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Listening to customers must become everyones business. With most competitors moving
ever faster, the race will go to those who listen and respond more intently.
- Tom Peters, Thriving on Chaos
Chapter 1: Conceptual Framework for CRM
What is Customer Relationship management?
Before we begin to examine the conceptual foundations of CRM, it will be useful to
define what CRM is. A narrow perspective of customer relationship management is
database marketing emphasizing the promotional aspects of marketing linked to database
efforts.
Another narrow, yet relevant, viewpoint is to consider CRM only as customer retention in
which a variety of aftermarketing tactics is used for customer bonding or staying in touch
after the sale is made.
Shani and Chalasani define relationship marketing as an integrated effort to identify,
maintain, and build up a network with individuals consumers and to continuously
strengthen the network for mutual benefit of both sides, through interactive,
individualized and value-added contacts over a period of time.The core theme of all CRM and relationship marketing perspectives is its focus on co-
operative and collaborative relationships between the firm and its customers, and/or other
marketing actors.
CRM is based on the premise that, by having a better understanding of the customers
needs and desires we can keep them longer and sell more to them.
Growth Strategies International (GSI) performed a statistical analysis of Customer
satisfaction data encompassing the findings of over 20,000 customer surveys conducted
in 40 countries by Info quest.
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The conclusions of the study were:
A Totally Satisfied Customer contributes 2.6 times as much revenue to a company as
a Somewhat Satisfied Customer.
A Totally Satisfied Customer contributes 17 times as much revenue as a SomewhatDissatisfied Customer.
A Totally Dissatisfied customer decreases revenue at a rate equal to 1.8 times what a
Totally Satisfied Customer contributes to a business.
By reducing customer defection (by as little as 5%) will result in increase in profits
by 25% to 85% depending from industry to industry.
An important facet of CRM is customer selectivity. As several research studies have
shown not all customers are equally profitable (Infact in some cases 80% of the sales
come through 20% of the customers). The company must therefore be selective and
tailor its program and marketing efforts by segmenting and selecting appropriate
customers for individual marketing programs. In some cases, it could even lead to
outsourcing of some customers so that a company better utilize its resources on those
customers it can serve better and create mutual value. However, the objective of a
company is not to really prune its customer base but to identify appropriate customer
programs and methods that would be profitable and create value for the firm and the
customer. Hence, CRM is defined as:
Customer Relationship management is a comprehensive strategy and process of
acquiring, retaining and partnering with selective customers to create superior
value for the company and the customer.
As is implicit in the above definition, the purpose of CRM is to improve marketing
productivity. Marketing productivity is achieved by increasing marketing efficiency
and by enhancing marketing effectiveness. In CRM, marketing efficiency is achieved
because cooperative and collaborative processes help in reducing transaction costs andoverall development costs for the company. Two important processes for CRM include
proactive customer business development and building partnering relationship with
most important customers. These lead to superior value creation.
The basic concept is that the customer is not someone outside the organisation, he is a
part of the organisation.
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High
Low
Low HighCustomer Value
Key CRM principles
Differentiate Customers: All customers are not equal; recognize and reward best
customers disproportionately. Understanding each customer becomes particularly
important. And the same customers reaction to a cellular company operator may be quitedifferent as compared to a car dealer. Besides for the same product or the service not all
customers can be treated alike and CRM needs to differentiate between a high value
customer and a low value customer.
What CRM needs to understand while differentiating customers is:
- Sensitivities, Tastes, Preferences and Personalities
- Lifestyle and age
- Culture Background and education
- Physical and psychological characteristics
Differentiating Offerings
Low value customer requiring high value customer offerings
Low value customer with potential to become high value in near future
High value customer requiring high value service
High value customer requiring low value service
Keeping Existing Customers
Low value customers whoRequire high levels of service
Must either purchase thehigher level of service or
become our competitors low
value/high cost customers
Low value customers whoRequire high levels of serviceMust either purchase the
higher level of service or
become our competitors lowvalue/high cost customers
ServiceReq
uirement
High value customers wrequire a high level of
service are maintained
without expanding thecostly offering to the en
customer population
High value customers wh
require a high level of
service are maintainedwithout expanding the
costly offering to the enticustomer population
Fig. 1 Customer value Service Matrix
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High
Low
*Focus On Short Term Profitability.
Spend Minimum Energy To Meet Your
Objectives.
#Dont Pursue.
Use Opportunity As It Comes.
Short Term Acquisition Shouldnt Affect
Long Term Image.
*Very cautious decision needed. Re-examine
business Plan & Strategy. Evaluate That
Your Loss (i.e. Your competitors gain)
Doesnt become nightmare for you.
#Needs In-depth strategic review as acquisition
alone and dissatisfaction later could be more
harmful
Low High
Grading customers from very satisfied to very disappoint should help the organisation in
improving its customer satisfaction levels and scores. As the satisfaction level for each
customer improves so shall the customer retention with the organisation.
Maximizing Life time valueExploit up-selling and cross-selling potential. By identifying life stage and life event
trigger points by customer, marketers can maximize share of purchase potential . Thus the
single adults shall require a new car stereo and as he grows into a married couple his
needs grow into appliances.
Increase Loyalty
Loyal customers are more profitable. Any company will like its mindshare status to
improve from being a suspect to being an advocate.
Company has to invest in terms of its product and service offerings to its customers. It
has to innovate and meet the very needs of its clients/ customers so that they remain as
advocates on the loyalty curve. Referral sales invariably are low cost high margin sales.
(Fig 2. Categorizing Customers)
*You have No Choice But To
Handle Them Very Carefully.
Will Consume Energy
# Think of Innovative Ways of getting
them on Your Side, But the Cost of
Acquisition Must Be Controlled
StrategicIm
portanceToYour
Business
P
lan
*Cultivate Relationship.
Spend Energy.
Go Out Of Your Way.
#Think Of Strategies TO Move ThemAway From Competition.Will Consume Disproportionately
High Energy.
Relationship & Profitability Potential
*Existing
Customer
#Potential
Customers
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Summarizing CRM activities:
The CRM cycle can be briefly described as follows:
1. Learning from customers and prospects, (having in depth knowledge of customer)
2. Creating value for customers and prospects
3. Creating loyalty
4. Acquiring new customers
5. Creating profits
6. Acquiring new customers
1
Creating value
for customers &
prospects
2Creating loyalcustomers
3
Acquiring newcustomers
4
5
Creating
Profits
Learning from
customers a&
prospects
Fig.3
CRM Activities
Customer Retention
and referrals for newcustomers
Customer NeedAssessment & Acquisition
Customer Development
through personalizationand customization
Customer Equity Leverage through
Cross Selling and Up Selling
Figure 4 Customer Life Cycle Management
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The Emergence of CRM Practice
The Past:
Looking back at a snapshot history of marketing, we can see the following clear
developments and progression over the last four decades:
1960s the era of Mass Marketing, when Gibbs SR toothpaste began the first
marketing of this kind with its black and white campaign.
1970s saw the beginning of segmentation, direct mail campaigns and early
telemarketing (such as publishing)
1980s where Niche marketing made millionaires of those who were best at it.
1990s Relationship Marketing. The explosion of telemarketing and call centers, all
set up to develop relationships with customers. The recognition of the true value of
retention and the use of Lifetime Value as a business case.
In addition to this, a number of key marketing concepts can also be used to see where
CRM has developed from:
Satisfying Needs, Customer Orientation
The organisation needs to be arranged so that all functions contribute
Profit must be the consequence of delighting customers (Kotler)
Developing customer relationship has historical antecedents going back into the pre
industrial era. Similarly artisans often developed customized produce for each customer.
