Chapter-1
Introduction to CRM
Developing close, cooperative relationship with customers is the requirement of modern business organizations. In the current era of intense competition and demand oriented markets, there is paradigm shift in the marketing strategies of business organizations, which were earlier focused on product/service called as product/service centric approach but now it has been shifted to customer centric approach. Due to this customer centric approach of marketing, Customer Relationship Management (CRM) has attracted the attention of marketers in order to focus on cooperative and collaborative relationship between the firm and its customers. This type of relationship is necessary from both growth and customer loyalty perspective of organization. Now a days CRM has become a globally recognized business practice
CRM means many different things to different people. It is possible to develop a greater understanding of it by looking at its origins and the principles that drove its development. In the marketing literature the term Customer Relationship Management is defined in different manner by different market researchers and academicians
According to Shani and Chalasani(1992), defines Customer Relationship Management as “an integrated effort to identify, maintain and build up a network with individual consumers and to continuously strengthen the network for mutual benefit of both sides, through interactive, individualized and value added contacts over a long period of time” Another Narrow perspective of Vavra(1992), CRM is customer retention in which a variety of after marketing tactics is used for customer bonding or staying in touch after the sale is made.
According to Gronroos, CRM is marketing strategy to establish, maintain and enhance relationship with customers and other partners, at a profit so that the objectives of the parties involved are met. This is achieved by a mutual exchange and fulfillment of promises.
We define CRM as Customer Relationship Management as a comprehensive marketing strategy to improve marketing productivity which can be achieved by increasing marketing efficiency and enhancing marketing effectiveness through a process of acquiring, retaining and partnering with selective customers to create superior mutual value for the parties involved.
As implied in the above definition, the objective of CRM is to create superior mutual value for both the business organizations and the customers. This will help in improving marketing productivity which is achieved by increasing marketing efficiency and by enhancing marketing effectiveness. The aspects, marketing efficiency and effectiveness have long term orientation for an organization as it is concerned with cooperative and collaborative relationship between the firm and its customers and other marketing actors.
Emergence of CRM
Looking back at a snapshot history, we see the following clear developments and progression in marketing strategies over the last four decades:
• 1960’s: Era of Mass Marketing, is market coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer. It is type of marketing of a product/service to a wider audience. The idea is to broadcast a message that will reach the largest number of people possible. Traditionally mass marketing has focused on radio, television and newspapers as the medium used to reach this broad audience. By reaching the largest audience possible exposure to the product is maximized. In theory this would directly correlate with a larger number of sales or buy in to the product. As the name says it’s mass so your trying to get your as many as you can.
• 1970’s: Era of Segmentation, Market segmentation divides a market for goods or services into distinct subdivisions. It takes a vague undistinguished group of consumers and uncovers those who have similar needs, those who make purchases or use products or services in the same. A market segment is a subgroup of people sharing similar consumer characteristics. And because each segment shares the same attitudes and behaviors, they generally respond the same to a given marketing strategy.
• 1980’s: Era of Niche Marketing, is a marketing strategy where a subset of the market in which a specific product is focused with a price range, production quality and the demographics aimed at specific market needs thereby intended to impact.
• 1990’s: Era of Relationship Marketing, It is a strategy designed to foster customer loyalty, interaction and long-term engagement. It is designed to develop strong connections with customers by providing them with information directly suited to their needs and interests and by promoting open communication. This approach often results in increased word-of-mouth activity, repeat business and a willingness on the customer’s part to provide information to the organization.
Year Era Apporach
1960 The Era of Mass Marketing
1970 The Era of Segmentation Transactional Marketing 1980 The Era of Niche Marketing
1990 The Era of Relationship
Marketing Relationship Marketing
Table 1.1 – Evolution of CRM
As it is implicit that upto 1980’s the firms were focused towards Transactional Marketing, which is wholly concerned about the promotion and selling of the product with little or no concentration over customer value and satisfaction and try to make new customers every time. But the present scenario is totally changed; there is paradigm shift from Transactional Marketing Approach to Relationship Marketing Approach which is
all about building and maintaining the long term customer relationship, creating a sense of loyalty by providing the value product and service for mutual benefit.
Figure 1.1 – Migration Towards Relationship Marketing
Difference between Transactional Marketing and Relationship
Marketing
Transactional Marketing
Relationship Marketing
Focus on Single Sale recruitment Focus on retention of the customer
Emphasis on product features Emphasis on product benefits and systematic solutions
It is short term oriented It is long term oriented Little or no importance given to customer
services Customer service is taken as most important element Limited commitment towards the
customers Higher commitment towards the customers
Focus on product quality while production Focus on quality at all levels
Communicate to persuade Communication to make sense and meaning
Functional, mechanistic and production oriented business model
More humanistic and relationship based business model
Goal is customer satisfaction Goal is customer delight It Serves 4Ps of Transactional Marketing
1. Product 2. Price 3. Place 4. Promotion
It Serves 8C’s of Relationship Marketing 1. Customer Expectation 2. Customer Satisfaction 3. Customer Delight 4. Customer Cooperation 5. Customer Retention 6. Customer Touchpoints 7. Customer Behaviour 8. Customer Collaboration Table 1.2: Transactional Marketing Vs. Relationship Marketing
Paradigm Shift from 4P’s of Transactional Marketing to 8C’s
Relationship Marketing
Transactional Marketing Approach Relationship Marketing ApproachThis figure shows that 4P’s which earlier took an important place in marketing strategies has changed to Customer Centric approach which are based upon expectation, satisfaction, delight and cooperation etc.
Principles of CRM
CRM in effect implies building long term relationship with customers and understanding their needs and responding through multiple products and services through multiple channels. CRM should finally enable “a targeted mutually beneficial profitable relationship with individuals and groups”
Key CRM Principles
Differentiate Customers Differentiate Offerings Keep Existing Customers Maximize Lifetime Value Increase Loyalty
1. Differentiating Customers: Most CRM systems allow for very little freedom to 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. Understandings each customer becomes particularly important. And the same customer reactions 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 and a low value customer.
