CRM- A Strategic Approach for Organization wide Implementation


By

Prof. Sreekumar. P
Vice Principal
ICFAI National College
Trichur, Kerala
 

Abstract

"The last thing any business would want to face, in an increasingly electronic and mobile global marketplace, is an alienated, impersonal, quirky, fickle, unpredictable and rootless customer-base. A uniquely personalized and intimate rapport and long-lasting loyalty, repeat-business and valued relationship on the other hand, that is mutually beneficial and rewarding, is what most enterprises are after these days."1

CRM (Customer relations management) has been perceived as a company- wide business strategy to reduce costs and increase profitability by solidifying customer loyalty. True CRM combines information from all sources of data within an organization (and if appropriate, from out side the organization) to give one holistic view of each customer. In the past few years, CRM has established as a separate discipline within marketing and service industries and a host of vendors are producing various CRM software packages for anything and everything in CRM. However, many CRM implementations have failed due to the over dependence on such ready-made solutions and many of these failures may be attributable to the lack of a vision or strategy on organization wide acceptance and involvement in the CRM initiative. A realization that CRM is not just collecting customer data and analyzing, but a detailed strategic initiative involving people, processes and technology can create the difference for a successful CRM implementation. Traditionally marketers have focused on acquiring customers, either new from the market or from competition, which involves prohibitive advertising and promotion costs. Today they have realized that the key to profitability is retaining the customers, if possible for a lifetime. The relevance of innovative CRM techniques is in this context. This article analyzes some of the practical issues in implementing a CRM initiative and also suggests a systematic framework for organization wide implementation of CRM.

1. Introduction

CRM has emerged as a customer centric phenomenon that permeates through the entire organization. There are 3 Key areas to a successful CRM initiative; People, Process and Technology. People at all levels in the organization should take active roles in the CRM initiative. A company's business process should be reengineered to bolster the CRM initiative. Contemporary high technology should be employed to collect and provide the best possible data to the employees.

CRM helps business to use people, process and technology to gain insights in to the value and behavior of the customers. This insight brings in improved customer service, increased call centre efficiency, added cross sells, improved closure rates, streamlined sales and marketing process, improved customer profiling and targeting, reduced costs, increased market share and profitability. To be successful in the long run, an organization must develop a competitive advantage. The best strategy to pursue a competitive advantage is the customer strategy. But still many organizations do not know how to maintain a relation with their customers, especially those organizations which have unintentionally distanced themselves from their customers through extensive dependence on the distribution channel.

CRM software is enabling organizations to collect, store and analyze customer information and improves their ability to attract and retain customers. These systems integrate company's sales, marketing and customer support functions in order to serve the customer better. Learning to rank customers in terms of profitability is the future of business.

2. Benefits of a sound CRM strategy

Time, Competency, Personalization and Care are the attributes experienced by a customer during a contact2 . Forward thinking organizations now focus on keeping and growing the most profitable accounts they presently have. So companies need to wisely pick the customers with whom they are going to have relations and what type of relations. Adopting this "profitable customer" strategy can change the face of their business and bring in one or more of the following benefits.

1. Ensure consistent service and quality delivery across all channels.
2. Improve response time to customer requests for information.
3. Reduced cost of products or services
4. Immediate access to order status.
5. Increased customer loyalty due to higher satisfaction levels.
6. Provide self-service options to customers over Internet.
7. Integrate front and back office systems.
8. Identify cross selling/ reference selling opportunities based on the customer profile.
9. Focus on acquiring high value customers
10. Establish a sound understanding of customer purchase lifecycle.
11. Allow sales over Internet, 365 days in a year.
12. Promote convenient, timely, user-friendly sales and service delivery.

3. CRM- some practical issues.

3.1 Customer Acquisition vs.  Retention–  the Marketer's dilemma.

A new customer is either created from the market or converted from a competitor. Both involve a cost of acquisition. Similarly, to retain or "recreate" a customer also involves a cost. Studies have shown that the cost of retaining is almost one fifth of the cost of acquisition. In other words, for the same amount of marketing budget spent on acquisition and retention, the later will yield more profits for the company. Optimizing the spending on acquisition or retention still continues to be a dilemma for marketers.

