UNIT 3 TYPES OF CUSTOMER RELATIONSHIP MANAGEMENT

UNIT 3 TYPES OF CUSTOMER RELATIONSHIP MANAGEMENT

UNIT 3 TYPES OF CUSTOMER RELATIONSHIP MANAGEMENT Types of Customer Structure 3.0 Introduction 3.1 Unit Objectives 3.2 Types of Customer 3.2.1 Operational CRM 3.2.2 Analytical CRM 3.2.3 Collaborative CRM 3.3 Sales Force Automation 3.4 Lessons from Failed CRM Initiatives 3.5 Summary 3.6 Key Terms 3.7 Answers to Check Your Progress 3.8 Questions and Exercises 3.9 Further Reading 3.0 INTRODUCTION Customer (CRM) is a concept and process through which a business organization derives benefits from a long-term view of relationship-building efforts with customers and clients. Organizations that believe in the concept and philosophy of CRM are devoted to serving their customers by deploying the latest technology with the support of their dedicated and self-motivated team members and all other outsourced agencies. CRM is a customer-focused strategy with the purpose of bringing a fine coordination between people, process and technology. The basic philosophy and theme of all CRM efforts and other CRM-related initiatives is its focus on cooperative and collaborative relationship with the customers. Another important facet of CRM is customer selectivity. Studies have shown that all customers are not equally profitable. Different types of CRM put together will help identify the customers who are highly profitable. In this unit, you will learn about the different types of CRM. 3.1 UNIT OBJECTIVES After going through this unit, you will be able to: Understand the CRM philosophy Discuss the main types of CRM Explain how one type of CRM helps another Understand the role of CRM in customer retention Self-Instructional Material 33

Types of Customer 34 Self-Instructional Material 3.2 TYPES OF CUSTOMER RELATIONSHIP MANAGEMENT The CRM philosophy is based on the principle that for the survival of any service organization, the interests, needs and demands of the customers must be given top priority. In no circumstances should the customer have a feeling that he is being ignored and given pseudo attention. The industry or the business enterprise must provide a unique identity to each and every customer. Random treatment to customers can prove disastrous for a company. There are numerous instances of companies getting dissolved just because they neglected their customers. Any organization who does not give priority and respect to customer needs and aspirations will not survive for long. The CRM concept is not new to the business organization. All the reputed and successful industries had been providing the best possible support to the customers; but now with the increase in the magnitude of business transactions and ever-increasing expectations of the customers, it not humanly possible to fulfill the demands and requirements of the customers without the support of highly sophisticated technology and wholehearted involvement of the people in the organization. Experts have broadly classified CRM activities into three different types for its proper understanding and implementation. The CRM activities are as follows: Operational CRM Analytical CRM Collaborative CRM However, ultimately, all the three types of CRM modules must integrate and merge to make CRM applications a success. 3.2.1 Operational CRM It represents automation of business processes while interacting with customers at front offices, back offices and also while interacting with other companies and partners, such as suppliers/vendors, distributors and various other associations helping in the growth of business. The central idea of operational CRM is to install software that provides a single window service to customers and business partners and renders support to marketing, sales force, service staff and other distribution channels for reaching the existing customers and prospects in a planned and systematic manner, for relationship building and for the sale of company s products. In operational CRM, technology is used by an organization to automate some or all the business processes and initiatives. However, the organization must understand that a piecemeal implementation of CRM techniques may prove counter-productive. There is no harm in implementing automation in stages, but the objective should be to bring all operations and processes under the umbrella of customer-friendly technology. The main focus is to provide technological support to customers facing processes at various levels of their interaction with an organization. In simple language, an operational CRM creates the latest technology and introduces easy-to-operate software to help the customers at all levels of their contacts and touch points with the organization. The technology provides the contact history of a customer which helps the staff to immediately access important information on the customer about the product owned, prior support calls, and the nature of his complaint, without obtaining all this information

