UNIT 5 THE CRM ROADMAP

UNIT 5 THE CRM ROADMAP

UNIT 5 THE CRM ROADMAP The CRM RoadMap Structure 5.0 Introduction 5.1 Unit Objectives 5.2 The CRM Strategy 5.2.1 Defining a CRM Strategy 5.3 Implementing CRM Initiatives 5.3.1 Steps for Successful Implementation of CRM Strategy 5.4 Summary 5.5 Key Terms 5.6 Answers to Check Your Progress 5.7 Questions and Exercises 5.8 Further Reading Case Studies 5.0 INTRODUCTION Customer is always right. Customer is king. Customer comes first. Customers tell about their negative experiences to more people than about their satisfying experiences. It is easier and economical to influence existing customers to buy more than it is to increase the customer base by acquiring new customers. Successful new product and service ideas can be developed by keeping an active communication with the existing customers. Repeat customers cost one-fifth less than new customers, and can substantially increase profits. Hence, there are compelling and convincing reasons for the companies to concentrate their efforts on improving customer satisfaction, and retaining them. Business strategies need to focus on successfully building, developing and managing lasting and long-term relationships with their existing customers. It needs a comprehensive and integrated approach to create, maintain and expand customer relationships. CRM is considered more as a business strategy than a mere technology. In this unit, you will learn and analyse how the relationship with the customer is developed strategically and then nurtured. 5.1 UNIT OBJECTIVES After going through this unit, you will be able to: Understand the concept of CRM strategy Implement the CRM strategy 5.2 THE CRM STRATEGY Customer relationship management is about making the customer the centre of the business and organizing all processes around him. CRM is all about customer strategies strategies that act as a means for making each customer more valuable to the company. The implementation of a customer-centric strategy for re-engineering the current customer interactions of the organization helps in retaining the existing customers and attracting new ones. It is a strategy for making continuous improvements in customer experience and value enhancement in the relationship. Implementation of CRM will Self-Instructional Material 69

The CRM RoadMap 70 Self-Instructional Material increase the delight of the customers and make them stay loyal to the organization for a longer period. CRM can be identified with the creation, development and maintenance of long-term, mutually profitable relationships between customers and the organization. The CRM strategy gives a competitive advantage to an organization as it creates a congenial environment to accurately understand the existing customers and helps in effective communication with them, leading to strong customer relationship development. It also helps in finding new customers. Managing customers and making them delighted have become a necessity in the wake of globalization, where customer delight is the only key to success and to the very existence of the company. It is widely accepted that it costs five to ten times more to bring in a new customer than it is to retain the existing one. The choices open to the customers are many and considering this scenario, the companies require to build a better understanding of their customer base so as to analyse their expectations and satisfaction levels. Information on customer behaviour is the key to success. Evolving right CRM strategies will enable the companies to figure out what their customers want and the most profitable ways to give it to them. 5.2.1 Defining a CRM Strategy Every organization should have a clearly defined strategy. It is important to devise a clear direction as to how the organization will plan to create, maintain and expand customer relationships. An X organization s vision to succeed by being world class is too vague to guide its CRM efforts. However, if the vision describes in detail what world class means to the organization s current and target customers, then one possibly has what is needed to build a winning strategy. CRM is an enterprise-wide initiative as it aims at integrating the front-end customer-facing systems with the back-end systems that actually deliver the product and value to the system. Defining a CRM strategy involves not only the top management but also the enterprise as a whole with all functional areas. It involves understanding the business requirements and needs and then searching for customer-oriented solution. A successful customer relationship management strategy will address the following key areas of the business. Business strategy: A CRM strategy aligns itself with the financial goals of the business and sets out an action plan for the enterprise to build customer loyalty or customer connection. This means that an organization will want that customers buy more, stay longer, recommend the organization to others and have the will to pay a higher price. Such a strategy requires a clear business vision so that its successful implementation can be developed and designed. A good CRM strategy takes the business vision and analyses the following issues: o What business the firm is carrying on and who are its customers? o What products and services are being offered and what value addition could be made? o What products and services could be added? o What market segment needs to be actively penetrated? o What customer groups will these products and services appeal to? o Which of these are of greatest value to the organization? o How can we make our delivery system more effective to attract and satisfy our customers? The aforementioned analysis would require a good deal of market research which must be aligned with classified data supplied by analytical CRM.