Such direct interaction led to relational bonding between the producer and the consumer.
It was only after industrial eras mass production society and the advent of the
middlemen that there were less frequent interactions between producers and the
consumers leading to transactions oriented marketing. The production and consumption
factions got separated leading to marketing functions being performed by the middle men
and middlemen are in general oriented towards the economic aspects of buying since the
largest cost is often the cost of goods sold.
In recent years however, several factors have contributed to the rapid development and
evolution of CRM. These include: -
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1. The growing de-intermediation process in many industries due to the advent of
sophisticated computer and telecommunication technologies that allow producers to
directly interact with end-customers. For example, in many industries such as
airlines, banks insurance, software or household appliances and even consumables,
the de-intermediation process is fast changing the nature of marketing and
consequently making relationship marketing more popular. Databases and direct
marketing tools give them the means to individualize their marketing efforts.
2. Advances in information technology, networking and manufacturing technology have
helped companies to quickly match competition. As a result product quality and cost
are no longer significant competitive advantages.
3. The growth in service economy. Since services are typically produced and delivered
at the same institution, it minimizes the role of the middlemen.
4. Another force driving the adoption of CRM has been the total quality movement.
When companies embraced TQM it became necessary to involve customers and
suppliers in implementing the program at all levels of the value chain. This needed
close working relationships with the customers. Thus several companies such as
Motorola, IBM, General Motors, Xerox, Ford, Toyota, etc formed partnering relations
with suppliers and customers to practice TQM. Other programs such as JIT and MRP
also made use of interdependent relationships between suppliers and customers.
5. Customer expectations are changing almost on a daily basis. Newly Empowered
customers who choose how to communicate with the companies across various
available channels. Also nowadays consumers expect a high degree of
personalization.
6. Emerging real time, interactive channels including e-mail, ATMs and call centre that
must be synchronized with customers non-electronic activities. The speed of
business change, requiring flexibility and rapid adoption to technologies.
7. In the current era of hyper competition, marketers are forced to be more concerned
with customer retention and customer loyalty.
8. As several researches have found out retaining customers is less expensive and more
sustainable competitive advantage than acquiring new ones.
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9. On the supply side it pays more to develop closer relationships with a few suppliers
than to develop more vendors.
10. In addition several marketers are concerned with keeping customers for life than
making one time sale. There is a greater opportunity for up selling and cross selling.
In a recent study, Naidu, et al(1999) found that relational intensity increased in
hospitals facing a high degree of competitive intensity
11. The globalization of world marketplace makes it necessary to have global account
management for the customers.
CRM Formation Process
In the formation process, three important decision areas relate to defining the purpose (or
objectives) of engaging in CRM, selecting parties (or customer partners) for appropriate
CRM programs and developing programs (or relational activity schemes) for relationship
engagement with the customer.
Purpose
IncreaseEffectiveness
Improve
Programs
Account
Management Retention
Partners
Criteria
Process
Team Structure
Role Specification
Planning Process
Process Alignment
Monitoring Process
Communication
Employee Motivation
Employee Training
RelationshipPerformance
Strategic
Financial Marketing
Retention
Evolution
Enhancement
Improvement
Fig 5. CRM Process Framework
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CRM Purpose
The overall purpose of CRM is to improve marketing productivity and enhance value for
parties in involved in the relationship. By seeking and achieving operational goals, such
as lower distribution costs, streamlining order processing and inventory management,
reducing the burden of excessive customer acquisition cost, and through customer
retention economics, firms could achieve greater marketing efficiencies. They can
enhance marketing effectiveness by carefully selecting, customers for its various
programs, individualizing and personalizing their market offerings to anticipate and serve
the emerging needs of individual customer, building customer loyalty and commitment,
partnering to enter new markets and develop new products, and redefining the
competitive playing field for their company. Thus, stating the objectives and defining the
purpose of CRM in a company helps clarify the nature of CRM programs and activities
that ought to be performed by the partners. Defining the purpose would also help in
identifying suitable relationship partners who have necessary expectations and
capabilities to fulfill mutual goals. It will further help in evaluating CRM performance by
comparing results achieved against objectives. These objectives could be specified as
financial goals, marketing goals, strategic goals, operational goals, and general goals.
Customers are motivated to engage in relational behavior because of psychological and
sociological benefits associated with reduction in choice decisions. In addition, to their
natural inclination of reducing choices, consumers are motivated to seek the rewards and
benefits associated with CRM programs.
Relational Parties
In the Initial phase, a company has to decide which customer type and specific customers
or customer groups will be the focus of their CRM activities.
CRM Programs
A careful review of literature and observation of corporate practices suggest that there are
three types of CRM programs: continuity marketing; one-to-one marketing; and,
partnering programs. These take different forms depending on whether they are meant for
end-consumers, distributor consumers, or business-to-business customers.
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Table 1 presents various types of CRM programs developed for different types of
customers.
Customer Types
Program Types
Mass Markets Distributors Business to Business
Markets
Continuity Marketing After- Marketing
Loyalty Programs
Cross-Selling
Continuos
Replenishment
ECR Programs
Special Sourcing
Arrangements
One-to-One Marketing Permission Marketing
Personalization
Customer Business
Development
Key Account
Global Account
Partnering/Company-
Marketing
Affinity Partnering
Co-Branding
Logistics Partnering
Joint Marketing
Strategic
Partnership
Co-Design
Co-DevelopmentTable 1 CRM Programs
Continuity Marketing Programs
Take the shape of membership and loyalty card programs where customers are often
rewarded for their member and loyalty relationships with the marketers. The basic
premise of continuity marketing programs is to retain customers and increase loyalty
through long-term special services that has a potential to increase mutual value through
learning about each other.
One-to-one Marketing
Meeting and satisfying each customers need uniquely and individually. In the mass
markets individualized information on customers is now possible at low costs due to the
rapid development in the information technology and due to availability of scalable data
warehouses and data mining products. By using online information and databases on
individual customer interactions, marketers aim to fulfill the unique needs of each mass-
market customer. Information on individual customers is utilized to develop frequencymarketing, interactive marketing, and aftermarketing programs in order to develop
relationship with high-yielding customers. In the context of business-to-business markets,
individual marketing has been in place of quite sometime. Known as Key Account
Management Program, here marketers appoint customer teams to husband the company
resources according to individual customer needs.
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Partnering Programs
The third type of CRM programs is partnering relationships between customer and
marketers to serve end user needs. In the mass markets, two types of partnering programs
are most common: co-branding and affinity partnering.
CRM Governance Process
Greater the scope of CRM program and associated tasks, and the more complex is the
composition of the relationship management team; the more critical is the role
specification decision for the partnering firms.
It is essential to establish intra-company communication particularly among all
concerned individuals and corporate functions that directly play a role in managing
the relationship with a specific customer or customer group.
With mass-market customers frequent face-to-face interactions will be uneconomical.
Thus marketers should create common bonds through symbolic relationships,
endorsements, affinity groups, and membership benefits or by creating online
communities
Involving customers in the planning process would ensure their support in plan
implementation and achievement of planned goals. All customers are not willing to
participate in the planning process nor is it possible to involve all of then for
relationship marketing programs for the mass markets.
Operating process between the company and customer partners: Operating alignment
will be needed in order processing, accounting and budgeting processes, information
systems, merchandising process, etc
Human resources decisions are also important in creating the right organisation
climate for managing relationship marketing. Training employees to interact with
customers, to work in teams, and manage relationship expectations are important. So
is the issue of creating the right motivation through incentives and rewards.