directly from the customer. This gives a feeling to the customer that he is being taken care of. The other objective of operational CRM is to provide transaction-level data about individuals and products, and offer support for customers through processes such as direct mail, phone interaction, web-based communications, point-of-sale of information, etc. Another area where technological support is provided is regarding information about the products, pricing and their comparative analysis. Customers should be able to know the details of distribution channels so as to reach them easily for buying the products. The products details and their pricing should be displayed with full transparency to help customers take a considerate decision before buying. Banks have gone much ahead in the implementation of operational CRM. ATM, phone banking, Internet banking are some of the applications of operational CRM. Bank account balance and other transactions are being intimated to an account holder by SMS on mobile. Most of the operations can be done through Internet banking. Some banks have even introduced mobile banking. Life insurance companies have also made good progress in automating many of their processes. Most of the insurance companies are giving the status of an insurance policy on telephone through Interactive Voice Response (IVR) and on the Internet. One can know the updated premium position, surrender value acquired and the amount of loan available on one s policy just on telephone and on the Internet. Various options are being provided to pay the premiums, such as through the Internet, by ECS, credit cards, and smart cards. In earlier times, policy holders suffered a lot at the time of payment of premiums, claim settlements and various other operations. The procedure for survival benefit, loan and surrender payments were very cumbersome. Many of the processes have now been computerized giving relief to the customers but true implementation of CRM in insurance industry is still a far cry. A Customer Interaction Centre (CIC) is a critical component of operational CRM, whether implemented for sales, marketing, or customer service function. The CIC is the key to consolidating customer interaction and developing a unified view of the customer. Every customer issue cannot be resolved by technology. CICs play a very useful role by having one-to-one interactions with the customers and finding solution to the problems by personal intervention. Today, consumers approach the business in more ways than from the past. The consumers are well informed, and they prefer to interact with the organization before buying, at the time of buying and after buying. The various interaction sources through which one gets in touch with the organization are called customer touch points. Operational CRM provides these touch points. All these customer touch points are a valuable asset to an organization. Ignoring them would keep an organization in the dark about the feedback and reaction of the customers towards the organization and its people. All information and views available at these touch points need a thorough analysis to understand the customers level of appreciation for the organization. 3.2.2 Analytical CRM Analytical CRM deals with creating a comprehensive customer knowledge base called data warehouse. A data warehouse is a system for storing and delivering huge quantity Types of Customer Self-Instructional Material 35

Types of Customer 36 Self-Instructional Material of data that can be used for analysis and decision-making. In a data warehouse, all the information available from different parts of an organization is stored for further analysis and classification as per the need of an organization. Most of the data in the data warehouse relates to customers interaction with an organization and helps an organization to understand customers behaviour, likes and dislikes and their criticism, and appreciation towards an organization. It also reflects the attitude and approach of the people in an organization towards the customers. Customers interact with a company at various levels. It captures all the relevant customer information giving a 360-degree view of the customers. Data marts are subject-specific data warehouses which stores department-wise information. The data stored in the data warehouse is intelligently segregated and classified and stored according to the line of business. Using the classified and segment-wise data is referred to as data mining. Data mining is the analysis of data for relationships that previously was not known to the organization. It helps us to know customers buying pattern, buying behaviour and latent needs. By data mining activities, relevant data is extracted to understand customer behaviour, identify desired customer segments, segregate potential and valued customers for marketing and servicing activities. Predicting customer behaviour, identifying the desired customer segments, finding high net worth clients, etc., are some of the functions that could be performed with the support of analytical CRM. Many business organizations are continuously seeking the help of analytical CRM to approach their existing customers for developing long-term relationship with them. The analysts also provide the data of new prospects, who have been trying to contact the enterprise for one reason or the other. Marketing automation means the application of information system technologies to sales activities. It includes accurate business forecasts, generating customized presentations and proposals and personalized communications by the field representatives. It also handles the entire sales pipeline from lead generation to closure. Analytical CRM helps to create a database called a data warehouse and select subject-specific data called data marts. Mining the data generates customer profiles and categorizes the customers into various segments. New customers are acquired through sales leads provided through analysis and reports. A customer can be an individual, family or a corporate. Insurers need to know more about them, their lifestyle preferences to cross-sell and up-sell. Analytical CRM helps in acquiring new customers and gives support for retaining the existing customers through proper service and relevant customer information. It works to create customer profiles, and analyses customer ordering history for a positive and pleasant interaction with him. The most important method is to build a correctly designed data warehouse and invoke its data, both current and past, for regular analysis and for ad hoc needs. The data can be used targeting right types of customers through call centres, telemarketing, direct mailing and personal contacts. Analytical CRM can provide support to evaluate the performance of different products and their financial viability. In insurance companies, analytical CRM technology plays a vital role in generating information about performance of the product, providing