4P’s Transactional Marketing 1. Product 2. Price 3. Place 4. Promotion 8C’s Relationship Marketing 1. Customer Expectation 2. Customer Satisfaction 3. Customer Delight 4. Customer Cooperation 5. Customer Retention 6. Customer TouchPoints 7. Customer Behaviour 8. Customer Collaboration
2. Differentiate Offering: A CRM solution needs to differentiate between a low value customer and a high value customers.
• Low value customer requiring high value customer offerings.
• Low value customer requiring with potential high value in near future. • High value customer requiring high value service.
• High value customer requiring low value service.
3. Keep 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.
4. Maximizing life time value: By identifying life stage and life event trigger points 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.
5. 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 invest 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 advocate on the loyalty curve.
Suspect →Prospect→Customer Client→Supporter→Advocate
Cost of Acquiring Customers
Acquisition is a vital stage in building customer relationship. Certain key issues connected with customer acquisition are dealt here. The customer acquisition cost is defined as the cost associated with convincing a consumer to buy your product or service, including research, marketing, communication, and differentiation costs etc. In simple words, it is the cost associated with acquiring new customers. Most businesses focus on organic growth as the path to long term success and that means adding new customers and growing their base.
For the purpose of customer acquisition an organization is likely to focus its attention on the following as its major sources for providing input for acquisition.
The suspects The enquiries
The lapsed customers The former customers The competitor’s customers
The competitor’s lapsed customers The competitor’s former customers The referrals
The existing buyers
The suspect represents the segment of the market who have the potential to become prospective customers. Enquiries whether they are intentional or casual provide for a
focused approach in the process of acquisition. Proper responses to enquiries are likely to result in customer acquisition.
The lapsed customers should not be neglected. They can be booked as new customers if the reasons for lapses are rectified suitably. The reasons for lapses are dealt under the recovery of lapsed customers. Once a customer has purchased something to fulfill a specific need and has then stopped buying from an organization be become a lapsed customer and he should be encouraged to become customer again, by marketing the organization’s new offerings to fulfill the customer’s emerging new needs and so on. The competitor’s customers, competitor’s lapsed customers, competitor’s former customers and competitor’s enquiries are major attractions for acquisitions. Customer who always prefer more values for every time, are naturally inclined to opt for alternatives. In the context the competing organizations can acquire the competitor’s customers if the customers perceive that they would be rewarded with more value for money.
Referrals play a significant role and provide a strong base for new customer acquisition. It is likely that fresh customers will rely heavily on referrals rather than the organization’s own promotion efforts. Referrals may be from within the organizations or from anyone outside connected to the organizations including suppliers, bankers, consultants etc. Existing buyers may also be targeted for acquisition in the event of the organization expanding its product line.
Process of Acquisition
The acquisition process constitutes the following stages: 1. Enquiry
2. Interaction 3. Exchange 4. Coordination 5. Adoption
In this stage, the prospective buyer undertake a detailed enquiry with regard to several aspects pertaining to the organization, product, nature of transaction and all other related aspects. Having stored the information he passes on to the interaction stage, where the customer interacts with the organization and obtains additional information, clarifies and ensures already connected information. Terms of exchange, mode of delivery and other things related to exchange are settled at the exchange stage. Further coordinated effort on either side would lead the customers moving to adoption of the product or service concerned and that completes the acquisition process.
Influences of Acquisition
The application of the acquisition process explained above is influenced by the following:
Type of buying Type of product Type of customer Economic environment Contextual operations
There are two different types of buying: one, the rational and the other, emotional. Rational buying is a more systematic buying influenced by reason and logic. On the other hand, emotional
buying is influenced by the emotions of the buyer. It is likely that a customer involved in the rational buying would move from one stage to another systematically, whereas in emotional buying he may not do so.
Acquisition depends on the type of product, whether it is convenience, shopping or speciality product. According, the significance of each stage of the acquisition process varies.
Further the significance depends on the type of customer whether the customer is an individual or an organization. In contrast to the individual buyer an organization may have its own procedures to adopt a product, policy and the related aspects. Also acquisition depends on whether the acquisition is a first time experience or a repeated one.
The economic and environmental forces focus attention on the market conditions, the operations of the competing forces, supply and demand, purchasing power etc. The acquisition process is likely to differ under conditions of limited availability of product, with limited brand choice and limited purchasing power as compared to unlimited availability of brands and purchasing power. The context of operations refers to the prospective buyer’s intention, urgency, previous experience, specific benefit expected, lifestyle of customer and so on. The acquisition process is likely to differ as per the context of operation concerned.
Acquisition is the act of gaining new customers through various different methods with the goal of turning potential customers into actual customers. This is a very difficult stage because with so much competition around today, customers are inundated with choices meaning that competition is fierce and customers are more informed. As a result of this people have become more demanding as they know that they have the upper hand. However, this is a very important step in marketing because for most businesses the only way they can grow is through the acquisition of new customers. There are various methods of achieving this from finding customers who weren't previously aware that the product was available to people who may not have needed the product before maybe needing it now. For example pet food - someone who didn't previously have a pet but then bought a cat would suddenly need to buy cat food.
There are several different methods of achieving customer acquisition such as mass marketing which includes magazines and billboards and direct marketing such as telesales and through the post.
The total cost of customer acquisition varies from situation to situation but has some of the basic components, which includes:
1. Marketing cost
a. Online marketing cost b. Offline marketing cost 2. Resources cost
a. Infrastructure b. Manpower
c. Expenditure on office equipments and stationary d. Electricity
e. Internet
3. Expenditure incurred on training and market research
Although winning new customers is extremely important customer retention is crucial to the life of any business. As it costs considerably less to retain a customer than it does to win new ones, focusing on a retention strategy makes perfect business sense. Studies across a number of industries have revealed that the cost of retaining a customer is only
about 10 percent of the cost of acquiring a new one. The main aim of customer retention is to prevent customers from swapping to competitors and to increase customer loyalty and profitability.
