UNIT 5 THE CRM ROADMAP

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UNIT 5 THE CRM ROADMAP

Structure5.0 Introduction5.1 Unit Objectives5.2 The CRM Strategy

5.2.1 Defining a CRM Strategy5.3 Implementing CRM Initiatives

5.3.1 Steps for Successful Implementation of CRM Strategy5.4 Summary5.5 Key Terms5.6 Answers to ‘Check Your Progress’5.7 Questions and Exercises5.8 Further Reading

Case Studies

5.0 INTRODUCTION

Customer is always right. Customer is king. Customer comes first. Customers tell abouttheir negative experiences to more people than about their satisfying experiences. It iseasier and economical to influence existing customers to buy more than it is to increasethe customer base by acquiring new customers. Successful new product and serviceideas can be developed by keeping an active communication with the existing customers.Repeat customers cost one-fifth less than new customers, and can substantially increaseprofits. Hence, there are compelling and convincing reasons for the companies toconcentrate their efforts on improving customer satisfaction, and retaining them. Businessstrategies need to focus on successfully building, developing and managing lasting andlong-term relationships with their existing customers. It needs a comprehensive andintegrated approach to create, maintain and expand customer relationships. CRM isconsidered more as a business strategy than a mere technology. In this unit, you willlearn and analyse how the relationship with the customer is developed strategically andthen 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 thebusiness 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 currentcustomer interactions of the organization helps in retaining the existing customers andattracting new ones. It is a strategy for making continuous improvements in customerexperience and value enhancement in the relationship. Implementation of CRM will

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increase the delight of the customers and make them stay loyal to the organization for alonger period. CRM can be identified with the creation, development and maintenanceof long-term, mutually profitable relationships between customers and the organization.

The CRM strategy gives a competitive advantage to an organization as it createsa congenial environment to accurately understand the existing customers and helps ineffective 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 thewake of globalization, where customer delight is the only key to success and to the veryexistence of the company. It is widely accepted that it costs five to ten times more tobring in a new customer than it is to retain the existing one. The choices open to thecustomers are many and considering this scenario, the companies require to build abetter understanding of their customer base so as to analyse their expectations andsatisfaction levels. Information on customer behaviour is the key to success. Evolvingright CRM strategies will enable the companies to figure out what their customers wantand 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 aclear direction as to how the organization will plan to create, maintain and expand customerrelationships. An X organization’s vision to succeed by ‘being world class’ is too vagueto 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 isneeded to build a winning strategy.

CRM is an enterprise-wide initiative as it aims at integrating the front-endcustomer-facing systems with the back-end systems that actually deliver the productand value to the system. Defining a CRM strategy involves not only the top managementbut also the enterprise as a whole with all functional areas. It involves understanding thebusiness requirements and needs and then searching for customer-oriented solution. Asuccessful customer relationship management strategy will address the following keyareas of the business.

• Business strategy: A CRM strategy aligns itself with the financial goals of thebusiness and sets out an action plan for the enterprise to build customer loyalty orcustomer connection. This means that an organization will want that customersbuy more, stay longer, recommend the organization to others and have the will topay a higher price. Such a strategy requires a clear business vision so that itssuccessful implementation can be developed and designed. A good CRM strategytakes 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 whichmust be aligned with classified data supplied by analytical CRM.

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• 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 long-term loyalty, while bad customer experiences have negative effect and harms theenterprise’s ability of creating new relationships with prospects.

As per a report published by the American Society of Quality and Arthur AndersenConsulting Inc. in 1977o Customers tell eight friends about a satisfying experience and twenty friends

for a negative experienceo 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 baseo 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/customerso The methodologies adopted to develop customer base and the changes made

to meet the customer needso 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 theorganization and maintenance of tight integration between operational and analyticalsystems. Successful CRM strategies require finding the right information at theright time. As organizations become more sophisticated, they must deploy creativeways to integrate technologies to support the relevant CRM strategies so as toreach an improved system of one-to-one management and data mining with themain focus on customer delight.

