable for the long-term benefit of the company, personal relationships are nevertheless formed and have an impact on the institutional relationship.
Thus proper training and motivation of employees to professionally handle customer relationships are needed. • Proper monitoring processes- are needed to safeguard against failure and manage conflicts in relationships. Such monitoring processes include periodic evaluation of goals and results, initiating changes in relationship structure, design or governance process if 17 Customer Relationship Management needed, creating a system for discussing problems and resolving conflicts.
Good monitoring procedures help avoid relationship destabilization and creation of power asymmetries. They also help in keeping the CRM program on track by evaluating the proper alignment of goals, results and resources. Overall, the governance process helps in maintenance, development, and execution aspects of CRM. It also helps in strengthening the relationship among relationship partners and if the process is satisfactorily implemented it ensures the continuation and enhancement of relationship with customers.
Relationship satisfaction for involved parties would include governance process satisfaction and in addition to satisfaction from the results achieved in the relationship. CRM PERFORMANCE EVALUATION PROCESS Periodic assessment of results in CRM is needed to evaluate if programs are meeting expectation and if they are sustainable in the long run. Performance evaluation also helps in making corrective action in terms of relationship governance or in modifying relationship marketing objectives and programs features.
Without a proper performance metrics to evaluate CRM efforts, it would be hard to make objective decisions regarding continuation, modifications, or termination of CRM programs. Developing a performance metrics is always a challenging activity as most firms are inclined to use existing marketing measures to evaluate CRM. However, many existing marketing measures, such as market share and total volume of sales may not be appropriate in the context of CRM.
Even when a more CRM oriented measures are selected, it cannot be applied uniformly across all CRM programs particularly when the purpose of each program is 18 Customer Relationship Management different from one another. For example, if the purpose of a particular CRM effort is to enhance distribution efficiencies by reducing overall distribution cost, measuring the programs impact on revenue growth and share of customer’s business may not be appropriate. In this case, the program must be evaluated based on its impact on reducing distribution costs and other metrics that are aligned with those objectives.
By harmonizing the objective and performance measures one would expect to see a more goal directed managerial action by those involved in managing the relationship. For measuring CRM performance, a balanced score card that combines a variety of measures based on the defined purpose of each program is recommended. In other words, the performance evaluation metrics for each relationship or CRM program should mirror the sets of defined objectives for the program. However, certain global measures of the impact of CRM effort of the company are also possible.
If cooperative and collaborative relationship with customers is treated as an intangible asset of the firm, its economic value adds can be assessed using discounted future cash flow estimates. In some ways, the value of relationships is similar to the concept of brand equity of the firm and hence many scholars have alluded to the term relationship equity is not available in the literature as yet, companies are trying to estimate its value particularly for measuring the intangible assets of the firm.
Another global measure used by firms to monitor CRM performance is the measurement satisfaction. Similar to the measurement of customer satisfaction, which is now widely applied in many companies, relationship satisfaction measurement would help in knowing to what extent relational partners are satisfied with their current cooperative and collaborative relationships. Unlike customer satisfaction measures that are applied to 19 Customer Relationship Management easure satisfaction on one side of the dyad, relationship measures could be applied on both sides of dyad. Both the customer and the marketing firm have to perform in order to produce the results in a cooperative relationship and hence each party’s relationship satisfaction could be measured. By measuring relationship satisfaction, one could be estimate the propensity of either party’s inclination to continue or terminate the relationship. Such propensity could also be indirectly measured by measuring customer loyalty.
When relationship satisfaction or loyalty measurement scales are designed based on its antecedents, it could provide rich information on their determinants and thereby help companies identify those managerial actions that are likely to improve relationship satisfaction and/or loyalty. CRM EVOLUTION PROCESS Individual customer relationships and CRM programs are likely to undergo evolution as they mature. Some evaluation paths may be pre- planned, while others would naturally evolve.