Customer experience: When interacting with enterprises, customers experiences play a significant role in shaping their perceptions about the enterprise. A pleasant customer experience generates satisfaction, develops trust and longterm loyalty, while bad customer experiences have negative effect and harms the enterprise s ability of creating new relationships with prospects. As per a report published by the American Society of Quality and Arthur Andersen Consulting Inc. in 1977 o Customers tell eight friends about a satisfying experience and twenty friends for a negative experience o It is easier to influence existing customers to buy more than it is to increase the customer base. o Most of the successful new products and service ideas come from existing customer base o Repeat customers cost 1/5 less than new customers, and can increase profits substantially. The success of CRM will depend upon the following factors: o The ways of meeting the expectations of the different target groups/customers o The methodologies adopted to develop customer base and the changes made to meet the customer needs o Capability of the staff and processes to provide convenient and efficient service to customers Technology: Application of CRM technologies is basic to any business strategy. Successful CRM requires information about customers to flow around the organization and maintenance of tight integration between operational and analytical systems. Successful CRM strategies require finding the right information at the right time. As organizations become more sophisticated, they must deploy creative ways to integrate technologies to support the relevant CRM strategies so as to reach an improved system of one-to-one management and data mining with the main focus on customer delight. Technology can be used to track customer needs, interests and buying habits and then restructure the marketing efforts accordingly to meet the specific needs of customers. It can also track customer product use as the product progresses through its life cycle, and then tailor the service strategy accordingly. In life insurance, for example, an endowment type product may have to make periodical payments, have loan facility and provide death or maturity benefits. The insurance company must track the product for their select customers, if not for all, for providing matching services at different points in the life cycle of the product. Technology can be used to understand the buying behaviour of individual customers and help coordinate the changing purchase patterns of the customers by approaching them with suitable products. Processes: A CRM business process involves processing of customer knowledge for accomplishing the goals of marketing. It may also require establishing direct customer contact and exchanging information or services between the business organization and the customer. The advancement in CRM applications has led to a focus on redesigning the key processes that touch the customers and asking customer feedback on the processes that matter the most to them. This is called The CRM RoadMap Check Your Progress 1. What is the basis of CRM strategy? 2. What are CRM business processes? Self-Instructional Material 71

The CRM RoadMap customer process re-engineering or redesigning. Continuous re-engineering creates processes that meet customer s changing expectations and also supports the customer value proposition resulting into desired customer experience. 5.3 IMPLEMENTING CRM INITIATIVES CRM is ultimately about deriving maximum revenue from loyal customers through proactive management of their life cycle. It is about taking the right CRM initiatives to the right customer segment at the right time to produce business results. The difficulty lies in deciding the right CRM initiative that should be applied to a particular segment of customers. A creative mind, advanced technology and custom-centric approach will be required to meet these challenges. CRM has to be understood as a business strategy that provides a systemic approach to customer life cycle management (CLCM). Successful customer life cycle management would require that business mechanism integrate business processes, technology and the customer life cycle. This can happen only if the business model integrates sales, service, marketing process and the CRM technology environment with the customer life cycle. Customer relationship management is recognized as a corporate-level strategy focusing on the establishment and maintenance of a long-lasting relationship with the customers. Several commercial CRM software packages are available in the market for supporting the CRM strategy. However, as emphasized earlier, technology alone is not enough for maintaining a long-lasting relationship with customers, as this objective can be achieved only through a holistic change in the philosophy of the firm. This needs involvement of the human element, wherein more emphasis is laid on customers needs, aspirations and behaviour. This may lead to changes at all levels in the firm, including policies and processes, and front-office customer service. Employees training and development, marketing activities of the firm, implementation of systems and information management, and all efforts of the business must be directed and tailored towards ensuring customer satisfaction. A Customer Relationship Management System (CRMS) when implemented will result into automation of all the front-office business functions. CRMS works towards value-added delivery to esteemed and loyal customers through improved technology. By managing the customers multiple interaction and response activities, CRMS ensures that customer benefits are upgraded and delivered reliably. CRMS acts as an efficiency multiplier, enhancing the processing power of advanced computers to effectively automate front-office operations. CRMS with its vast storage capacity of a modern-day computer system, enhances the finite memory of front-office staff helping an organization in maintaining intimate relationships with a practically unlimited number of customers. An effective and successful CRMS involves the following stages: 1. Business scenario analysis: To understand the business, the first priority should be to define the purpose of the business and its functions. It should answer questions about the types of businesses of the firm, their customers, and their competitive position in the market. This scenario analysis will help the firm in understanding its position vis-à-vis its competitors and in further defining the strategy to improve performance in the market and develop relationships. 72 Self-Instructional Material