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Periodic evaluation of goals and results, initiating changes in relationship structure,
design or governance process if needed, creating a system for discussing problems
and resolving conflicts.
CRM Performance Evaluation Process
Without a proper performance metrics to evaluate CRM efforts, it would be hard to make
objective decisions regarding continuation, modification, enhancement, or termination of
CRM programs.
If co-operative and collaborative relationship with the customers is treated as an
intangible asset of the firm, its economic value add can be assessed using discounted
future cash flows estimates. Here the term relationship equity comes in where you
measure the intangible assets of the firm.
Another global measure used by firms to monitor CRM performance is the measurement
of relationship satisfaction. By measuring relationship satisfaction, one could estimate the
propensity of either partys inclination to continue or terminate the relationship. Such
propensity could also be indirectly measured by measuring customer loyalty.
CRM Implementation Issues
One of the most interesting aspects of CRM development is the multitude of customer
interfaces that a company has to manage in todays context. Until recently, a companys
direct interface with the customers, if any was primarily through sales people or service
agents. In todays environment most companies interface with their customers through a
variety of channels including sales people, service personnel, call centers, Internetwebsites, marketing departments, fulfillment houses, market and business development
agents, etc. For large customers it also includes cross-functional teams that may include
personnel from various functional departments. While each of these units could operate
independently, they still need to share information about individual customers and their
interactions with the company on a real time basis. For example, a customer who just
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placed an order on the Internet and subsequently calls the call centre for order verification
expects the call centre staff to know the details of his or her order history. Similarly a
customer approached by a sales person unaware that she has recently complained about
dissatisfactory customer service, is not likely to be treated kindly by the customer.
Therefore effective CRM requires a front-line information system that shares relevant
customer information across all interface units. Relational databases, data warehousing
and data mining tools are thus very valuable for CRM systems and solutions.
However, the challenge is to develop and integrated CRM platform that collects relevant
data input at each customer interface and simultaneously provides knowledge output
about the strategy and tactics suitable to win customer loyalty and support. If a call centre
personnel cannot identify or differentiate a high value customer and does not know what
to up-sell or cross sell to him then it would be a tremendous loss of opportunity for the
company. Although most CRM software solutions based on relational databases are
helping share customer information, they still do not provide knowledge output to the
front line personnel. As shown in Figure.6, CRM solutions platform needs to be based on
interactive technology and processes. It should assist the company in developing and
enhancing customer interactions and one-to-one marketing through the help of suitable
intelligent agents that help develop front-line relationship with customers. Such a system
would identify appropriate data inputs at each customer interaction site and use analytical
platforms to generate appropriate knowledge output for front-line staff during customer
interactions.
In addition, implementation tools to support interactive solutions for customer
profitability analysis, customer segmentation, demand generation, account planning,
opportunity management, contact management, integrated marketing communication,
customer care strategies, customer problem solving, virtual team management of large
global accounts, and measuring CRM performance would be the next level of solution
sought by most enterprises.
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Knowledge
Output
KnowledgeOutput
KnowledgeOutput
Knowledge
Output
KnowledgeOutput
Data Input
Data Input
Data Input
Data Input
Data Input
Figure 6. Information Platform for CRM
Since CRM implementation comprises a significant information technology (IT)
component, these companies have handed over the responsibility of CRM
implementation to information technology departments. They are focussed on simply
installing CRM software solutions without a CRM strategy or program in place. This
leads to creating an operational tool within the company, but the usability and
effectiveness in producing desirable results from such tools is limited. CRM tools would
be valuable when they are used to identify and differentiate individual customers and to
generate individualized offer and fulfill customized solutions. The lack of CRM strategy
or CRM programs, would leave the front-line people without any knowledge of what they
should be doing with the additional customer information that they now have access to.
For those who apply themselves and develop improvised solutions, it could backfire as ad
hoc solutions could cause unintended deterioration in customer relationships. Appropriate
strategy and excellent implementation are both needed for obtaining successful results.
Sales Group
Market
Development
MarketingCustomer
Operations/
Service
Call Centre
Internet
Knowledge
Output
Data Input
Integrated Marketing
Information Platform
Information Content
Relational Databases
Decision Support System
Active Intelligence
Business Rules Collaborative Communication
User Profiles
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From a corporate implementation point of view, CRM should not be misunderstood
to simply mean a software solutions implementation project .
Chapter 2: CRM and Related Concepts
Knowledge Management (KM) with focus on CRM
As Peter Drucker defined Information is data endowed with relevance and purpose.
To effectively implement a CRM solution it is very important to identify real knowledge
about different types of customers (Viz. Most valued customers, Most grow able
customers, Below zero customers) from plethora of internal and external data, figures,
surveys, etc. A straightway technique is to create a data warehouse, thereafter
information which is required to effectively implement principles of CRM, could be
mined out of this data warehouse.
Marketing, sales after-sales people would be knowledge workers. Front office could be
more productive if they could utilize customer knowledge. Knowledge Management
(KM) is about embracing a diversity of knowledge resources, like legacy systems,
existing data warehouses, portals, websites, customers, suppliers, partners, external
marketing research agencies and cultivating the knowledge where it resides.Metrics, ROI, Balance Scorecard method, benchmarking are some of the common
technique of KM system evaluation. KM implementation is the key to CRM.
Its a proven fact that 80% of organization revenue comes form 20% of its customers; it
becomes imperative to design CRM solutions keeping in mind these most valuable
customers and to leverage 80% non structured data of about 20% of these most valuable
customers.
Just as more tangible corporate assets like computer systems have a finite shell life, so
too does knowledge, it must be available at the right time to be able to act upon it.
Retaining tacit knowledge (derived from experiences, data and documents) means
retaining the individual, which is invariably not possible. It is possible to generate
explicit knowledge from tacit knowledge, but its a complex exercise. The key ingredient
of this exchange is face to face sharing of knowledge or virtual environmental tools like
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Lotus Notes, which can facilitate tacit knowledge exchange. Hence for tacit knowledge
exchange text mining is very useful and important. There are ways to do text mining, like
search engines, web solutions, text analysis tools, etc. The key to successful customer
KM is personalization, i.e. how to extract the knowledge that is pertinent to the user and
translate it into a format that is easily understood. The choice of Customer Knowledge
Management (CKM) architecture should have a layered approach. Existing systems
should be seamlessly linked with the proposed layer. The choice for CKM system could
be Web (Enterprise information portal) or a packaged solution such as Lotus Notes,
Microsoft solution.
Role of CRM in the Context of SCM
In the context of SCM, where alliances and partnerships are keys to success, CRM plays
an important role in building long-term relationships. Apart from the end-users, it
involves internal employees, channel members and other external entities such as
advertising agencies and consulting orgnizations. The success of relationships depends
upon sharing of savings from the supply chain, which may be reinvested to further
enhance its efficiency, and sustain the competitive advantage.
The supply chain of tomorrow will look like a virtual organisation, seamlessly integrated
through sharing data and savings as well. The bonding between partners will be closely
held by CRM practices.
ERP and CRM
Like ERP, CRM solutions focus on automating and improving business processes, albeit
in front-office areas such as marketing, sales, customer service, and customer support.
Whereas ERP implementation can result in improved organizational efficiency, CRM
aims to provide organizational effectiveness by reducing sales cycle and selling cost,
identifying markets and channels for expansion, and improving customer value,
satisfaction, profitability, and retention. While CRM applications provide the frameworkfor embodying, promoting and executing best practices in customer facing activities, ERP
provides the backbone, resources and operational applications to make organizations
more efficient in achieving these goals.
