A Study on customer satisfaction in marketing management on v-mart mall

7/22/2019 A Study on customer satisfaction in marketing management on v-mart mall

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Varin Commercial Pvt. Ltd. (V-MART)

A PROJECT REPORT ON

CUSTOMETR RELATIONSHIP MANAGEMENT ATRETAIL OUTLET OF VARIN COMMERCIAL

PVT.LTD. (V-MART)

In Partial fulfillment ofMBA ProgramProject Guide:

Prof. Palak Kanabar

Submitted To:

Submitted On:

Submitted By:Dhanesha Mehul R.Dadhania Nishant D.

S. K. Patel Institute Of Management & Computer Studies,Gandhinagar.

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Acknowledgement

The Beginning of the act decides its future success and it is imperative that the firststep of the act is taken in the right direction because these footsteps go on to set a

direction for the rest to walk on and explore the enormous opportunities that lie within.Any successful venture also has its unsaid gratitude towards its direct and indirectcontributes.

At the out set we would like to thank our institute and our director prof. S. ChinnamReddy for having provided us with an opportunity to carry out a project to of thismagnitude that helped a satisfied our curiosity as far as our area of interest wasconcerned.We are also thank full to Gujarat University for giving us the opportunity to undertake aGrand project in our desired are and including it as a part of our curriculum.

We wish t express our heart flat thanks to prof. Sonu Gupta and all other facultymembers as well who have put in grate efforts and gave us guidance for the successfulcompletion of the project. They have been enthusiastically involved in every aspect ofour project. we are highly indebted to them for all the knowledge, guidance andmotivation that they have provided to us trough out our project.

We would also like to be a thank full of Mr. Hament Agrawal, Director of V-Mart, andMr. Vikas Bheel, store manager to provide us this opportunity which help us in out

project. And we are also thankful of the customer who had visited the store and had

provided us help in filling up questioner.

Last but not the least, we also thankful to our parent sand friends who through theirselfless love where always ready to fulfill our reasonable and unreasonable demands.

Mehul Dhanesha,Nishant Dadhania.

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Declaration

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TABLE OF CONTENT

Acknowledgement

DeclarationEXECUTIVE SUMMERYCOMPANY PROFILE

ABOUT RETAILING

1. What is Retail?2. What is Retailing?

Retail Marketing Mix.3. RETAILING IN INDIA

RETAILSALES

MAJORRETAILPLAYERS HURDLESFACEDBYTHERETAILSECTOR

4. Why Study Retailing?5.Test and Learn Retailing6. The industry Structure

Classification of Retailing

7. What drives the industry?Porters Five Forces model:

About CRMIntroduction to CRMEight myths of CRMIdeas about the CRMWhat is CRM?Advantage of CRMDifference between relationship management and CRMSome important topics

1) Find out what customer wants, firsti) Model of customer driven improvement

2) Creating stack holders can matter more than the technology itself3) Customer is the king4) The demand for loyalty marketing

Core CRM development rolesResearch Methodology

- Objective- Methods of Data Collection- Sample Design- Data Analysis

Findings

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Suggestions and RecommendationsLimitationsAnnexureBibliography

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EXECUTIVE SUMMERY

Relationship is the basic funda on which each and every transaction is done. Allthe transactions are based on it weather there is a relationship of father son,husband wife, buyer seller, employer employee etc. Some short of relationship isthere.In todays fast changing and dynamic world every companies are moreconcentrating on the relationship management with there customers. So as toincrease their satisfaction and also to maintain it at a desirable level it is also usefulin retaining customer for life time.Today we have retail industry as a growing child in the India and world as a large.

It works as a bridge between manufacture to the final customer. From the viewpoint of product life cycle we can say that retailing is some where around betweenthe growth and maturity stage. In this report our study is totally based on organizedretailing which covers shopping mall, super markets, chain stores and etc. Fromthe figure point of view retail industry is growing by 5% every year.As far as India is concern the tradition of Indian people is not to purchase goods in

bulk at a time but they prefer to purchase as and when required in a very smallnumber that means retail purchase. So we can say that retailing is suit to the Indianculture and mentality of people.

We can take advantage by combining the above two points to delighting thecustomers which suggest our project title CRM at retail outlet.In our survey we have covered Ahmedabads law gardens store for our sample

point and we had covered 240 customers as sample for our survey.During our survey, at the time of filling up the questionnaire and face to faceinterview with customer and at the time of analysis we have tried to reach atmaximum point at we can reach though we have certain limitations. We havediscovered some findings, suggestions, recommendation for the benefit of varincommercial Pvt. Ltd. (V-MART) to retain the customer and also to provide themopportunities to increase their satisfaction level.The various part of report covers data about retailing, CRM, company profile,research methodology, finding, suggestions and recommendation, and limitation

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COMPANY PROFILE

A company named varin commercial Pvt. Ltd. Was started on oct-2002 at new delhi bytwo person Mr. lalit Agrawal and Mr. Hemant Agrawal they both are the director of the

company. Head office od this company is situated at new-delhi. At present in delhi theyhave three stores which as follows

H.O.:

Mayapuri Industrial Area,Gate No. 1, Phase-II,

New Delhi-64.

Show Rooms:

Bunglow road, Kamla Nagar, New Delhi.

Lajpat Nagar, New Delhi.Pitum Pura, New Delhi.Total handling is done by Delhi based office. They had started with only one show roomat Delhi and by the passing of time they where thinking of expansion and had establisheda show-room at Ahmedabad that is in Gujarat on 5 th oct. 2003 with the store name of V-MART atBroadway business centre,Law garden corner,Ahmedabad-Gujarat.

The Handling of this region was taken care by Mr. Hament Agrawal. During very shortspan of time they had started a new show room in Ahmedabad itself on 25 th dec. 2003.atFun-Republic,Sarkhej Gandhinagar Highway,Nr. ISCON temple,Ahmedabad.

Recently they had also started one new show room at Rajkot In saurastra in collaborationwith Adani B2C India Limited on 28th Feb.The management hierarchy followed by this company is as follows

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The Director

Manager

Floor In charge

Cashier

Staff-Member

For the time period from Oct 2002 to as on today they had touch the turn over near about12-15 Cr. And had open five new branches. It is a big achievement isnt it. The

purchasing system is totally centralized from Delhi and they are also purchasing locallyto fulfill the local requirement as per the region. The vision of this is to reach at eachstate by opening atleast one outlet of V-MART. They mention in their future plan is tofollow their slogan SABSE SASTA SABSE ACHHA and also to satisfy their customerwith high level of customer delight.

In store there is a bar coding system is applicable to each and every item. Theyhave computerized system for maintaining their inventory. They are having two systemfor maintaining their accountings.

Gini SystemTally

So by the way they have totally six outlets which areThree at Delhi

Two at AhmedabadOne at RajkotIn near future, they are planning to open their outlets again in Gujarat Region at Barodaand Surat.

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ABOUT RETAILING

1. What is Retail?

The word retail is, in fact, derived from the French word RETAILER, whichmeans to cut off a piece or break bulk. A retailer may be defined as a dealer or traderwho sells goods in small quantities or one who repeats or relates. Retailing can hence,

be considered as the last stage in the movement of goods and or services to theconsumers. put simply, any firm that sells products to the final consumer is performingthe function of retailing .it thus consists of all the activities involved in the marketing ofgoods and services directly to the consumers, for their personal, family or household use.

The past century has been witness to many changes occurring in our everyday

world. Industrial and technological growth has made a significant impact on our lives asconsumers. One such industry, which has made a phenomenal impact on our daily lives,is retail. This industry touches our lives as end consumers, by providing us with the

products or services that we need.

Almost everything we use in our daily lives including the feed we eat, the clotheswe wear, and the things we need for our homes or for ourselves, are bought from retailstores. Goods are manufactured all over the world but are ultimately sold to us throughthese retail stores.

