customer relationship management & it role

8/9/2019 Customer Relationship Management & IT role

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Customer Relationship ManagementOmaid Ansari

HAMDARD INSTITUTE OF MANAGEMENT & SCIENCES (HIMS)

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Abstract

In order to compete effectively in globalized economy, organizations must be customer-

focused. Customer relationship management (CRM) is the way to integrate this approach

throughout an organization. Many a times organizations are likely to believe that it is

function of marketing to have the customer relationship management. In reality it is

meant for everyone in the organization starting from the security person, telephone

operator and accounting department. Providing good service and then finding a way to

leverage the good will created by quality service a company can tie deeply into a

consumers psyche and develop a strong business/client relationship. This paper examines

customer complaints as a major source of losing customers and suggests suitable policy

measures to overcome these handicaps. In addition, there is discussion on role of

information technology as an enabler of customer relationship management. The paper

also develops a model for organizations to follow and summarizes the discussion.


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Customer relationship

management (CRM)

Customer relationship management (CRM) is a broadly recognized,widely-implemented strategy for managing and nurturing a companysinteractions with customers and sales prospects. It involves using technologyto organize, automate, and synchronize business processes principally sales related activities, but also those for marketing, customer

service, and technical support. The overall goals are to find, attract, and winnew customers, nurture and retain those the company already has, entice former customers back into the fold, and reduce the costs of marketing andcustomer service.

Customer relationship management (CRM) is a term applied to processesimplemented by a company to handle its contact with its customers. CRMsoftware is used to support these processes, storing information on current

and prospective customers. Information in the system can be accessed andentered by employees in different departments, such as sales, marketing,customer service, training, professional development, performancemanagement, human resource development, and compensation. Details onany customer contacts can also be stored in the system. The rationale behind

this approach is to improve services provided directly to customers and to usethe information in the system for targeted marketing

While the term is generally used to refer to a software-based approach tohandling customer relationships, most CRM software vendors stress that a

successful CRM strategy requires a holistic approach. CRM initiatives often fail because implementation was limited to software installation withoutproviding the appropriate motivations for employees to learn, provide input,and take full advantage of the information systems.


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Business Objectives of CRM

CRM applications, often used in combination with data warehousing, E-commerce

applications, and call centers, allow companies to gather and access information aboutcustomers' buying histories, preferences, complaints, and other data so they can betteranticipate what customers are looking for. The other business objectives include:

y Increased efficiency through automationy The ability to provide faster response to customer inquiriesy Having a deeper knowledge of customer needsy Generating more marketing or cross-selling opportunitiesy Better information for better managementy Reduced cost of sales and increased productivity of Sales Representativesy Receiving customer feedback that leads to new and improved products or servicesy Conducting more one-to-one marketing

Customer Relations Management (CRM)

and Role of Information Technology

In the era of information revolution, customer relations, or rather "customer

relations management" (CRM) is playing an ever-increasing role. CRM entails compiling

information concerning customers' profiles, their previous purchases, their preferences,

etc. This is very useful when, for example, a customer requests repairs to his refrigerator,

because the service company has all the information, such as make and type of

refrigerator, date of purchase, etc. readily available. It makes it easier, both for the

customer and for the service company, to arrange for a technician's visit because most of

the necessary information is already on file.


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CRM applications are also useful in gathering information from various business

departments and merging them into one file, so that the company representative who

takes a customer's call can answer most questions that the customer may have. This

avoids the problem of having to transfer customers to other departments. Of course, CRM

is a "two-way street," in that it enables companies to use information on a customer's

previous purchases to focus their marketing on items of special interest to a particular

customer. For instance, a bookseller may send information on new travel books to a travel

enthusiast.

While acknowledging the benefits of CRM (a technology which would seem to bemainly applicable to large organizations), it must be recognized that CRM covers only a

small percentage of what we refer to as "Customer Relations." Customer relations is a

multifaceted domain which ranges from business policies, practices and strategy at the

management level, to enthusiasm, eagerness to achieve customer satisfaction,

resourcefulness, flexibility, and a positive attitude towards customers on the part of

employees and company representatives who are in direct contact with customers or

clients.

Both management decisions and employee behaviors/interactions should be

governed by what is referred to as "organizational culture". It is the perceived internal

environment of the organization that has a major influence on how an organization

operates, values it espouses, and how it treats its employees. In a company culture that

stresses customer satisfaction, strives for excellence, values its employees, and is able to

instill in them a sense of mission, or of common purpose, all members of the organizationwill recognize that their contributions play an important role in the overall success and

profitability of the organization of which they are a part.