In any case, several decisions have to be made by the partners involved about the evolution of CRM programs. These include decision regarding the continuation termination, enhancement and modifications of the relationship engagement. Several factors could cause the precipitation of any of these decisions. Amongst them relationship performance and relationship satisfaction are likely to have the greatest impact on the evolution of the CRM programs.
When performance does not meet expectation, partners may consider termination or modifying the relationship. However, extraneous factors could also impact these decisions. For example, when companies are acquired, merged or divested many relationships and relationship marketing programs undergo changes. Also, when senior corporate executives and senior leaders in the company move CRM programs undergo changes. Yet there 20 Customer Relationship Management re many collaborative relationships that are terminated because they had planned endings. For companies that can chart out their relationship evolution cycle and state the contingencies for making evolutionary decisions, CRM programs would be more systematic. CRM IMPLEMENTATION ISSUES Where CRM is well understood as a concept, many board-level managers are still unclear as to how a particular CRM approach should be cost-effectively implemented and what technology options should be adopted.
The starting point for introducing or further developing CRM must be determined from a strategic review of the organisation’s current position. Companies need to address four broad issues: what is the core business and how will this evolve in the future; what form of CRM is appropriate for the business now and in the future; what IT infrastructure does the company have and what do they need to support the future organisation needs; and what vendors and partners do they need to choose?
An organisation should first examine its core business and consider how it will evolve in the future. It then needs to consider the form of CRM that is appropriate for their business now and in the future and what organisation resources does it have to support the business now and in the future. Having identified the present and future focus of CRM, the organisation then needs to address the appropriate information 21
Customer Relationship Management architecture to enable their CRM strategy to be implemented. Stated simply the task is how can the company exploit technology for improved CRM. As organisations increase their sophistication they will need to creativity integrate these technologies. —Planned evolution” is a good way of summarising the technology approach to building the backbone to support the relevant CRM strategy that has been mapped out for the business.
As shown in the figure below, CRM solutions platform needs to be based on interactive technology and processes, it should assist the company in developing and enhancing customer interactions and one-to- one marketing through the application of suitable intelligent agents that develop front-line relationship with customers.
Such a system would identify appropriate data inputs at each customer interaction site and use analytical platforms to generate appropriate knowledge output for front-line staff during customer profitability analysis, customer segmentation, demand generation, account planning, opportunity management, contact management, integrated marketing communications, customer care strategies, customer problem solving, virtual team management of large global accounts, and measuring CRM performance would be the next level of solutions sought by most enterprises.
An essential element of achieving successful implementation is to ensure that their strategy is underpinned by viable and appropriate technology architecture. This involves the selection of vendors and partners based on issues of customisation capability and other appropriate commercial factors including both technological and commercial criteria. The new millennium, Customer Relationship Management will have advanced considerably and we will have reached much more 22 Customer Relationship Management sophisticated level of one-to-one marketing and data mining.
There is now an enormous opportunity for organisations to improve their “customer ownership’ by building a co-ordinated and integrated set of activities which address all the key strategic elements of CRM. Ultimately, however, organisations’ success in CRM will involve creating an appropriate strategic vision for the future, making the appropriate choice of applications, creatively using appropriate analytical techniques to exploit the data, and choosing the right vendor for supply of the technology solution. 3 Customer Relationship Management IMPLICATIONS OF GLOBALIZATION ON CRM The globalization of markets has been one of the major business developments in the last three decades contend that choosing not to participate in global markets is no longer optional. The pressure of global competition impacts every domestic market as well as international markets. Marketplaces are transitioning to demand-side approaches with a focus on customer needs and wants.