Some of the many advantages of customer retention are that long - term customers are less likely to stop using your product or switch to a competitor, they tend to be less price sensitive, they may introduce new customers through referral, they're more likely to purchase additional products, are less expensive to service because they are familiar with the process and are consistent in their buying behaviour. CRM involves using software applications that allow companies to manage every aspect of their relationship with a customer and thus turning customer satisfaction into customer loyalty and building longer lasting relationships.
Turning customer acquisition in to customer loyalty
Loyal customers are addressed by different name by different organizations like premium customers, key accounts, elites and crown jewels. The term customer loyalty means commitment or attachment to a product, brand, a store based on favorable attitudes and is reflected purchases or recommendations to others.
Richard L Oliver has defined loyalty as “A deeply held commitment to buy or re-patronize a perfect product or service consistently in future despite situational influences and marketing efforts having the potential to cause switching behavior”
Customer loyalty can be loosely defined as the predisposition of any given customer to purchase your goods or services over comparable ones available in the marketplace. When speaking of products (rather than services or the broader classification which includes both) it is often referred to as "brand loyalty." Investing time and energy in promoting customer loyalty should be an integral component of any business' marketing strategy. When business people think of "marketing" in general, they tend to focus on activities targeted at attracting new customers. While expanding your business' customer base is a crucial undertaking which you must work towards with clearly defined goals, the importance of retaining existing customers mustn't be overlooked. Working toward promoting customer loyalty (or brand loyalty) is critical to your goal for many reasons. A few of the most important reasons why customer loyalty is important to your business are outlined below.
1. Repeat Business : Loyal customers, almost by definition, will purchase your goods or services again and again over time. Depending on what type of business you have and what the sales cycle is like, you may end up selling more to one loyal customer in a year than you might to even 10 first time customers.
2. Greater Volume : As you build relationships with your loyal customers, it will become increasingly easy to sell to them in higher volumes. This may happen naturally, or you may choose to incentivize the process for your customers. In any case, higher volumes mean greater sales, which translates to higher overall profits. 3. Cross-selling Opportunities : Customers who exhibit brand loyalty have a
relationship with your business. They trust you to provide quality products and customer service. This creates a great opportunity to fulfill more of your customers' needs than the traditional ones you currently meet. What does this
mean? You can make sales to loyal customers across product lines and thus increase your overall sales volume without needing to focus so much on attracting new customers.
4. Protects You From the Competition : The more loyal your customers tend to be, the safer you will be from the draw of the competition. Establishing strong brand loyalty can make you practically immune to competitive forces. This is especially important in places where new players enter the marketplace often.
5. Word-of-Mouth Marketing : Loyal customers can also bring you new customers. Customers that have great relationships with businesses tend to talk about it. Happy and satisfied customers who keep coming back to you are very likely to refer others who may need your product and/or services.
6. Benefit of the Doubt : Let's face it; things go awry sometimes - even in the best businesses. Sometimes we get an order wrong, don't meet a deadline, or aren't able to deliver on promises made to customers. In today's economy, it's even easier for little hiccups such as these an others to take place in business. These types of mistakes can damage your business' reputation in the eyes of a new customer. A scheduling error can make your firm seem disorganized and unreliable. This is a very easy way to lose customers. The good news is, loyal customers are much more likely to give you the benefit of the doubt and/or overlook errors. If you maintain the level of customer service and quality that it takes to achieve brand loyalty in the first place, your customers will be willing to forgive you when bad things happen.
How to make customer loyal?
There are few tips for making our customer loyal or to get repeat business
1. Add a human touch to your customer service : It is well known that most companies fail to provide adequate customer service. Just call nearly any 1-800 number and you will experience frustration as your call is transferred from one automated message to another. Do not let your customer get lost in a technological loop. Provide a means for them to contact you directly and answer them promptly.
2. Tell the truth, even when it’s not what the customer wants to hear : Sometimes freelancers have the mistaken impression that good customer service means always saying “yes”. They couldn’t be more wrong! Rather than agreeing to do something that you cannot really do, be upfront with your customer. In most cases your honesty will enhance your situation. Saying “no” upfront is a lot better than saying “yes” and then not delivering.
3. Being pleasant counts for a lot : My Wife and I recently ate at our favorite restaurant. Now the city where we live has dozens of restaurants. There are even three other restaurants located in the same mall. So why this is our favourite?
a. The owner and employees greet by name and seem glad to us. b. They remember our preferences. “No lemon in your team mam” c. They remember details about our lives.
d. How kids are doing?
4. Become the quality provider : I once tried purchasing my children’s clothing at the cheapest possible price. However, after one very cheap little outfit that I purchased for my daughter fell apart after she wore it only one time. I changed my tactic. It dawned on me that quality is more cost effective in the end.
5. Be in constant touch with your customers and associate them in important aspects like new product development and also keep them informed of your new products and prices.
6. Reward the customer in appropriate manner for their loyalty .
7. Get to know the customer as much as you can . Simple gestures like sending birthday cards can emotionally bond the customer with the organization.
8. If a valuable customer suffers any disadvantage due to an transaction with you, compensate the customer
Internet and its effect on CRM
The emergence of the Internet heralded a new opportunity for customer relationship building. For one thing, search engines made it easier for customers to find online merchants and interact with them. And once found, those merchants offered customer more streamlined ways of ordering and receiving products and services. Moreover the internet simplified bidirectional communication for the first time offering a better way for consumers to replay information to the merchant. Instead of waiting to be mailed a from to open an account or order a phone line, a prospective customer needed only to send an application through cyberspace resulting in shorter delivery time, improved accuracy and quite often a higher positive perception. Internet is an environment of zero latency, offering real time information and often on demand product delivery.
Consider the old way. A customer needs a new set of window blinds. He goes to the kitchen, finds the yellow pages and calls his local blind company. The representative explains they can have someone come out and measure for the blinds a week from Thursday. The representative arrives from the blind company, measures and shows the customer photos of various blind styles and colors. Then the representative takes another two days to write up and estimate. Almost two weeks later the customer has the pricing information he needs. Now he must decide whether to get another estimate or take his chances with the only vendor he’s contacted.