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Unfortunately, in many organizations, ambitious and well-meant plans are made

at the top management. While the behavior of employees who are in actual contact with

customers may be negatively influenced by a number of factors. Some of the factors are,

1) Feelings of not being appreciated by management,

2) Unwillingness to go beyond the basic requirements of their jobs and to tap into their

own resourcefulness/Entrepreneurship,

3) Seeming lack of interest in advancing the company's business through their

interactions with customers.

What seems to be misunderstood by people working for companies is that

everyone, from the business owner or manager to the telephone operator or receptionistor the sales associate, plays an important part in how customers view a company. Rude,

unfriendly, uncooperative, or inappropriate behavior on the part of company

representatives who are in direct contact with customers may translate into loss of

business, regardless of the quality of the goods or services the company has to offer. It has

been estimated that 68% of business losses are because rude behavior of employees.

Furthermore, customers who encounter this type of treatment are likely to tellothers about their experience, who in turn, will not be very interested in dealing with that

particular company, thereby magnifying the extent of customer loss (actual and

potential).

In this era of fierce competition, both on a local and a global level, it becomes

increasingly important to ensure that a business is "customer-centered." There is an

abundance of merchandise available, and there is no shortage of businesses that offer thesame type of goods. It is therefore necessary for companies to try to set themselves apart

from their competitors by offering superb customer service. This can be achieved by

listening to customers' comments and suggestions; by upper management spending time

at the reception desk, at the service counter, or in the store, observing customers'


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comments and reactions. Anyone associated with a company needs to see him/herself as

a company representative who contributes to the company's image. Of course, everyone

working for a company needs to receive recognition for special efforts, ingenuity, and

problem solving, geared towards achieving customer satisfaction.

No doubt, excellent plans are made at the management level of many companies, but

inadvertently, the message communicated to customers or potential customers often is

more akin to saying, "We do not really care whether the organization become or remain

our customer or not!" How else could one interpret the message that "Our computer

department is too busy to take order," or "We will let organization know when the item

you wish to purchase is in stock," and never getting back to the customer. Alternatively,turning away a group of patrons in a restaurant, just because the kitchen will close in ten

minutes?

Similarly, customer complaints or suggestions do not seem to receive the attention

they deserve. It has been pointed out that customer complaints should be treated as gifts

because they enable a company to take corrective action and to make improvements.

Apparently, customer complaints are relatively rare--customers are inclined to tell theirfriends and relations about negative experiences, rather than informing the companies in

question. For that reason, it seems incomprehensible that some large companies tend to

dismiss customer complaints and consider them immaterial (if one goes by the reactions

of the company representative receiving the complaint).

In order to ensure excellence in customer relations and customer service,

organizations need to assess all aspects of their operations, in order to determine whetherany of their business practices and interactions with customers needs to be improved.

Corrective actions could take the form of training or retraining staff, establishing a code

of conduct, empowering staff to apply company guidelines less rigidly, where warranted,

and keeping focused on the customer at all times.


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Why are the reasons for customer

complaints?

Most customers complain because they purchased a product or service with

certain expectations and, for any number of reasons, those expectations was not met.

Some of the research done by organizations found the following to be among the major

causes of consumer complaints.

Product Service Causes:1) Poor product quality2) Maintenance difficulties3) Inadequate or poor repair work4) Delays in delivery of goods or services5) Failure to fulfill product or service warranties6) Incompetent or discourteous employees

Accounting Causes:

1) Billing errors2) Failure to provide timely refunds and adjustments, as promised

Sales Practice Causes:

1) Deceptive or inaccurate advertising, advertised are not available or are in limitedsupply.

2) Misleading or false representations by sales staff.


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Underlying Causes:

1) A wide range of product choices coupled with a lack of information on which to basepurchase decisions

2) Advanced technology --- complicated product design3) Inadequate, or complicated product instructions

The foundation of customer goodwill is the existence, promotion, and practice of a

sound customer relations policy. Such a policy is a formal promise to customers

representing commitment to their satisfaction. A customer should not be forced to run

from department to department, or individual to individual to get satisfaction. The policy

should spell out specifically how, when, where, and who handles complaints or questions.