India has already proven its mettle as superpower in the arena of informationtechnology. The retail industry offers to bloom to the same level if conductiveenvironment and support is provided it. Indias one billion populations make the countrythe second largest in the world in terms of population which is the very basis forsuccessful organized retailing. We should take heart from the fact that most of theworlds successful retail stories in the developed as well as developing countries haveshaped up in small towns and villages.

Retailing is a green pasture not just for individuals or companies but also comeswith job opportunities in all aspects of the operations. Professionalisms in retail while

still in its infancy does show some promising future for those keen to make a career inthis fascinating world.

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2.What is Retailing?

Retailing consists of those business activities, which are involved, in

the sale of goods or services to consumers for their personal, family or

household use. It is the final stage in the distribution process for good and servicesfrom manufacturers to final consumers.

Typical Distribution chainSource: - Retail ManagementBy: - Ron Hasty, James Reardon.

Retailing involves- Interpreting needs of the consumers- Developing good assortments of merchandise

- Presenting them in an effective manner so that consumer find it easy and attractiveto buy.

Retailing differs from marketing in the sense that refers to only those activities, whichare related to marketing goods and/or services to final consumers for personal, familyor household use.

Whereas marketing , according to American Marketing Association, refers to theprocess of planning and executing the conception, pricing, promotion and distributionof ideas, goods and services to create exchanges that satisfy individual and

organizational objectives.

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Organizational buyers purchase in order to perform a task or sell a producteffectively, efficiently and at a profit. They could be industrial buyers or intermediary

buyers. Industrial buyers are those who purchase good and services to be used in or toaid manufacturing process. Intermediary buyers atr include street vendors, localsupermarkets, department stores, restaurants, hotels, barbershops, airline and every

bike and car showrooms. Still retailing may or may not involve the use of a physicallocation. Mail and telephone orders, direct selling to consumers in their homes andoffices and vending machines all fall within the purview of retailing. In addition toit , retailing may or may not involve a retailer. Manufacturers, importers, non-profitfirms and wholesalers are acting as retailers when they sell goods and/or services tofinal consumers.

Whatever the form of retailing, a retail marketing strategy defines the execution of themarketing process and facilitation of customer satisfaction. This retail marketingstrategy involves selecting a retail target market (i.e. the carefully/exactly identifiedgroup of final consumer that a retailer sees to satisfy) and then implementing thecorresponding retail marketing mix (i.e. a combination of product, price, promotionand distribution strategies that will satisfy the retail target market). The table depictsconsumer service as the crux of the whole activity.

Retail Marketing Mix.

Product Branding

PackagingProduct DesignAssortmentServices

Price

Cost of GoodsBusinessExpensesGross MarginProfit

PromotionAdvertisingPersonal SellingSales Promotion

Public RelationVisual Merchandising

DistributionLogisticsStore LocationSite Evaluation

TransportationStorage of Goods

Source: - Retail Management By: - Ron Hasty, James Reardon.

The implementation of such a retail strategy mix benefits consumer and producers and

yields economic utility. The same has been explained in detail in Annexure-1.

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3. RETAILING IN INDIA

RETAIL SALES

The retail market in India is estimated to be worth around USD 180 billion. It isIndias largest source of employment in the country after agriculture, employing morethan 20 million people. The retail industry in India is largely unorganized with small andindividually owned businesses accounting for more than 98% of total retail sales.

There are nearly 12 million retail outlets in India, with a majority of them locatedin rural areas. Though India has one of the highest numbers of retail outlets as a

percentage of population in the world, the retail space at 2 sq .ft per capita is amongst the

lowest. There has been a growing shift towards organized retailing in India in recentyears.

At present, organized retail in India is estimated to be 2% of the total retail sales.Experts have predicted high growth in organized retailing and some have projectedorganized retail to grow by 30% until 2005.

Recent years have seen the entry of several new players in the retail industry;chains such as Westside, Shoppers Stop, Foodworld, Crossroads, Wills Lifestyle andLifestyle have been establishing themselves in the retail market. In addition several of the

existing players such as Nilgiris and Subhiksha, have been focusing on expanding theiroperations. With per capita incomes rising and disposable income rising too, retailindustry is likely to witness high growth. Established retail brands, due to their image ofconsistent quality and service, may be the most from these trends.

MAJOR RETAIL PLAYERS

Retailing in India is still evolving and the key players are working with newerformats in an attempt to grow at a fast rate. The table lists some of the important retailersin India at the present time:

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13

Sl.

no

Compan

y

name

Group

name

Format No.

of

stores

Total

sq.ft.

2002 -03

Sales(INR

Millions)

Future

plans

1 MarginFreeMarkets

IndependentRetailer

Discountgrocerychain

300 360,000 5,400 Plan to openhuge marginfree hypermarkets(50,000sq.ft.each inErnakulam,Thiruvanathpuramand

Kozhikode).

2 Nilgiris Banga-lore

basedNilgirisgroup

Foodsuper-market

30 89,000 2,300 Plan to open30 new outlets

3 FoodWorld

RPGGroup

(51%)andDairyFarmIntl.(49%)

Foodsupermar

ket

90 262,000 Plan to open14more stores

this financialyear

4 ShoppersStop

KRahejaGroup-RealEstate

Department Store

13 475,000 3,030 4 more storesby the end of2003


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14

Sl.

no

Company

name

Group

name

Format No.

of

stores

Total

sq.ft.

2002 -03

Sales(INR

Millions)

Future

plans

6 Subhiksha IndependentRetailer

Discountgrocerychain

143 192,000 Expand inKarnataka,Maharashtra,Gujaratand AndhraPradesh

7 Westside TATAsTRENT

Ownbrandapparel

stores

11 217,000 1,200 20departmentalstores by

2004

8 Big Bazaar PantaloonRetail

Hypermarket

5 100,000 1,500 2 more storesby the end ofthe 20038 Giant RPGGroupHypermarket(sells bothretail and

trade)1 50,0008 stores in3 years. All50,000 sq. ft.each


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9 Crossword Shoppers Stop51%;

ICICIVentures49%

BookRetailer

12 60,000 230 Open 25-30new storesacross 7

citiesby 2004.Aninvestmentof1,200,000rupees perstore will

bemade. The

stores willbe between300-600 sq.ft.each.

10 Globus R RahejaGroup- RealEstate

Ownbrandstore

5 110,000

11 Wills

Lifestyle

ITC 100

12 Landmark SpecialtyStore

4 75,000 Open shopsinBangalore

13 Lifestyle DepartmentStore

6 225,000 1,350 Plan toopen2 newstores- both inMumbai.

14 Giant RPGGroup

Hypermarket(sells

bothretail andtrade)

1 50,000 8 stores in3 years. All50,000 sq.ft.each


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The trend of large corporate groups entering the organized retail sector - lookingfor new business opportunities continues. Groups such as ITC, RPG, Tatas whichentered the organized retail sector are expanding their operations in the country.

Most of the players in organized retailing are in the initial stages of their businessand expansion plans. Accordingly, most are not profitable businesses at the present time.

Pantaloon and Westside (Trent) are listed on the capital markets and have shownnet profitable in the last year. Most other players are hoping to break even and startmaking money only in the coming years.

The presence of multinational retailers is still an exception with Dairy Farm,Marks & Spencer, already on the market. Metro is expected to set up operations by theend of the year.

Hurdles faced by the Retail Sector

The Indian Government is in the process of formulating a strategy to nurture andsupport the retail sector. Due to this, retailing in India is largely unorganized andfragmented. Lack of FDI (Foreign Direct Investment) is another reason why it remains sotraditional. Policy makers continue to put barriers for the entry of foreign enterprises dueinto this sector. But the last decade has witnessed significant movements towards modernretailing, especially in the consumer durable products segment. Products, marketed on

lifestyle platforms, experienced a dearth of appropriate retail outlets, which could fittheir brand positioning. As a result, many brands began to set up their own retail outletsinitially, thereafter expanding their modern retail network through franchisearrangements.