Regain Management
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The cost of acquiring a new customer is 9 to 12 times that of holding on to an existing
customer.-Philip Kotler
A study conducted by Andersen Consulting in conjunction with EIU found that
businesses are intensifying their focus on customer and are taking a more process
oriented approach to customer relationship management. Key Findings of the study are:
(a) The number of businesses citing customer retention as a critically important measure
in the next 5 years has jumped to nearly 60%, as companies shift their focus from
attracting new customer to retaining their more profitable ones;
(b) By 2002, 83% of companies expect to have customer data warehouses, up from about
40% today; and
(c) Companies predict their use of Internet to collect customer data will surge by 430%
Consumer Life Time Value
Quantifying the value of customers is absolutely essential in regain management. In
fact, the percentage of profit a company makes from continued sales to its own customer
base is consistently higher than the profit made on original sale.. Each of the customers
then delivers an income stream and the stream of profit far exceeds the value of original
purchase. Income streams contribute cash flows in terms of years for any single product.
Regain Strategies:
Customization
Differentiation Strategies
The lost customer would be segmented differently from the existing customer. Base and
the company could provide additional features and benefits to win them back.
Wow Syndrome
For example, a client checks into a hotel and his/her room isnt ready. The clerk could
respond by You are in luck! Your room isnt ready. That means you get to eat breakfast
on us and use our business centre for free!
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Chapter 3: Technological Tools for CRM
Tools
Customer database
A good customer information system should consist of a regular flow of information,
systematic collection of information that is properly evaluated and compared against
different points in time, and it has sufficient depth to understand the customer and
accurately anticipate their behavioral patterns in future. The customer database helps
the company to plan, implement, and monitor customer contact. Customer
relationships are increasingly sustained by information systems. Companies are
increasingly adding data from a variety of sources to their databases. Customer data
strategy should focus on processes to manage customer acquisition, retention, and
development.
Other Technologies that are used are as follows:
Electronic Point of Sale(EPOS)
Sales Force Automation
Customer Service Helpdesk
Call Centers
Call Centre helps in automating the operations of inbound and outbound calls generated
between company and its customer. These solutions integrate the voice switch of
automated telephone systems (e.g. EPABX) with agent host software allowing for
automating call routing to agents, auto display of relevant customer data, predictive
dialing, self service Interactive Voice Response systems, etc. These systems are useful in
high volume segments like banking, telecom and hospitality. Today, more innovative
channels of interacting with customers are emerging as a result of new technology, such
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as global telephone based calls centers and the internet. Companies are now focusing to
offer solutions that leverage the internet in building comprehensive CRM systems
allowing them to handle customer interactions in all forms.
While CRM solutions are front office automation solutions, ERP is back office
automation solution. An ERP helps in automating business functions of production,
finance, inventory, order fulfillment and human resource giving an integrated view of
business, where as CRM automates the relationship with customer covering contact and
opportunity management , marketing and product knowledge, sales force management,
sales forecasting, customer order processing and fulfillment, delivery, installation, pre-
sale and post-sale services and complaint handling by providing an integrated view of the
customer. It is necessary that the two systems integrate with each other and complement
information as well as business workflow. Therefore, CRM and ERP are complementary.
This integration of CRM with ERP helps companies to provide faster customer service
through an enabled network, which can direct all customer queries and issues through
appropriate channels to the right place for speedy resolution. This will help the company
in tracking and correcting the product problems reported by customers by feeding this
information into the R&D operations via ERP.
CRM A FRAMEWORK
Traditional Approach to CRM
Customer Contact by
Telephone
Mail
In Person
Personal Selling
After Sales Service Complaint Handling
Account Management
Customer care
Customer Satisfaction
Web-Enabled & Integration
Approach
Customer Information
System
Customer Database
Electronic Point of Sale
Sales Force Automation
Automation of Customer
Support
Call Centres
Systems Integration
Lifetime value of a Customer
Integration with
technology
(Web & Internet)
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Data Mining for CRM: Some Relevant issues
Data mining is an important enabler for CRM. Advances in data storage and processing
technologies have made it possible today to store very large amounts of data in what are
called data warehouses and then use data mining tools to extract relevant information.
Data mining helps in the process of understanding a customer by providing the necessary
information and facilitates informed decision-making.
Operational CRM solutions involve integration of business processes involving customer
touch points. Collaborative CRM involves the facilitation of collaborative services(such
as e-mail) to facilitate interactions between customer and employees. All this effort
produces rich data that feeds the Analytical CRM technologies.
Information Requirements of an Effective CRM Solution
The employees of a firm employing CRM would require rich information about their firm
and customer base including:
Information about the market
Information about the firm
The current segment
Demographic Distribution (by age, sex, education, income, marital status, etc)
The firms best customers and the segment they belong to, products they buy,
preferences, habits and tastes of each segment.
Operational CRM Collaborative CRMAnalytical CRM
Customer
Fig.8 Interactions between CRM Technologies
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Individual level information consisting of: Customer personal details such as name, address, family details, education, etc
The customer group /segment to which the individual belongs
History of present and past behavior
Likes, dislikes, habits and preferences
Events coming up in their personal life etc.
Levels of data mining operations
The aggregate or the Macro level
Mining at the macro level gives us a broad overview of the data e.g. when customers
of the retail store are segmented by profitability criteria, we obtain clusters that are
profitable to various extents. Knowledge obtained by mining at macro level is useful
when dealing with situations where:
We are dealing with a customer about whom we do not have individual
information. Hence, we need to extrapolate the characteristics of the group to which
he/she might belong. In retail store example, a store can segment its customers onbasis of age and characteristics can be extracted. When a new customer enters the
store, the salesman could use his intuition in arriving at the customers age and
recover the characteristics of that age group such as the frequently bought products,
color preferences, etc.
Targeting new set of customers. If the retail chain has opened a new store it can
use the data from the most similar current store to predict the behavior of the new
prospects.
We are dealing with aspects of the service, which influence a majority of the
customer and therefore cannot be customized to suit individual tastes, example being
the design of the physical layout of a retail store.
Predicting the possibility of an action that the cu has never undertaken. A
customer might not have tried out a new product because he/she was not aware of it.
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A salesman can encourage him/her to try out the product if his/her profile matches
that of the current product users.
Classification:
Classification is a process that maps a given data item into one of the several predefined
classes. CRM uses classification for a variety of purposes like behavior prediction,
product and customer categorization.
Regression
Regression is the operation of learning a function that predicts the value of a real valued
dependent variable based on values of other independent variables. Regression finds
application in a CRM environment where prediction needs to be made about the behavior
regarding real value added variables. Suppose the retail store collects data on the monthly
visits of the customers viz. Frequency, time spent on each visit. And purchases made
during each visit. If the manager has a strong intuition that total purchase is linked to
frequency of visit, then this situation can be modeled by regression. This model can then
be used to predict future purchases of a customer. Regression needs sufficient amount of
data to be reliable and valid.
Link Analysis
Link Analysis seeks to establish relationship between items or variables in a database
record to expose patterns and trends. Link analysis can also trace connections between
items of record over time. The most important link analysis application in CRM, called
market basket analysis, is an operation that seeks relationship between product items
characterizing product affinities or buyer preferences. The retail store collects thousands
of interactions daily. A link analysis task performed on this data will point to items that
are bought together e.g. bread and butter are bought together rather than bread and orange
juice. Such information can be used to design store layouts, design coupons, etc.
Segmentation
Segmentation aims to identify a finite set of naturally occurring clusters or categories to
describe data.