comparative review of business based on number of policies, annualized premium, geographical spread of business, mode and method of payment, etc. It also generates business figures in terms of agents, managers and branches, for review. Profitability analysis by product, channel, geographical area, and so on, can be made and shared with all concerned. Persistency rate of policies, details of loyal and profitable customers can be known for taking necessary steps to bind them permanently with the organization. Analysis of the behaviour of the existing customers can help to acquire and retain new customers. Capturing data of customer interaction with the organization, the analysts measure and predict customer behaviour, his temperament, attitude and financial needs and views about the organization. This information is passed on to the marketers to systematically deal with the individual customers with the purpose to serve them better and simultaneously offer them new products of the company to suit their needs at different stage of their lives. Though all customers should get due attention by the organization, there is a select group of customers who need special attention. There are some customers who are expected to bring more revenue for the organization. Hence, customer value is expressed in terms of customer profitability over a long-term relationship. The organization and salespersons arrive at customer lifetime value by calculating the revenue they and their referrals will generate over a period of time. Improving relationship with the existing customers will optimize up-selling and offer up-selling opportunities. Up-selling is part and parcel of customer service. Customers needs change with time. The existing products sometimes do not match the newly created financial needs and requirements. It is therefore highly desired that the organization approach their old and loyal customer for offering new products matching their newly created needs. The organization should not give a chance to the existing customer to buy the products which are available with them, from other organization. Cross-selling gives an opportunity to the existing customers to buy products of other companies at the counter arranged by his own organization. Selling insurance products by banks (bancassurance) is an example of cross-selling. This has become a great source of revenue for the banks. However, the success of cross-selling depends upon the degree of trust and confidence which the customers have reposed in the organization. CRM involves all areas of the organization and all functions of the organization. It requires all areas of the organization to work together in harmony towards a common goal of stronger customer relationship. By integration of marketing, sales and service strategies, high-value customers can be targeted in the most effective manner. 3.2.3 Collaborative CRM The information systems have evolved tremendously and so have the communication systems. The commercial penetration of the Internet into homes has changed everything. This has led to the evolution of CRM, which uses the Internet to integrate the customer contact points directly with the enterprise. A true collaborative CRM will result into a position where customers, distribution channels, staff and all agencies connected with an organization work as partners with the single objective of taking the organization to such levels of profitability and prosperity that enriches and engulfs every stakeholder and ultimately even the society at large. Types of Customer Self-Instructional Material 37