In contrast, the grocery segment has been slow to take to modern retail. Thegrocery sector in India is estimated to be USD 90 billion. The organized retailing in thissegment is still in its nascent stage and needs to develop in terms of its scale and share inthe market, margins earned, labour productivity, and economic propositions likedistinctive sourcing, development of private labels, technology, etc.

But there are some modern retailing formats in grocery that have emerged and arecatching on with the increasing number of nuclear households in urban India, where bothhusband and wife may be working out of home or traveling.

A large number of retail outlets in India still remain family owned. They offerlimited Products and finance facilities. Banks are hesitant to provide these retail sectorunits with finance facilities due to their small size which is non viable for the banks. The

supermarket format in India faces the difficulty of obtaining licenses, customer inhibitionand the lack of suitable personnel.

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But organized retailing is likely to emerge in other categories like appliances, ITproducts and others. This kind of progress will depend largely on real estate, prices,supply chain bottlenecks and sourcing.

Emerging Channel Conflicts

The relationship between manufacturers, wholesalers, middlemen and retailersneed to improve so that business practices are smooth and stock outs in India becomeuncommon. In the grocery sector, for example, there are still no direct transactions

between major owners and large retail chains-with local suppliers still being routedthrough the companys distributors. Direct interaction through intermediation of thedistributor could lead to conflicts for the larger part of the business of brand owners.However, with recent changes and growth in the retail segment, the supply chainrelationship is also likely to undergo several changes in future years.Brand Competition

The Indian urban consumer is quite aware of international trends and mostconsumers are very value-conscious. Indian retailers need to be extremely efficient intheir operations and design, as the value-conscious Indian consumers will not pay morefora superior shopping experience. What this means for international brands is that theyneed to clearly offer contemporary designs and provide value to the Indian consumer -even if this means adapting their international designs to suit local conditions.

With the advent of global competition in the retail sector, domestic companies willhave to learn to keep up with the trends of the market or face the consequences ofshutting down. But consumers have benefited from this competition as it provides themwith a larger variety of choices and a better standard of living.

Franchising Development

Transnational retail giants have opened up stores in India through franchisearrangements with Indian promoters. Marks and Spencers have recently opened its storein New Delhi and Mumbai through the licensee route.

Human resource

Big retails shops do not confirm their target segment for employees to undergraduates. Shoppers stop broke the myth of MBAs not waiting to go into the retailingcarrier. Cross road s and spinier also higher MBAs to manage their changes. Howeverthere still exists agape between the supply and demand of professionals. Mr. Goneka,chairman RPG Gropes, hopes that one of the greatest challenges facing modern retailingin India is the availability of the trained personnel. In order too address to problem RPGGroup has setup a national institute in Chennai, which offers a variety of courses in retailmanagement for front line, supervisory and managerial post.

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Retailing the human resource is also a major challenge for these big retailers. Thebigwigs like cross roads offer high compensation and create a cohesive environment thatmakes an employee prouder to part of such big retail chains.

Space and infrastructure

To establish a retail shop the real estate and the infrastructure are very vital. Theexpenditure and availability on both the account do hinder the growth of the retail chain.The land calling restriction and other state restriction on land use have prevented thegrowth of efficient retailing in the cities. An average investment of about Rs. 5 Cr. isrequired to establish a mall and that explains the rush of big companies in to this

business. Small and individual retailers find it difficult to pour in that much ofinvestment. In addition to the initial investment, to combat e-tailing, expenditure has to

be incurred on technological side. This makes the retail project less attractive for theindividual players.

Consumer mind set towards discount stores

In India the concept of discount store like wall-mart, at which genuine, defect freeinternational brands are available at 50% discount, is yet to catch on. Still, the majorsections of consumer are conservative and choosy and prefer to go to a non retail shopthen opt for a discount store. Very few discount stores like SM2, Mumbai are at presentoperational. If research is confine to major cities. Braking the conventional mind set ofthe Indian consumer that discount stores do not sell inferior goods will take some time.

Rural Market how to penetrate?

Penetration in to the rural market is what big retailers have to concentrate on forgrowth. Attracting rural market will be different from that of the urban market. Forexample detergent cakes are preferred to powder and coconut oil in bottle to sachets inthe rural areas. the rural consumer are different from the urban consumer as they aremore price sensitive and their quantity of consumption would be less as their share ofwallet for shopping alone with entertainment is delineated. Food ad agriculture in foodsdominated the rural consumers in the rural are not urbanites without money. he has adistinct identity and value system. One more challenge in rural market is that shoppinghabits vary according to seasons. During harvest time, the spending of rural consumerincreases compares to other times. However, penetrations of television, increasing

literacy level, mobility between rural and urban are telecommunication (STD service) hasincreased their awareness toward branded products and entertainment. Customize retailshops would be big success in the rural are too if right strategies are adopted.

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4. Why Study Retailing?

So far, it has been seen that retailing is a vital and involuntary action performed bythe living structure of the market economy (as opposed to the case in a barter economy).In a barter economy, barter transactions take place between consumers themselves.Consumers interact directly whereas in a centralized market economy, transactionstaking place at a larger scale (both in terms of volume and variety) necessitate aninterface between the manufacturers and industry is extant as an interface between

production and consumption, from times immemorial, benefiting us consumers orproducers in the various ways discussed above.

Our study concentrates on organized retailing, which consists of shopping malls,super markets, chain stores, and like. In the last few years a shift has occurred in India

from individual retail outlets owned separately and managed distinctively toprofessionally managed retailing. This is an industry, which has now started attractingbatter investments and talent. Things primarily because of the rising expectations ofconsumers and the corporate responding quickly.

Today, the industry (in India) seems to be functioning somewhere between theaccelerated development and maturity stages, with high growth rates, intense competitionand moderate profitability. For reference, the table, depicting the various stages of theRetail Life Cycle is given in annexure 6

In order to get an idea of the magnitude of the issue we are dealing with, we look at theinternational scenario. During 1992, the largest 100 retailers in the world generated over$1.1 trillion in revenues.

Retailing is the second largest industry in the world, one of the largest employer of theworld and an index of economic growth. In India there are about 5 million retail outletsvarying in sizes and nomenclatures. India has the highest number of retail outlets percapita in the world but has the lowest retail space per capita in the world (2 ft / person).Out of these five million outlets 96% are smaller than 500 sq. ft. in area. There are about3 million outlets in Indias 3700 designated towns and more than 6, 00,000 villages.

About 350 million people live within one minute walk of these retail shops.According to retail census conducted by market researcher ORG-MARG, Rs. 4, 79,568Cr. worth of products where sold through these 5 million retail outlets.

Manufacturer owned and retail chain stores are springing up in urban areas to marketconsumer goods to the middle class in a much similar style as malls around the globe. At

present about 8% of the Asian population is employed in the retailing industries asagainst 20 % in USA. As India moves towards the service oriented economy, a rise inthis percentage is expected. The number of the retail outlets is growing at about 8.5%annually in the urban areas and in towns with population between 1, 00,000 to 1 million;

the growth rate is about 4.5%.

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According to Kurt salmon Association, a global management consulting firm, organizedretailing seems all set to power ahead from Rs. 5000 Cr. currently to about Rs.30,000 Cr.in next five years.

In India, organized retailing is catching up fast. Yet retailing is to be recognized as full-fledged industry in the India. Organization retailing is bound to grow tremendously

provided the marketing strategies are adopted.

Even though the big retail chain are concentrating on the upper segment and sellingproducts at higher prices like Crossroads, Shoppers Stop, retail stores are sprouting thatcater to the needs of the middle class. With a huge middle class population, the retailerslike RPGs Foods world are tapping this customers are in a dilemma as to pick whichone! The organized retail chains display all the products and the most attractive productcatches number of products of similar quality hitting the market. Differentiation plays thelead role. According to Mr. Simon Bell of A. T. Keearney, there is a close relation

between the growth of brands and the growth of the organized retailing. Companiesselling branded products prefer to have big differentiated from unbranded products heopines. India is going through that phase in retailing, which the US experienced in 80sand early 90s. From product based shopping, the importance has shifted to experience

based shopping.