3.2 Lifetime Customer Value (LCV)

Lifetime Customer Value or Long term Customer Value is a reflection of the possible future business a company can expect from a loyal customer. This will include not only the repeat purchases by the customer, but also his family purchases, referral purchases, cross sells etc over a long period of time. It should also consider the future product introductions of he company for which this loyal customer is a ready prospect. This adds more dimensions to the exact assessment of the LCV.

3.3 Data Mining

Many a times, customer data in various forms for various purposes is residing in the organization's database itself. However, to analyze it as per the parameters needed for a CRM program needs skill. Out of the large number of customers existing on the database, a few may be exhibiting characteristics, which make them more receptive, loyal and useful to the organization in future. These are the Gems in the database and searching the database to list out these Gems is the process of Data mining. Any CRM initiative will produce more results at lesser costs if the Gems are properly identified.

3.4 Scoring a database

Customers vary in their buyer behavior and readiness to respond to promotion programs. Applying the concerned parameters to a database and getting a customer list which is more likely to evince a positive behavior towards the company is called scoring a database. Applying or addressing company campaigns on a scored database will yield better results than on a raw database.

3.5 Visualizing the results of Data mining

The results of data mining are to be presented in an easy to understand, practical form for the reader who will try to make future CRM programs. The purpose of conducting data mining should be well understood by all concerned.

3.6 Outsourcing

Outsourcing company activities to call centers and logistic companies will have implications on CRM. The customers presume and react to the good or bad actions by the outsourcing agency as if these are actions by the company itself. More the extent of outsourcing, more vigilant the company should be to the service quality of the agency.

4. A Workable CRM strategy

Tarrystone defines CRM as "the understanding, acquisition, servicing, development and retention of customers for profits by an organization with a truly customer focused culture using an integrated, customer centric contact strategy, systems and processes." Understanding customer buying habits, making exciting offers for conversion, adding value at every possible contact with customer for retention, etc will be part of this strategy. The best pattern is to Build, Launch and Improve rather than pent months together in preparations5. Accordingly, a procedure for implementing a systematic CRM initiative is proposed here.

4.1 Return on Investment

Often CRM is seen as an IT investment to implement a multi channel contact management platform across the company or in a customer service call center. This is potentially a large investment but clear benefits should be seen in improved and more efficient customer service and in centralizing data management.  However, a financial return is often difficult to justify.  This is because the clear benefits of a CRM approach, particularly top line revenue generation, are not fully addressed at the same time and in an integrated way.

4.2 Knowing your customer.

How can one feel loyalty to a large MNC where the person you speak to is different every time? Among the most difficult parts of customer experience management is ensuring that the quality of experiences across all interaction channels is the same. Customers expect to be known regardless of the channel – in the retail store; on the phone; through email and chat; or via web-self service.3

Loyalty works on a "what is in for me" attitude and with so much choice available, good reasons to stay have to be provided to the customers constantly. Similarly, providing innovative, value for money products supported by a brand recognized by good customer service is vital.

It is difficult to sell additional products to an unhappy customer. So, it is important not only to proactively manage the unhappy customer, but also to get a statistical fix on the level of customer satisfaction, from all potential contact points within the organization. Dissatisfaction can occur on any of the customer contact points, not necessarily in the marketing or customer service points. Clearly there is a need to know what a customer has bought, the value, the channel, and when. Additional products to sell to clusters of customers need to be defined according to their existing portfolio, when their previous purchases were made and which channel was preferred. This will involve filling product gaps, collecting key information from customers before maximizing customer value, target accurately and market cost efficiently. A sales and marketing multi channel strategy to sell the additional products then needs to be developed.

4.3 Data collection and management

The collection of data has to be both accurate and consistent over a long period of time if it is to be there in a meaningful quantity for profiling and targeting options. Data collection strategy should be geared precisely to the marketing initiatives and sales opportunity. Vague data collection under the assumption that it may become handy some time in the future will dilute what is important qualitatively and quantitatively.