Types of Customer Check Your Progress 1. State the principle on which the CRM philosophy is based. 2. What are the types of CRM activities? 3. What is the central idea of operational CRM? 38 Self-Instructional Material The collaborative CRM provides a point of interaction between customers, staff and business partners through Web technologies (e.g., personalized publishing, customized communications, developing e-mail communities, conferencing, web-enabled customer interaction centres, etc.). It creates a partnership relationship with the customers and the clients. This includes technologies such as e-mail, phone, the Web, portal, IVR, Computer Telephony Integration (CTI), conferencing, etc. Staff members can share information collected about the customers while interacting with them with members of other departments. Collaborative CRM s main objective is to use information collected by all departments to improve quality of services provided by an organization. It also plays the role of a data distributor to sales, marketing and service people and to customers as well. The ultimate goal is to bring customers closer to a company and find new markets. Prospective buyers can access information about products, can calculate premiums and view the benefits and salient features of a product on the Internet. Collaborative CRM is a merger of all CRM modules. There will be sharing of relevant information among customers, sales force, distribution channels and other connected agencies. In collaborative CRM, customers no more remain outsiders. They become part of the business operation. They chat and interact with the industry people on matters relating to their choice and selection of products, and all issues relating to service and additional requirements. The customer gets a wide platform to understand and deal with the product and people of the enterprise. The most important role that collaborative CRM plays relates to retention of existing customers, acquiring new customers and winning of loyalty of high value customers. This in the long run will result into improved revenue and reduced cost. Customer is king and business strategies must be built for earning customer loyalty. It costs five to ten times more to create a new customer than to retain an old one. The proper implementation of collaborative CRM leads to retention of customers. Analytical CRM provides relevant data about each and every customer. This gives an ideal CRM opportunity by creating segmentation of customers based on their lifestyle, financial status, needs, buying pattern, lifetime value, future prospects, etc. The organization uses this database for building long-term relationships with the customers. In the life insurance industry the customers sign contracts with the insurance companies which run into many years. Hence, the customers needs and problems must be taken care of at every stage of their lives. Life insurance companies must ensure that policies do not get lapsed and all the services are provided in a very smooth way. The customers must be assured continuously that the insurance products they have purchased are the best and they must keep the policies in force by paying regular premiums. They should be given all insurance policyrelated services promptly in a personalized manner. The employees should be trained and motivated to understand the importance and long-term benefits of retaining the customers. 3.3 SALES FORCE AUTOMATION Sales force automation is one of the most important aspects of operational CRM. It is the application of information system technologies to sales activities. It includes business forecasts, creating customized presentations for the use of sales force, contact centre segmentation and campaign management tools in large insurance companies.

Birla Sunlife introduced easy-to-use software for the sale of their unit-linked plan. A proposal can be generated on the basis of the amount the prospect wants to invest. The growth of one s investment is displayed from year to year showing death and survival benefits during different stages of the policy. Such auto-generated proposals help a great deal in quick closing of sales. Now such software is being used by all the insurance companies for describing the salient features of their products, benefits available and rate of return. Some technologies are handling the entire sale operation from lead generation to closure. There are continuous efforts to integrate customer data from multiple channels and use it to increase sales force productivity. For web-based customer support, the Internet becomes the general interaction medium via the use of e-mails, chat sessions, voice mails, etc. The organization must evolve systems to send prompt response to e-mails and find speedy solutions. The webbased technology should be customer friendly. Information available on the Web includes new business figures, premium income, and achievement levels in terms of company, agency, channel, and so on. Personalized communication with the client is generated for relationship building and customer retention. It includes accurate business forecasts, generating customized presentations and proposals and personalized communications by the field representatives. A special programme for client management is developed and separate cadres of customer relationship executives and managers are posted at different offices. Types of Customer 3.4 LESSONS FROM FAILED CRM INITIATIVES CRM is not just a technology initiative. Any CRM initiative which lacks total organizational support is bound to fail. Most of the business organizations have deployed CRM modules for sales activities without providing any CRM service support module. Such half-hearted efforts could prove counter productive. Hence, a successful CRM would be a harmonious integration of technology, the people engaged in the organization and customer service. Successful implementation of integrated CRM will bring about increased sales revenues, increased win rates and reduced costs. Travel, tourism and transport industry have been revolutionized by the introduction of CRM modules. Customers can book their journey tickets, make hotel reservations and buy other allied services on the Internet. Financial services, insurance, investment banking, education and utilities are the other large-scale user of CRM in the service sector, though the area is still vastly untapped and there lies a great potential for further growth. It is often observed that in many organizations technological support is not backed by equal support of the people in the organization. They have created websites which are not updated. Banks have installed ATMs without much support of the administrative staff in case of fault and failure of the machines. When Interactive Voice Response System (IVRS) does not help, there is no immediate People Response Support System that may provide assistance. Many a time a customer has to dial a number several times without being able to reach the right option. Customers have to wait for a long time to get replies of their queries and several times their queries remain half resolved. There is dire lack of personalized attention and care. This leads to failure of CRM implementation. It must be clearly understood by the organizations that CRM is not only a technology initiative. Its success lies in full support of the all the people directly and indirectly connected with the industry. Self-Instructional Material 39