The customers of the 21st century would expect to pick his/her own products around anarray of choice rather than asking the local kiranawallas to deliver a list of monthlygroceries. Thus the way of distribution of products has gained importance in the past

decade.

5.Test and Learn Retailing:

Retailers are using the scientific method to test new business models and createsustainable competitive advantage.Integrated Solutions for Retailers, January 2005

Written by Jim Manzi, Applied Predictive Technologies:

All good retailers experiment. Whether guided by management intuition or moreformalized tests, shopkeepers have experimented throughout the ages. There is nothingnovel about it. What is new, however, is the availability and sophistication of informationtechnology that has enabled large retailers to make the experimentation process morerigorous and systematic. Formal experimentation in the store network, often dubbed testand learn, was first pioneered by very large ($5 billion to $10 billion+) retailers. As the

power of this approach has been confirmed by experience, it has become widespreadamong successful multibillion dollar retailers. Leading test and learn retailers spanvirtually all retail segments, and include Wal-Mart, Staples, The Limited, Starbucks, and

others.

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What Is Test and Learn?

Test and learn starts with the premise that any business idea is a hypothesis that can betested and value-engineered before it is implemented throughout the entire network.Whether by conducting planned tests or observing natural experiments, a test and learncapability identifies management actions that are most successful in improving

performance, evaluates their impact, and helps executives make better, more accuratedecisions about how or whether to move forward with new concepts. Test and learn has

been demonstrated to work for virtually any enterprise with about 100 physical locationsthat sell goods or services to consumers. Test and learn retailers apply this methodologyto decisions spanning marketing (e.g. media advertising, in-store visual merchandising,

promotions), operations (e.g. sales associate training programs, operating hours, laborloadings), and capital investments (e.g. store remodels, "store-of-the-future" programs,in-store technology rollouts). At any given time, test and learn retailers are testing dozensof such initiatives across their store networks. These retailers are able to reliably,consistently, and economically answer three questions about any tested store program

before rollout:

What average impact will the program have on key performance indicators ifexecuted across the network?

Will the program have a larger impact on some locations than others?

What is the relative impact of each major component of the program?

A Sustainable Competitive Advantage

Test and learn has become a strategic capability for retailers for three reasons.First, it has driven identifiable incremental profits of tens of millions of dollars per yearto retailers as they have institutionalized the capability throughout the enterprise. Thisallows the retail organization to attract more capital as its overall capital productivityrises and also to invest the new capital more effectively, establishing a cycle of profitablegrowth. Second, unlike many retail innovations that are on immediate display tocompetitors, this capability is very hard to identify and copy -- even the results of thecapability in the form of targeted and segmented implementation of programs by location

are often misinterpreted or misunderstood by competitors. Third, constant testing of ideaswith real consumers creates a reality check that helps to prevent the consumer value

proposition of the retail brand from drifting away from evolving consumer tastes.

Fully implementing the business process, organizational, analytical technology, and datacomponents of a best practice test and learn capability may seem daunting, but it has beensuccessfully accomplished by many large retailers and is currently a source ofcompetitive advantage and substantial net profit improvement for these companies.

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6. The industry Structure:

Classification of Retailing

Retailing is not bound or restricted by product categories, any consumer productsmanufactured by a company can be retailed and available in the market can be retailedranging from food to books to toys etc

Entire retailing market in India can be divided into traditional retail stores and modernretail stores. While traditional retail stores form the unorganized segment of the marketmodern stores are part of organized sector. Organized retail market can be furthercategorized in four different ways:

Based On Form of Ownership

Based on the form of ownership, various types of retailers comprising the retailingindustry are described below:

An Unaffiliated or Independent

The retailer is one who owns and operates only one retail outlet. A family mostly owns itwith high dependence on the owner, thus affecting long run success and employeemorale. He is supposed to have a friendly personalized image and his offering reflects hisown tastes and preferences and to some extent those of his regular customers. Kiranashops are very good examples of such retailers.

A Chain retailer or Corporate

A chain retailer or corporate retail chain owns and operates multiple retail outlets (storeunits) under common ownership. Most chains have well defined management

philosophies, which tend to be solid overall strategies. Consistent strategies withreference to store hours, product assortment, prices, sales personal, promotion and other

policies must be maintained throughout all branches in order to project a particular imageof the chain. This calls for centralized decision making which in turn result in difficultiesfor individual units in adapting to local needs of the target markets. There also exist

associations of independent retailers, which are formed in order to compete moreeffectively with corporate chain stores. They enjoy the benefits of corporate chain whilestill maintaining status of individual owners. These associations could be formed withother retailers (known as co-operative chains), with sponsorship by a wholesaler (knowas voluntary chains) rather than by the retailer themselves or by franchise agreementssponsored by manufacturers or distributors (known as dealers) or by service firms(known as franchisees).

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A Franchise System

A franchise system results from contractual agreement between a franchiser and a retail

franchisee thus allowing the franchisee to conduct a given form of business under anestablished name as per a particular business format in return for an initial fee and a

percentage of monthly gross sales as royalty. It helps franchise to create national orinternational presence quickly and with lower investments (than required by thefranchiser alone for creating such a presence independently).

Moreover, franchisees, that are owners and not employees, have a greater incentive towork hard than the owners (or caretakers) of retail units in other forms of retail chain.Also to their advantage, they obtain SOPs and management skill from the franchise.Further, they have support from co-representative to spot and solve any problems.

To maintain the brand image, uniformity has to be maintained throughout the franchiseenetwork. So the franchisees have to meet some specified provisions of franchiseagreements. These, if not met, give the right to the franchise to avoid the individualfranchisee. It is for this reason that franchisees are seeking more and more independencefrom franchise rules and regulations.

A Leased Department (LD)

A Leased Department (LD) is a department in a retail store that is rented to an outside

party. If the existing store is well known, with a large number of steady customers, itbecomes easier for the LD to generate immediate sales. It operates in categories on thefringe of the store's major product lines and it must be taken care that it is not a parasiteand does not live off the traffic generated by other parts of the store. Thus goods orservices lines that it can offer may be restricted. Apart from this, various requirements areimposed to ensure overall consistency and coordination.

Vertical Marketing System (VMS)

Vertical Marketing System (VMS) comprises all the levels of business along a channel of

distribution. In an independent VMS, there are three levels of independently ownedbusinesses manufacturers, wholesalers and retailers. Such a system is most beneficial ifmanufacturers and/or retailers are small, intensive distribution is sought and customersare widely distributed.

In a partially integrated VMS, two independently owned businesses (most likely amanufacturer and retailer) along a channel perform all production and distributionfunctions without the aid of the third party i.e., wholesaler. This type of system is mostappropriate if manufacturers and/or retailers are large, selective or exclusive distributionis sought and existing wholesalers are too expensive or unavailable.

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Through a fully integrated VMS, a single firm performs all production and distributionfunctions without the aid of any other firm. A fully integrated VMS enables a firm tohave total control over its strategy, to have direct contact with final consumers, to havehigher retail markups without raising prices (by eliminating channel members), to be self-sufficient and not rely on others and to have exclusivity over the goods and servicesoffered.

Consumer Co-operatives

Consumer Co-operatives are retail firms owned by their respective customer members. Insuch cooperative arrangements, groups of consumers invest in the cooperative, receivestock certificates, elect officers, manage operations and share the profits or savings thataccrue. Consumer Cooperatives come into existence with the purpose (of someconsumers) of operating stores as well or better than traditional retailers, of gettingcontrol over prices, of saving money by substituting their own labor or of getting accessto healthful, environmentally safe plots, not available from traditional stores.

Based On Location, Target Market, Price, Offerings & Customer Services &

Competitors Challenges

There are several types of retailers whom we can divide based on location, target market,price, offerings, and customer services and competitors challenges.

