Customer Relationship Management

47 Customer Relationship Management K. Sreedhar Reddy, MBA Student, Santhiram Engineering College, Andhra Pradesh A.Veera Mallaiah, MBA Student, Santhiram Engineering College, Andhra Pradesh T.J. Chaithanya Royal, Asst. Professor, Dept of MBA, Santhiram Engineering College, Andhra Pradesh INTRODUCTION: CRM, refers to Customer Relationship Management, has it origin in the Contact Management in 1980s.The aim is to establish a management mechanism to improve the relationship between enterprise and customer. As a business strategy, CRM effectively organize the enterprise resource in the department of marketing, sales and support; as the customer-centered management strategy with the information technology, the system intends to redesign the business function, recombine the work flow, and upgrade the satisfaction degree to appeal the customer, in order to gain profit. CRM exists as the management system in early times, but as the mature idea and technology in the management mechanism, it merges and rises in recent years. CRM software which supports this management mechanism became the sunrise industry in the software market and regard as the emerging technology which improve the enterprise management after ERP. The enterprises all over the world undergo a profound conversion because of CRM, which related to the communication and interaction between enterprise and customer or potential customer. Information technology and Internet not only change the management and operating mode but also impact the competitive capability. If ERP help the enterprise to optimize the internal management flow and other resources, CRM make the external resource especially the customer resource to be fully utilized, in order to boost the enterprise development. The origin and development of CRM inspired by three aspects: pull the demand, promote the information technology and renovate the management idea. In the aspect of demand, business flow reorganization (BRP) and ERP achieve the goal of optimizing and automating the flow in the field of production, inventory, finance and current of materials in 1980s. But the field of sales, paying not much attention to the marketing and after-sales service could result in the incomplete recognition of the customer and dealing with them without unified information. On the other hand, it is important for enterprise to keep regular customer and win new ones. This gave birth to the inconsistent behavior between reality and demand. CRM DEFINITION: Customer Relationship Management (CRM) is a term representing the business strategy built around the concept of improved customer service. CRM practice involves all aspects of communication and dealing an organization has with its client, whether it is product or service linked. More clearly, CRM aims at increasing customer satisfaction, consequently increasing a business income. "Customer Relationship Management, CRM, aims at providing better customer service, retaining customers as long-term profitable customers, selling services/products more effectively, gaining new customers from present customers through referrals, and providing helping hand to salespeople". "CRM is a process of building partnerships with your clients/customers, which involves technology, personal marketing techniques, strategic planning, and internal business processes from customer service, sales and marketing to build a relationship that adds to revenue margins and productivity". Examples: A database which purposely tracks consumer service issues, and a web page that permits customers to verify inventory availability, check order position and put orders. Capturing visitor information to your website, which includes visitor s name, e-mail ID, location and his purchasing choices. CUSTOMER RELATIONSHIP MANAGEMENT OVERVIEW: Customer Relationship Management (CRM), also known as relationship marketing or customer management, is an

48 information technology industry term for the methodologies, strategies, software, and other web-based capabilities used to help an enterprise organize and manage customer relationships. The goal of CRM is to aid organizations in better understanding each customer's value to the company, while improving the efficiency and effectiveness of communication. CRM captures, analyzes, and distributes all relevant data from customer and prospect interactions to everyone in the organization. This distribution of information helps an organization better meet customer, product, and service needs. CRM has replaced traditional marketing techniques that focused on key marketing mix elements, such as product, price, promotion and place. By being too functionally-based, traditional marketing techniques neglected the customer in the after-sales process and failed to meet customers' desires. CRM emphasizes customer retention over customer acquisition and is recognized as one of the most viable tools used to further a company's success in the highly competitive business world. There are three major areas that focus on customer satisfaction: Sales, Marketing, and Service. The functionality of and between these three fields is essential to successfully connecting a company's front and back offices to facilitate effective, enterprise-wide coordination. The professional sales force predicts and proposes the real-time analysis of information and distributes this information to the company and business partners. Marketing concentrates on personalizing customer preferences and offering them satisfying experiences. Service is associated with the companies' call centers and coordinates interaction between Web, e-mail, and other communication Medias. These fields are developed further with the help of CRM automation. OBJECTIVES: The core of CRM is to improve and manage the business flow of sales, marketing, customer service and support which related with the customer relationship and enhance the automatic process of each sector in order to reduce the sales cycle, save cost, enlarge the sales quantity, increase income and profit, occupy more market shares, ask for new market opportunity and sales channels, and finally make it more competition. The customer associable with business process in CRM is the core of the enterprise operation. CRM boil down the entire business flow related with customer, (such as sales, marketing, service and support, etc.) and devote to the customer's demand. CRM blend various