Compare that to the Web version. The customer enters mini blinds in his favourite search engine, which returns the web sites for several catalog window treatment firms. He chooses a company, which displays a series of blind designs and prices per inch. The customer chooses a design he likes, enters his window measurements and receives a price online, including tax and shipping. Before purchasing be browses a couple of other window ware websites for additional blind designs and prices, eventually placing his order in less than an hour.
Benefits to organizations
1. Global Reach: INTERNET expands the marketplace to national and international markets. With minimal capital outlay, a company can easily and quickly locate
the best suppliers, more customers and the most suitable business partners worldwide. Expanding the base of customers and suppliers enables organizations to buy cheaper and sell more.
2. Cost Reduction: INTERNET decrease the cost of creating, processing, distributing, storing and retrieving paper based information. High printing and mailing costs are lowered or eliminated.
3. Supply chain improvements: Supply chain inefficiencies such as excessive inventories and delivery delays can be minimized with INTERNET. For example by building autos to order instead of for dealers showrooms, the automotive industry is expecting to save tens of billions of dollars annually just from inventory reduction.
4. Extended Hours: The business is always open on the web, with no overtime and no other extra costs.
5. Customization: Pull type production allows for inexpensive customization of products and services and provides a competitive advantage for companies that implement this strategy. A well known example of pull type production is that used by Dell.
6. New Business Models: INTERNET allows for many innovative business models that provide strategic advantages and/or increase profits. Combining group purchasing with reverse auctions is one example of an innovative business model. 7. Vendor’s specialization: INTERNET allows for a high degree of specialization
that is not economically feasible in the physical world. For example a store that sells only dog toys can operate in cyberspace but in the physical world such a store would not have enough customers (dogtoys.com).
8. Rapid time to market: INTERNET reduces the time between the inception of an idea and its commercialization due to improved communication and collaboration. 9. Lower communication costs: INTERNET lowers telecommunication costs-the
internet is much cheaper than VANs.
10. Efficient Procurement: INTERNET enables efficient e-procurement that can reduce administrative costs by 80 percent or more reduce purchase price by 5 to 15% and reduce cycle by more than 50%.
11. Improved customer relations: INTERNET enables companies to interact more closely with customers, even if though intermediaries. This allows for personalization of communication, products, and services which promotes better CRM and increases customer loyalty.
Benefits to consumers
1. Ubiquity: INTERNET allows consumers to shop or perform other transactions year round, 24 hrs a day from almost any location.
2. More products and services: INTERNET provides consumers with more choices they can select from many vendors and from more products.
3. Customized products and services: Dell customizes computers and sells them at competitive prices. Customers can get an increased number of products and services just the way they want them.
4. Cheaper products and services: INTERNET frequently provides consumers with less expensive products and services by allowing them to shop in many places and conduct quick comparisons.
5. Instant delivery: In the case of digitized products, INTERNET allows for fast delivery.
6. Information Availability: Consumers can locate relevant and detailed product information in seconds, rather than days or weeks. Also, multimedia support is cheaper and better.
7. Participation in auctions: INTERNET makes it possible for consumers to participate in virtual auctions. These allow sellers to sell things quickly and buyers can locate collector’s items bargains.
8. Electronic communities: INTERNET allows customers to interact with other customers in electronic communities and exchange ideas as well as compare experiences.
Different Terms of CRM/Types of CRM
1. eCRM : Electronic CRM concerns all forms of managing relationships with customers making use of Information Technology (IT). eCRM is enterprises using IT to integrate internal organization resources and external marketing strategies to understand and fulfill their customers needs. Comparing with traditional CRM, the integrated information for eCRM intraorganizational collaboration can be more efficient to communicate with customers.As the internet is becoming more and more important in business life, many companies consider it as an opportunity to reduce customer-service costs, tighten customer relationships and most important, further personalize marketing messages and enable mass customization. ECRM is being adopted by companies because it increases customer loyalty and customer retention by improving customer satisfaction, one of the objectives of eCRM.
2. ECRM : When a company reaches a certain size, usually after management has been assumed by a board of directors, it begins to divide up company activities into different strategies. Some of these strategies govern marketing, or reaching out to consumers in an effort to win new customers. Other strategies involve CRM, or attempts by a company to hold onto customers it already has and increase market share through good opinions and word of mouth. CRM stands for customer relationship management. Enterprise CRM is simply a CRM strategy that is designed to change the way the business thinks about its relationship with customers, rather than continue with traditional approaches to customers. CRM is designed to attract customers by increasing product value and paying attention to personal preferences. Several "pillars" are essential to all CRM strategies, including sales, marketing, customer service and technology. CRM sales are designed to appeal to existing customers who can be offered better deals for their continuing loyalty, while marketing techniques are designed to remind customers of the benefits they get from the products or services the business offers. CRM technology keeps track of customer habits so customer service techniques can be adapted to each person.