4.4 Customer contact strategy

A contact strategy needs to be decided for different segments of customers according to the sales potential offered. Within this it may be considered that some customers do not justify any proactive contacts at all. More weightage should be on how the customer is likely to react rather than the potential offered per se. The customer needs to hear from the company with the relevant and well-timed propositions frequently enough to keep the brand on top of mind, but not too often as to make him turn off to the constant bombardment.

4.5 Use the data for Customer acquisition

By understanding the profile of customers who have bought some products through certain channels, prospect data can be sought with a similar profile to refine and make more cost effective future customer acquisition activity. By researching a customer's and prospect's experience of the sales process, lessons can be learned to improve the buying experience and hence the conversions. This needs to be reviewed as and when the number of communication channels for potential contact increases.

4.6 Develop the customer for retention.

In typical situations, the customer would expect a certain product to be with in the stable but the company sees limited value in it. Alternatively, the company may have gaps in the portfolio, which the customer sees as a logical extension. Hence the product development / sourcing is a key area in the CRM strategy. A prioritization of accounts and a servicing and development strategy combining the field sales with the internal sales and direct marketing is often the best method to maximize customer development, while giving the sales force sufficient time to focus on key accounts and customer acquisition.

A lost customer research is needed to understand when and why customers leave and to develop the corrective action program to improve retention. The issues could be partly due to product offering and competitiveness and / or with the quality of customer service.

4.7 Customer service and the call centre

Front line staff in the call centre can do so much to add value to a customer's brand experience by having a positive, upbeat attitude and a helpful disposition. This can be partially achieved through formal training but more through ongoing supervision, call monitoring and coaching. Their high motivation levels will drive home the CRM culture.

5. Restructuring the marketing organization

Nowhere does the CRM impinge more than on the Marketing function. It is here that most of the opportunities can be realized to build customer value and additional revenue streams. A multi channel contact situation will lead to a few fundamental changes in the marketing thinking. First is the need to identify the Brand across all the channels. In other words, a tightening of the corporate identity is warranted. A common, creative, marketing communication strategy that transcends all media is the next logical step. The best combination of hybrid channel can be selected after evaluation as a third stage.

5.1 Overall Organization structure for CRM

CRM cannot be executed by one part of the company in isolation because the customer does not see it that way and most projects cannot be executed that way. The complexity of projects demands the potential involvement of a lot of staff, all working together with common purpose and vision. The degree of cultural change required means CRM projects need a lot of corporate drive to see them through to success. Any initiative will need key project champions throughout the organization, and ownership and drive at Board level.

5.2 CRM Measurement

One big issue in convincing the top management about allocation of CRM budget is the lack of proper measurement tools to show the improvements convincingly. What makes CRM measurement difficult is that the measurement problem is not confined to just measuring customer behavior and mindset.4 Instead, businesses need to measure activities that occur inside the company, too. CRM measurement also sometimes goes beyond measuring those activities that directly touch the customer (value delivering capabilities). Companies frequently need to measure specific attributes about how a product or service is produced (value production capabilities), especially if the product or service is customized for the customer. Value production capabilities extend through to suppliers and partners. Hence CRM measurement may also involve supply chain management activities. In fact, supply chain management, as a discipline, exists to better deliver value to customers and therefore is often a key component in CRM activities.

6. Conclusion

Implementing a successful CRM strategy is more of an intellectual activity and not a mere IT or data processing activity. The managements commitment to reap future benefits by truly satisfying the customer will be tested in the process through the empathy they exhibit in understanding customer issues.  Their keenness to make the initiative a " customer experience management" process by adding value at every possible customer experience or contact points within and out side the organization will be the key to its success. For the same reason, a CRM strategy and system tailor made based on the organization's customer philosophy and experience may be a better option than the run of the mill CRM solutions.

References

1. www.esalestrack.com
2. www.rightnow.com, white paper "customer experience management", visited February 3rd , 2008
3. Strativity Group white paper "Making customer experience a reality",2006. www.rightnow.com visited 5th February,2008.
4. Vince Kellen, CRM measurement frameworks, 2002. www.depaul.edu.
5. Carlos Costa et al, 2004,"CRM – The new face of Marketing", ICFAI Books, pp48.
 


Prof. Sreekumar. P
Vice Principal
ICFAI National College
Trichur, Kerala
 

Source: E-mail February 9, 2008

          

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