Deviation Detection
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Deviation Detection (DD) focuses on discovering the most significant changes in the data
from previously measured, expected or normative values. Most CRM solutions have a
DD task running in parallel on a regular basis. Suppose a retailer finds out that the sales
from a particular section of the store have been much less than expected. This deviation
on further analysis points out to non-stocking of a popular brand.
Tools such as decision trees, rule induction, case based reasoning, visualization
techniques, nearest neighbor techniques, clustering algorithms, etc are used for the above
purposes.
The existing CRM Solutions
Delivering the 360 view requires automation to bring together all the data concerning a
customer. This implies the organization has to change from:
Mass Marketing Product Focus
Product Focus Customer Focus
Economies of Scale Economies of time
1 way communication Interactive
Response Time Real Time
Present CRM Alternatives
Present CRM solutions are offered by host of vendors that are to a great extent not
industry specific. While there are some vendors, who have come up with industry
specific solutions, the broad model around which the CRM solutions are built remain the
same. Adopting a similar or a look a like solution across industries is what causes major
strain in servicing a customer.
Typical offerings of the current CRM solutions (such as Siebel, Oracle Apps or
MySap.com, etc) vary from solution to solution. However typical CRM offerings consist
of:
Customer Development Field sales, Tele sales, Internet Sales
Service Centre Call Centers, Field Service
Sale management and support Internet Customer Service
Market Analysis Service Interaction Centre
Internet, Tele marketing Business Partner Collaboration
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Product and brand management
The Customer focused organization: CRM Model
The idea here is to develop systems that allow flexibility, work on not completely
predefined processes so as to enable front office to be proactive to each customer needs
The Mindset impact on CRM
A typical data warehouse will have the following components:
While developing a data warehouse one takes into account all the legacy and operation
systems. But typically sales teams could be managing leads on an excel worksheet.
Sometimes critical DSS input like Profitability Analysis itself may reside on a
worksheet.
Thus a Data Warehouse solution must be able to accept information from such
unstructured sources as well as budget for an open architecture to enable plug-in for
systems to be developed in the future.
a) Generally the existing information is mapped into a data warehouse. Since a
customer centric info-base is being developed, its is critical that extensive customer
OLAP Tool
Risk
Cube
F P & A
Cube
Mktg &
Sales Cube
Campaign
Mgmt
Data
Warehouse
Legacy & Operation
Extract & Transfer
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research is done to identify their information needs and thus what profile data will be
relevant for us. Thus any data-warehousing project needs to work closely with the
research team.
b) After extracting the data from various systems, we need to scrub and clean the data,
reduplicated.
c) Even though we may find 80% of the names in a database of a million customers
using combinations of lets say a 1000 first and last names, to take into account all
possible combinations we may actually need a database of 10,000 first and last
names. Even then we may not be able to comprehensively cover all future
combinations. Now, the system must expect this kind of input on a regular basis
rather than it happening by exception, as is the case with updating masters in a
traditional system.
d) Ad-hoc querying is a tool that is most often used in such applications. Unfortunately
not much effort is made to make this tool end-user friendly so that even a layman
could run his/her reports. Typically a data-warehouse and data mining person is
placed in information technology to manage all queries. With the advent of tools like
Metadata Repository, drill down OLAP tools and Palm Pilots it is now possible for
hardcore marketing and sales types to directly access and run their queries. Infact we
need to budget for training the sales and marketing team with the use of data-
warehouse.
e) The real power of the CRM system is its ability to provide a rich, value added
experience to our customers at all touch points call Centers, kiosks, retail outlets,
mobile devices, Internet and branches. Integration and information dissemination
must happen at all these points. Thus the CRM specialist in marketing must be well
versed with all these tools and techniques.
eCRM
What is eCRM?
In simplest terms eCRM provides companies with means to conduct interactive,
personalized and relevant communications with customer across both electronic and
traditional channels. It utilizes a complete view of the customer to make decisions about
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messaging, offers and channel delivery. It synchronizes communication across otherwise
disjoint-customer facing systems. It adheres to permission based practices, respecting
individuals preferences regarding how and whether they wish to communicate with you
and it focuses on understanding how the economics of customer relationship affect the
business.
eCRM Vs CRM
CRM is essentially a business strategy for acquiring and maintaining the right
customers over the long term. Within this framework, a number of channels exist for
interacting with customers. One of these channels is electronic and has been labeled
e-commerce or e-business. This electronic channel does not replace the sales force,
the call Centre, or even the fax. It is simply another extension, albeit a powerful new one,
to the customer. The thrust of eCRM is not what the organisation is doing on the web
but how fully the organization ties its on-line channel back to its traditional channels, or
customer touch points.
Why employ eCRM?
Companies need to take firm initiatives on the eCRM frontier to
Optimize the value of interactive relationship
Enable the business to extend its personalized reach
Company-ordinate marketing activities across all customer channels.
Leverage customer information for more effective emarketing and ebusiness
Focus the business on improving customer relationship and earning a greater share
of each customers business through consistent measurement, assessment and
actionable customer strategies.
The six Es of eCRM
1. Electronic channels
2. Enterprise
3. Empowerment
4. Economics
5. Evaluation
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6. External Information
eCRM Architecture
The primary inputs to this module are mainly from the eCRM Assessment and strategy
alignment modules. During this stage the company will try and develop a Connected
Enterprise Architecture (CEA) within the context of the companys own CRM strategy.
The following is a set of technical eCRM capabilities and applications that collectively
and ideally comprise a full eCRM solution:
Customer Analytical Software
Data mining software
Campaign Management software
Business Simulation A real time decision engine
Review and Assessment of CRM solutions
CRM software applications embody best practices and employs advanced technologies to
help organizations achieve these goals.
Categories of CRM solutions
Any enterprise, which wants to implement CRM solutions, can choose from four
categories of solutions Integrated applications suite
Interfaced applications bundle
Interfaced best of breed solutions
Best of cluster
Selecting an interfaced best of breed approach for pure functionality or a front office
application suite solely for integration limits enterprise choices. Enterprises need to start
with a clear picture of the basic truths of integration, interfacing and functionality. An
integrated application suite is a set of application that employs a common architecture,
referencing a common logical database with a single schema. Some suites are more often
interfaced application bundle i.e. a set of interfaced application from a single vendor
containing more than one technical architecture or more than one logical database-
frequently assembled by the vendor through the process of acquisition or partnership
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An alternative approach to suites is an interfaced best of breed solution an approach
whereby an enterprise selects from multiple vendors a set of applications that must be
interfaced to work together, either by the enterprise, one of the selected vendors or a third
party integrator. The individual applications are not the best in any objective sense.
Rather, some enterprises select the applications because they best meet the particular
needs. The challenge of this approach is that, in some cases, the enterprise fails to
complete the necessary interfaces to get the individual applications working together;
consequently, the applications remain stove pipes. Best of cluster is similar to best of
breed except that here best is chosen from the cluster and they are interfaced.
Key requirements for CRM solutions
Some of the functional and technical requirements for CRM solutions are as listed below:
Business intelligence and analytical capabilities
Unified channels of customer interactions
Support for web based functionality
Centralized repository for customer information
Integrated work flow
Integration with ERP applications
Functional Components of CRM solutionCRM applications are a convergence of functional components, advanced technologies
and channels. Functional components and channels are described below:
Sales applications
Common applications include calendar and scheduling, contact and account management;
compensation; opportunity and pipeline management; sales forecasting; proposal
generation and management; pricing; territory assignment and management; and expense
reporting.
Marketing applications
These include web based and traditional marketing campaign planning, execution, and
analysis; listgeneration and management; budgeting and forecasting; collateral generation
and marketing materials management.