The variety store

It contains a wide variety and sells a wide assortment in inexpensive and popularly pricedgoods and services. Neither they are departmental stores nor they carry full product lines.This type mainly focuses on middle and lower class niche markets and the location can

be a shopping center or an isolated store. Here the prices are average prices and thequality is below average and average. There is a wide range of offerings but customerservice is limited. These types of stores face a stiff competition from specialty stores anddiscounters. Examples could be Food World and the Trinetra supermarket chain.

The specialty store

It concentrates on selling one goods or service line. That is the location may be a businessdistrict, or shopping center. Concentrates on selective market segments with very narrowwidth, extensive depth, and average to good quality. Generally the prices are fixed atabove average. The offerings are like apparel and accessories, toys, furniture etc.Extensive sales force, knowledgeable sales personnel, good customer service policies arethe main assets of these stores. Competition will be determined according to the depth ofassortment and size of the store. Examples could be Walden and Odyssey at Hyderabad.

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The retail catalog showroom

It helps consumers select merchandise from catalogue and shop in a warehouse-style

setting. It is located at shopping center or isolated store. And the targeted group is middleand lower middle class. Maintains average to good quality goods, with competitive

prices. The offerings are electronics, house wares, gifts and watches. Here they try toavoid clothing and other high fashion items.

These are mostly self-service based and face a difficult time reacting to both price risesby suppliers and price cuts by competitors because catalogs have to be printed in advancein order to carry out business. Examples here could be tiles shops, sanitary ware storesetc.

Off-Price chain stores

They are set up at business district, suburban shopping strip or can be an isolated store.The targeted group is price conscious customers. The assortment is with moderate width

but poor depth; and average to good quality goods with low continuity prices. Theofferings are apparel and accessories, footwear, linen, fabrics, cosmetic, house wares.They maintain limited sales force, no gift-wrapping, and extra charge for alterations. Thechallenges are from other institutions formats due to discontinuity of merchandise andinsufficient customer service for some upscale shoppers. Examples here could be storesin towns and city suburb stores.

Factory outlets

They are mainly manufacturer-owned and sell the manufacturer's closeouts, discontinuedmerchandise, cancelled orders or in-season, first-quality merchandise. The location isout-of-the way site or discount mail. Choosy and price conscious customers are the targetgroup. This has moderate width, poor depth, and a low continuity. The prices are alsovery low. Any factory or firm items will come under this category based on self-service.Competitors are specialty and department stores. These stores face challenges mainlyfrom the manufacturer's key customers. Examples here could be Lee, Levis and other

branded garment manufacturer's factory outlets.

A Flea market

It has many retail vendors offering a range of products at discount prices in plainsurroundings. The location is an isolated site, racetrack, arena, parking lot, and stadiums.The customers are lower class and the assortment is extensive width, poor depth, variablequality, low continuity, with very low prices because the target group is low class. The

products are antiques, knick-knacks, used merchandise, new clothing, cosmetics,watches, consumer electronics, hardware and gift items, self-service oriented and hardly

any competitors or challenges

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The Membership club

It is a club of consumers, which straddles the line between wholesaling and retailing. It isan isolated store or is located in secondary sites like industrial parks. The targeted groupsare price conscious consumers who are the members of the club. This is with moderatewidth, poor depth and low continuity with low prices. The offerings are generalmerchandise (appliances, consumer electronics house wares, apparels), food and sundries(health and beauty aides, tobacco, liquor and candy). They manage with limited salesforce. The challenges are the limited size of final consumer market segment. It is difficultto allocate efforts between business and final consumer accounts.

7. What drives the industry?

The actual composition (the distribution of the types of retail store) of the retailingindustry in a particular geographic area is determined by following factors;

I. Demographic trend:Demographic trends involving population size, the number of house hold,

population mobility, its location and income dominate a retailers strategic planning forthe future, hence qualifying him for a particular category from the once describe above.These factors have been elaborated upon in annexure 2.

II. Lifestyle trends:Lifestyles represent the way in which individual consumers; families or households live and spend time and money the lifestyles trends, in correlation withdemographic trends, do have a grate impact on the structure of the retailing industry.The trends regarding some factors must be understood and adapted to by the retailers.

Porters Five Forces model:

As yet, we have been analyzing the retailing industry in the context of the macro-

environment - consisting of Political laws, Economic regulations, Social customs andTechnical standards, in the land of a particular retailer.Now we move on to the analysisof the industry in the contest of competition prevalent within the players of the industry.This addresses the need to identify those factors in the environment, which influence thecapability of a firm to achieve a competitive advantage and to position itself to suchadvantage.

Players at different levels of scale of operations have to confront different levels ofcompetition posed collectively by the five forces- threats of new entrants, rivalry amongstthe existing firms, and pressure from the substitutes and the bargaining power of buyers

and suppliers. Different forces take on prominence in shaping the competition at and alsoacross different levels.

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1. Threat Of EntryTo an industry depends on the extent to which there are barriers to entry, which mosttypically, are one or more of the following six:

1. Economies of scale are not such a big issue in the retiling industry. The scale ofoperation might be small for a firm to begin with and it can, in its initial stages, focuson a specific target segment whose needs can be addressed by that scale ofoperations. But these surely gain importance once expensive technologicaladvancements (which may be beyond the reach of small retailers) come into picture.

2. For instance, it may be difficult for the small firms (or retail outlets or chains) to usefully automated inventory systems or toll-free 800 numbers or in-store videonetworks or other interactive applications. As a result, they might lose out on thegrounds of efficiency, in competition with their larger competitors. So they mustadapt by concentrating on providing more personalized services to the target segmentseeking it. Hence this factor is mainly responsible for triggering competition betweenlarge and small retailers.

3. Capital requirements again depend on the scale of operations. Franchisers have anedge over the corporate retail chains in this regard as they are able to form national /international networks without high investment of their own.

4. Cost advantages independent of size (scale) arise due to the experience gained byearly entrants and the relationship they have established over time with theirsuppliers, manufacturers and customers. These might also pose difficulties inhandling market and operational problems. This is why absolutely new local entrantface severe competition from the large retail chains operating worldwide who mightwant to plunder their regions, with the expertise that they have gained as a result ofyears of experience. On the top of it, with the help of lucrative offers, they tie-upwith the existing local players who know the area well. Such an example is Spencer'stying up with RPG to open Food World Dairy International.

5. Expected Retaliation from the existing firms (at large scales) is rising over time ordue to recent trend of foreign collaborations, they now have the financial muscle tocombat any sort of competition relating to price or promotion. For small and localretailers, this is not such a big issue.Legislation regarding location, prices, number of employees etc. affects the

operations or even establishments of a new entrant - at large as well as at smallscales. Today legislation has contributed towards increasing competitiontremendously by allowing entry of foreign players, independently or as a jointventure with the local players. But it works towards keeping a check on entry byimplementation of FIPB regulations.

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6. Differentiation: postulates that new entrants might have to spend heavily toovercome existing customer loyalties, which established firms are enjoying due to

past advertisement and customer service or simply due to early entry into the market.To attract its target segment, a retailer will have to project some benefit(s) that he/sheis offering over and above the offerings of the existing players.

2. Intensity Of Rivalry Among Existing Competitors is High

In case of tangible products in retailing industry as the existing feature in the consumermarket is brand loyalty (i.e. loyalty to a manufacturer's product) rather than store loyalty.Consumers look for a particular brand which they have used/ consumed/ heard about,which might be available with a number of different types of retailers- big and small.Today big supermarkets or malls with specialized retailers do pose a threat to theneighborhood retail stores, which are now used for fulfillment of immediate and smallneeds only. On the other hand, large professional retailers face competition from more

personalized retailers who might be more comfortable with offering facilities like crediton purchases, return and exchange offers, specialized, hard to get and better quality itemsand extended business hours in order to retain whatever customer base they have and notlet it be lured away by competitors. They just have to niche around big retail stores andmalls by improving customer service, tailoring selection to customer needs and notcompeting directly with their product lines. Big retailers cannot match small ones onvalue. They live on hype and not reality. E.g. Big retail stores (chains) like Wal-Martcreate illusion that they always undersell the market, based on a handful of heavily

promoted items at rock bottom prices, but the rest of their inventory is not as pricecompetitive.According to the research published in Business World - May 1999, few large retailers dohave large turnovers- 35.2% of the total retail turnover. But that still leaves a bulk of themarket in the hands of the medium and small retailers.