One person within the company should have ultimate authority and responsibility

for customer relations. In a small firm, it may be the owner, while in a large organization

it may be customer affairs executive. It is important that the person designated be readily

available, and authorized to act on behalf of the company in all customer relations

matters. The organization may want to consider incorporating a commitment to a third

party dispute resolution mechanism into customer relations policy. Even if organization

follows and carries out a sound customer relations policy, there still will be some

complaints that are difficult to settle, and a few customers whom the company cannot

seem to satisfy.

Alternatively, we may consider offering resolution through a third party

mechanism on a case-by-case basis. An independent and neutral third party will act as a

mediator, helping organization and customers communicate to reach an understanding.

In the event that an agreement is not reached, organization should be prepared to offer

arbitration. Arbitration is a process where a neutral person listens to both sides and

makes a final decision based on fairness and equity.


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Complaint Handling Procedures:

Complaint handling system, which is structured from customer relations policy,

must operate simply, effectively, and quickly. Speed is essential in responding to

customer dissatisfaction. Customer should be assured that organization care and thatprompt remedial action will be taken to resolve any reasonable problem. A sound

complaint handling system should include the following essential procedures:

y Screening And Logging -- There should be a formal procedure for recording the date acomplaint is called for attention, along with a record of pertinent information. For

example, the type of product or service; manufacturer/brand name; model

name/number; date of purchase/contract; warranty expiration date; salesperson; cost

of product/service; date problem occurred; and a description of the problem should be

listed. This will allow organization to exercise control, and assure proper follow-

through.

y Investigating -- customer's explanation of a problem can provide much information.Nevertheless, to assure we have all the information needed for a thorough review of

the facts involved, by:

y Researching in-house records on the customer;y Requesting receipts, or other records;y Inspecting the product, or service performed; andy Following-up with the customer for any necessary additional information.y Acknowledging -- When organization cannot resolve an issue immediately, it is

important to let customer know that the matter is receiving attention. Prompt

acknowledgment will set customer at ease, demonstrate that organization care, and

begin the process of preserving goodwill. Whenever possible, tell customer how long

it will take to complete action on the complaint. If there is further delay, be sure to

advice customer why and when organization expects to have an answer.


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y Formulating A Solution -- solution must be consistent with established customerrelations policy and should take into account a number of important criteria.

organization should consider:

yContractual and/or warranty obligations;

y The customer's expectations;y expectations of the customer;y The cost/benefit of alternative solutions;y The probability and cost of customer seeking redress in some other way;y The comprehensiveness and fairness of solution;y ability to perform the solution; andy What to do if the customer rejects solution.y Responding -- The response should be clear and appropriate. The customer must

understand the response, and the response must address the issues raised in the

customer's original complaint.

We should avoid "stock" language and form letters when an individual response is

needed, and refrains from using excessive technical jargon. An explanation of decision

may preserve the goodwill of customer, even if the decision itself is adverse.

y Following-Up -- Contact customer following response to verify whether or not thematter has been resolved satisfactorily.

If customer is unhappy with response, organization should refer the matter to a third

party dispute resolution mechanism for assistance.

If we intend to seek the assistance of a third party, be sure to give the customer a name

and telephone number of the person, or office to be contacted.

The follow-up step is critical to ensure the effectiveness of system. While organization

may never satisfy everyone, this contact will provide direct feedback, and can be

extremely valuable in making customer relations the best possible.


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Management should monitor complaint-handling procedures to ensure that complaints

are being handled properly, fairly, and promptly. Analyze complaints as a basis for

reviewing customer relations policies and operating procedures, and for evaluating

product or service quality.

Types/Variations of CRM

There are several different approaches to CRM, with different software packagesfocusing on different aspects. In general, Campaign Management and Sales ForceAutomation form the core of the system (with SFA being the most popular).

Operational CRM

Operational CRM provides support to "front office" business processes, e.g. to sales,marketing and service staff. Interactions with customers are generally stored incustomers' contact histories, and staff can retrieve customer information as necessary.

The contact history provides staff members with immediate access to importantinformation on the customer (products owned, prior support calls etc.), eliminating theneed to individually obtain this information directly from the customer.

Operational CRM processes customer data for a variety of purposes:

'Managing Campaigns'Enterprise Marketing AutomationSales Force AutomationSales Management System

Sales Force Automation (SFA)

Sales Force Automation automates sales force-related activities such as:

Scheduling sales calls or mailingsTracking responsesGenerating reports


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AnalyticalCRM

Analytical CRM analyzes customer data for a variety of purposes:

y Designing and executing targeted marketing campaignsy Designing and executing campaigns, e.g. customer acquisition, cross-selling, up-

selling

Analyzing customer behavior in order to make decisions relating to products and services(e.g. pricing, product development)

Management information system (e.g. financial forecasting and customer profitabilityanalysis)

Analytical CRM generally makes heavy use of data mining.