2. Defining the purpose: The firm needs to define the purpose for going in for a CRM exercise. Just because a competitor is engaged in CRM activities should not be a compelling factor in implementing CRMS initiatives. This may be initiated to build long-lasting relationships with the customers in an effort to be more effective and efficient, or to create a customer-focused culture by effective adoption of customer-based measures, or to develop a complete end-to-end process to serve customers better. 3. Planning: The next important step in CRM implementation is the planning stage. This includes the documentation of high-level CRM goals in the form of a business document that becomes the focal point for strategy development. Planning also involves detailing of what needs to be done and choosing the people who would be responsible for the same. Teams need to be set up for execution of the various stages of the process. There may be internal issues between various operating departments, such as marketing, operations, IT, where the process changes may have a direct impact and hinder progress. It will be very important to maintain an effective communication among all. 4. Process design: CRM entails changing the entire focus of the organization with all processes and operations designed around the customer. Customer centricity is a long-term strategy that requires long-term management and commitment of significant resources. The pay-off too is long term. The challenge for the organization, therefore, is to manage the long term while excelling in the short term. The process design should be such that it creates an environment that generates complete knowledge about the customers to enable the organization to effectively and fruitfully communicate and deliver to its existing customers, in addition to creating new customers. 5. Technology and vendor selection: At this stage, various options on vendor selection are viewed and evaluated. Factors, such as alignment of technology with the current systems, capabilities of the solutions offered in terms of their functionalities, and other such factors, are considered while evaluating the products of different vendors. 6. Solution development and implementation: This stage consists of various activities, such as customization of features, development of new features that are not present in the product, process integration and testing by using the prototype and design of the database. Many a time, integration of different CRM solutions with each other and also with the back-end systems takes place at this stage. Before implementation, these solutions are documented and circulated among the people going to be affected with its implementation. The process is then initiated with internal staff training for better understanding and effective implementation. 7. Measurement and control: The final stage in the CRM implementation road map entails development of metrics for measurement of performance of CRM solutions with the desired performance indicators. If the CRM solutions are not apt, the firm may go back and refine its CRM requirements. Developing metrics enables a firm to measure the success of the CRM implementation in terms of how well it has solved the business problem. Measurement matrix must also include user feedback for better acceptability and business effectiveness. The CRM RoadMap Check Your Progress 3. Mention two issues that a good CRM strategy analyses. 4. What are the various stages of an effective and successful CRM programme? Self-Instructional Material 73

The CRM RoadMap 5.3.1 Steps for Successful Implementation of CRM Strategy The development of CRM strategy and its implementation are equally crucial to the business. The following steps would ensure the successful implementation of CRM in any firm. (a) Managers should only think about providing quality customer services rather than concentrating more on the CRM label. The success lies in implementation of CRM and not in following vague policies. (b) In order to understand the specific CRM needs, the firm has to re-examine the vital CRM areas like strategy, communication, software tools, etc. (c) The effective implementation of CRM requires the availability and allocation of adequate funds. (d) CRM implementation can be undertaken on a small scale in the initial stages, which will help the firm find out the pitfalls and practical difficulties. This would help the firm to adopt the required corrective measures at the time of the fullfledged implementation of CRM. (e) The firms should focus on the CRM integration and data mining. (f) Instead of abandoning the existing systems and data, the firm must retain them when introducing new CRM strategies. 5.4 SUMMARY In this unit, you have learned about CRM strategy and the stages involved in the successful and effective implementation of CRM. CRM business processes involve processing knowledge about customers to pursue the goals of marketing. Usually, it also involves direct customer contacts and exchange of information or services between the enterprise and the customers. CRM involves customers, organizations and relationships and works for their integration. This requires management of technology and people for the benefit of the customers. CRM is not simply a new software package or a breakthrough in management technique, but a very useful and effective tool in the hands of business organizations to retain the existing customers as well as to attract new customers. By adopting a CRM system, a firm can keep track of various basic and vital customer information like communications, contacts, accounts, buying histories and preferences. Through proper maintenance of data relating to the customers, the firm can improve contacts with its customers, manage marketing campaigns, reduce customer response times and offer services in a large and geographically widely spread out market. 5.5 KEY TERMS Customer process re-engineering: Redesigning the key processes that touch the customers and asking customer feedback on the processes that matter the most to them. Customer life cycle management: The measurement of multiple customerrelated metrics, which, when analysed for a period of time, indicate performance of a business. 74 Self-Instructional Material