Customer relationship management thus should assume a central role in the marketing management of global products and services. The impact of globalization on CRM however represents an under-researched area. The multinational corporation operates in a number of countries, and adjusts its products and practices in each at high relative costs. The global corporation operates with resolute constancy at low relative cost as if the entire world (or major regions of it) were a single entity; it sells the same thing in the same way everywhere”
The merits and demerits of standardization versus localization of product/service offerings and the associated promotional activity are again being debated in the trade and academic literature, admittedly more vociferous in the former than in the latter settings. Some authors suggest that the debate is forcing a false dichotomy and that it should be recognized that different strategies with regard to the degree of standardization or localization should apply.
These strategies would be contingent upon the nature of the product or service, and on the market in which it is active, for example, contends that, for the service industry at least, decentralized strategies empower those most involved with customers, allowing them to make business decisions, which recognize 24 Customer Relationship Management marketplace variations.
Thus marketing itself is now concerned with un- derstanding of target customers and develops the value propositions that customers want and need, and then creating the marketing approach. This does not mean that this approach is followed by international firms, certain other factors, for example corporate edict, may control how country strategic business units approach marketing and marketing communication. Market segmentation and positioning strategies may need to reflect wide divergence in consumer needs and preferences.
The structure of the competitive environment may also vary widely from country to country, not to mention current product life cycle stage on the temporal dimension. These factors will inevitably impact on marketing communication strategies and techniques, as will other issues outlined below. Cultural differences may impact on what is or is not acceptable in marketing communication, such as the way women are portrayed and what values, such as individualism versus collectivism are used.
Cultural differences may be overstated in the area of technology (e. g. personal computers). Recent research that suggests that attitudes, motivations and needs for these products transcend national boundaries, with regional differences making no appreciable impact on the purchase process. However, the exclusion of developing countries in the study cited may limit the generalize ability of this finding. 25 Customer Relationship Management
However, while the importance of CRM is recognized and interest is high, there is also a great deal of confusion regarding how effective strategies can be developed and what operational processes are required to support this at an individual country level, let alone on a global basis CRM software is increasingly being offered as ‘the solution’ to many operational problems but users suggest that simple software ‘solutions’ may allow technical and organizational challenges to be underestimated.
Suggests that key portions of actual operations can be missed or may be disjointed and that the software is not of itself sufficient to remedy ‘system’ deficiencies. The impact of technology on globalization should not be understated. While technology is helping to shrink distances between markets and firms who are able to effectively manage the interaction of technology, knowledge and information management seem to be the most successful technology presents its own problems.
For example, while the Internet can help global marketing efforts, it can also create discontent for consumers and distributors in relation to price discrimination across markets and variations in distribution strategies. Technology is, however, no panacea for solving one of the major enduring problems being experienced in the global marketplace: cultural arrogance and insensitivity The impact of arrogance and insensitivity on the development of customer relationships in both the short and long term is obvious. 6 Customer Relationship Management EFFECTIVE CRM THROUGH CUSTOMER KNOWLEDGE MANAGEMENT Customer relationship management starts with an in-depth knowledge of customers, their habits, desires, and their needs, by analyzing their cognitive, effective behavior and attributes. CRM applies this knowledge to develop and design-marketing strategies, to develop and cultivate, long lasting mutually beneficial interaction and relationship with the customer.
Customer knowledge and customer interaction on the basis of this knowledge are tow pillars on which any CRM design and its successful implementation rests. WHAT IS KNOWLEDGE MANAGEMENT Core of any knowledge management implementation is to abstract vital and meaningful knowledge from the voluminous amount of data available from variety of internal end external sources and ensure is practical use.
Knowledge management is a management discipline that treats intellectual capital as managed asset, it is not about creating a central database that is a complete replica of all that is known by employees or that is embedded in the system they use, Knowledge management is about embracing a diversify of knowledge sources, like legacy systems, existing, data-warehouses, portals, websites, customers, suppliers, partners, external marketing research agencies and cultivating this knowledge where it resides.