Technology can be used to track customer needs, interests and buying habits andthen restructure the marketing efforts accordingly to meet the specific needs ofcustomers. It can also track customer product use as the product progressesthrough its life cycle, and then tailor the service strategy accordingly. In lifeinsurance, for example, an endowment type product may have to make periodicalpayments, have loan facility and provide death or maturity benefits. The insurancecompany must track the product for their select customers, if not for all, forproviding matching services at different points in the life cycle of the product.

Technology can be used to understand the buying behaviour of individual customersand help coordinate the changing purchase patterns of the customers byapproaching them with suitable products.

• Processes: A CRM business process involves processing of customer knowledgefor accomplishing the goals of marketing. It may also require establishing directcustomer contact and exchanging information or services between the businessorganization and the customer. The advancement in CRM applications has led toa focus on redesigning the key processes that touch the customers and askingcustomer feedback on the processes that matter the most to them. This is called

Check Your Progress

1. What is the basis of CRMstrategy?

2. What are CRM businessprocesses?

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customer process re-engineering or redesigning. Continuous re-engineering createsprocesses that meet customer’s changing expectations and also supports thecustomer value proposition resulting into desired customer experience.

5.3 IMPLEMENTING CRM INITIATIVES

CRM is ultimately about deriving maximum revenue from loyal customers throughproactive management of their life cycle. It is about taking the right CRM initiatives tothe right customer segment at the right time to produce business results. The difficultylies in deciding the right CRM initiative that should be applied to a particular segment ofcustomers. A creative mind, advanced technology and custom-centric approach will berequired to meet these challenges.

CRM has to be understood as a business strategy that provides a systemic approachto customer life cycle management (CLCM). Successful customer life cycle managementwould require that business mechanism integrate business processes, technology andthe customer life cycle. This can happen only if the business model integrates sales,service, marketing process and the CRM technology environment with the customer lifecycle.

Customer relationship management is recognized as a corporate-level strategyfocusing on the establishment and maintenance of a long-lasting relationship with thecustomers. Several commercial CRM software packages are available in the marketfor supporting the CRM strategy. However, as emphasized earlier, technology alone isnot enough for maintaining a long-lasting relationship with customers, as this objectivecan be achieved only through a holistic change in the philosophy of the firm. This needsinvolvement 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, includingpolicies and processes, and front-office customer service. Employees’ training anddevelopment, marketing activities of the firm, implementation of systems and informationmanagement, and all efforts of the business must be directed and tailored towards ensuringcustomer satisfaction.

A Customer Relationship Management System (CRMS) when implemented willresult into automation of all the front-office business functions. CRMS works towardsvalue-added delivery to esteemed and loyal customers through improved technology. Bymanaging the customers’ multiple interaction and response activities, CRMS ensuresthat customer benefits are upgraded and delivered reliably. CRMS acts as an efficiencymultiplier, enhancing the processing power of advanced computers to effectively automatefront-office operations. CRMS with its vast storage capacity of a modern-day computersystem, enhances the finite memory of front-office staff helping an organization inmaintaining 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 shouldanswer questions about the types of businesses of the firm, their customers,and their competitive position in the market. This scenario analysis will helpthe firm in understanding its position vis-à-vis its competitors and in furtherdefining the strategy to improve performance in the market and developrelationships.

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2. Defining the purpose: The firm needs to define the purpose for going in fora CRM exercise. Just because a competitor is engaged in CRM activitiesshould not be a compelling factor in implementing CRMS initiatives. This maybe initiated to build long-lasting relationships with the customers in an effort tobe more effective and efficient, or to create a customer-focused culture byeffective adoption of customer-based measures, or to develop a completeend-to-end process to serve customers better.

3. Planning: The next important step in CRM implementation is the planningstage. This includes the documentation of high-level CRM goals in the formof a business document that becomes the focal point for strategy development.Planning also involves detailing of what needs to be done and choosing thepeople who would be responsible for the same. Teams need to be set up forexecution of the various stages of the process. There may be internal issuesbetween various operating departments, such as marketing, operations, IT,where the process changes may have a direct impact and hinder progress. Itwill be very important to maintain an effective communication among all.

4. Process design: CRM entails changing the entire focus of the organizationwith all processes and operations designed around the customer. Customercentricity is a long-term strategy that requires long-term management andcommitment of significant resources. The pay-off too is long term. Thechallenge for the organization, therefore, is to manage the long term whileexcelling in the short term. The process design should be such that it createsan environment that generates complete knowledge about the customers toenable the organization to effectively and fruitfully communicate and deliverto its existing customers, in addition to creating new customers.