Types of Customer Box 3.1: Data mining An important tool for building customer relationship Data refers to a series of facts or statements that may have been collected, stored or processed but not organized or placed into context. The sheer magnitude of data available in large organizations serves as a strong base for companies desiring to be ahead of competition as well as for emerging organizations in adopting a customer centric approach. Information access not only helps an organization realize new opportunities and potentials, but also provides far reaching benefits from knowledge management. Organized collection of data generates a database, where each record is a set of data elements and facts. Organizing the data will lead to generation of information, which is what is required in applying to customer centric decision making. One manager may access this database for knowledge discovery while the other may access this for knowledge deployment. Data warehouse and data mining Each customer is a subject of record in the data base that provides the customer s or the perspective customers personal details and other contact information. Companies try to capture information from a customer every time he comes in contact with any of its departments. The prime touch points being the i) customer purchase call; ii) on line enquiry; iii) service related call; iv) complaints generated by existing customers etc. The information generation will include the personal characteristics of the customer, their preferences and choices of products, usage patterns and purchase histories including a record of previous contacts with the competitor companies. These data are collected by the appointed contact centre and organized into a Data Warehouse. The content of data file will be customized to the specific needs of the company and inferences will then be drawn about an individual customers need. Data Mining is a process of extracting hidden information from the available databases and presenting that information in an organized and systematic manner. It will involve the use of sophisticated statistical and mathematical techniques such as cluster analyses, automatic interaction detection, predictive modeling, etc. to predict customer behaviour and suggest information trends of customers. It is to be seen that the results of data mining are different from other data-driven business processes. While in the case of customer data interactions, nearly all the results presented to the user are things that they knew existed in the database already. Data mining, on the other hand, extracts information from a database that the user did not know existed. Data mining unearths the relationships between variables and customer behaviors that are non-intuitive. Extracting hidden patterns of customer behaviour can help in finding an altogether different route to solving a business problem. Data base of the customer information when combined with sophisticated analytical techniques makes possible to derive substantially precise information on customer needs and trends and monitor changes and variations over a period of time. Through application of Data mining software, companies can predict future trends and behaviours, thereby allowing business to gather hidden predictive information about their customers to solve business problems. Data mining is thus Discovery of previously unknown patterns and Prediction of trends and behaviours. 40 Self-Instructional Material Whether it is to increase market share or improve internal productivity or gain a competitive edge, data mining is the solution to most problems and issues. We see that today all big companies have made data mining an integral and continuous part of their business processes as database management helps in the process of

