BPO in Customer Relationship Management


By

Dr. A. Vinayagamoorthy
Reader
Department of Commerce, Periyar University
Salem-11 TN

Dr. Vijay Pithadia
Asst. Professor
R.K. College of Business Management
Kasturbadham, Bhavnagar Road, Rajkot-360020 GJ
 


Introduction

Winning in the market share through the world-class customer service is an important method adopted by many companies. Customer relationship management [CRM] is one of the customer care services and which provides the opportunity for the companies to maintain customers intact and also attract new market for their products.

Significance of CRM

Customer retention through better customer services is very significant for any business enterprise. The slowdown in global economy and tough competition among the enterprises made the companies to focus at cost containment and growth in profitability. Managing the good relationship with the customers is the only key to success and for the survival of the business. The concept customer relationship management helps companies to not only to retain the existing customers, but also widen the customer base. The cost of retaining a customer is one-fifth in the cost of acquiring a new customer. CRM helps in tracking marketing opportunities better and focus on those customers who not only increase the sales/volume but also in terms of profitability. CRM is defined as tracking customer behavior in order to develop marketing and maintaining customer relationship to a brand often by a development of software system provides one-on one contact between the marketing business and their customer.  CRM is a business strategy, which includes the people, processes, and technology associated with a marketing and service. It provides information for every corporate activity from marketing to fulfillment.

CRM embodies six key disciplines: Sales force Automation; Marketing Automation; Help Desk, and call center.  The CRM technology promise to retain customers and boost the top line continues to resonate with companies recovering from a tough economy.  Apart from customer relationship management, CRM also referred as customer relationship marketing and continuous retention marketing.

CRM's largest vendors such as siebel, people soft, Oracle, and SAP will continues to grow and expand their reach into newer application segments, such as marketing automation, partner-relationship management and even employee-relationship management.

ICICI Bank, HDFC Standard Life, UTI and ABN-Amro are now looking at business process management to increase returns on investment, improve customer relationship management and employee productivity.

The worldwide CRM services market reached $22 billion in 2002-03, a 10.6 percent increase from the prior year according to Gartner group. The group forecasts this market to hit $25.3 billion in 2003-04, and $47 billion by 2006.

The CRM market in India has witnessed a healthy growth and expects the CRM software market to grow at a CAGR of 40% to reach Rs 188 crores in 2006.

IBM's 2004 Global CRM Survey

According to 2004 Global CRM Study from IBM Business Consulting services, 85% of companies in America, Europe and Asia large and small, across every industry are not feeling fully successful with CRM. Fewer than 15% of global companies believe they are fully succeeding with their CRM initiatives, and another 20%to 30%are having only some success. The survey was conducted in late 2003 and early 2004 on 373 senior-level or above management decision makers or influencers at a mix of small, medium and large enterprises, to understand how companies attain CRM success and achieve significant return on investment. More than half of respondents' companies had annual revenues exceeding US$50 million; 30% of respondents reported annual revenues of US$ 1 billion to more than US$50 billion.

Despite the dismal results, CRM continues to hold great promise for most companies. Over 50% of the 373 companies surveyed believe CRM is relevant to increasing performance from a shareholder value perspective.75% consider CRM important in delivering revenue growth through improved customer experiences, retaining and growing existing customer bases, increasing customer acquisition rates and influencing the development of new product and services.

A successful CRM strategy should be at a heart of business model which focuses on a virtue of flexibility, real time responsiveness, and a laser focus on the customer.

Significant findings

Around 75% of companies manage CRM at the division level such as marketing, sales, IT or   Customer service. Only 25%of companies run CRM from corporate, where a senior level team typically spans multiple divisions and business units. Survey revealed that corporate units achieve a CRM success from 25% to 50%.

Senior management in over 35% of companies impede CRM success by portraying CRM as useful, but not critical.

Over 75%of companies do not realize returns on CRM initiatives because they do not fully use CRM once it is implemented. Only 21% of responding companies view alignment as very important to CRM success.

Approaches to CRM success

The global research survey found that the two approaches most consistently cited as requirements for CRM success were 'change management' such as training employees to use CRM processes, tools and policies; and 'process change' such as involving employees in the process of designing and changing CRM activities. The right action taken drive commitment to CRM throughout the company that in turn translates into sustained   value.

The key faults which can cause CRM projects to fail or prevent delivery of expected return –on –investment include too much dependence on technology systems as a panacea or organizations down-play the importance of senior management buy-in which in turn leads to lukewarm adoption by employees.  