kinds of communication channels into one, such as face-to-face, telephone and Web so that the enterprise could negotiate business according to their favorite way of communication and increase chance of success to communicate with customer and potential customer. CRM could explain responses to the customer and has a thorough understanding of the whole process. Integrated with ERP, the CRM solution could be satisfied the demand through a closed-loop definition, a clear structure and business flow, in order to reserve regular customer and appeal new ones. THE FEATURE OF CRM: With the increased penetration of CRM philosophies in organizations and the concomitant rise in spending on people and products to implement them, it is clear we will see improvements in how companies work to establish long-term relationships with their customers. However, there is a big difference between spending money on these people and products and making it all work: implementation of CRM practices is still far short of ideal. Everyone has his or her own stories about poor customer service and e-mails sent to companies without hearing a response. Despite several years of experience. Web-based companies still did not fulfill many Christmas orders in 2000 and customers continue to have difficulties returning unwanted or defective products. We can expect that the technologies and methodologies employed to implement the steps shown in Exhibit 1 will improve as they usually do. More companies are recognizing the importance of creating databases and getting creative at capturing customer information. Realtime analyses of customer behavior on the Web for better customer selection and targeting is already here (e.g...net

49 Perceptions), which permits companies to anticipate what customers are likely to buy. Companies will learn how to develop better communities around their brands, giving customers more incentives to identify themselves with those brands and exhibit higher levels of loyalty. One way that some companies are developing an improved focus on CRM is through the establishment or consideration of splitting the marketing manager job into two parts: one for acquisition and one for retention. The kinds of skills that are need for the two tasks are quite different. People skilled in acquisition have experience in the usual tactical aspects of marketing such as advertising and sales. However, the skills for retention can be quite different, as the job requires a better understanding of the underpinnings of satisfaction and loyalty for the particular product category. In addition, time being a critically scarce resource makes it difficult to do an excellent job on both acquisition and retention. As a result, some companies have appointed a chief customer officer (CCO) whose job focuses only on customer interactions. ELEMENTS OF CRM: The realization of a CRM strategy depends on a number of components or competencies. Perhaps the most obvious competency is related to ability to create the infrastructure referred to by McKenna which makes it possible for customer and supplier to recognize one another and to be able to real-time. The 4 cornerstones of CRM which must be mentioned first are 1. Customer knowledge. 2. Relationship strategy. 3. Communication. 4. The individual value proposition. 1. Customer knowledge: Knowledge of the individual customer is essential in order, ultimately, to develop a long- term relationship and to supply customization. Customer, but also prospects must be identifiable; it has to be possible to determine who someone. Companies must develop the competency or capability to develop this type of individual customer knowledge for a large number of customers. Database will have filled with correct and current data which will be transformed by analyses into individual customer information. 2. Relationship Strategy: The individual customer information must be used to develop a long-lasting customer-supplier relationship. In order other words, a marketing or other type of strategy must be implemented which truly differs from a strategy which merely focused on the stimulation of transactions and thus requires other competencies. On other hand, organization with a relationship strategy in place have a long-term horizon, tell and listen more than they sell and have a border and deeper interest in the right customer. 3. Communication: The communication between customer and supplier, the relation strategy will have to itself to a great extent. Is the supplier capable of carrying on a dialogue with individual customers? On the surface it may seem like a simple task, at every consumer who recalls experience with the suppliers will quickly arrive at the conclusion that the quality of convention generally taking place between customer and supplier is somewhat basic. Many companies have no experience in carrying on a dialogue of any substance. The simulation becomes even more complicated if we involve the role of information network of communication technology. 4. The Individual value proposition: The organization that takes the initiative to get to know an individual customer, to develop a relationship with him or her and to carry on a dialogue with him or her really cannot avoid also offering these customers an individual proposition. The company will then have efficient method of producing this design: for instance, the custom product might to be composed from standard modules produced on a large scale and for which only the assembly needs to be flexible. CUSTOMER RELATIONSHIP MANAGEMENT MODEL 1. Creating a Customer Database: A necessary first step to a complete CRM solution is the construction of a customer database or information file.' This is the foundation for any customer relationship management activity. For Web-based businesses, constructing a database should be a relatively straightforward task, as the customer transaction and contact information is accumulated as a natural part of the interaction with customers. What should be collected for the database? Ideally, the database should contain information about the following: Transactions: this should include a complete purchase history with accompanying details (price paid, SKU, delivery date). Customer Contacts: today, there is an increasing number of customer contact points from multiple channels and contexts. This should not only include sales calls and service requests, but any customeror company initialed contact.

