A Journey from Customer Relationship Management (CRM)
to Corporate Renaissance (CR)


By

Mr. Saroj Kumar Dash
Lecturer
Skyline Institute of Engineering and Technology
Greater Noida
E-mail:
saroj_dash111@rediffmail.com
 


Abstract:

Business in south Asia is currently at low ebb. So is the corporate confidence.  There is a clear and present danger from the forces of global competition, to the corporate sector in South Asia, if it does not re-invent itself and engineer massive renaissance. The risk mandates not only a better management of macro parameters of the economy but also necessitates a new strategy at the firm level. The strategy is customer relations management (CRM). The concept of CRM is premised on a simple logic of business- it must keep tracking customers once attracted; retain them in business portfolio; and, profit from their growth. Shorn of all managerial jargons, CRM epitomizes a 'marriage of relationship marketing with the emerging information technology'. The paper describes the concept and mechanics of customer relationship management; illustrates how CRM helps corporate renaissance in hard times; and finally, recommends a line of action for an effective CRM implementation towards a quicker corporate renaissance. Alongside, the paper urges business schools of South Asia to incorporate CRM in their teaching curricula so that the business and academics can continue to stay relevant to each other.

Customer Relationship Management (CRM) and Corporate Renaissance

* "Industrial production of India rose by a mere 1.6% in the first six months of 2001-2 over the previous year…Indian exports fell by 2.3% in the first five months of the current financial year...Gross domestic product (GDP) hovers around 6% in the first six month of the current financial year thanks to higher contributions from the service sector…The growth projections are not sustainable in the nearer frame of time…. Bank borrowings of the Indian companies plummeted 40% to Rs.20, 894 crores in the first six months of the current financial year". 
(Source: Business at War, India Today, November 19, 2001 pp. 68-73.)

* In the cellular business, it costs five times more to acquire a customer. It is the same in every business. Retaining this customer is the critical first step for successes.
(Harsh Goenka, Chairman, RPG Enterprises, Kolkata, India)

Indian business is in full gloom as these quick statistics show. In line with the unmistakable signs of a global recession, more pronounced after the tragic events of September the Eleventh in USA, Indian corporate as a whole, stand numb at the plummeting profits, spiraling customer expectations and a long struggle to stay afloat (Business India, 2001). The search is on for a winning formula, a quick pull back and for a continued relevance (India Today, November 2001).

In simple words, the business in India and indeed in South Asia is on the look out for a corporate renaissance. For some, the search ends on such traditional tips as cost reduction, re-engineering, and market expansion and productivity improvement. The others are experimenting with such new remedies as customer orientation, customer service & care; quick product launches and niche development. In this burgeoning crowd of corporate mourners, there are several braves and visionaries too (Aditya Birla group, RPG and Netcraft for instance). They have tuned-in to an altogether new way of doing business and effecting corporate renaissance-customer relationship management (CRM for short) (Business World, November 2001).

The paper aims therefore, to describe briefly the concept of customer relations management, the ingredients of a CRM and the myths surrounding it.  It hopes to stimulate a serious discussion on how CRM can be effectively used for a corporate renaissance in South Asia, which is reeling under a business downturn. Finally, it recommends that the CRM should be aggressively incorporated in the business education curricula so that the business schools of this part of the world continue to be the source of intellectual output and corporate training. 

CRM: A Concept in the Making

If the essence of CRM is customer and continuity, the term CRM can as well be an acronym for any of the following cognate marketing terms:

* Caring Relations Management (CRM)
* Continuous Relations Management (CRM)
* Creative Relations Management (CRM)
* Customer Retention Management (CRM)
* Customer Return Management (CRM)
* Cost Reduction Management (CRM)
* Cost and Return Management (CRM)

In more ways than one, CRM represents a logical end of the philosophy that the business should be customer oriented (Gamble etal, 2000, Payne 1997). It traversed successive strains of thoughts to reach what is now viewed as a new business paradigm (Figure 1). For instance, the early marketing paradigms prevalent until the sixties, ordained marketers to satisfy customer needs that were essentially nature created. Later in the seventies, the marketing functions served the customers wants that were nothing but 'specific solutions' to the needs and were the outcome of the marketing initiatives. Marketing thoughts of the eighties devoted themselves to meet the higher, more lifestyle oriented demands and expectations of customers. These were the result of the then social and economic environment. The nineties witnessed the most potent force of our times, information technology. Naturally marketing thoughts focused on how to leverage on the same and serve the customers (Kotler, 2000). One of the fall out of the era is Customer relationship management. CRM thus, represents 'the marriage between the customer orientation and the emerging information technology to produce a memorable relationship experience to the marketers as well as to the customers'. Exhibit 1 summarizes the marketing evolution culminating at the CRM:

The CRM concept and technology is more than just identifying who our customers are, providing them with a quality service and analyzing their preferences. The key dimensions of CRM that were largely ignored in the past are customer loyalty and customer profitability. A report published in the Harvard Business Review identified that an increase in customer loyalty by five percent could increase profits in telecom by over 50 percent (Cockburn, 2000). A recent study by ICL for a UK Telco too highlights importance of retention of profitable customers, especially the top ten percent of profitable customers in terms of generating additional revenue and profit. For example, through a business model, it forecasts that a ten percent churn in the segment of top customers would reduce profits by more than 25 percent:

The business focus must be on the high value customer segments, specifically to ensure their retention and revenue growth by excellent customer service and by individually tailored services. In an example from the utility industry where the ABC method was used to determine the cost of the customer activities, it was found that the maximum profit was achieved with 85 per cent of the customer base, yet 15 per cent of least-value customers dissipated the profit accumulated by the higher ranked 45 per cent. These revenue and profit profiles serve to illustrate how important profitability analysis is to the health of the business. It sets the scene for a remedial action through CRM. Figure 2 summarizes how the CRM as a dream-tool contributes to corporate renaissance.

How to Strategise CRM 

Given the importance of the CRM in business, it is a high-stake strategy and is planned carefully and holistically (Buttle, 1996; Boar, 1995, Brown and PriceWaterhouse Coopers, 1999). It is an orchestration of a series of inputs and processes that must come right. Figure 3 shows a
six-step process of the CRM:

An effective CRM strategy needs to be customized for a business as a blind imposition will only impede its profitability (Peterson, 1999). As a rule the CRM strategy is expected to vary from one business to another and indeed for one segment to another (Peppers & Rogers, 1996). For example, the business development force of a cellular provider with a target to raise revenue from the 'singles' segment, may want to earn revenue from its services designed specifically for the single segment, reduce customer churn by ensuring frequent upgrades and reduce costs by promoting self-care in most transactions. Such strategy may not be suited to the small traders as a segment. 

For CRM strategy to be effective, several sets of data are required. For instance, a cellular service provider requires such key performance indicators (KPIs) as the number of profitable customers, the number of unprofitable customers who have churned in the last quarter and the projected customer lifetime value (CLV) of the most valuable segments. These are in addition to the total number of subscribers usually available with a firm. The data warehouse performs a pivotal role in this regard (Barquin & Edelstein, 1997; Berry & Linoff, 1999). A typical data warehouse will   yield a repository of customer information, revenue, behavior and cost data. It will help the CRM marketers access information by the analysis applications and broadcast the required KPI information throughout the organization. All this is to ensure that the business is focused on customer segments, which, over time, are likely to turn into ideal segments and support the marketing campaigns by supplying specific information for specific campaigns. This customer-led data warehousing approach for CRM has direct implications (Lan, 1998; Berry & Linoff, 1999; Stone, Merlin and Neil Woodcock, 1989). 

a. Aditya Birla Group (India)

Stepping in the shoes of his illustrious father, late Sri Aditya Birla, was never imagined to be easy by Kumar Mangalam Birla, the Chairman of the A.V. Birla Group, Mumbai. With sheer determination, restructuring, change and growth, Kumar Mangalam Birla grew his business from Rs.15,000 crores in 1996 to Rs.28,000 crores in 2001. Still better, Mr. Birla faces the current downturn optimistically. 'Downturn affords a huge opportunity as it alters perception, speeds up thinking process and provides an urgency for change and growth'- says Kumar. Thus under the tight business conditions for the others, he entered new industries that are based on knowledge technologies. At the same time, he has brought in information technology in all aspects of business. Naturally, customer relationship management is a chief organ of the his strategy to stay at par with the needs of the end users, intermediaries and influencers. His industries too range from commodities on one end (cement, aluminum, textiles, fertilizers) to life style brands (Madura ready to wear garment) on the other end. Setting up of such retailing icons as Planet fashion and Trouser towns fill the spectrum at the middle- all fertile ground for a CRM intervention.