building, maintaining and utilizing the databases on the customer for the purpose of contacting, transacting and building relationships. For example, consider a life insurance major who wants to launch a new policy and needs to decide on his target customers for offering this particular product. There exists a historical database consisting of age, address, profession, income, previous insurance coverage, etc. of all existing and prospective customers with prior interactions and responses. The data mining software would use this historical information to build a model of customer behavior that could be used to predict which customers would be likely to respond to the new product launch. By using this information a marketing manager can select only those customers who are most likely to respond, thereby saving time and being cost effective. Data mining and relationship building The concept of customer relationship management involves use of knowledge and analyses about customers with a view to effectively sell them more and more goods and services, and facilitate enhanced customer satisfaction. It is the CRM function in the organization that ushers in improvements in customer service to facilitate long term sustained customer satisfaction and paves the way for repeat purchase, improved customer loyalty, reduced customer switch over and off course greater profit and revenue for the firm. Virtually every company knows that 80% of its revenues are coming from 20 per cent of its customers. In insurance industry, with high policy lapsation, it is found that on an average over 45 per cent of customers are unprofitable. Measuring customer profitability requires data that relate to both revenue generation as well as the costs of serving the product or service. Imagine that you are the marketing manager for an Insurance company. You are responsible for managing the relationships with the company s existing customers. One of your immediate concerns is churning of business and maximizing customer retention. In this business of Insurance you understand that the cost of keeping existing customers around is significantly less than the cost of getting new customers, so you need to figure out a cost-effective way of managing this problem. Traditional approach: Pick out your high end customers (that is, the ones who pay heavy premiums) and use your persuasive skills to encourage them to pay their next premiums on time and reduce lapsation and loss of contract. You may offer a rebate on late payment charges, or a new year gift, but this solution is probably very wasteful. These high end customers would be willing to stick around without receiving a persuasion or a gift. Modern approach: The solution to the churn problem has to be perceived in an altogether different way. The customers to concentrate on are the ones that will be leaving! There is no need to worry about the ones who will stay. Instead of providing the customer with something that is proportional to their value to your company, you should instead provide the customer with something proportional to your value to them. All customers are different and they need to be understood individually in order to optimize relationships. A high value customer might value the relationship because of trust and reliability, and thus wouldn t need any persuasion to stay on. While on the other hand, small customers who are financially constrained but need the coverage of life the most will require personalized care and concern to stick on. The key is determining which type of customer one is dealing with. The approach to building a relationship will be optimized through extracting hidden information. Applications of a database in CRM functions Efficient customer service enhances the insurer s reputation for taking good care of its customers and in a way creates a relationship bonding which helps and assists agents in making further sales. We understand that customer service is that crucial part of insurance administration that helps maintain important Types of Customer Self-Instructional Material 41

Types of Customer 42 Self-Instructional Material contractual and business connections between the insurer and its customers. There is an astute relationship between customer service and policy conservation. An insurer that establishes and maintains superior customer service enhances business in a number of ways. Data mining is one part of a much larger series of steps that takes place between a company and its customers. The way in which data mining impacts the relationship building process depends on the total organizations vision and mission and not only the data mining process. The customer database can however have broad range of applications, such as the following: - Meeting customer requirements. Database approach to relationship building employs observation rather than inference about customer needs and behaviour. It has been seen and experienced that observed purchasing behaviours are more powerful predictors of future buying behaviours. - Building long-term customer loyalty. By customizing the service approach, insurers build upon the brand loyalty thereby creating such customers who are satisfied with an insurer s service and are more likely to renew and increase their current coverage and to buy new products. They may also recommend the insurer to friends and family members. In addition, an insurer with a reputation for effective customer service increases its ability to attract new customers and to recruit and retain its sales force. - Improving profitability. Data mining can help in retaining existing business and can greatly increase an insurer s profit margin, because it is less costly to keep an existing customer than to gain new customers. Avoiding the time and resources required to replace customers and agents lost due to poor service allows the insurer to direct those resources into building its business. - Organization of customer service with the help of database. Customer service departments can be organized according to the types of business an insurer does and according to the approaches of each insurer s management. Some insurers establish one department or area to deal with every kind of service to its customers. Other insurers divide customer service activities by product, by distribution system, by client, or by type of service requested. For example, in organizing customer service activities by product, an insurer usually trains specific employees to respond to the questions concerning one or two products for example, in case of keyman insurance or a group life insurance product, an employee who understands all the details of the product, is the one to answer customer queries. If the Datamining results show higher number of internal customers, i.e. more agents, sales managers, the department can be grouped in a manner that internal and external customers are handled separately. If the results of Datamining show that there are requests for multiple services, assigning employees to different types of requests for service will be the best alternative. Using this organizational mode, an insurer can assign certain employees to make minor changes, while others to work with policy loans, assignments and so on. - Service improvements for agents through data mining. Agents need information in the form of organized data to service their existing customers. Policyholders consider the agent to be their link to the insurance company and, therefore, communicate directly with him when they have questions or issues. Answering customer questions promptly is vital to a continuing relationship between the policyholder, the agent, and the insurer. If the insurer makes errors in transactions, is unresponsive to requests for information, or otherwise fails to meet policy owner s expectations, the agent is the one to face their wrath. Providing reliable and effective service by the organization also helps in retention of successful agents to sell an insurer s products. - Conservation of business and improving business persistency. To get premiums regularly and timely is what every insurer seeks. Conservation is the process