5.6 ANSWERS TO CHECK YOUR PROGRESS The CRM RoadMap 1. The CRM strategy is based on the idea of making each customer more valuable to the company. 2. The CRM business processes involve processing of customer knowledge to pursue the goals of marketing. Usually, it also involves direct customer contacts and exchange of information or services between the enterprise and the customers. 3. The issues that a good CRM strategy analyses are: a. What business the firm is carrying on and who are its customers? b. What products and services are being offered and what value addition could be made? 4. The various stages of an effective and successful CRM programme are as follows: a. Business scenario analysis b. Defining the purpose c. Planning d. Process design e. Solution development and implementation f. Measurement and control 5.7 QUESTIONS AND EXERCISES Short-Answer Questions 1. What is the importance of a CRM strategy for a company? 2. What are the factors on which the success of CRM depends? 3. What is the use of technology in CRM? 4. What do you mean by CLCM? 5. What are the various steps for successful implementation of CRM strategy? Long-Answer Questions 1. Describe the key areas that need to be addressed for a successful customer relationship management strategy. 2. Explain the various stages of an effective and successful CRM programme. 5.8 FURTHER READING Shahjahan, S. 2004. Relationship Marketing: Text and Cases. New Delhi: Tata McGraw-Hill. Mukerjee, K. 2007. Customer Relationship Management: A Strategic Approach to Marketing. New Delhi: Prentice Hall of India. Sheth, J. N. 2001. Customer Relationship Management. New Delhi: Tata McGraw- Hill. Self-Instructional Material 75

The CRM RoadMap 76 Self-Instructional Material CASE 1: Touch Point Management at Philips Dutch consumer electronics MNC Philips uses a programme called touch point tool, which is a six-point plan for creating an improvement framework for each function and business. The touch point tool is basically a methodology that helps in identifying a company s interactions with its customers and other stakeholders and then prioritizing and improving them. Identifying every touch point is stressed upon since it influences customer opinion. Each interaction then needs to be managed in a way that it gets aligned with the brand positioning. All touch points are plotted sequentially along a customer s passage, from pre-purchase to post purchase with the help of touch point wheel. A touch point, for example, could be a chat with a Philips account manager, a Philips TV commercial or even a hit on the Philips website, that is, any place where the customer touches Philips. All customer interfaces are defined and the ones with the greatest impact are prioritized. These are then tested against the three criteria with which every product, solution, service and process have to be aligned. The three criteria designed around you, easy to experience and advanced were decided upon after extensive research to measure Philips performance and that of its competitors. The result serves as a framework for the planning process for developing improvement programmes. These are tested against real customer insights. It is the combination of two unique capabilities that enable us to deliver on our sense and simplicity promise. These capabilities are firstly, understanding people and secondly, technology integration and product design. We put our end-users in the front and centre our product innovations by beginning with understanding their needs and aspirations. We use best-in-class research facilities and agencies for validating and ensuring that our product innovations are designed around people s needs and aspirations, easy to experience and advanced. The process is divided into six steps: Identify touch points Prioritize touch points Assess touch points Define touch point improvements Define business impact and resources Develop key action steps The touch point tool enables managers to view the business from the perspective of customers. It takes them through the process of studying customer requirements and ensuring that they constitute the centre of all marketing activities. The semiconductor division at Philips, for example, regularly conducts customerspecific product seminars, which is a valuable touch point. The touch point tool helped in making these seminars more interactive. It was discovered that the customer needed to feel more closely connected with the products and the tool helped to achieve this. End-to-end demos and taking participants through the whole product process were some key action steps taken. The touch point tool helps both during introducing a new product and relaunching an old one. Market research showed that Senseo (a new type of electric kettle from Philips), for example, was often given as a gift. Hence, word of mouth was one of its vital touch points. A strategy was developed using this information, which proved to be an effective marketing tool and even saved on an expensive advertising campaign. All Philips marketing managers are trained on the touch point tool, which helps them understand the full cycle of interaction points right from point of purchase to end application. By identifying the touch points they can start to improve the quality of each encounter. This results in an increase in sales as well as in a more meaningful bond with the customer. Questions for Discussion 1. Is a touch point tool useful? 2. Was it a good idea for Philips to introduce touch point management?