The CRM Myths

Any new management and marketing philosophy receives its own share of confusion, misunderstanding and myths. CRM is no exception. Almost everyone in the Indian corporate sector who has heard of CRM, sounds excited of its presence and power (Agrawal, 2001). Confederation of Indian Industries (CII), the apex body of Indian corporate is doing its own bit through organizing well-attended and star-studded conferences in New Delhi as well as in all regions. Unfortunately, the ones who are at best 'jumping jacks' outnumber executives who truly comprehend the theme of CRM and its essence.

The excitement is reaching disproportionate levels. Although a formal survey of the CRM practitioners is underway, as a quick count, eleven companies out of the eighteen with which there was an interaction this year, reported their preoccupation with launching CRM or its variation in their firms. There is a sudden splurge of articles on CRM and eCRM in almost all types of journals and magazines including the magazine sections of newspapers. General interest magazines like India Today and Swagat profile CRM in business. While the interest in the CRM is encouraging, lack of clarity and the severe 'cognitive challenge' may inhibit the growth of CRM and systematic implementation. The misunderstanding and myths eventually contribute to the failure or disappointments with CRM. Figure 5 summarizes a set of quick findings of a 'reality-check' with a random group of Indian executives (n:115) visiting two leading business school of India. That the phenomenon is global one, the figure also summarizes findings of a survey of the Meta group on global scene (2000).

Towards More Effective CRM Implementation

Clearly, there is a need to ensure that CRM is not only understood properly (Buttle, 1996; Baron, 1997) but is also implemented strategically (Brown & PriceWaterhouseCoopers, 1999, Curry 2000). Only CRM can contribute to a dramatic but enduring corporate renaissance. A CRM practitioner needs to do a series of things right at the right time. The following eight guidelines-by no means exhaustive, help the process of effective CRM implementation in a firm:

Move from Myths to Reality

As outlined earlier, a large section of the corporate sector appear 'cognitively challenged' when it comes to CRM. Most executives either are unaware or appear overwhelmed by the surreal powers of the CRM. The truth is that CRM is neither powerful software nor a panacea for all corporate ailments (Agrawal, 2001; Boar, 1995). The need is to take a proper perspective and avoid unreasonable expectations. Figure 6 lists the most commonly found myths about CRM and shows the corresponding reality. Every CRM practitioner needs to pay heed to them while launching CRM in the firm.

Match Your CRM Needs with Customer Needs

CRM is not right for every company. Thus it is advisable for the corporate  sector to begin by clearly defining the business issues and needs, and then determine whether CRM can and should be a part of the solution. CRM strategies that are clearly linked to business objectives have a much greater likelihood of success. Similarly, CRM applications are just a component of a CRM strategy, but they are not the whole solution (Brown & PriceWaterhouse Coopers, 1999):

Leading the CRM efforts with technology solutions is akin to 'putting a cart before the horse' (Economist Intelligence Unit, 1998).

Finally, the CRM initiatives are intended to drive better relationships with customers (Cross & Smith, 1996). Relationships that are most important to a company are the ones that provide the greatest profit potential. To implement CRM strategy and technology, it is critical that the practicing firms understand value, needs, requirements and behavioural patterns of the customers (Major, 1992). This understanding juxtaposed with business needs, helps build systems and processes based on customer requirements and to better returns. The key to effective relationship management is crafting a comprehensive customer view (Eckerson, 1997).

CRM & Customer Retention

In order to leverage relationships, the CRM practicing companies must define and zero in on the right customers only (Major, 1992). CRM data warehousing and mining must be integrated to the goal of right customer identification and their sharp profiling (Boar, 1995). Many CRM efforts fail because the sales revenue data is stored separately from customer support and client history data (Barquin & Edelstein, 1997). What is required is to devise a database that pulls information from every department-from sales to customer support, and creates a unified report (Berry & Linoff, 1999). Any business that is serious about CRM, ought to seek out software systems that integrate data and draw up comparative charts that help drive sales and right customer retention decisions.