Understanding data in terms of its context and inert-relationship give information; understanding principles of knowledge gives wisdom top satisfy complete needs of customer. This has the potential of developing customers even before product or service is developed. 27 Customer Relationship Management Knowledge management helps an organization to gain insight and understanding from its own experience. Knowledge management implementation also protects intellectual assets from decay, adds to firm intelligence and provides flexibility.
There are three guiding issues in the concept of Knowledge Management, People, Processes and Technology. The people throughout a company-from the CEO to each and every customer service rep-need to buy in to and support CRM. A company’s business processes must be reengineered to bolster its CRM initiative; often from the view of, how can this process better serve the customer? Firms must select the right technology to drive these improved processes, provide the best data to the employees, and be easy enough to operate that users won’t balk.
If one of these three foundations is not sound, the entire CRM structure will crumble. Understanding of organizational needs, its vision, and mission, should determine development of knowledge management system. A knowledge management could be developed more effectively on knowledge of organizational structure, information flow, information usage and storage, any proposed business process reengineering, existing automation levels, existing data warehouse solutions, existing messaging systems and internal applications any other legacy systems. 8 Customer Relationship Management CUSTOMER VALUE CHAIN Customer Data Customer Information Customer Knowledge Wisdom to Completely Satisfy Customers The CRM Value Chain Foundation of customer knowledge rests on variety of data sources, data could be numerical, textual, organize in tables, discrete and so on. Key to leverage this data is to organize it so that it becomes knowledge on the basis of which informed business decisions could be taken.
Industry analysts estimate that data has no external structure (internally there are sentences, paragraphs, words) represent 80% of the enterprise information compared to 20% of structures data. It’s a proven fact that 80% of an organization revenues come form 20% from its customers, it becomes imperative to design CRM solutions keeping in mind these most valuable customers and to leverage 80% non structured data of about 20% of these most valuable customers. Thus if CRM 29
Customer Relationship Management architecture could take care of this simple but important fact, CRM implementation will become less cumbersome and would start giving fruitful results very quickly. Only way to leverage this 80% of unstructured but most useful data is to use knowledge management architecture. Well-managed customer information that is properly catalogued and structured, available and accessible to the right people at the right time becomes customer knowledge.
Just as more tangible corporate assets like computer systems have a finite shelf life, so too does knowledge, it must be available at the right time to be able to act upon it. It is not only important to capture customer knowledge form the existing structured and unstructured, internal and external sources but to be able to cultivate this knowledge as to be able to gain a strategic advantage even in the future CRM systems should be able to classify, store retrieve when require this dynamic information which is created every moment.
There are many kind of much tacit knowledge, for example troubleshooting of very complex control system, which is used by every valuable customer of a capital equipment manufacturer. A service man when goes to a customer ste does number of hit and trial checks in the basis of his experience and thus able to transform system to a healthy state. Since the system is so complex that every visit of service man is a new exercise, in which he uses past knowledge to solve complex problem.
This kind of tacit product knowledge is derived from expertness, data and documents. This is hard to define and can only be shared through consultation, mentoring and giving examples. 30 Customer Relationship Management Retaining tacit knowledge means retaining the individual, which is invariably not possible. It is possible to generate explicit knowledge from tacit knowledge, but it’s a complex exercise. The key ingredients of this exchange is face to face sharing of knowledge or using virtual environmental tools like Lotus notes, which can facilitate acit knowledge exchange. Hence for tacit knowledge exchange text mining is very useful and important. There are ways to do text mining like search engines, web solutions, text analysis tools. The key to successful customer knowledge management is personalization i. e. how to extract the knowledge that is pertinent to the user and translate it into a format that is easily understood. It is important form the point of navigation through various data sources, information and knowledge.