CASE 2: Implementing CRM in Indian Financial Institutions Shalini Mehta, who has a savings bank account with a private bank, has just taken a car loan. She has a credit card and also invests in mutual funds, all with the same bank. Her parents have been long-term customers of the bank in question, and her NRI brother banks there too. How does the bank evaluate her business on the basis of her modest personal account or in the larger context of all these connections? So far, most banks have had discrete systems pertaining to different functionalities like credit cards, channels and wealth management. But the sector is now beginning to adopt IT solutions that provide an integrated view of the customer or one face across all transactions. In addition to data warehousing and solution for customer relationship management, measures like giving customer a single identification number for all transactions are being taken. In today s scenario, when banks pride themselves on offering universal banking solution to customers, having separate databases of different services to the same customer doesn t make sense. Apart from the various kinds of transactions, banks also need to keep the entire family of the individual in mind and the overall creditworthiness of the client. The need for adopting such a system is illustrated by a real case described by Deepak Ghaisas, CEO, India operations, I-flex solutions: A customer who had defaulted on a payment was intimated by the bank, but the result of such an action was that the son-in-law of the customer, who happened to be a big industrialist, closed all accounts with the bank. Max New York Life, for instance, hands out a single statement to the customers if desired by them, along with statements for their individual policies as stated by their spokesperson. ING Life Insurance also gives each customer a single statement, which incorporates the exposure of the customer across all the policies and products. Life Insurance Corporation is yet to implement the same. In the banking sector also, all private banks have already incorporated the concept of single statement for all product mix. HSBC, Citibank and ICICI Bank give customers the options of linking the accounts pertaining to all transactions with the bank, with regard to different kinds of products. Banks like Standard Chartered Bank says that the concept of one face of the customer is yet to come into full force in India. We have 1.8 million customers here in India, but the usage is restricted to 1.2 products per customer on an average. Domestically, this situation exists because banks are still working at becoming a one-stop service provider. Internationally, the factor of cross-selling is higher, where each customer on an average opts for more than three products from a particular bank. In India, crossselling in banks is yet to take off fully. People, for example, still prefer to approach housing finance companies for a housing loan, instead of banks. Although many insurance companies are yet to evolve a single customer ID system, ING Life, Tata AIG, and Max have already adopted the practice. If a customer has one ID for all deals, it would benefit the company in two ways. First of all, customer profiling would be easier and secondly, it would become easier to quickly track the value of transactions. The technology would help in segmenting and classifying customers to identify further business potential as also to provide better services. Life Insurance Corporation of India is also working on the similar principle of customer profiling and giving a single ID to clients holding various policies and then segmenting them further as gold customer, silver customer, etc. However, there could be problems in implementing this. Customers may not like it. Segmenting in gold, silver or platinum grade, for example, may publicly bring them in focus of their investments. Also, some customers use different names (for example, they may or may not use a middle name) for different purposes like loans, The CRM RoadMap Self-Instructional Material 77

The CRM RoadMap deposits and demat accounts in a bid to minimize tax; they would fall prey to segmentation. This one face of the customer strategy also integrates the individual CRM initiatives of different business lines of a bank like saving accounts, credit cards or loans, and also various channels of service delivery like ATM or the Internet or phone banking. Since it concentrates on the total value of the relationship with customers, both for products and services, it helps the banks on two fronts: customer servicing and cross-selling products. Girish G Vaidya, senior vicepresident and head, banking business unit, Infosys, said at a recent conference: In the present scenario, when the technology can be duplicated in banks, the ability to connect with and maintain a relationship, with the customer is what gives a bank a sustainable competitive advantage. However, some banks are still unsure whether such a system would add value. With all advantages to building and strengthening relationships it also involves the challenge of maintaining customer privacy. Questions for Discussion 1. Has CRM implementation improved bank services? 2. Why are some banks still unsure of implementing CRM? 3. What types of customer profile are life insurance companies creating? 78 Self-Instructional Material