Take for instance the selling of a CT Scan or MRI - the two most expensive health diagnostic tools, to a hospital. The hospital buying a MRI spends over ten million rupees for it. Prima facie, to a brand marketer of MRI, any customer is a big customer and therefore retention worthy customer. Consequently, strong efforts follow to court and continue the relationship with this "big spender". However, what if the buying hospital overwhelms the MRI seller, ties up its customer support lines with constant complaints and demands too many special features in the ordered MRI? What if this customer desires special shipping options, buy back, etc., etc.? As we calculate the cost of these interaction patterns, the MRI marketer may find the buying hospital in reference to be less retention worthy or wrong customer as the cost of serving the big customer in the long run is not adequately covered by the margin on the one-time buyer of the MRI. The chosen CRM strategy must identify and isolate such cases and focus on right customers.

Involve the Right Customers in CRM Design and Implementation

As stated earlier, all CRM practitioners need to define their customer relationship goals and then identify the CRM policy, procedures, and cultural changes to support those goals (Curry, 2000). It helps if the firms involved their customers in the process (Gordon, 1998). "Customers are becoming an integral part of an organization's design process,"

This is not to suggest that the CRM firm should sit tight and do nothing until the customers react. Instead, the submission here is that the firms should identify the key customers that have a vested interest in the welfare of the CRM firms and have them validate the CRM 'interaction approaches'. The CRM practicing companies also need to realize that it is critical to provide seamless management of interactions (McKenna, 1993; Gordon, 1998). As communication channels multiply, customers will expect the organizations that they do business with, to provide accurate and consistent support and services across each of these channels (McKenna, 1993, Payne, 1997).

Keep Introducing CRM Enhancements Regularly

The CRM technologies introduced in an organization must remain vibrant and scalable (Curry, 2000). It should support the firms in better tracking and managing customer interactions (Peppers & Rogers 1996). Rules for prioritization, escalation and routing of complex issues can be automated within the system to reduce the time of resolution.  Quick resolutions help the service agents with trouble-shooting issues and serve as the foundation for self-service offerings (Sterne, 2000).

Providing self-service capabilities to customers frees the support organization from answering basic questions and allows them to focus time on resolving more complex issues (Sterne, 2000). Additional CRM enhancements are also evolving. Provisions of self-service, natural language processing and speech recognition technologies enhance processing of questions, e-mails, and phone calls with little or no interaction from live agents. Vendors are also embedding e-learning technologies into CRM products. Users can learn how to use the new systems and enhancements more quickly. Ultimately, it's the companies who use their customer data in conjunction with interaction management applications, and their CRM front end, that will handle customers more efficiently. As one CRM expert averred, "the big bang approach of doing everything all at once is a recipe for disaster. Instead, when constructing your long-term strategy, develop a phased plan. The ability to adapt to ever-changing customer needs and deliver value-added functionality will be a key component to a successful CRM strategy (Sterne, 2000).

Constantly Measure the Return on CRM

The old adage "You can't manage what you can't measure" remains true in CRM too. A part of the reason why CRM has failed to prove its worth to many is its perceived inability to demonstrate measurable benefits (Stone & Woodcock, 1989). No organization needs to be satisfied with the assumed or intuitive CRM benefits (Jayadev & Srinivas, 2001). The corporate need to ensure that their planned CRM strategies and expenditures are clearly linked to measurable business impacts (Chowdhary, 2001).

Measuring return on CRM has additional gains too. The computed ROI can be leveraged to secure further support and momentum for CRM efforts (Economist Intelligence Unit, 1998). Similarly, return on CRM stimulates personal actions.

Having stressed that ROI is an important issue for most executives while deploying CRM, the calculation is far from easy (Peterson, 1999). It depends on the way two key word 'return and investment' are defined. A typical set of ROI measures could include installation to the number of users to the number of customer touch-points to the bundling of e-CRM services a firm wants to implement and finally mass-customization. It is an admixture of hard and soft measures (Chowdhary, 2001). In a way it lies in the eyes of the beholder.

Make CRM An Enterprise Mission

CRM efforts within an organization are often championed by one functional area (probably marketing or information technology department). As a result, CRM strategies are pursued in a vacuum (Gordon, 1998). This approach fails to consider that almost all business processes involve more than one functional area within the company. The greater the level of integration among all functional areas, the better experience the firm has to serve its customers (Preiss, and Goldman, 1996). CRM initiative must follow the rule and transform into an enterprise-wide mission (Swift, 2001), instead of languishing as a crusade of a lone department (Agrawal, 2001).