Customer service and support applications
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These include customer care; incident, defect and order tracking; field service; problem
and solution database; repair scheduling and dispatching; service agreements and
contracts; and service request management.
Given below is a brief review of what some of the known vendors in this area have in
their applications for these verticals. The table 2 at the end gives comparative assessment
of the products discussed below for the above verticals:
SIEBEL
It continues to out market and out sell the competition. It is one of the few front office
suite vendors having vertical specific functions. Its functionality is compelling. It can be
integrated with most of the back office solution like SAP and Oracle. It has solutions for
automotive, public sector (US), communications, consumer goods, apparel and footwear,
energy, finance, insurance, health care, life sciences and high technology industry sectors.
The solutions for the verticals described above are discussed below:
For Consumer goods: a Siebel e Consumer goods offers e Business solution spanning
the entire demand chain from the end consumer, through the retailer and the
wholesaler, to the manufacturer. It has robust trade promotions planning
functionality allowing users to manage customer promotion plans and the funds to
support them, while comprehensive route planning functionality enables integrated
account targeting. Using Siebel e Consumer Goods, organizations can also identify
customer-buying behaviors and translate this understanding into new trade
promotions and product offerings
For Financial Services: Siebel e Finance enables banking, brokerage, insurance, and
capital market or generations to establish and maintain long term profitable
relationship with consumers, small businesses, and corporate customers. The
organizations can capitalize on information captured during each customer
interaction to more effectively cross-sell and up-sell additional products and services.Additionally, Siebel e Finance provides a comprehensive view of the entire customer
relationship across multiple product lines, enabling financial service organizations to
provide a personalized experience across all channels.
For Healthcare: Siebel e Healthcare gives organizations the ability to streamline and
improve sales, member services, medical management, and network management
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services. By using multiple distribution channels, including the Internet, call Centers,
home office staff and independent brokers, Siebel e Healthcare provides
organizations with a single view of their customers, thereby ensuring better service
and improved quality of care.
For telecom service providers: Siebel e Communications helps wireless, cable, and
Internet service providers to target and win the right customers, accelerate service
delivery, and provide service across all touch points. Siebel e Communications
embodies the industrys best practices for generating accurate service orders,
managing billing inquiries and adjustments, and up-selling and cross-selling
additional services. By using Siebel e Communications integration technology,
service representatives and salespeople can instantly access information such as
billing, order management, and network management from Operation Support
Systems (OSS), to deliver highly responsive customer support and significantly
increase sales.
Siebel 99, the vendor's major release, boasts 117 applications that span sales and service
and incorporate multiple vertical markets.A major effort in the new application release is it integrates all the channels companies
use to contact customers: Web, E-mail, voice, wireless and face-to-face contact.
Some of Siebel employee-
facing applications are:
Some of Siebel customer-
facing applications are:
Some of the additional products
available in version 6.0
Siebel Call Center Siebel e ChannelSiebel e Business Connector for SAP
R/3
Siebel e Mail Response Siebel e Customer Siebel Communications Server
Siebel Field Service Siebel e Marketing Siebel Distance Learning
Siebel Marketing Siebel e Sales Siebel Global Enterprise Support
Siebel Sales Siebel eService Siebel Language Extensions
Siebel Service Siebel Wireless
Clarify
It offers customer service & support and field service suite; however its sales
functionality is immature.
Oracle
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Oracle is betting everything on its thin, Web Based, centralized computing model. The
Internet computing architecture is compelling for connected non-mobile users; Oracle is
rebuilding functionality on the new platform and integrates its various acquired products.
It offers a broad set of functionality across e-commerce, front office and business
intelligence applications.
Vantive
Vantive offers a compelling customer service and support and field service suite. The rest
of its front office functionality makes it suite more of a bundle. The solution is integrated
with PeopleSoft at the back office.
Some frequent modules that most CRM have is:
Forecast Management, Encyclopedia Management, Campaign Management, Brand
Management, Opportunity Management, and Event Management.
CRM solutions are intertwined combinations of technology and business processes. In
order to be effective CRM service providers will need a balanced understanding of both
products and services. Its necessary to have an expertise in not CRM technology but also
customer service processes.
The potential use of CRM lies in it being the leading indicator of future revenue than just
being used as a customer facing transaction-processing tool or as a lagging indicator
communicating past consumer grievances.
The complete concept of CRM can be mapped on a technology solution as per the
following blue print. The databases feed the technology infrastructure which links You
with the customer touch points.
Thus we have four components of a CRM initiative rollout
Customer Value Management Strategy
CRM roadmap keeping in mind industry nuances
Database solutions
Customer access channels
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Case Study 1: Implementing a Technology-
Based CRM Solution
The ICICI Experience
ICICI set up as Development Bank over four decades ago to provide products and
services for the corporate segment, diversified into the retail segment of the financial
markets in the early 1990s.
In 1994, it established ICICI bank as a commercial bank that is flexible, innovative and
prompt in meeting customer requirements. In addition to the bank, the retail initiatives
include Prudential ICICI AMC, ICICI Personal Financial Services, ICICI Capital
Services, and ICICI web trade, Prudential ICICI Life Insurance, ICICI Lombard Generalinsurance. This apart the retail initiatives also include a plethora of web based businesses
including city portals and various other utility sites such as billjunction.com,
icicimoneymanager.com, and magiccart.com, among others.
The Retail Strategy
As part of plans, it is implementing various projects to establish world class CRM
practices, which would provide an integrated view of its customers to everyone in the
organization. CRM at ICICI involves increased communication between the virtual
universal bank and its customers and prospects, as well as within the group itself. The
underlying idea is to enhance every instance of contact with the customer. ICICI believes
that a true customer centric relationship can only be accomplished by considering the
unique perspectives of every single customer of the organization. Hence the pressing
need to put in place a technology enabled CRM solution.
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The CRM Roadmap
CRM, at ICICI, is viewed as a discipline as well as a set of discrete software
technologies, which will focus on automating and improving the business processes
associated with the customer face to-face, call Centre, ATM, web, telephone, kiosk,
bank branch, sales associates, etc so as to allow ICICI to carry out cradle-to-grave
customer management more efficiently. It should allow ICICI to engage in one-to-one
marketing by tracking complete customer life-cycle history. To begin with it will
automate process-flow tracking in the product sales process, and be able to generate
customized reports and promote cross selling. It will also enable efficient campaign
management by providing a software interface for definition, tracking, execution, and
analysis of campaigns.
From an architecture perspective, the enterprise-wide CRM solution should seamlessly
integrate non-transactional related customer information housed in the front-office with
the transactional information housed in the back office.
Implementing CRM
A very detailed and comprehensive CRM action plan was developed based on the
understanding that CRM will require enterprise wide transformation.
The CRM Business Transformation Map below shows the various aspects of that change.
Product Sales Channel Marketing Service Customer
Product
Management
Place
Management
Promotion
Management
Channel
Management
Contact
Management
Customer
Management
Product
Performance
Place
Performance
Program
Performance
Customer
Revenues
CustomerPatterns &
Profitability
Customer
Lifetime Value
and Loyalty
BUSINESS FOCUS
ORGANISATIONAL STRUCTURE
BUSINESS METRICS
MARKETING FOCUS
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Mass
Advertising
Sales
Promotion
Marketing
Campaigns
Integrated Marketing
Communications
Segment
Specific
Marketing
CRM
Transaction
Processing
Data
Maintenance
Data Access Data Warehouse Data Marts Customer
Touch point
Systems
Source: How to Get There from Here by Melinda Nykamp, President, Nykamp Consulting group
Interviews with key individuals throughout the organization helped identify different
initiatives that have been launched, all focused on CRM.