Mr. R Gopalkrishnan of Tata Sons has opined that- "In India, smaller retailers continue togrow contradictory to the normal economic development where small retailers decline innumbers with their emergence of the large players." Experts feel that the size of

population and the high unemployment rate have contributed to their growth of small

retailers. With so many looking for work, setting up a small outlet is relatively a simpleThings to do. Lastly, high (10%) industry growth has turned competition into a marketshare game.

3. Pressure from Substitutes Emerges Mainly From Two Factors

1. Switching costs for customers to the substitute.2. Buyer willingness to search out for substitutes.

Also the threat of substitution may take four different forms, each of which we shall nowDiscuss with reference to above factors.

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Product-for-product substitution

The growing popularity of traditional non-store retailing base of catalog mail orders,direct mailers, telephone sales, door-to-door selling, supplemented by recent innovationslike vending machines, in-home video tape infomercials, on-line CD ROM systems, tele-shopping and net shopping poses a threat to store retailers. These media do provide thecustomers with ease of shopping, some entertainment and even more information aboutrange of products. But still there are reasons (as per data in table 3 in Annexure 3) due towhich these media are not catching on quickly (as per data in table 4 in Annexure 3)especially in India. E-tailing transactions are less than a quarter of a percent of the totalretail business in India 8. Even in western countries, it accounted only for 20% of thetotal retail spending.

In the US, store based retailers, altered by analyst's predictions that online retail couldaccount for as much as 10% of the total US retail sales by 2003, are queuing up to theinternet. However, the situation in India is little different. With limited penetration ofcomputers and Internet, will online retailing (e-tailing) catch up is a big question mark.Retailing is expected to change with the rapid development of new online sales anddistribution channels that can be used from anywhere but the extent to which it will growin India depends on the shift in the mindset of Indians whose current state gives rise tomany. As described in the section on challenges (e-tailing) these substitutes need to takecare of these hindrances in order to grow in magnitude. Furthermore, instead of complete

substitution, these media should be looking at possibilities of collaboration with theExisting store retailers.

Substitution of need

We take switching from one store or one type of store (e.g. small neighborhood retailoutlet) to another (e.g. a big department store) as an example of this type of retailing. Inthis case, the buyers might be looking out for new experiences and might not mind thenominal switching costs (like longer distance to be covered)iii. Generic substitution-

Generic Substitution or doing without is not possible in case of retailing industry.Retailing will definitely remain, in one form or the other, as long as the manufacturersmanufacture and consumers consume. Retailing does not seem to become extinct even inthe future. The issue that remains to be addressed is just - what forms it keeps evolvinginto. One Most prominent form visible today is e-tailing.

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4. Bargaining Power Of Suppliers Is High If

1. There is high supplier concentration (i.e. few number of suppliers for the industry).In case of the retailing business, large numbers of manufacturers are competing forshelf space, resulting into low bargaining power of suppliers in this context.

2. There are other substitute products for sale to the industry. With large numbers offirms manufacturing similar goods or providing similar services, differentiation iswhat gives a competitive edge to some suppliers over others. But again due to spadeof brands in the market bargaining power of suppliers is low even in this context. Butin one specific case of exclusive distribution or dealership bargaining power ofsuppliers may be high.

3. The industry is not an important customer of the supplier group. This is not at all thecase here. Today, apart from probably factory outlets, retailing is the only interface

between manufacturers and consumers. The suppliers' product is an important inputto the buyer's business. Generally, this is not the case with individual suppliers,hence affecting their bargaining powers adversely.

4. Switching costs from one supplier to another are high. This again is not the case inmost of the categories of retail sales expect for the exclusive dealership of somefirms.

5. There is threat of forward integration by suppliers. This might be a threat in the long

run. Signs are visible in the form of direct mailers, door-to-door selling, tele-shopping and e-tailing.

6. Marketers across the FMCG category and the durable sector feel that the retailer isgoing to be a powerful influence on buyers. A primary reason for this is trust. Manyfamilies take goods on credit from the retailer and moreover, spoilt goods are taken

back by him. With all these facilities thrown in, when he recommends a product, theconsumer has no reason to doubt him.

5. Bargaining Power Of Buyers Is High

Bargaining Power Of Buyers is high for the retailing industry because of flux of retailersof varying sizes and types within the reach of consumers. Hence because of nominal orno costs of switching suppliers (for the final consumers), these retailers are fighting forthe fixed budget of consumers. The customer in the past decade has become the keyfocus. The marketing strategies revolve around him. From shopping, the trend has shiftedto Shopping entertainment and in certain cases, where retailers are providing highlydifferentiated products or services to the buyers; the buyers have low bargaining powersE.g. Crossword in Ahmedabad.

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CRM is the need for:

Understanding customer behavior fully,

Maximizing the value of customers,

Really strengthening the relationship with customers,

Speed and accuracy in information analysis,

Foundation for organization wide data and information,

Facilitating business process re-engineering,

Improving quality and increased customer service,

Personalization of goods and services, Improving customer retention

To conclude we can say that CRM is seen as a comprehensive businessstrategy that helps retail outlet to convert their near customers to dear ones.The branch manager agrees that collecting in depth information about customerhelps the outlet to develop customer insight and increase customer orientation.In addition, it also enables them to offer quality solution to customers

problems with increased speed. Undoubtedly, effective implementation andmonitoring of CRM by the Indian outlet will result in providing superiorexperience to their customers, gaining long term loyalty and finally pocketingmore revenues.

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ABOUT CRM

Introduction to CRM

Customer relationship management (CRM) is a business strategy to select and managethe most valuable customer relationships. CRM requires a customer-centric business

philosophy and culture to support effective marketing, sales and service processes. CRMapplications can enable effective customer relationship management, provides that anenterprise has the right leadership, strategy, and culture.CRM is a philosophy that puts the customer at the design point; its getting intimate withthe customer. CRM is more a strategy than a process. Its designed to understand andanticipate the needs of the current and potential customer base a company has. Once younail that, there is a plethora of technology that helps capture customer data and externalsources, and consolidate it in a central warehouse to add intelligence to the overall CRMstrategy.The concept of CRM is now gaining wide acceptance and is recognized as a powerfultool for business development and to have an edge over the competitors on account of theuniversal traits of human behavior. Organization have already focused on their productsas the starting point and than looked around for customer to sell it. But the approach ofCRM is different - it starts with the customer not the totality of customers because eachcustomer is an individual and thus each customer has to be dealt individually to find outwhat they want design the product as per their need and supply it. In a nutshell, CRM isabout growing enduring relationship with profitable customers.

Eight Myths Of CRM

Its hard to open a trade publication, newsletter, or industry white paper without readingabout the high failure rates in CRM and newest answer to CRM success.Unfortunately, CRM often ends up sounding more like a religion than a businessinitiative, with high-level mantras and noble solutions designed mainly to drive thenext consulting project. CRM project manager must debunk the myths and manageexecutive and business user CRM expectation or risk another round of flavour of themonth enthusiasm followed by inevitable disillusionment.

Myth 1: CRM can be purchased.

Despite lip service to organizational change management and process alignment, mostcompanies still earmark at least 75% of CRM budget for technology -- not people or

process investment s. Often, companies with the best CRM processes actually have

very little technology, instead relying on simple tools and organizational incentives(backed by clear CRM strategies) to get results.

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Myth 2: Customers can be managed.