Further, the support of all employees is vital here. Even the best CRM strategies and applications stand little chance of succeeding without the employee buy-in (Preiss, and Goldman, 1996). Leveraging employee input on CRM strategy development and application selection on the front-end will lead to greater buy-in post implementation (Musgrave & Michael, 1996). The efforts to ensure employee alignment should also include skill development, awards/incentives, tools to gather and address feedback, and ongoing communication strategies.

Enterprise-wide CRM can be all encompassing, consisting of people, processes and technology (Brown & PriceWaterhouseCoopers, 1999). Successful companies view the path to CRM as an evolution and are willing to make mistakes, learn from them, and regroup to get closer to the goal (Economist Intelligence Unit, 1998).

Validate CRM Output with an Intellectual Asset

CRM is important for business renaissance as is clear from the afore made discussion. It is thus equally important to run the CRM output and directions regularly through a credible intellectual asset (e.g. business school, university, research lab, academic). The interaction may be in the form of an independent validation of the CRM processes, model building or hypotheses development. Whatever be the form, CRM practitioners do need a 'sounding board' to have their CRM processes audited. For instance, a leading cellular firm religiously invites marketing faculty and others to audit their CRM practices (Agrawal, 2001).

Fortunately, a variety of options are available to the corporates in South Asia for this purpose. Chief among them is the Escotel Chair & Center for Customer Relationship Management (CRM) at the Indian Institute of Management, Lucknow (Annex. 2 for a profile). Such intellectual assets are quite handy, objective and low cost methods for the Corporates to stay sane with their CRM initiatives.

The intellectual assets help the CRM practitioners in three important ways. First, they ensure that CRM practitioners have a strategy first and only then buy the CRM software and not the other way round. The second benefit of the corporate and academic interface is that it helps the CRM practitioners to pick an integrated CRM approach and not just 'few bits and pieces strewn here or there'. In the latter case, CRM suffers due to lack of synergy. The third and final payoff from the linkage is that the CRM practitioners can share their implementation ideas and challenges with a full army of the young and fresh minds at the graduate business schools and multiply the output.

The business schools on their part too need to reinvent themselves and launch such new customer edge courses as the CRM, Relationship Marketing and Customer Care in syllabi. In fact, it is high time that business schools in South Asia offered CRM as a new specialization in the management teaching – on the lines of marketing, manufacturing and personnel management (Agrawal, 2001). Towards that objective, the business schools will need to develop fresh course outlines.

Annex 3 maps essential contents of a CRM course at the masters level of management programs.

CONCLUSION

The initial days when everything went in the name of CRM are over. The corporates will soon tighten their conceptualization of CRM, demand tangible financial and non-financial return on investment in CRM and, seek to have the output of the CRM audited and validated such that befits the organization and fulfills expectations of the customers. The guiding philosophy that all firms especially those with high customer turnover, must get a CRM project going somehow, will get tempered with a new wisdom. There is no doubting the fact that customer information is the lifeblood of any business and hence, CRM initiatives. However, CRM needs a better implementation if it were to contribute to the corporate renaissance.

Like any other new function, CRM too has its own drawbacks and challenges. Any organization that seeks to implement CRM may from now onwards want to focus on value creation and on a continuous stream of profits. They will give up their myopic fix that CRM is the responsibility of marketing or worse IT Dept. They must not mistake CRM as bribe or reward or a tool of forced relationships. The firms will realize that in order for CRM to contribute to corporate renaissance, the CRM responsibility must rise to the level of a CEO.

CRM will be more strategy driven, and thus be able to concentrate on what customer expects from the relationship. CRM technology will return to the role of an assisting tool. The 'final take' for the CEOs will be that CRM is and can be a vehicle for cultural change and integration in the organization. In short, a true CRM encourages a relationship view of the world that goes beyond customers, includes multi-members and facilitates corporate renaissance.
 


Mr. Saroj Kumar Dash
Lecturer
Skyline Institute of Engineering and Technology
Greater Noida
E-mail:
saroj_dash111@rediffmail.com
 

Source: E-mail February 1, 2006

   

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