The next step in the planning process was a Gap Analysis. This analysis essentially
compared current stage against optimal relative to the five aspects of business, to identify
and specifically describe the gaps.
The CRM Business Cycle:
Understand and Differentiate
Organizations cannot have a relationship with the customer unless they understand
them what they value, what types of services are important to them, how and when
they like to interact, and what they wan to buy. True understanding is based on a
combination of detailed analysis and interaction. ICICI groups customers need to see
that the company is differentiating service and communication based on both what they
have learned independently and on what the customer has told them. At the same time,
differentiation should be based on the value customer are expected to deliver.
Develop and Customize
ICICI believes that the extent of customization should be based on the potential value
delivered by the customer segment.
Interact and Deliver
ICICI is strongly of the opinion that value is not just based on the price of the product or
the discounts offered. In fact, customer perceptions of value are based on a number of
factors including the quality of products and service, convenience, speed, ease of use,
responsiveness, and service excellence.
Acquire and Retain
TECHNOLOGY
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The more ICICI learns about customers, the easier it is to pinpoint those that are
producing the greatest value for the organization. Successful customer retention basically
involves getting it right on an ongoing basis. And that is exactly what ICICI group aims
to achieve out of its CRM initiatives.
Successful customer retention is based very simply on the organizations ability to
constantly deliver on three principles:
Maintain interaction; never stop listening to customers
Deliver on customers value definition. Remember that customers change as they
move through differing life stages; be alert for the changes and be prepared to modify
the service and value proposition as they change.
Prioritizing Changes
Because there might be many gaps, therefore many changes that an organization
will need to make, prioritization was critical. The evaluation of each of the
strategies identified to resolve the gaps at ICICI were based on:
Cost to implement including initial one time costs, as well as anticipated ongoing
expenses.
Overall benefit some changes may have higher impacts on an organizations ability
to increase customer value and loyalty.
Feasibility based on the organization readiness, data and systems support, resource
skill sets and a number of other factors.
Time Required including the time necessary for training and addressing cultural
change management issues related to a specific strategy
Creating an Action Plan
The next step in the planning process was the development of a very detailed
action plan. While the complete plan might span three or more years, it was based
on three-month phases with clear deliverables that will demonstrate both progressand quick hits or measures of success. The plan identified interdependent
activities and should comprehensively detail the time and resources required for
each activity.
Another key factor for the planning process was the Leadership Action Plan.
Advancing on the CRM transformation map required significant organization
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change. This part of the action plan helped assess the drivers and restraints of
change and the organizations readiness to assess the change.
Selecting and Implementing a Technology Based Solution
Technology
The successes of the CRM initiatives were contingent on various decisions pertaining to
technology. Some of the key issues were: -
(a) Make or Buy: - The decision to buy was based on an evaluation of an identified set of
criteria. Some criteria were Functionality, Flexibility, Scalability, Fit with existing
architecture, etc. was decided to purchase an off-the-shelf CRM solution and
customize it to suit ICICIs requirements.
(b) From whom to buy: Some Criteria included were CRM expertise, Retail Finance
Experience, Credentials including financials, client list, life history, etc. A detailed
Request for Information (RFI) was sent to each of the short listed companies. After
receiving the RFIs, another round of evaluation was done. After short listing two
product vendors and system integrators, reference calls were made to several of the
past clients of all shortlisted companies.
Processes
All processes were mapped on to product by understanding the details. During the course
of the process mapping, several opportunities for improvement were identified and
implemented.
The Sales Process Pre CRM and Post Implementation of CRM
Call Centre Sales Agent Scrutiny Credit Agent Operations
Independent Databases
Database
Call Centre Sales Agent Scrutiny Credit Agent Operations
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Lessons so far from the ICICI experience
If CRM involves optimizing product, price, place of distribution, promotion, sales and
service, why are so many companies struggling? Hasnt anyone really mastered the art
and science of CRM, and if not, why is it so difficult?
CRM is difficult because it is an enterprise wide initiative.
CRM is not a technology initiative. Many have confused CRM as a technology
initiative, and assigned the CRM implementation project to their information system or
information technology group. CRM conferences often equate to technology exhibits
and demonstrations. Technology is needed in order to implement CRM particularly the
customization part but technology is not the driver of CRM, or the solution to
successful CRM implementation.
CRM is not exclusively a marketing initiative. Many organisation have merely
equated CRM with customer focused marketing, or data-driven/database marketing.
CRM results in more effective, data driven marketing efforts; CRM requires marketing
experience. But CRM is strictly not a marketing initiative.
CRM is not exclusively a sales initiative. Similar to marketing, CRM is often lodged
within the sales department. The sales-force, after all, is extremely close to their
customersunderstanding their needs and wants., and trying to fulfill them. Sales,
however, is just one functional area that can benefit from CRM, and that is necessary for
effective CRM.
CRM is not exclusively a service initiative. As with sales and marketing, customer
service is one functional aspect of successful CRM implementation. But customer
service is not the sole driver of the process.
CRM involves marketing, sales, service, and technology, as well as the other inner
workings of the organization. Having even one broken spoke in the wheel. one area of
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the organization that is less than committed to CRM can make the difference between
success and failure.
Case Study 2: Building Relationship with Doctors
For Effective Marketing
The Case of the Pharmaceutical Industry
Introduction
The Indian Pharmaceutical market is worth approx. Rs. 140000 million growing at a
healthy 10%. There are around 16,000 players both in the organized and the unorganized
market vying for a piece of this pie. It is a very fragmented market with the number one
player, Glaxo Welcome, having a market share of 5.8%. Infact the combined of the top 5
companies does not exceed 20%. Earlier MNCs used to sell on the quality plank but
today quality is a table stake condition where even the smallest player is able to meet the
highest quality norms.
Doctor Population
There are approximately 500,000 doctors in India who are registered with the Indian
Medical Association. The largest of the pharmaceutical companies cannot meet more
than 125,000 of this doctor population. As a result most of the doctors are being met by
atleast 60-100 companies.
Out of the total doctor population as much as 60-65% are general practitioners within the
basic MBBS degree. The higher specialties constitute the remaining 35-40%.
Promotion
In an ethical market product promotion is directed solely to the qualified directors. No
advertising mentioning the brand names is allowed in the lay press. The medical
representative (MR) is the major means of promotion though other media like direct mail,
journal advertising, conferences, also play a role albeit a limited one.
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Starting a CRM initiative
Having understood the major characteristics of the industry, the identification,
differentiation, interaction and customization (IDIC), model as suggested by Don Peppers
and Martha Rogers would be used to understand the steps to a CRM initiative.
Identification
The first step towards any CRM initiative is identification of the customer. Each medical
representative maintains a list of doctors in his area. This list is generated through
interviews with stockiest, retailers, as well as his peers from other companies. The list
called the MSL (must see list), MVL (Must Visit List), Customer list, etc typically lists
the name, address, telephone no., specialty, qualification, visit timings, and other basic
data of the doctor. The key driver for a CRM program is integration of this data from all
the MRs to a central database.
The next step is to add to this data by collecting details from other sources like
Membership directories of association: Almost all cities have their branches of the
Indian Medical Associations (IMA). These have a directory of all their members listing
their contact details and some personal information. These are a good source to begin
with but most are updated at very long intervals and hence the veracity of the data has to
be checked. Similarly, there are individual associations for almost all the specialties
whose membership directories are also easily available.