3. PRM : Partner relationship management (PRM) is a business strategy for improving communication between companies and their channel partners. Web-based PRM software applications enable companies to customize and streamline administrative tasks by making shipping schedules and other real-time information available to all the partners over the Internet. It allows a company to manage its alliance partner and reseller relationships to provide customers with the optimal sales channel while streamlining the sales process. Determining incentives for various web referral sites based on the profitability of the customers they send your way is one PRM tactic. Several CRM providers have incorporated PRM features, such as Web-enabled spreadsheets shared through an extranet, in their software applications. PRM is often compared to customer relationship management (CRM) and there is some argument over whether the complex relationships of channel partnerships, makes it necessary for PRM to be a separate entity, or merely a component of CRM
4. cCRM: Collaborative CRM is an approach to customer relationship management (CRM) in which the various departments of a company, such as sales, technical support, and marketing, share any information they collect from interactions with customers. For example, customer feedback gathered from a technical support session could inform marketing staff about products and services that might be of interest to the customer. The purpose of collaboration is to improve the quality of customer service, and, as a result, increase customer satisfaction and loyalty. 5. SRM: Supplier relationship management is a comprehensive approach to
managing an enterprise's interactions with the organizations that supply the goods and services it uses. The goal of supplier relationship management (SRM) is to streamline and make more effective the processes between an enterprise and its suppliers just as customer relationship management (CRM) is intended to streamline and make more effective the processes between an enterprise and its customers. SRM includes both business practices and software and is part of the information flow component of supply chain management (SCM). SRM practices create a common frame of reference to enable effective communication between an enterprise and suppliers who may use quite different business practices and terminology. As a result, SRM increases the efficiency of processes associated with acquiring goods and services, managing inventory, and processing materials. 6. mCRM:
7. Operational CRM: According to Crosby and Johnson (2001), operational CRM focuses on improving the efficiency of customer interactions. They mention that operational CRM aims at combining sales, support and marketing databases into a single repository that tracts and manages interactions with customers. It concerned with the customer facing functions and the capturing of data generating as a result of the interactions with the customer. The contact points from where transactional data is usually generated include:
a. Call centre interactions with customers b. Sales people interactions
c. Automated interactions such as websites
8. Analytical CRM: It is defined as the analysis of customer data for strategic or tactical purposes to enhance both customer and firm value. It aids decision making using various tools ranging from simple spreadsheet analyses to sophisticated data mining. The analysis should enable insights into customer’s behavior.
CRM and Business Intelligence
Business intelligence (BI) refers to computer-based techniques used in spotting, digging-out, and analyzing business data, such as sales revenue by products and/or departments, or by associated costs and incomes.
BI technologies provide historical, current, and predictive views of business operations. Common functions of business intelligence technologies are reporting, online analytical processing, analytics, data mining, business performance management, benchmarking, text mining, and predictive analytics.
Business intelligence aims to support better business decision-making. Thus a BI system can be called a decision support system (DSS). Though the term business intelligence is sometimes used as a synonym for competitive intelligence, because they both support decision making, BI uses technologies, processes, and applications to analyze mostly internal, structured data and business processes while competitive intelligence gathers, analyzes and disseminates information with a topical focus on company competitors. Business intelligence understood broadly can include the subset of competitive intelligence.
CRM means many different things to different people. It is possible to develop a greater understanding of it by looking at its origins and the principles that drove its development. In the marketing literature the term Customer Relationship Management is defined in different manner by different market researchers and academicians
According to Shani and Chalasani(1992), defines Customer Relationship Management as “an integrated effort to identify, maintain and build up a network with individual consumers and to continuously strengthen the network for mutual benefit of both sides, through interactive, individualized and value added contacts over a long period of time” Another Narrow perspective of Vavra(1992), CRM is customer retention in which a variety of after marketing tactics is used for customer bonding or staying in touch after the sale is made.
According to Gronroos, CRM is marketing strategy to establish, maintain and enhance relationship with customers and other partners, at a profit so that the objectives of the parties involved are met. This is achieved by a mutual exchange and fulfillment of promises.
We define CRM as Customer Relationship Management as a comprehensive marketing strategy to improve marketing productivity which can be achieved by increasing marketing efficiency and enhancing marketing effectiveness through a
process of acquiring, retaining and partnering with selective customers to create superior mutual value for the parties involved.
Organizations earlier used data processing technologies to assimilate information and effectively distribute the same to the internal environment. Analytical CRM is a management discipline that treats intellectual capital as managed assets; it is not about creating a central database but to gain insight and understanding of customer requirements in order to completely satisfy the needs of customers. Foundation of customer knowledge rests on variety of data sources, data could be numerical, textual, organized in tables, discrete etc. 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 in management institute. The key to successful customer relationship 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 and is called as customer knowledge catalogue. Analytical CRM helps in development of customer knowledge catalogue which is utilized by the counselling people working in the management institute for the purpose of career guidance. This career guidance is given to the prospect, the person coming for the inquiry and which in then helps in converting them to the advocates or loyal customers.
Analytical CRM is designed to analyze deeply the customer’s information and data and unwrap or disclose the essential convention and intension of behaviour of customers on which capitalization can be done by the organization. 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.
Relevant analytics capabilities are often interwoven into applications for sales, marketing, and service. These features can be complemented and augmented with links to separate, purpose-built applications for analytics and business intelligence. Sales analytics let companies monitor and understand client actions and preferences, through sales forecasting and data quality.
Marketing applications generally come with predictive analytics to improve segmentation and targeting, and features for measuring the effectiveness of online, offline, and search marketing campaign. Web analytics have evolved significantly from their starting point of merely tracking mouse clicks on Web sites. By evaluating “buy signals,” marketers can see which prospects are most likely to transact and also identify those who are bogged down in a sales process and need assistance. Marketing and finance personnel also use analytics to assess the value of multi-faceted programs as a whole.
These types of analytics are increasing in popularity as companies demand greater visibility into the performance of call centers and other service and support channels, in order to correct problems before they affect satisfaction levels. Support-focused applications typically include dashboards similar to those for sales, plus capabilities to measure and analyze response times, service quality, agent performance, and the frequency of various issues
Difference Between CRM and BI
S.No CRM Business Intelligence
1 IT consist of the processes a company uses to track and organizes its contact with its current and prospective customers
It refers to the skill, technologies, applications and practices used to help a business acquire a better understanding of its commercial context
2 Display customers most recent inbound contact on my PDA along with their current corporate address
Display the name and address of business customer
3 Once a month for the next six month, send a direct mail solicitation to customers most likely to rent next month’s new features who are not weekly visitors to the store
Display customer who visit one of the video store in our chain on weekly basis
4 Contact all high value customers who have lodged a complaint. Generate retention recommendations for each customer
Display a list of customers who have lodged a complaint within the past 30 days
5 Identify the top five purchased office supplies and trial run an automated web request for quote system for limited quantities to test price improvements
Analyze the top five most popular office supplies and compare approved vendor prices to prices of other potential suppliers
6 Send profitable registered customers online discounts if they fill in a form explaining why they abandoned their shopping carts.