The IBM study reveals the great promise of CRM in driving customer value and increasing organizational performance when it is done correctly. In the end, making CRM effective comes down to culture and creating broad acceptance and adoption. Successful CRM can transform a company, helping it to grow more profitably by serving its customers more intelligently. At its best, CRM does more than just automate a call center or improve a sales report; it can transform a company –culturally, structurally and strategically.

P-factors in implementation

For implementing CRM, the company has to start with three P-factors namely people, processes, and planning. The P factors affect sales, productivity, service, and profitability. The well management of the organization and right mix of these factors will lead the company to grow and prosper. 

People factor  

A positive interaction among employees, customers, and vendors will create a successful enterprise. Contact with the customers and vendors will create a successful enterprise. Contact with the customers and vendors are essential in order to understand their likes and dislikes of a company's product and the way for further improvement of company's business. The next people factor is employees. If there are complaints from employees about the customers, vendors, other departments as well as complaints about employees from the side of customers and vendors, the gaps have to be bridged before starting a CRM initiative.

The importance of people's change favorable towards the work and interaction with each other is a valuable contributor for the successful implementation with each other is a valuable contributor for the successful implementation of the CRM concept. Establishing a consistent process of reviewing and resolving the issues will create a good image on the company's management. The perception of employees, customers, and vendors on the company also reflect on a positive mood.

Process factor

The CRM success is also influenced by the process factor. Before introducing a new technology, the company management needs to review their business and workflow processes. In reviewing the workflow, it is essential to look at the natural flow of orders, product and information. It is also important to note at the source of order namely internet, the mail or the call center and continues through the shipment of product. This will facilitate to notice any bottlenecks, employee conflicts and inter departmental issues. Once these are mitigated, the next step is to document the procedures, policies and processes.

Planning Factor

Planning is a particular kind of decision-making that addresses the specific future that managers desire for their organizations. A well-developed plan will give the managers to stretch boundaries and achieve organization goals.

The primary features of a good plan are:

* Specific particulars: each goal and the step must be indicated. For example increase customer retention by 20%
* Responsibility: the responsibility should be assigned to a team or person for completion.
* Deadlines: Specific deadlines and contingencies need to be mentioned.
* Flexibility: Modifications are essential for the plan when necessary.
* Integration: the area affected by CRM must be integrated in to the plan.
* Metrics: Benchmarks are essential in order to measure the success or failure.

Addressing the P factors will reflect on small gains initially and latter there will be tremendous growth in profitability. There will be a rise in sales, decline in cost, satisfactory customers and motivating employees.

How do companies succeed at CRM?

Across the world, there are some companies who are successful at customer relationships and some are not. Numerous reasons are attributed for this. George day, marketing professor at Wharton Business School provided the answer after surveying 342 companies. He classified the companies that pursue a CRM strategy in to three groups.

The first and the most successful are companies that have market driven approaches. This approach makes CRM a core element of a strategy that aims to deliver superior customer value through complete solutions, superior service and a willingness to cater to individual requirements.

Technological support will then come in to speed up business processes which will save the customer's time and effort.

The second rungs are companies whose CRM initiatives are related to inner-directed. These companies want to get a better picture of their internal processes, with the intent of organizing data to cut service costs and help improve marketing targets. However, these companies assign operational tasks to the IT department, which does not have much to do with the operational strategy.

Finally, there are companies that use a defensive approach to crm, by way of using loyalty programs and reward. This is essentially a reactive strategy and, at best, maintains status quo in the market.

Limitations of CRM

The business objectives in front of the CRM path are appearing more like distant mirages when companies see the potholes/ traffic jams and road- raged drivers that lie in between.

The software and systems cost hundreds of thousand of dollars to buy and customize and it takes months, if not years to install, integrate and debug. The process requires endless meetings with IT staff, which are in short supply, command huge wages, and may not have all the skills to do it right.

Further, the business enterprises may not have the screening and training modules, or have the time to develop and deploy them to sift out agents for contacts.

CRM is essentially about value. But this is not achieved simply by putting more people on the phones. The businesses have to offer a broad, integrated range of services: live agents and technology, backed by market analytics and deployed to each to their advantage.

CRM implementation is a challenge. Most managers are reluctant to measure parameters to monitor progress before and after a CRM exercise. This is because it could show how well or badly the manager has implemented the CRM programme.

CRM has become a senior management issue because it consumes staggering amounts of money and, notwithstanding the success stories, has mostly proved a disappointment. Companies around the world spend has mostly proved a disappointment. Companies around the world spend $3.5 billion a year on CRM software and that is only a fraction of total expense. Implementation, training, and integration outlays can be three to five times higher. Further, it takes three years to complete the implementation.

Outsourcing the CRM

To overcome the limitations of CRM approach practiced by companies themselves, the company's worldwide contact the outsourcing bureau or service provider to find the solution. This will facilitate faster and less bumpy alternative CRM route to reach the business destination.