5. Technology and vendor selection: At this stage, various options on vendorselection are viewed and evaluated. Factors, such as alignment of technologywith the current systems, capabilities of the solutions offered in terms of theirfunctionalities, and other such factors, are considered while evaluating theproducts of different vendors.

6. Solution development and implementation: This stage consists of variousactivities, such as customization of features, development of new featuresthat are not present in the product, process integration and testing by using theprototype and design of the database. Many a time, integration of differentCRM solutions with each other and also with the back-end systems takesplace at this stage. Before implementation, these solutions are documentedand circulated among the people going to be affected with its implementation.The process is then initiated with internal staff training for better understandingand effective implementation.

7. Measurement and control: The final stage in the CRM implementationroad map entails development of metrics for measurement of performance ofCRM solutions with the desired performance indicators. If the CRM solutionsare not apt, the firm may go back and refine its CRM requirements. Developingmetrics enables a firm to measure the success of the CRM implementation interms of how well it has solved the business problem. Measurement matrixmust also include user feedback for better acceptability and businesseffectiveness.

Check Your Progress

3. Mention two issues that agood CRM strategyanalyses.

4. What are the various stagesof an effective andsuccessful CRMprogramme?

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5.3.1 Steps for Successful Implementation of CRM Strategy

The development of CRM strategy and its implementation are equally crucial to thebusiness. The following steps would ensure the successful implementation of CRM inany firm.

(a) Managers should only think about providing quality customer services rather thanconcentrating more on the CRM label. The success lies in implementation ofCRM and not in following vague policies.

(b) In order to understand the specific CRM needs, the firm has to re-examine thevital CRM areas like strategy, communication, software tools, etc.

(c) The effective implementation of CRM requires the availability and allocation ofadequate 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 wouldhelp the firm to adopt the required corrective measures at the time of the full-fledged 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 themwhen introducing new CRM strategies.

5.4 SUMMARY

In this unit, you have learned about CRM strategy and the stages involved in the successfuland effective implementation of CRM. CRM business processes involve processingknowledge about customers to pursue the goals of marketing. Usually, it also involvesdirect customer contacts and exchange of information or services between the enterpriseand the customers. CRM involves customers, organizations and relationships and worksfor their integration. This requires management of technology and people for the benefitof the customers. CRM is not simply a new software package or a breakthrough inmanagement technique, but a very useful and effective tool in the hands of businessorganizations 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 vitalcustomer information like communications, contacts, accounts, buying histories andpreferences. Through proper maintenance of data relating to the customers, the firmcan improve contacts with its customers, manage marketing campaigns, reduce customerresponse 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 touchthe customers and asking customer feedback on the processes that matter themost to them.

• Customer life cycle management: The measurement of multiple customer-related metrics, which, when analysed for a period of time, indicate performanceof a business.

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5.6 ANSWERS TO ‘CHECK YOUR PROGRESS’

1. The CRM strategy is based on the idea of making each customer more valuableto the company.

2. The CRM business processes involve processing of customer knowledge to pursuethe goals of marketing. Usually, it also involves direct customer contacts andexchange 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 analysisb. Defining the purposec. Planningd. Process designe. Solution development and implementationf. 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 customerrelationship 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: TataMcGraw-Hill.

Mukerjee, K. 2007. Customer Relationship Management: A Strategic Approach toMarketing. New Delhi: Prentice Hall of India.

Sheth, J. N. 2001. Customer Relationship Management. New Delhi: Tata McGraw-Hill.