A customer knowledge catalogue should be created, in which a categorized collection of company’s intellectual assets will exist. It should be build on a database platform that enables enterprise wide scaling, protects and maintains the knowledge content, and allows for consistent fast access to enterprise wide customer knowledge resources. 31 Customer Relationship Management PROPOSED CUSTOMER KNOWLEDGE MANAGEMENT FOR EFFECTIVE CRM A phase for proposed customer knowledge management for effective CRM is shown below. Resources Analysis
Aligning CKM and Business strategy CKM architecture design based on KM CRM knowledge audit and analysis CKM team foundation CKM team organization blueprint Develop the CKM system CKM deployment Organizational culture CKM performance and evaluation Phase 1 Evaluation Phase 2 CKM System analysis, design and deployment Phase 3 Deployment Phase 4 System Evaluation Phases of Implementation of Customer Knowledge Management 32 Customer Relationship Management As stated earlier like any Knowledge management implementation, Customer Knowledge Management should have four phases as shown above.
The customer knowledge management architecture should have a layered approach. Existing systems should be seamlessly linked with the proposed layer. The choice for a customer knowledge management could be Web or a packaged solution such as Lotus Notes, Microsoft solutions. Some important points concerning Customer Knowledge Management architecture are • Integration of internal and external customer knowledge sources. • Identification of IT components of knowledge creation, collaboration and application. • Identification of existing and required data mining and nowledge discovery techniques including artificial intelligence, genetic algorithms, neural networks expert and decision support system, reasoning tools. • Identify push and pull bases mechanism for knowledge sharing and delivery. • Identification of right mix of searching, indexing and retrieval. • Tagging existing knowledge bases depending on attributes domain, form, type, product, service, time, and location. • Identify platform and element of the interface layer like clients, servers, and gateways. Identification of components of knowledge architecture. 33 Customer Relationship Management WINNING MARKETS THROUGH EFFECTIVE CRM Information technology and Internet are rapidly changing the face of what is possible in customer contact, care and insight. Moreover, customer expectations for quality, service, and value are rising continually. Keeping this in mind, successful companies are now gearing to organize their business around the types of customers they serve types rather than organizing their business along the product lines poor geographic business units.
Today with ever increasing focus on customers, companies are taking a process-oriented approach to customer relationship management. The following is a framework bases on the new paradigm by which CRM research and applications might be expanded to provide better and more useful information for effectively managing customer relations. Traditional Approach to CRM Customer Contact by •Telephone •Mail •In Person Personal Staffing After Sales Service Complaint Handling Account Management Customer Care Customer Integration with Technology (Web and Internet) Web-enabled and
Integration Approach Customer Information System Customer Database Electronic Point of Sale Sales Force Automation of Customer Support processes Call Centers System Integration Lifetime Value of a Customer Customer Relationship- A Technology Driven Approach A framework in designing a strategy for effective customer relationship management and highlighting the important elements viz. Developing 34 Customer Relationship Management Customer Insight, Use of Technology in CRM, customer contact, Personalizing Customer Interaction, and Achieving Superior Customer experience.
DEVELOPING CUSTOMER INSIGHT Companies gather information from all points if interactions with the customers and make available to everyone within the organization. This function is facilitated by customer database. A good customer database information system should consist of a regular flow of information, systematic collection of information that is properly evaluated and compared against different points in time, and it has sufficient depth top understand the customers and accurately anticipate their behavioral patterns in future.
The customer database helps the company to plan, implement, and monitor customer contact. Customer relationships are increasingly sustained by information systems. Companies are increasingly adding data from a variety of sources to their databases. Customer data strategy should focus on processes to manage customer acquisition, retention and development. Current spread of information in the company over many different databases is often incompatible and therefore has to focus on data warehousing to integrate the, into one analyzable data set.
Few businesses have the luxury of defining their customer data requirements from the beginning. As customers’ needs and behavior change and marketing strategies respond, new datasets are required. Each dataset collected will therefore need to be developed dynamically. Some data will cease to be relevant; other data will need to be added. 35 Customer Relationship Management USE OF TECHNOLOGY IN CRM The application of technology is the most exciting, fastest growing, and change the way customers get information about products and services.