List of conference participants: each specialty of doctor organizes a national level
conference every year where members from all over the country attend. Details can becollected through the sponsorship of the front-desk; organizing contests, or distributing
give always in exchange for information.
Doctors Referral: Another route would be akin to a member get member scheme
wherein doctors would be encouraged to refer follow practitioners.
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Thus a semblance of a database would take shape. The term is a misnomer, since at best
it is a customer list, as it contains nothing more than contact information along with some
basic information. But nevertheless it is a starting point.
The database at no stage can be termed as final as collection of doctor details is an
ongoing process. Continues additions, updating and deletions are always taking place.
The list cam be mined for details of specialty wise break-up, geographical coverage etc,
to serve as a tool for the marketing decision making process.
Differentiation
The success of any loyalty program lies in differentiating the key customers. Typically, a
MSR would classify his doctors using the ABC Method as core, important and others
based on the amount of business he gets.(or expects to get) from them. The number of
sub-classes would vary but the principle would be the same. In a typical pyramidal
fashion the top-rung doctors who are the least in number would be commercially most
important and the importance would linearly decrease as one goes down the pyramid. The
numbers would propotionately increase as per the Pareto principle.
The point to be borne in mind is that the whole basis of diffrentiation is being done on
very subjective terms of the perception of the local MR unlike other industries viz.
Airlines, who would classify frequent fliers based on data collected from reservation.
Since there is no formal mechanism of capturing data about the revenue generated from a
doctor, the MR is the sole and final judge.
Thus the database formed is step one, can be now classified into the important doctors
and the not so important ones.
Interaction
Now comes the stage of building on the database collected and refined in the above 2
stages. The basic idea now is to build on the data collected in the first stage. The idea is
get to know the doctor intimately. His hobbies, likes, dislikes, family details,etc. The
fundamental premise being that the doctor is as human as anybody else is and hence we
should recognise his individuality. It is of utmost important that it is decided beforehand
what kind of information would be collected and much more importantly how it will be
used.
Interaction can be done at two levels:
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Firstly, personally at the MR level: the most productive would be using human
intervention. The MR can easily collect most of the information from his day to day
interaction with his customers. Alternatively a formal structured questionnaire can also
be administered.The biggest hurdle to this approach is not surprisingly enough the MR. A level of
conviction has to e brought into him that the data he would collect would actually be used
and more importantly will help him do his job better. Numerous instances abound of
companies who have gone about collecting loads of information on their doctors through
their MRs and finally not using them at all.
Secondly. Direct at the corporate level. : The structured questionnaires requesting
further details can also be mailed to doctors with each response entitled to a token gift,
etc. This approach typically would yield a lower rate of return but the quality of
information would be superior to the first approach as it is coming directly from the
doctor. The information collected is then incorporated to the basic database earlier
formed. Just to give an idea of the type of information collected by companies consider
the following:
Personal information : date of birth, marriage anniversary, details of children,
qualification and experience, etc
Hobbies and Interests: Activities during spare time, tv channels watched, general
interest, magazines read, favorite vacation destinations, etc
Professional Interests: Type and name of medical journals read, professional
membership of associations, attendance at national conferences, etc
Ownership Details: Household durables owned, vehicle ownership, etc
Companies have been able to collect enormous amount of such data, through either of the
means elaborated earlier. What is important to note that they have been able to
demonstrate their sincerity in actually using this data.
Customization
This is the time to start using the data. The easiest and the most preliminary step is to
start greeting the doctor on his birthday and marriage anniversary. From a simple card
personally signed to a personal phone call from the head office anywhere in the country
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to a birthday cake being actually presented are some of the ideas. Even bouquets can be
delivered at the doorstep. A company even arranges for the doctor to have dinner with
spouse on their marriage anniversary, with the tab taken care of course!
But more important to customize the interaction with the doctor based on the data we
have on him. Gifts based on the interests and hobbies can be presented. If a doctor has
expressed interest in national conferences of his specialty the same can be arranged.
The success of the whole programmedd hinges on how well can the companies pass on
the data of the doctor to their field force and train them on how to use this data. He is
actually the man of the moment. It is necessary that the information received on an
interaction be fed into the system so that it can be used for the next interaction. A sort of
master-database can be generated which would recover every contact with a doctor
through the field, mail, telephone, web, etc. this master database would be the key driver
to foster a learning relationship.
Loyalty Programmed
The next obvious step is to have a loyalty programmed as a frequency marketing
initiative. An ideal loyalty programmed would be able to identify its key accounts,
reward them for their custom and encourage them to increase their spend.
This concept in case of the pharmaceutical industry has a twist since the customer (the
doctor) is not the actual consumer (the patient) of the product. Thus there are ethical
issues involved in rewarding points in return for prescriptions One cannot have a reward
programmed based on the redemption of these points.
One approach would be to set the whole programmed based on the classification into
which the doctor falls. Thus the lowest rung would be restricted to the basic of activities.
The number and the level of activities would increase as the important of the doctor
grows. A branded programmed can be started for the most important doctors. It is
important that it is clearly defined at the onset what will be the objective of the
programmed and more importantly convey the exclusivity of the programmed. The
doctor has to be made to realize that he is the chosen one. All activities and inputs
should only reinforce this communication.
The success of such a programmed hinges on making the doctor covet the membership to
the programmed. Thus a continues monitoring is required of the returns generated from
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the doctor. If they fall below a predefined limit then the doctor can be downgraded and
his privileges reduce.
Direct Marketing
It is a valuable tool for effective CRM. Since a captive database has been put into place it
can easily lend itself to direct marketing initiatives. As the primary fields captured are the
contact address a program through mail is easiest to accomplish. Brand awareness
mailers, new launches, contests all can be conducted by mail. Information technology has
several advantages
It is very cost effective: A large audience can be touched at a relatively cheaper cost
as compared to personal selling.
It can be targeted and specific to the right target audience in term of specialization or
geographical area.
It is measurable with use of reply devices one can immediately gauge the efficacy of
a campaign. In fact since the target audience for a brand is usually sharply defined in
terms of their specialization e.g. An allergy product to ENTs, Dermatologists and GPs,
the response received is usually much higher then that accepted as a norm in other
industries. A response of 15-20% can be easily achieved through such communications.
Most of the pharmaceutical companies have realized the advantages of this mode of
communication. The primary rationale is to save the time of the field by promoting the
low involvement (for the doctor) products, promote brand recall for a new product,
exploit alternative avenues for brand promotion etc.
Apart from mail other DM media like telemarketing and web have also been tried. While
telemarketing has been tried for promoting new launches to get instant feedbacks the web
has still to achieve its potential. The PC penetration in India is still very low which
handicaps the growth of this mode. Using the e-mail to correspond and interact withdoctors is being tried. It is especially useful for targeting higher specialties, which is more
technology savvy and information hungry.
Measurement Systems
The measurement system would require studying the prescription profile of the doctors
who are being exposed to the CRM programmed vis a vis a control sample who are met
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by the field force but not exposed to CRM activities. The prescription given by the
doctors can be studied over a particular time frame and the amount of prescriptions
before exposure to the programmed can be measured. The idea is to check if the
prescription levels have increased after the doctor has been made the member of the
loyalty programmed. This method would at best provide a qualitative idea but would
nevertheless give an idea of the success or failure of the programmed.
Conclusion
The importance of internally marketing the CRM programmed is very important. The
success of the whole programmed hinges on the support of the top management who can
act as a mentor. The programmed takes time to take off and much more time to actually
show results.
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Case Study 3: Relationship Building in
Cement Marketing
The Case of Indian