Sales Intelligence CRM:

Sales Intelligence CRM is similar to Analytical CRM, but is intended as a more directsales tool. Features include alerts sent to sales staff regarding:

Cross-selling/Up-selling/Switch-selling opportunitiesCustomer driftSales performanceCustomer trendsCustomer margins

Campaign Management:

Campaign management combines elements of Operational and Analytical CRM.Campaign management functions include:

y Target groups formed from the client base according to selected criteriay Sending campaign-related material (e.g. on special offers) to selected recipients using

various channels (e.g. e-mail, telephone, post)y Tracking, storing, and analyzing campaign statistics, including tracking responses and

analyzing trends

Collaborative CRM

Collaborative CRM covers aspects of a company's dealings with customers that arehandled by various departments within a company, such as sales, technical supportand marketing. Staff members from different departments can share information


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collected when interacting with customers. For example, feedback received bycustomer support agents can provide other staff members with information on theservices and features requested by customers. Collaborative CRM's ultimate goal is touse information collected by all departments to improve the quality ofServices provided by the company.

Geographic CRM

Geographic CRM (GCRM) combines geographic information system and traditionalCRM. Geographic data can be analyzed to provide a snapshot of potential customers ina region or to plan routes for customer visits.

Strategy

Several commercial CRM software packages are available, and they vary in their approachto CRM. However, as mentioned above, CRM is not just a technology but rather acomprehensive, customer-centric approach to an organization's philosophy of dealingwith its customers. This includes policies and processes, front-of-house customer service,employee training, marketing, systems and information management. Hence, it isimportant that any CRM implementation considerations stretch beyond technologytoward the broader organizational requirements.

The objectives of a CRM strategy must consider a companys specific situation and itscustomers' needs and expectations. Information gained through CRM initiatives can

support the development of marketing strategy by developing the organization'sknowledge in areas such as identifying customer segments, improving customerretention, improving product offerings (by better understanding

Customer needs), and by identifying the organization's most profitable customers.[3]

CRM strategies can vary in size, complexity, and scope. Some companies consider a CRMstrategy only to focus on the management of a team of salespeople. However, other CRMstrategies can cover customer interaction across the entire organization. Manycommercial CRM software packages provide features that serve the sales, marketing,event management, project management, and finance industries.

Implementation Issues

While there are numerous reports of "failed" implementations of various types of CRMprojects,

these are often the result of unrealistically high expectations and exaggeratedclaims by CRM vendors.


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Many of these "failures" are also related to data quality and availability. Data cleaning isa major issue. If a company's CRM strategy is to track life-cycle revenues, costs,margins, and interactions between individual customers, this must be reflected in allbusiness processes. Data must be extracted from multiple sources (e.g.,departmental/divisional databases such as sales, manufacturing, supply chain, logistics,

finance, service etc.), which requires an integrated, comprehensive system in placewith well-defined structures and high data quality. Data from other systems can betransferred to CRM systems using appropriate interfaces.

Because of the company-wide size and scope of many CRM implementations,significant pre-planning is essential for smooth roll-out. This pre-planning involves atechnical evaluation of the data available and the technology employed in existingsystems. This evaluation is critical to determine the level of effort needed to integratethis data.

Equally critical is the human aspect of the implementation. A successful implementationrequires an understanding of the expectations and needs of the stakeholders involved.An executive sponsor should also be obtained to provide high-level managementrepresentation of the CRM project.

An effective tool for identifying technical and human factors before beginning a CRMproject is a pre-implementation checklist.

A checklist can help ensure any potential

problems are identified early in the process.

Privacy and data security

One of the primary functions of CRM software is to collect information about customers.When gathering data as part of a CRM solution, a company must consider the desire forcustomer privacy and data security, as well as the legislative and cultural norms. Somecustomers prefer assurances that their data will not be shared with third parties withouttheir prior consent and that safeguards are in place to prevent illegal access by thirdparties.