Technology includes all of the equipment, software and communication links that organizations use to enable or improve their processes, including everything from simple overhead transparency projectors to laptop computers, from fax machines to e-mail, from audio cassette and video cassette players to cellular phones and voice mail. The most widely used tools as explained below • Electronic Point Of sale (EPOS) – The main benefit of EPOS and retail scanner systems is the amount of timely and accurate information they deliver.
Advances in the technology have significantly aided the scope for data analysis. In addition to the original scanner-related data on sales rate, stock levels, stock turn, price and margin, retailers now have information about the demographics, socio-economic and lifestyle characteristics of consumers. They can, in addition, asses the impact of whole host of variables-price, promotion, advertising, position in store, shelf position, number of facings, and so on.
This information drives their choice of product mix, allocation of shell space and promotional tactics. EPOS has certainly changed the relationship between buyer and seller. • Sales force Automation- These systems help in auto mating and optimizing sales process to shorten the sales cycle and increase sales productivity. They enable the company to track and manage all qualified leads, contacts, and opportunities throughout the sales 36 Customer Relationship Management cycle including customer support.
The improve the effectiveness of marketing communications programmes for generating quality leads as well as greater accuracy to sales forecasting. The internet can be used by the company in imparting proper training to its sales force. In-depth product information, specialized databases of solutions, sales force support queries, and a set of internal information on the internet can improve the productivity of the sales force. • Customer service Helpdesk- These applications help the company in automating the customer support processes, which enable it to deliver high quality service tom their customers.
Such software helps in logging the information about customer problems, enquires, and suggestions, etc. It also helps in directing these queries to appropriate employees within the company. It maintains information regarding status of customer enquiries and stores all support calls and related communications to final resolution, continually updating the database accordingly. With an automated customer service, a company can reduce the costs of maintaining its customer service department while at the same time improving the level and quality of customer service.
Customer service using the web provides more information and tools in the hands of customers, which enhances customer benefits by allowing them to learn more about the product and improving their skills in using the product. • Call Centre- Call centre helps in automating the operation of inbound and outbound calls generated between company and its customers. These solutions integrate the voice switch of automated telephone systems (e. g. EPABX) with agent host software allowing for automatic call routing to agents, auto display of relevant customer 37
Customer Relationship Management data, predictive dialing, self service Interactive Voice Response systems, etc. These systems are useful in high volume segments like banking, telecom and hospitality. Today, more innovative channels of interacting with customers are emerging as a result of new technology, such as global telephone based call centers and the internet. Companies are now focusing to offer solutions that leverage the internet in building comprehensive CRM systems allowing them to handle customer interactions in all forms. System Integration- While CRM solutions are front-office automation solutions. ERP is back-office, automation solution. An ERP helps in automating business functions of production, finance, inventory, order fulfillment and human resource giving an integrated view of business, where as CRM automates the relationship with a customer covering contact and opportunity management, marketing and product knowledge, sales force management, sales forecasting, customer order processing and fulfillment, delivery, installation, pre- sale and post-sale services and complaint handling by providing an integrated view of the ustomer. It is necessary that the two systems integrate with each other and complement information as well business workflow. Therefore, CRM and ERP are complementary; the integration of CRM with ERP will help companies to provide faster customer service through an enabled network, which can direct all customer queries and issues through appropriate channels to the right place for speedy resolution.
This will help the company in tracking and correcting the products problems reported by customers by feeding this information into the R&D operations via ERP 38 Customer Relationship Management —Choice boards” are interactive, on-line systems that allow individual customers to design their own products by changing from a menu of attributes, components, prices, and delivery options. The customer’ selection send signals to he supplier’s manufacturing system that set in motion the wheels of procurement, assembly, and delivery.
The role of the customer in this system shifts from passive recipient to active designer. Every business, no matter how much it relies on indirect sales channels, no has the opportunity to begin electronically thinking linking its channel partners with its end customers and participating in the dialogue between them. CUSTOMER CONTACT Internet us helping companies in improving communication with customers. Consumers have been increasingly engaging themselves in an active and explicit dialogue with manufacturers of products and services.