List the email addresses for registered customers who abandoned their shopping carts during their last web vist.
Campaign management software applications allow marketing users to segment groups of customers (and prospective customers) into smaller groups and then specify the interaction that should take place with those individuals. For example, consider a marketing manager for a cellular phone company that is focusing on customer retention. There might be a large number of reasons that a customer chooses to leave their cellular provider, and the marketing manager is responsible for identifying ways to reduce this problem. One group of customers might be leaving because they are experiencing technical problems (e.g., frequent dropped calls) while another group might be leaving because the plan they are signed up for does not match their current calling patterns (e.g., a local calling plan with a large number of national calls).
A user of the campaign management software would define these segments by selecting customers in the database that have these characteristics. For the customers with technical problems, the marketer could create a customer segment that selects those customers who have had more than five dropped calls within the same month. The information that drives these selections is contained in a customer data warehouse, a database that is used to collect information about customer characteristics and activities. In the case of dropped calls, the customer service call-center would enter information in the database when a customer called to complain (even better would be an automated system that identified dropped calls and automatically added them to the database without a customer complaining).
Once this segment is defined, it needs to be associated with offers that will be communicated to the customers in order to improve retention. In the case of customers with technical problems, the offer might be a rebate of one month's charges and a promise to improve service quality. This offer could be communicated by a call from customer service or via a piece of direct mail (email might be a third option, if the customer's email address is available). The campaign management application would take the segment and split it into two groups, half receiving a phone call and the other half receiving a piece of direct mail (which half a customer fall into would be a random selection).
In addition, the marketing person might want to try out a slight alternative, offering a rebate of one-half of the most recent bill. The idea being that the less expensive offer might be more cost effective. Data will be collected and a statistical analysis done at a later date in order to evaluate the difference between the two offers. This test offer would then further segment each of the two existing segments (phone call, direct mail) into to additional groups, with most (say 90%) receiving the full-month rebate while a smaller group (10%) receiving a half-month rebate.
Once the definition of the segmentation is complete and the marketing manager is satisfied with the campaign, it still needs to be executed. This would be handled by a scheduler that executes the campaign at regular intervals (e.g., monthly). Upon execution of the campaign, the segments associated with the phone call would be passed to the call-center software system, which would queue up the customers who are supposed to receive the offer along with the specifics of the script that the operator is supposed to use
(full or half month rebate). The direct mail segments would likely be handled differently, possibly by using an external vendor (a "mail shop") that would take a list of customers and produce the actual envelopes that would be mailed. In this case, the campaign management system would generate a file listing each of the customers, including their address and offer type.
This process of creating segments, associating them with offers, and executing campaigns would be repeated for each possible segment that a marketing manager might think of (some companies define thousands of possible segments for their customers). Collisions between segments are handled by the campaign management software, either by excluding customers from segments (based on a set of rules) or by allowing the overlap. Over time the effectiveness of the segments are evaluated, with refinements incorporated continuously (this kind of marketing is sometimes referred to as "continuous customer management").
Campaign Management can be based upon:
1. Demographic profile i.e. the income of parents, social status, geographic location etc.
2. Psychographic profile i.e. attitude towards usage of products 3. Which products would be needed by particular segment 4. Which products would be deemed suitable by a segment 5. Choice of variants and sizes
6. Which channel of communication is preferred by a particular segment 7. Preferred action options
The following steps to be followed for effective campaign management:
1. Take into account the needs of a segment before deciding on the offers to be made 2. Use segment characteristics to decide on communication channel, product
variants, etc that are offered.
3. Analyze the response to previous campaigns before finalizing the offers 4. Create metrics to measure the success of the campaign
Types of Campaign
Single stage campaign A one-off communication to a customer
Multi stage campaign Follow ups on earlier communication with
a defined strategy for non responders
Single channel campaign May be single/multi stage but using only one channel for communication
Multi channel campaign A single / multi stage campaign through multiple channels
Trigger based campaign Based on a trigger generated as a result of the customer’s profile, purchase behaviour etc
Measurement metrics for campaigns: The success of campaign needs to be judged and metrics should be used to provide correct indicators. These should include:
Volume of communication sent and percentage of response received Volume of responses converted into sales
Value of the sales
Cost of the campaign v/s value of the sales.
CRM Marketing Initiatives
1. Cross-Selling : Cross-selling is defined by the Oxford English Dictionary as "the action or practice of selling among or between established clients, markets, traders, etc." or "that of selling an additional product or service to an existing customer". In practice, businesses define cross-selling in many different ways. Elements that might influence the definition might include:
the size of the business
the industry sector it operates within
the financial motivations of those required to define the term.
The objectives of cross-selling can be either to increase the income derived from the client or clients or to protect the relationship with the client or clients. The approach to the process of cross-selling can be varied.
Unlike the acquiring of new business, cross-selling involves an element of risk that existing relationships with the client could be disrupted. For this reason, it is important to ensure that the additional product or service, being sold to the client or clients, enhances the value the client or clients get from the organization.
2. Up-Selling : Upselling (sometimes 'up-selling') is a sales technique whereby a saleperson induces the customer to purchase more expensive items, upgrades, or other add-ons in an attempt to make a more profitable sale. Upselling usually involves marketing more profitable services or products, but upselling can also be simply exposing the customer to other options he or she may not have considered previously. Upselling implies selling something that is more profitable or otherwise preferable for the seller instead of, or in addition to, the original sale. A different technique is cross-selling in which a seller tries to sell something else. Some examples of upsales include:
o suggesting a premium brand of alcohol when a brand is not specified by a customer, such as if a customer simply requests a "rum and Coke").
o selling an extended service contract for an appliance
o suggesting a customer purchase more RAM or a larger hard drive when servicing his or her computer
o selling luxury finishing on a vehicle
o suggesting a brand of watch that the customer hasn't previously heard of as an alternative to the one being considered.
o suggesting a customer purchase a more extensive car wash package.