Too many companies try to force customers towards a management objective such asprofitability or cost reduction. In the all volunteer demand chain: every participantmust be encouraged with a clear core value proposition and the right incentives to

participate. Customer needs with the right products and services.

Myth 3: Sales can be automated.

Forget about collecting extensive data from the sales reps of dictating how they spendtheir time. Instead, focus on offloading routine tasks such as collateral fulfillment, orderstatus inquiries, paperwork, and quoting / proposal generation, and on delivering better,more qualified sales leads to shorten the sales cycle. The best CRM lets sales people dowhat they do best selling and employs technology around not at the center of thesales process.

Myth 4: Starts with a 360-degree customer view.

Setting complete integration as the first priority for CRM is akin to proposing worldpeace as the first step to help the poor admirable, but doomed to sink under the weightof high expectations and complex execution. Instead, prioritize information that canimprove the customer experience or help the company make better decision (cross sell,retention, etc.). Putting integration in the context of the important interaction with top

customers helps turn a multi-year architecture project into a roadmap for incrementalimprovement and value.

Myth 5: Integration is a product.

Right behind the integrate first consultants is the we integrate it for you softwarevendors. Products must still be customized to reflect business-specific flows andexception processing. Theres nothing simple about integration and no easy answer togetting different organizations to work together on behalf of the customer.

Myth 6: Customer retention means service.

Customer service can improve customer satisfaction and reduce costs -- but shouldnt beviewed as a primary vehicle for retention management. Satisfied customer can still leave,service relationship usually are not with customer decision makers (especially in B2B),and customer service doesnt have the relationship or selling skill to play more than asupporting role in customer retention. Instead, retention management requires its own

processes to reward positive behavior, encourage more frequent activity, and proactivelywinback customers who have begun to consider other solutions.

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Myth 7: One size CRM fits all.

In an industry focused on one to one personalization, vendors still insist (andcompanies still want to believe) that there is a single best solution to all CRM

problems and customer types. Magic quadrants aside, the right CRM solution andbusiness approach depends on what the customer processes are, and where theopportunities are to improve the customer experience and capture value, yours not readyto select CRM software.

Myth 8: If you build it, they will come.

The web is littered with under-utilized e-commerce and e-serve sites attempting to helpcustomers and partners who never show up. Build in usage and diagnostic metrics as you

implement new processes and watch carefully for areas where user acceptance is low.Dont launch new CRM functionality without pilot testing with representative users and plan to revise the application quickly as user obstacles surface. The most successfulCRM project teams spend as much time in marketing, rollout, and testing as they do onsoftware implementation.

There is no short cut to customer enlightenment instead, companies must do the hardwork to understand customer processes, issues, and opportunities, set clear goals(supported by specific actions nad metrics), and prioritize the long list of possible

projects into a series of steps that can improve customer value and demonstrate results.

Ideas about the CRM

CRM is not another ATM or internet bank. It is not a checking account, a stock or anmortgage. In fact, CRM is not anything a customer should even know about. You willnever sell your customer CRM. So, one can conclude that CRM is not tangible. If itsintangible, can it be expected to produce a tangible return? Probably not, or at least notwith any direct financial value to it.

When financial conditions are tough, fancy theories are tested to the limit. So far, theideas behind Customer Relationship Management (CRM) seem to be standing up.Spending on CRM products looks to be one of the bright sports in the whole IT market.The financial sector is in the vanguard of CRM enthusiasts. Why?

First, its worth emphasizing that CRM is a business concept, not a technology. The basicprincipal is that question about the organizations customers, and how they can beserved, are more fruitful than question about products. It is also misleading to think

purely in terms of customer satisfaction, although that may be an important factor.

Various slogans have been proposed such as one-to-one marketing, reduction ofcustomer churn, the identification of profitable customers and so on.

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Yet none of these is a substitute for careful thought about the precise circumstances ofthe individual organization.

While IT should never be the starting point for CRM, it is often the enabling factor. Withthe potential not merely to cut costs, but to bring new sales and develop new customers,well-applied CRM technology is relatively easy to justify. This remains true even whentimes are hard. It is this fact that is sustaining growth of around twenty fove per annum inthe CRM technology sector. In the financial services sector, the growth is even higher.

What is CRM?

CRM stands forCustomer Relationship Management. It is a process or methodologyused to learn more about customers' needs and behaviors in order to develop strongerrelationships with them. There are many technological components to CRM, but thinkingabout CRM in primarily technological terms is a mistake. The more useful way to thinkabout CRM is as a process that will help bring together lots of pieces of informationabout customers, sales, marketing effectiveness, responsiveness and market trends.

CRM helps businesses use technology and human resources to gain insight into thebehavior of customers and the value of those customers.

Advantages of CRM

Using CRM, a business can:

Provide better customer service

Increase customer revenues

Discover new customers

Cross sell/Up Sell products more effectively

Help sales staff close deals faster

Make call centers more efficient

Simplify marketing and sales processes

What's difference between relationship marketing and CRM?

Relationship marketing typically focuses only on relationships with customers. It has thesame end goal. By and large it's CRM, but the technology component is very oftenmissing, as is another component. That is the management of relationships with othermembers of the business network: the partners, employees, suppliers.

In CRM, I believe it's really important to involve these other network members to ensurethat the value that's ultimately delivered to customers is something which is going tosatisfy and retain them.

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Bob Thompson

You said earlier that there were some misconceptions or misunderstandings about CRM.After several years studying the subject, what are a few that come to mind?

Francis Buttle

A fairly traditional one is the misconception that CRM is an IT implementation. This hasbeen a real problem for the large corporate who've been early adopters of CRM. Many ofthe failures, in my view -- and there have been many of them -- are due to CRM beingregarded principally as an IT implementation, without the necessary fixes to the businessstrategy. If IT is applied to faulty business strategy, all that companies are going to do is

become more efficient at doing the wrong things. If the core business strategy isn't putright first, it's a recipe for failure.

Bob Thompson

You said earlier that there were some misconceptions or misunderstandings about CRM.After several years studying the subject, what are a few that come to mind?

Francis Buttle

A fairly traditional one is the misconception that CRM is an IT implementation. This hasbeen a real problem for the large corporate who've been early adopters of CRM. Many ofthe failures, in my view -- and there have been many of them -- are due to CRM being

regarded principally as an IT implementation, without the necessary fixes to the businessstrategy. If IT is applied to faulty business strategy, all that companies are going to do is

become more efficient at doing the wrong things. If the core business strategy isn't putright first, it's a recipe for failure.

Bob Thompson

In your book you define CRM as, the core business strategy that integrates internalprocesses and functions, and external networks, to create and deliver value to targetedcustomers at a profit. It is grounded on high quality customer data and enabled by IT.

I'd like to explore two key phrases in that definition. One is to create and deliver value tocustomers, and the other is the notion of external networks. Much of what I've seen aboutCRM seems to be about how to extract value from our customer base, and here you'resaying that CRM should be about creating and delivering value. Why would we want todeliver more value to customers? Why can't we just get more from them?

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Francis Buttle

Because delivering value is a means to the end of extracting value. It is true to say thatmany CRM implementations do focus upon extracting value. Many of the analyticalCRM implementations, for instance, are about exploiting customer data to the nth degree,to extract as much value as possible from customers by cross-selling and up-selling.That's all well and good, and it may in the end deliver good increases in shareholdervalue. But there is a risk of pursuing customers and cross-selling and up-selling adinfinitum without giving due thought to the value that's being created for them.

Bob Thompson

Could you give an example of how a CRM program can actually create and deliver morevalue for the company?

Francis Buttle

The notion of shareholder value underpins quite a bit of the thinking in the book. Thevalue of a company is generally agreed to be based upon the present-day value ofdiscounted profit streams from the future. So a company is worth whatever profit it cangenerate from its customer base in the future, discounted back to today's value. And,

profit, in turn, is the residue of revenue, less costs. CRM implementations can impact onboth sides of that profit equation.