50 Descriptive Information: this is for segmentation and other data analysis purpose. Response to Marketing Stimuli: this part of the information file should contain whether or not the customer responded to a direct marketing initiative, a sales contact, or any other direct contact. can also be chosen depending upon additional factors. For example, for promotions or other purchase-inducing tactical decisions, if the customers in the heaviest purchasing segment already huy at a raic that implies further purchasing is unlikely, a second tier with more potential would also be attractive. The descriptor variables for these segments (e.g., age, industry type) provide information for deploying the marketing tools. In addition, these variables can be matched with commercially available databases of names to find additional customers matching the profiles of those chosen from the database. If individual customer-based profitability is also available through LCV or similar analysis, it would seem to be a simple task to determine on which customers to focus. The marketing manager can use a number of criteria such as simply choosing those customers that are profitable (or projected to be) or imposing an ROI hurdle. The goal is to use the customer profitability analysis to separate customers that will provide the most long-term profits from those that are currently hurting profits. This allows the manager to "fire' customers that are low costly to serve relative to the revenues being produced. While this may seem contrary to being customer-oriented, the basis of the time-honored "marketing concept," in fact, there is nothing that says that marketing and profits are contradictions in terms. 2. Analyzing the Data: Traditionally, customer databases have been analyzed with the intent to define customer segments. A variety of multivariate statistical methods such as cluster and discriminants analysis have been used to group together customers with similar behavioral patterns and descriptive data which are then used to develop different product offerings or direct marketing campaigns. Direct marketers have used such techniques for many years. Their goals are to target the most profitable prospects for catalogue mailings and to tailor the catalogues to different groups. 3. Customer Selection: Given the construction and analysis of the customer information contained in the database, the next step is to consider which customers to target with the firm's marketing programs. The results from the analysis can be of various types. If segmentation-type analyses are performed on purchasing or related behavior, the customers in the most desired segments (e.g., highest purchasing rates, greatest brand loyally) would normally be selected first for retention programs. Other segments 4. Targeting the Customers: Mass marketing approaches such as television, radio, or print advertising are useful for generating awareness and achieving other communications objectives, but they are poorly-suited for CRM due to their impersonal nature. More conventional approaches for targeting selected customers include a portfolio of direct marketing methods such as telemarketing, direct mail, and, when the nature of the product is suitable, direct sales. Writers such as Peppers and Rogers' have urged companies to begin to dialogue with their customers through these targeted approaches rather than talking "at" customers with mass media. In particular, the new mantra, "l-to-l" marketing, has come to mean using the Internet to facilitate individual relationship building with customers." An extremely popular form of Internet-based direct marketing is the use of personalized e-mails. When this form of direct marketing first appeared, customers considered it no different than "junk" mail that they receive at home and treated it as such with quick hits on the delete button on the keyboard. 5. Relationship Programs: While customer contact through direct e-mail offerings is a useful component of CRM, it is more of a technique for implementing CRM than a program itself. Relationships are not built and sustained with direct e-mails themselves

51 but rather through the types of programs that are available for which e-mail may be a delivery mechanism. The overall goal of relationship programs is to deliver a higher level of customer satisfaction than competing firms deliver. There has been a large volume of research in this area.'^ From this research, managers today realize that customers match realizations and expectations of product performance, and that it is critical for them to deliver such performance at higher and higher levels as expectations increase due to competition, marketing communications, and changing customer needs. In addition, research has shown that there is a strong, positive relationship between customer satisfaction and profits.'' Thus, managers must constantly measure satisfaction levels and develop programs that help to deliver performance beyond targeted customer expectations. 