In practice, large businesses usually combine up-selling and cross-selling techniques to enhance the value that the client or clients get from the organization in addition to maximizing the profit that the business gets from the client. In
doing so, the organization must ensure that the relationship with the client is not disrupted.
3. Customer Retention : Customer Retention is the activity that a selling organisation undertakes in order to reduce customer defections. Successful customer retention starts with the first contact an organisation has with a customer and continues throughout the entire lifetime of a relationship. A company’s ability to attract and retain new customers, is not only related to its product or services, but strongly related to the way it services its existing customers and the reputation it creates within and across the marketplace.
Customer retention is more than giving the customer what they expect, it’s about exceeding their expectations so that they become loyal advocates for your brand. Creating customer loyalty puts ‘customer value rather than maximizing profits and shareholder value at the center of business strategy’. The key differentiator in a competitive environment is more often than not the delivery of a consistently high standard of customer service.
Customer retention has a direct impact on profitability. Research by John Fleming and Jim Asplund indicates that engaged customers generate 1.7 times more revenue than normal customers, while having engaged employees and engaged customers returns a revenue gain of 3.4 times the norm.
4. Behaviour Prediction : It helps marketing departments determine what customers are likely to do in the future. Using sophisticated modeling and data mining techniques behaviour prediction uses historical customer data to foresee future behaviour. This analysis includes several variations:
Propensity to buy analysis: Understanding which products a particular
customer is likely to purchase.
Next sequential purchase: Predicting what product or service a customer
is likely to buy next.
Product affinity analysis: Understanding which products will be
purchased with other products.
Price elasticity modeling and dynamic pricing: Determining the optimal
price for a given product often for a given customer or customer segment.
5. Personalization : Personalized marketing (also called personalization, and sometimes called one-to-one marketing) is an extreme form of product differentiation. Whereas product differentiation tries to differentiate a product from competing ones, personalization tries to make a unique product offering for each customer.
Personalized marketing had been most practical in interactive media such as the internet. A web site can track a customer's interests and make suggestions for the future. Many sites help customers make choices by organizing information and prioritizing it based on the individual's liking. In some cases, the product itself can be customized using a configuration system.
More recently, personalized marketing has become practical with bricks and mortar retailers. The market size, an order of magnitude greater than that of the Internet, demanded a different technological approach now available and in use.
Many retailers attract customers to the physical store by offering discounted items which are automatically selected to appeal to the individual recipient. The interactivity occurs through the offer redemptions recorded by the point of sale systems, which can then update each model of the individual shopper. Personalization can be more accurate when based solely upon individual purchasing records because of the simplified and repetitive nature of some bricks and mortar retail purchasing, for example grocery superstores.
6. Channel Optimization : The goal of marketing automation is to offer the right message to the right customer and at the right time. With the advent of the Internet many firms are appending through the right channel as customer’s interaction preference evolve. For instance a new customer whose use of online banking services has steadily increased might prefer to be emailed a new offer along with regular statement. Understanding the channels through which specific customers prefer to interact with your company is only a slice of the pie. Company must also decide how best to communicate with customers. Because a valuable customer prefer his work to be done online and in an effective manner. Channel management means optimization of inbound and outbound means of customer interaction and knowing how to choose the best approach for each. 7. Contact Management : Business contacts in customer organizations are people
whom the sales personnel contact initially for say sale. They may be at various levels in the hierarchy customer organization. Some may be simply contact persons while others may be decision maker, whose opinion go a long way in finalizing the deal. Previously the sales representatives would maintain business cards of these key contacts in transparent vinyl folders. These formed the life blood as far as providing information with the key contact was concerned. However, many important characteristics about contacts are lost especially if they are present at a tacit level with the sales representative. If a different sales representative is assigned to this territory, he will not have the advantage of such information and will have to start fresh. Contact management provide critical information about each customer contact is stored in the system and is available easily. Sales representatives can access such information through their mobile PDAs or laptops anywhere, while on the move and accordingly tone their sales pitch.
Marketing Automation
The name given to software platforms designed for marketing departments and organizations to simplify processes by automating repetitive tasks is Marketing Automation. Marketing departments, consultants and part-time marketing employees benefit by specifying criteria and outcomes for tasks and processes which are then interpreted, stored and executed by software, which increases efficiency and reduces human error.
Today’s business world is incredibly competitive and many companies look for ways to make their marketing campaigns more effective. Often, advertising dollars are limited and companies seek to avoid investing in marketing strategies that may not produce satisfactory results. As such, many companies find it advantageous to develop methods for managing and tracking marketing campaigns in order to provide greater
understanding of customer profiles and profitability. Marketing automation can be effective for keeping track of the campaign strategies that work versus those that fail to produce good results. At the same time, marketing automation can make it easier to use campaign results in developing improved campaigns for the future.
To many, marketing automation involves the use of specially designed software. Marketing automation software allows businesses to automate important marketing processes. This type of software can help businesses in accomplishing varied tasks such as defining, scheduling, and tracking campaign goals and creating and implementing marketing campaigns. Marketing automation software can also help businesses in market segmentation and identifying target markets, as well as the collection of pertinent market information and response. Collected response information is fed back into the system. Some types of marketing automation software make it possible to manage campaigns that encompass many different marketing methods. For example, such software may be used with print, Internet, radio, television, and e-mail marketing campaigns. However, the capabilities of marketing automation software may vary widely depending on the particular software.
For some, marketing automation doesn’t mean a particular program or group of applications at all. Instead, it means varied tools used for analysis and profiling. Such tools can include everything from web measurement to those intended for personalizing campaign strategies. These tools are used to improve communications with customers and obtain valuable insight into a company’s marketing target.
For other companies, marketing automation is not simply software. Instead, it is an entire system focused on the management of high-volume marketing campaigns. Often, such high-volume campaigns focus on offline marketing strategies, such as those that are direct mail or telephone-based.
Regardless of the type of marketing automation a company chooses to implement, there is always a common denominator. That common denominator is the use of technology to ensure better communication with customers and more targeted and effective marketing campaigns. Frequently, the type of marketing automation path chosen is directly linked to company size and sales volume.