A lot of the service automation projects are designed around reducing the cost of

customer service. But the revenue side of the profit equation can also be influenced byCRM implementations. To influence the revenue side, you've got to really be able todeliver excellent value to customers. An excellent value to customers means solving their

problems better, more effectively, more efficiently than competitors. Companies that failto do that and simply engage in analytical CRM to cross-sell and up-sell run the risk ofalienating customers without delivering what will truly succeed at creating a high level ofcustomer retention.

Bob Thompson

Based on what you've learned about what makes CRM work, what's one quick bit ofadvice you would give a CEO or business unit head?

Francis Buttle

I have no doubt about this. Get the business strategy right first. I like to think in terms ofa cube. It's a three-dimensional matrix. On one side it's got customers. On another side it'sgot channels. And the third side of the cube has offers or value propositions. My adviceto any CEO would be to get that cube sorted out before implementing CRM. Decidewhich customers or segments to target. Develop sensible customer acquisition, retention

and development plans. Sort out the channel strategy first, direct or indirect, and whichchannel partners to use to reach the chosen customers.

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Then sort out which products, services, bundles of value to offer the chosen customers.Once that's in position, then start looking for IT to support it--but not until then.

Some important topic

1.Find Out What the Customer Wants, First

For example: By Chris Stiehl

In the early 1990s, while working on the new car designs at Cadillac Motor CarCo., Chris Stiehl found that their customers had a different reaction to scratches and

wrinkles in the leather than they did. They had thought these were "defects." Customers,however, were wary of "perfect" leather, without "natural markings" and thought it might

be fake. Their leather had no scratches or wrinkles, but it did have a plastic coating thatcovered up the smell of tanning agents. It also removed the supple feel of the leather.Thus, in removing "natural markings" to please customers, they had actually spent extramoney displeasing them. A small investment in market research enabled them to turn thatsituation around and develop standards for leather for Cadillac, contributing to winningthe Malcolm Baldrige National Quality Award.

The key learning point from this example was that a disciplined approach to listening to

customers and translating their wants and needs into products and services was the basisfor managing the customer relationship.

How do you document what the customer wants and make sure that those desires remainthe focus of your customer service efforts?

An engineer and researcher in Fortune 500 companies for more than 25 years and aconsultant for 10 years, over the past 20 years, Chris Stiehl developed a disciplined

process for making sure the products and services that are delivered accurately reflect thewishes of the customers throughout their relationship with the company. Chris Stiehl call

it the Customer-Driven Improvement Model. Dozens of companies have adopted thisprocess with great success.

The figure below illustrates how it works.

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Many companies say they are customer-driven, particularly with respect to customerservice but do not have a disciplined process such as this one to document how the Voiceof the Customer is incorporated into their work and internal metrics.

The process begins with a formal collection of the Voice of the Customer (which may beinternal customers, external customers, fellow employees or association members). To dothis, we usually conduct one-on-one interviews, rather than hold focus groups. Because

the research is qualitative, the number of customers who make a specific request is notvery important, but the depth of the research is.

In focus groups, a moderator typically asks the same questions in the same order, and theresponses can be dominated by specific individuals. A one-on-one interview should beunique, discussing that particular customer's relationship needs and his or her passions.

This Qualitative Research is used to develop corresponding Internal Predictive Measures.These internal metrics are linked to what customers are looking for from the company.They provide a basis for internally managing service according to the customers' wishes.

How would you know if your customers' needs were being met, before surveying them tofind out what those needs were? Your internal metrics should tell you.

They translate the Voice of the Customer into survey questions that customers like toanswer, because the questions are based upon the customers' thoughts and ideas. This

produces external data, which is used merely to check on the accuracy of the internalrelationship metrics. You should never be surprised by a survey result.

Finally, all of the internal and external data is combined to direct improvement to the

places that can have the maximum impact on the customer relationship--in other words,where you achieve the "biggest bang for the buck." (Note: This process is often called

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Quality Function Deployment)(QFD) or the House of Quality; see the May-June 1988edition of the Harvard Business Review, reprint No. 88307).

The same techniques work well in business-to-business relationships. How many of yourinternal metrics can be linked directly to customer needs? How many of them result in

behaviors by your staffs that are counterproductive?

Most CRM systems include both sales and service functionality. This includes account,contact, opportunity management and call center capabilities, such as case tracking andknowledge base. Many go beyond these functions to include marketing automation,

partner relationship management and even supply chain management or SCM.Additionally, many CRM vendors provide some level of integration to traditionalEnterprise Resource Planning (ERP) applications. There are very few aspects of modernday businesses that CRM does not touch.

The difficulty companies have with embracing CRM solutions has historically been thestruggle to understand the return on investment. Even in the practical life it is difficult toextrapolate the lost revenue as a result of lack of CRM system or one that fails to meetthe needs of the organization. However, if companies spend the time to trulyunderstand their processes from lead generation through order processing to

customer service, they will inevitably come to a better understanding of where their

inefficiencies exist and where technology can be aptly used to address the

weaknesses.

It is important for companies to answer the question, "What are my customer relationship

management objectives?" From there, they should be able to formulate their policy andextract the high-level requirements necessary for selection of a CRM system that best fitstheir needs. It is also extremely important that customers understand the importance ofthe underlying technology platform in their selection. Questions such as, "Can I adapt thissystem to my business?" and "Can it integrate with my back-office functions?" should beforemost in their minds. CRM holds a lot of promise for improving customer loyaltyresulting in top and bottom line benefits.

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2. Adoption: The Overlooked Key to CRM Deployment Success

By Michael Heflin Dec. 13, 2003--------------------------------------------------------------------------------Creating Stakeholders Can Matter More Than the Technology Itself

The missing ingredient: inspiration

Of course our first mistake in each case is to fall a bit too much in love with thetechnology benefits. That leads us to the second mistake: overlooking the question ofwhether the 'gift' actually helps the user, at which point they buy into the 'gift' and changetheir work habits long enough to taste the benefits. Consequently, we do too little in theway of sustained direction, training, and incentives.

We forget to methodically and relentlessly inspire.

According to the Alexander Group, when asked about the top challenges for CRMsuccess, seasoned enterprises rank technology well below managing employee resistanceto change (63 percent) and optimizing processes and job roles (56 percent). To addressthose toughest challenges, an adoption program, concurrent with technology deployment,can put a proper perspective on the technology itself as a means to the real goal: inspiringchange toward every stake holders benefit.

Creating stakeholders: a case study

In early 2003, a large regional communications service provider (CSP) deployed a saleseffectiveness solution to thousands of sales users.

This sales effectiveness application is designed to boost productivity during the salesinteraction with prospects by providing rapid recommendations and guidance tocontextual, solution-specific information such as product information, selling tips,competitive information, configuration, pricing and promotions to the sales person at the

point-of-sale--when it is most valuable.

To achieve user buy-in, adoption and ROI success, the CSP and the sales effectivenessvendor co-developed an adoption program that embraced each set of stakeholders--marketing, sales operations, sales executives, and users. The intent of the program was toachieve regular user adoption not temporary compliance. It also incorporated specificadoption goals: Forty percent to 50 percent sustained adoption within 60 days. This iscompared to sales technology adoption, which ranges from 15 percent to 25 percent.

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The CSP's measurable results exceeded its lofty goals

Fifty percent to 60 percent sustained adoptionSixty-eight percent completion of introductory trainingA 217-percent increase in loginsA record of 209 percent more revenue than non-usersA record of 93 percent greater value of sales proposals

Indeed, over a three-month period, new users grew by 78 percent in the second month,and 72 percent of established users returned in the third month. The strongest evidencethat sales staff were buying in: Proposals generated using the application grew 2,642

percent between the fifth and eighth months.

A multi-layered campaign

How did the plan achieve such stellar results? By employing all of the following adoptionand change management strategies:

Executive leadership, direction and communication

Metrics--rewards and incentives

Consistent, channel-specific communication

A Study on customer satisfaction in marketing management on v-mart mall

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