6. Privacy Issues: The CRM system depends upon a database of customer information and analysis of that data for more effective targeting of marketing communications and relationshipbuilding activities. There is an obvious tradeoff between the ability of companies to better deliver customized products and services and the amount of information necessary to enable this delivery. Particularly with the popularity of the Internet, many consumers and advocacy groups are concerned about the amount of personal information that is contained in databases and how it is being used. 7. Metrics: The increased attention paid to CRM means that the traditional metrics used by managers to measure the success of their products and services in the marketplace have to be updated. Financial and market-based indicators such as profitability, market share, and profit margins have been and will continue to be important. However, in a CRM world, increased emphasis is being placed on developing measures that are customer-centric and give managers a better idea of how their CRM policies and programs are working. ADVANTAGES DISADVANTAGES OF CRM AND Advantages: 1. CRM systems offer a 360-degree observation of the customer, facilitating a deal to keep a track of every client touch. This facilitates the creation of a strong profile of every client, there by delivering goods and services to the customers in bulk 2. On-premise option helps the customers who require control and a complete ownership over each and every characteristic of the installation and maintenance of the CRM application together with its infrastructure. A superior level of integration with legacy and operational applications can be achieved by clients who can then customize the installation as they want. The customers will also be in control of their private data from external exposure and prevent embarrassment due to a third party s mistake. Finally, a number of CRM providers and dedicated third parties provide superior customized vertical industry solutions that widen on-premise installations with a level of complexity that cannot be matched with on-demand services (Paul Gillin, 2007). 3. The on-premise approach contains all the advantages and disadvantages of the CRM approach as well as added advantages of undersize installations and access external expertise Customers can cut the running time in comparison to traditional on-premise installation and also the time required to cut the staff learning curve. The retailer in turn can improve functionality with custom and business-specific installations excluding ramp-up time. 4. Multi-tenant On-Demand SaaS (Software-as-aservice) is a preferable choice for clients with restricted capital resources, variable work force requirements to commit to a particular CRM application. Fixations and up gradations are performed quickly even without the customers notice, which in turn lessens maintenance for the IT personnel (Paul Gillin, 2007). 5. SaaS options can be generated with the help of a Private On-Demand model for a class of customers having no knowledge of the SaaS option. This contains clients from highly regulated and securityconscious businesses, where any kind of sharedspace installation would be dangerous. These clients without giving up control can have access to all the benefits of SaaS like quick implementation, best-of-breed functionality, expert service, and variable cost. 6. CRM incorporates all the things that organizations use to administer customer relationships, which also include analysis and capture of client information and analytics to power that information towards improved sales performance (Paul Gillin 2007). Disadvantages: 1. The main disadvantage of the on-premise installation is cost and time. Obtaining software and hardware infrastructure is expensive and time-

52 consuming. However, this problem can be overcome if the client installs the application widely over a long period of time. Customers also have restricted options for transferring to other CRM app because of the need to apprehend a return on investment on the up-front cost (Paul Gillin, 2007). 2. The primary downside of on-premise deployment is cost and time. Acquiring hardware and software infrastructure is expensive and time-consuming. However, over time an on- premise deployment can be the least expensive option if a customer deploys the application widely over a period of years. Deployment times for highly customized applications can stretch to a year or more and may involve the use of dedicated IT resources and external consultants. Customers also have limited options for migrating to other CRM applications because of the need to realize a return on investment on the up-front cost (Paul Gillin, 2007). 3. Even though service providers deliver customization features, it is not possible for software offered as a service to be modeled according to the customer s requirements as promised by the on-premise model. Customization is normally handled in the SaaS model with a high-level programming language or a proprietary toolset. Data ownership issues have been a problem when data is hosted off site. This requires a cautious attention to the contractual commitments. As SaaS costs are normally considered as operating expenses, the costs would be least expected affecting profitability (Paul Gillin, 2007). 4. The cost of a Private on-demand service option is justifiably larger than the multi-tenant SaaS, as a private on-demand service offers small per-user charges and minimum-user assurances. Customers cannot anticipate having control over customization and upgrades analogous to on-site installation. (Paul Gillin, 2007). VENDOR S WEB SITE ADDRESSES [1] Introduction: http://www.getfast.co.uk [2] Customer Relationship Management Overview: http://misbridge.mccombs.utexas.edu [3] Objectives, Feature of CRM: http://misbridge. mccombs.utexas.edu [4] Customer Relationship Management Model: http://gvoss.cox.smu.edu Books: [1] Elements of CRM: www.pearsoned.co.in CRM in fifth Imposition, 2012 [2] Advantages and disadvantages of CRM: CRM author Paul Gillin, 2007 :