There are three categories of software:
1. Marketing Intelligence uses tracking codes in social media, email and webpages to track the behavior of anyone interested in a product or service to gain a measure of intent. It can record which social media group or thread they followed, which link was clicked on in an email or which search term was used to access a website. Multiple link analysis can then track buyer behavior - following links and multiple threads related to product A but not B will show an interest only in A. This allows more accurately targeted response and the development of a nurturing program specifically targeted towards their interest and vertical market. Due to its interactive nature this has been described as Marketing Automation 2.0. 2. Marketing Automation has a focus on lead generation with targeted marketing
and nurture leads from first interest through to sale. Commonly used in to-business(B2B), to-government(B2G), or longer sales cycle business-to-consumer(B2C) sales cycles, Marketing Automation involves multiple areas of marketing and is really the marriage of email marketing technology coupled with a structured sales process as delineated by a CRM program.
3. Marketing Workflow Automation encompasses automation of internal marketing processes. These includes budgeting and planning, workflow and approvals, the marketing calendar, internal collaboration, digital asset creation and management and essentially everything that supports the operational efficiency of the internal marketing function. Typically these systems require a CRM or COM administrator to set up a complex series of rules to trigger action items for internal sales and marketing professionals to manually process (designing files, sending letters, sending email campaigns). This type of system increases marketers ability to deliver relevant content to relevant individuals at relevant times. Limitations may apply, based on the human resource capacity of an organization and their level of commitment to the tasks as they are assigned.
Call Centre and Customer Care
A call centre is a group of agents and/or automated voice response units that support customer contact functions over the telephone. They are assisted by computers. A call centre must anticipate and accommodate customers needs by delivering the right information, at the right time, in the right way, with right quality.
Objectives of call centre
Offer a high quality of customer service Have contractual agreements met
Quicker and more reliable response to service requests Consistent service
Increase communication with the organization Improve customer satisfaction
Enhance knowledge circulation Increase employee productivity Decrease costs
Differentiate against competition Increase sales revenue
Call Centre Features and their functionalities
Contact Management: Improve the quality of customer service by
providing the information instantly on the agent’s screen. Deliver prompt, refined and knowledgeable service that does not require callers to repeat their questions as they are routed through the organization. Maintain a database of all customer contact persons with details as part of knowledge base.
Opportunity Management
Target efforts at a particular segment of contacts or prospects Get new business from existing customers
Measure returns from campaign and media
Increase revenues resulting from cross selling and up selling opportunities
Improve your reach
o Activity Management : Streamline activities to track from start to completion. Reduce the reliance on slow, cumbersome paperwork. Increase productivity either by reducing head counts or by increasing the level of services without adding incremental staff. Shorten the learning curve, reduce the amount of agent training time required each time a new product or service is offered, or when a new computer system, peripheral or application comes online.
o Customer management : Provide single contact point for any customer query. Identify and track loyal customers based on pre defined parameters and focus on profitable customers, attract new customers, nurture and retain them for high profitability.
o Workflow management: Efficient enforcing of key business practices to increase communication across the organization: automation of business processes based on events. Facilitate complex business functions by providing the necessary automated business workflow and message based routing and querying functions.
In an economy of converging technologies, morphing markets and web paced communications, customers get ready access to an unprecedented amount of information from anywhere in the globe and at any time of day or night. In response, a host of new products and services emerges to serve these customers. In a competitive environment, the one idea that is likely to succeed will be the customer centric model, where the organization builds long term strategic relationships with its customers.
It is CRM that encapsulates this view better than other concepts and technologies like BPR, TQM, SCM and ERP. Now CRM is embedded into every Call Center (CC). A CC is an arrangement where the division of an organization or its intermediary acts as a link with their customers. The typical CC is an area where specially trained employees called as Customer Services Representatives (CSR) or Customer Care Executives (CCE) are available and these people handle queries on products and services. The CC is a single function unit limited to customer care and support and sometimes sales. The CC helps in Customer Care through various touchpoints such as:
Phones
Touchscreen kiosk Fax
Internet Char
The CCE of the contact center is an active salesman, not a passive middleman routing queries. He uses a bank of telephones that is supplemented by computer terminals and high-end CRM software. The most basic customer interactions like enquiries are automated and the CCE gets more time for customer service with personalized care. Typical CC software would link telecom hardware to IT databases at the backend and
communicate automated information to the callers in the form of interactive voice response (IVR), and screen pop-ups layers through the CSR. New CC systems incorporate internet technologies and be web-enabled, allowing more interactivity for their callers, while keeping the basic model for customer interaction unchanged.
Customer service applications at the CC includes:
help desks, technical support, product information, service calls, scheduling, catalogue services, and reservations.
Components of Call Center for customer care The CC system has three entities
Caller: The caller communicates with the PBX linked to the IVR, where
he selects an option that relates to his need. The trigger in the CTI N(customer telephone interaction) for the screen popup’s could be either caller’s telephone number or his account number and this may be supported by a unique telephone number.
The CCE: The focus of the CCE should be threefold: Get new customers
Retain customers
Grow profitable customers
o The ACD(Automated Call Distributor) , is a computerized system that responds to the caller with voice menu and connects the call to next available CSR.
CC delivers gains for any industry that needs a customer interface and where the success of transactions is based entirely on information availability. CC can drive focused direct marketing campaigns using captive data supported by technology such as predictive dialers. CC cuts effort, time and costs for their customers, for more value to them. Quick and consistent services delivered whenever desired by the customers can help to retain existing customers. Promotion campaign stands a better chance of success. CC can increase customer satisfaction and allow products and services providers to operate on an 24x7x365 global scale. CC builds relationships with prospective and current customers by managing information, and delivers products and services at speeds that facilitate customer retention and creation.
Automating the contact center
Contact centers have evolved quickly from a group of local workers answering phones during business hours to a dedicated organizations providing on demand global support and sales through several different channels. Companies are realizing increasingly that their customer relationships are only as good as the quality of their support and are