Individual; consumers can address and learn about business either on their own or through the collective knowledge of other customers. Usenet groups and chat discussions allow feedback and targeted e-mail surveys can pinpoint problem areas and options that will have high benefits from improvement. Collaborative design with suppliers allows much faster turnaround of new deign. This causes the earlier introduction of products, generating much higher satisfaction and feelings of getting state-of-the art products.
The connecting of supplier-manufacturer intranets into functioning extranets has been notably successful. 39 Customer Relationship Management PERSONALIZING CUSTOMER INTERACTION The modern devices and technology tools are designed to help consumers make informed purchasing decisions. • Customer Communities Customers in the new economy are finding it easier to form, on their own, self-selecting virtual communities. On-line customer communities can be quite tightly knit. Internet chart rooms are easy to start up, join, and participate in.
Chat rooms accommodate a wide range of personalities-many of them assumed ones. Customer comminutes can exercise powerful influence on the market. The power of such communities derives in large measures from the speed with which they can be mobilized. Word spreads so fast on the internet that people now refer to word of mouth as” virtual marketing” • Personalization Personalization is a special form of product differentiation. It transforms a standard product or service into a specialized so0lutioon for an individual.
It changes product design from an inherent compromise to a process of deciding what features would benefit a specific individual. Combined with innovative distribution, it can do a better job of matching consumer tastes without the waste of current approach. Online choice assistance takes a set of products, tries to determine an interval’s tastes and needs, and makes a recommendation. If this recommendation is accurate and trusted, it creates value and loyalty.
In other words, personalization helps the customers in becoming the co-creators of the content of their experiences. 40 Customer Relationship Management ACHIEVING SUPERIOR CUSTOMER EXPERIENCE Customer relationship management is about managing director life cycle through all points of customer contacts ensuring that every interaction leads to a value addition on relationship. This is made possible through each contact point empowered with the knowledge, capable of being responsive to customer needs and to offer superior experience to the customer.
Experiences occur as result of encouraging, undergoing, or living through situations. Experiences also connect the company and the brand to the customer’s lifestyle and place individual customer actions and the purchase occasion in a broader social context. A good customer experience delivers service, product-and peace of mind. Consumer’s experiences of a buying and using a product or service depend on their perceptions about actual performance of that product or service. 41 Customer Relationship Management DATA MINING FOR CRM
A typical CRM cycles consists of front-end operations in which the customer interacts with your company via e-mail, telephone, web or face- to-face, through your company’s Back Office, Sales team, Marketing division etc. As the interaction progresses to a sale, service query or quote the information from that interaction is stored and fed through middleware into a database. This data can then be used to create data marts, warehouses etc and drawn upon by sales, service, marketing or business to add a greater functionality to those departments. Data analysis is done by data mining methods.
The output is interpreted and new knowledge is transferred to a central customer repository where all employees of the firm access it. This helps them to customize Reponses. Thus, data mining provides the intelligence behind the CRM initiative. 42 Customer Relationship Management One can also view the same CRM task from a technology point of view having three primary components operational process management technologies, analytical or performance management technologies and collaborative or business collaboration management technologies- all of which are required to achieve a balanced CRM approach.
Operational CRM solutions involve integration of business processes involving customer touch points. Collaborative CRM involves the facilitation of collaborative services (such as e-mail) to facilitate interaction between customer and employees. All this effort produces rich data that feeds the Analytical CRM technologies. It analyses the data using data mining and other technologies and in turn feeds the result (i. e. knowledge gained) back to the operational and collaborative CRM technologies.
It is to be noted that there is very big overlap in the above description and there is feedback between efforts. Operational CRM Analytical CRM Collaborative CRM Customer Interaction between CRM tec