The outsourcing provider or bureau provides a CRM platform that offer an integrated blend of live agent and automated IVR, web and e-mail services, connected with contact management and if needed, integration with the business enterprise existing database.

Many service providers have entered the CRM game that companies have almost too many choices. There are data base providers and call centers. There are communications specialists. Most advertising agencies have their own direct marketing arms. Further there are technolog6y vendors. With all these, getting started on CRM should not be a problem.

Outsourcing the CRM can reduce customer retention costs, with out compromising the responsiveness, accuracy, availability, and quality of customer service. In addition, businesses should strive to increase both their efficiency and quality and drive greater profits to their bottom lines.

By outsourcing CRM and intelligence, companies will have powerful analytics with fewer payrolls overhead. Meanwhile suppliers are delivering greater personnel accountability and ability to access software, technology and skill sets otherwise4 not available to a single company. Suppliers promise greater revenue reduced marketing costs and shortened cycle time.

Many companies have decided to outsource all or part of their CRM technology, applications and /or business processes to achievable improved processes, business improvement, more effective customer service, increased competitive advantage and a demonstrated ROI.

According to a survey reported in tele Professional magazine, "Companies who fully outsource CRM had the most favorable results. This is reflected in a greater 10-year average return to investors, a higher average 10 Year annual growth rate and a larger average percentage change in annual earnings per share".

Off shoring CRM Locations

A large number of companies around the world have set up thousands of off shoring call centers to provide integrated customer service solutions. Australia has about 4000 call centers employing 225000 people with US$7 billion revenue. Similarly India has nearly 1000 companies employing over 100,000 people with revenues of US$1 billion. Philippines and Ireland has 70 and 500 companies employing over 12000 and 40000 people respectively.

Elements of CRM outsourcing

CRM outsourcing includes the following elements:

Customer support: this comprises value based phone support, e-mail response, live chat and co-browsing and instant messaging.

Telemarketing and telesales: this covers outbound calling for lead generation, campaign management and outbound calling for cross-sell and up-sell to existing customers.

Employee IT Desk: this comprises level1 and 2 multi-channel support for internal applications; system problem resolutions related to desktop; notebooks; shrink wrapped products; connectivity; office productivity tools support including browsers and mail; new service requests; IT operational issues; and remote diagnostics.

Thames water is a good example for CRM outsourcing in the Utility industry. Thames water has signed a business process outsourcing deal with Xansa to offshore to India it's metered billing expenses and Customer correspondence operations. The BPO service will handle over 700,000 transactions a year and in one month it has already handled predicted volumes and cleared a backlog of an extra 17 percent of transactions.

Vital reasons to outsourcing CRM

The compelling reasons to outsource usually include cost reduction, improved customer service, and access to leading edge technology and avoiding significant capital investments.

Cost reduction
Specialist Manpower
Improved Customer Service
Insight into improved customer service

Technology

Selection of an outsource service provider

In selecting the outsource service provider, the business enterprise need to pay special attention very carefully for due diligence, contract agreement, cost structures, and vendor relationship.

Due diligence
Contract
Cost Structures
Vendor relationship as a Partnership

Limitations

Even though the outsourcing to CRM provides valuable benefits to a business organization, but it still faces some problems. The business enterprises are losing much of their control of customers and services to another party. Another problem is technology implementation, database integration and agent selection and training issues with the service provider. These issues are more complex.

Conclusion

For selecting the right outsource provider, the business enterprises should take enough time, due diligence and clearly established and communicated goals and objectives. A successful relationship will be one that lowers the business costs, increase the company's revenue and retains profitable relationship a win-win situation for the company's business and its most valuable assets, and business customers.

Bibliography:

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5. Joathan Reuvid and John Hinks, Managing Business Support Services-Strategies-For Outsourcing & Facilities Management, Sodexho Alliance, June 2001.

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7. Linder Jane, Susan Cantrell and Scott Crist, Business Process Outsourcing Big Bang: Creating Value in an Expanding Universe, Accenture Institute for Strategic Change, August 2002.

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10. Praxis, Inside the BPO boom, Business Line's Journal of management, January 2004, pp. 28-38.

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12. Jagdish Dalal, " BPO and Relationship Mangement", www.siliconindia.com
 



Dr. A. Vinayagamoorthy
Reader
Department of Commerce, Periyar University
Salem-11 TN

Dr. Vijay Pithadia
Asst. Professor
R.K. College of Business Management
Kasturbadham, Bhavnagar Road, Rajkot-360020 GJ
 

Source: E-mail April 4, 2007

       

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