of ensuring that the insurer retains policies in its books for the entire term of the plan. For many insurers conservation of existing business is as important as selling new policies. Datamining helps in predicting and forecasting the lapsation behaviour of the clients, and it is here that trends can be captured in time and remedial measures taken before much harm is done to the business. - Creating customer bonding. A strong relationship between an insurer and its policy owners ensures automatic growth in business. This relationship can be built and enhanced through improved customer interactions Data captured through customer enquiries, alterations in policies, complaints, and other services related issues enables the insurer to do an in depth analyses to enhance its relationship with its policyowners. By prudent data analyses, an insurer can often identify and help concerned policyholders not only achieve satisfaction but strive towards customer delight. - Conservation of orphan policyholders. Since agent is the prime link between the insurer and the client, without regular communication and touch of the agent, a policy owner could be likely to cancel or surrender the policy and purchase coverage from another insurer whose agent can provide ongoing service. Through Data mining, some insurers have been able to establish electronic tracking of agent activities to identify agents who are no longer active. The sooner an insurer can identify an agent who is wanting to loosen his ties with the organisation, the more likely the insurer can conserve that business. - To control claim ratios and fraud detection. Data mining can be effectively applied to detection of fraudulent claims and fraud analysis in various ways. While analyzing the characteristics of fraudulent insurance claims, prior data like type of insurance, vehicle type, age of policy, age of insured, postal address of insured shall be used for detecting hidden information. Here a model might be induced that shows a high propensity for fraud among motorcycle vehicle owners below the age of 25 for policies that have been in force for less than three months. Another approach involving clustering and algorithms could also be used to detect the cluster most worthy of further analysis by reviewing relationship among attributes. To ensure that customer service is prompt, courteous, complete, and accurate, an insurer from time to time needs to amend its ways and methods and ensure effectiveness in dealings. Providing complete service is sometimes a challenge, especially when requests for service cover a variety of transactions or when transactions are complicated or unusual. It is here that systems need to be put to replace older technology. The system that a company invests must have the ability to handle future predictive models and applications and allow to increase market share, internal productivity, and gain competitive advantage. Geeta Sarin Source: IRDA Journal, December 2009 Types of Customer 3.5 SUMMARY In this unit, you have learned about the different types of CRM. CRM is broadly classified into operational CRM, analytical CRM and collaborative CRM. Operational CRM deals with automation of business processes while interacting with customers at front offices, back offices and also while interacting with other companies and partners, such as suppliers/vendors, distributors and various other associations helping in business growth. Check Your Progress 4. What do you understand by data mining? How do data mining activities help a business organization? 5. What is the main objective of collaborative CRM? 6. What do you understand by sales force automation? Self-Instructional Material 43