BENEFITS OF CRM

Customers are Profitable over a period of time:

Studies by the US-based Bain and Company have shown that a customer becomes moreprofitable with time because the initial acquisition cost exceeds gross margin while theretention costs are much lower. When an organization retains the customer, it gets alarger share of the customers wallet at a higher profit-one percent increase in sale toexisting customer increase profits by 17 per cent while the same amount of sale to new


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customer increased profit by only 3 per cent. This huge different is explained by the factthat for most companies the cost of acquiring the customer is very high. It costs six toeight times more to sell to a new customer than to sell to an existing one. The same studyalso highlighted that a company can boost its profit up 85 per cent by increasing itsannual customer retention by only 5 per cent.

Similarly, studies have shown that the probability of selling a product to a prospect is 15

per cent while it is 50 per cent to an existing customer. Thus, the time, the effort and the

costs of selling are much lower for an existing customer.

Customer probability is skewed:

An analysis of the revenue and profit contribution of customer base of banks in the US,

Europe and Australia showed the following:

y The top 20 per cent of the customers contribute to 150 per cent of the profits whilethe bottom 20 per cent drain 50 per cent of the profits and the rest 60 per cent just

break even.

Experiences of Indian organizations are on similar lines. In a large public sector Banks;

the top 23 per cent of the customers contribute to 77 per cent of the revenues. Similarly,

the top 27 per cent customers of a leading cellular phone service provider contribute to 75

per cent of the revenues.

The implication of such a skew in customer profitability and revenue contribution are

startling for organizations, which use to conventionally treat all customers are equal.

Competitors have to just lure these top customers and the organization would face

serious problems. It also highlights the fact that one has to adopt different strategies for

different customer groups:

y Programmers have to be developed to retain and build stronger bonds with the topgold standard customers so that they do not get poached

y Activity-Based Costing analysis has to be done with the middle group ofpotentials so that the cost of serving this customers are reduced. In addition,


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cross-selling and up selling should be done to increase the profitability of these

customers.

y An analysis of the bottom growth has to be done to identify those customers whocan be shifted to the potential group. For the remaining, the cost of service has to

reduce by encouraging them to use lower cost channels. In extreme cases, some of

these customers will be encouraged to defect to competitors. Outsourcing of loss

making customers to specialized low overhead agencies is an emerging trend.

Marketing Benefits of CRM

CRM will gradually reduce organizations dependence on periodic surveys to gather data.

Collection of data related to buying and consumption behavior will be an ongoing

process. In many cases, the transaction data is automatically collected sometimes real

time as in the e-commerce transaction. This rich repository of customer information and

knowledge updated through regular interactions and actual customer transactions and

purchase behavior will help marketers to develop and market customer centric products

successfully.

Customized promotions-based customer preferences and purchase patterns will

substantially reduce the wasteful expenditure of mass communication and even direct

mailing. As a customized promotion are more focused and are based on a deeper insight

of existing customers, they have a greater chance of conversion to sales.

ServiceBenefits of CRM

Research findings conducted across industries as a part of a Technical Assistance

Research Project (TARP) indicate that:

y 95 per cent of the customers do not bother to complain, thejust take their business elsewhere.

y Most loyal customers take time to complain. This enables the product / serviceprovider to improve and ensure that such mistakes do not recur.


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y A typical dissatisfied customer will tell an average of 14 others about a badexperience while she will tell only six about a satisfying experience with an

organization.

y 70 per cent of customers who complain will do business with a company again ifit quickly takes care of a service problem.

SUMMARY

Analytical CRM is a consistent suite of analytical applications that help the firm tomeasure, predict and optimize customer relationships. To address these business issues,

analytical CRM includes a sound analytical infrastructure that allows gathering all therelevant information about customer and organizing it consistently. The analyticalcapabilities allow a firm to identify new trends in the market and then to channel theinvestment in these market. They also help you gain further insights into customer needsand preferences.

Five Ss of managing customer data are: Strategy, Standard, System, Smart people &Statistics.

Customer data is critical to every business. Accurate customer information enables thefirms sales, service and marketing teams to target specific customer through an in-depth

understanding of customer. Effective data management provides a number of businessprocesses by eliminating duplication and wasted data collection & increased complianceand data security through standardization and centralization of data.A customer database is an organized collection of comprehensive information aboutindividual customer or prospects that is current, accessible, and actionable for suchmarketing purpose as lead generation, lead qualification, sale of a product or services, ormaintenance of customer relationships.Consumer privacy laws and regulations seek to protect any individual from loss of privacydue to failure or limitations of corporate customer privacy measures.

customer relationship management & it role

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