Types of Customer Sales force automation is one of the most important aspects of operational CRM. It is the application of information system technologies to sales activities. It includes business forecasts, creating customized presentations for the use of sales force, contact centre segmentation and campaign management tools in large insurance companies. In operational CRM, personalized communication with the client is generated for relationship building and customer retention. A special programme for client management is developed. Analytical CRM deals with creating a comprehensive customer knowledge base called data warehouse. A data warehouse is a system for storing and delivering huge quantity of data that can be used for analysis and decision-making. The data is shared with sales, marketing and servicing people in the organization for establishing long-term relationship with the customers with the objective of further revenue generation and also for acquiring new customers. Using the classified and segment-wise data is referred to as data mining. By data mining activities, relevant data is extracted to understand customer behaviour, identify desired customer segments, segregate potential and valued customers for marketing and servicing activities. Analytical CRM helps in acquiring new customers and provides support for retaining the existing customers through proper service and relevant customer information. Collaborative CRM provides a point of interaction between customers, staff and business partners through web technologies. It creates situations where the customers, distribution channels, staff and all the agencies connected with the organization work as partners with the single objective of taking the organization to such levels of profitability and prosperity that enriches and engulfs every stakeholder and ultimately the society at large. The most important role that collaborative CRM plays relates to retention of existing customers, acquiring new customers and winning of loyalty of high value customers. This in the long run results in improved revenue and reduced cost. Collaborative CRM is the merger of all CRM modules. Relevant information is shared among customers, sales force, distribution channels and other connected agencies. In collaborative CRM, customers no more remain outsiders. They become part of the business operation. The customer is provided a wide platform to understand and deal with the product and people of the enterprise. A successful CRM needs a harmonious integration of technology, the people engaged in the organization, the customers, and customer service. 3.6 KEY TERMS Customer touch points: The various interaction sources through which one gets in touch with the organization. Data warehouse: A system for storing and delivering huge quantity of data that can be used for analysis and decision-making. Data marts: Subject-specific data warehouses, which store department-wise information. Data mining: The analysis of data for relationships that previously was not known to an organization. Marketing automation: The application of information system technologies to sales activities. 44 Self-Instructional Material

3.7 ANSWERS TO CHECK YOUR PROGRESS Types of Customer 1. The CRM philosophy is based on the principle that for the survival of any service organization, the interests, needs and demands of the customers must be given top priority. 2. The types of CRM activities are as follows: a. Operational CRM b. Analytical CRM c. Collaborative CRM 3. The central idea of operational CRM is to install software that provides a single window service to customers and business partners and renders support to marketing, sales force, service staff and other distribution channels for reaching the existing customers and prospects in a planned and systematic manner for relationship building and for the sale of company s products. 4. Using classified and segment-wise data is referred to as data mining. It helps a business organization know customers buying patterns, buying behaviour and latent needs. It helps identify desired customer segments and segregate potential and valued customers for marketing and servicing activities also. 5. The main objective of collaborative CRM is to use information collected by all departments to improve quality of services provided by an organization. It also plays the role of a data distributor to sales, marketing and service people and to customers as well. The ultimate goal is to bring customers closer to a company and find new markets. 6. Sales force automation is one of the most important aspects of operational CRM. It is the application of information system technologies to sales activities. It includes business forecasts, creating customized presentations for the use of sales force, contact centre segmentation and campaign management tools in large insurance companies. 3.8 QUESTIONS AND EXERCISES Short-Answer Questions 1. What do you understand by operational CRM? 2. What are the objectives of using operational CRM? 3. What is a customer interaction centre? 4. What is a data warehouse? 5. Mention some functions that can be performed with the support of analytical CRM. 6. What are the advantages of collaborative CRM? Self-Instructional Material 45

Types of Customer Long-Answer Questions 1. Explain the different types of CRM activities. 2. What do you understand by sales force automation? Discuss. 3. Write a short note on data mining. 3.9 FURTHER READING Shahjahan, S. 2004. Relationship Marketing: Text and Cases. New Delhi: Tata McGraw-Hill. Mukerjee, K. 2007. Customer : A Strategic Approach to Marketing. New Delhi: Prentice Hall of India. Sheth, J. N. 2001. Customer. New Delhi: Tata McGraw- Hill. 46 Self-Instructional Material