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CASE 1: Touch Point Management at Philips

Dutch consumer electronics MNC Philips uses a programme called touch pointtool, which is a six-point plan for creating an improvement framework for eachfunction and business. The touch point tool is basically a methodology that helpsin identifying a company’s interactions with its customers and other stakeholdersand then prioritizing and improving them. Identifying every touch point is stressedupon since it influences customer opinion. Each interaction then needs to be managedin a way that it gets aligned with the brand positioning. All touch points are plottedsequentially along a customer’s passage, from pre-purchase to post purchase withthe help of ‘touch point wheel’. A touch point, for example, could be a chat with aPhilips 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 areprioritized. These are then tested against the three criteria with which every product,solution, service and process have to be aligned. The three criteria—designedaround you, easy to experience and advanced—were decided upon after extensiveresearch to measure Philips’ performance and that of its competitors. The resultserves as a framework for the planning process for developing improvementprogrammes. These are tested against real customer insights. ‘It is the combinationof 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 frontand centre our product innovations by beginning with understanding their needsand aspirations. We use best-in-class research facilities and agencies for validatingand ensuring that our product innovations are designed around people’s needsand aspirations, easy to experience and advanced.’

The process is divided into six steps:

• Identify touch points • Prioritize touch points

• Assess touch points • Define touch pointimprovements

• Define business impact and resources • Develop key action steps

The touch point tool enables managers to view the business from the perspectiveof customers. It takes them through the process of studying customer requirementsand ensuring that they constitute the centre of all marketing activities. Thesemiconductor division at Philips, for example, regularly conducts customer-specific product seminars, which is a valuable touch point.

The touch point tool helped in making these seminars more interactive. It wasdiscovered that the customer needed to feel more closely connected with theproducts and the tool helped to achieve this. End-to-end demos and takingparticipants through the whole product process were some key action steps taken.

The touch point tool helps both during introducing a new product and relaunchingan old one. Market research showed that Senseo (a new type of electric kettlefrom Philips), for example, was often given as a gift. Hence, word of mouth wasone 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 expensiveadvertising campaign. All Philips marketing managers are trained on the touchpoint tool, which helps them understand the full cycle of interaction points rightfrom point of purchase to end application. By identifying the touch points theycan start to improve the quality of each encounter. This results in an increase insales 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?

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CASE 2: Implementing CRM in Indian Financial Institutions

Shalini Mehta, who has a savings bank account with a private bank, has justtaken a car loan. She has a credit card and also invests in mutual funds, all with thesame 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 personalaccount or in the larger context of all these connections? So far, most banks havehad discrete systems pertaining to different functionalities like credit cards,channels and wealth management. But the sector is now beginning to adopt ITsolutions that provide an integrated view of the customer or ‘one face’ across alltransactions. In addition to data warehousing and solution for customerrelationship management, measures like giving customer a single identificationnumber for all transactions are being taken.

In today’s scenario, when banks pride themselves on offering universal bankingsolution to customers, having separate databases of different services to thesame 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 overallcreditworthiness of the client. The need for adopting such a system is illustratedby 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 theresult of such an action was that the son-in-law of the customer, who happened tobe a big industrialist, closed all accounts with the bank.’

Max New York Life, for instance, hands out a single statement to the customers ifdesired by them, along with statements for their individual policies as stated bytheir spokesperson. ING Life Insurance also gives each customer a singlestatement, which incorporates the exposure of the customer across all the policiesand products. Life Insurance Corporation is yet to implement the same.

In the banking sector also, all private banks have already incorporated the conceptof single statement for all product mix. HSBC, Citibank and ICICI Bank givecustomers the options of linking the accounts pertaining to all transactions withthe bank, with regard to different kinds of products. Banks like Standard CharteredBank says that the concept of ‘one face’ of the customer is yet to come into fullforce in India. We have 1.8 million customers here in India, but the usage isrestricted to 1.2 products per customer on an average. Domestically, this situationexists because banks are still working at becoming a one-stop service provider.

Internationally, the factor of cross-selling is higher, where each customer on anaverage opts for more than three products from a particular bank. In India, cross-selling in banks is yet to take off fully. People, for example, still prefer to approachhousing finance companies for a housing loan, instead of banks.

Although many insurance companies are yet to evolve a single customer IDsystem, ING Life, Tata AIG, and Max have already adopted the practice. If acustomer has one ID for all deals, it would benefit the company in two ways. Firstof all, customer profiling would be easier and secondly, it would become easier toquickly track the value of transactions. The technology would help in segmentingand classifying customers to identify further business potential as also to providebetter services.

Life Insurance Corporation of India is also working on the similar principle ofcustomer profiling and giving a single ID to clients holding various policies andthen 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 themin focus of their investments. Also, some customers use different names (forexample, they may or may not use a middle name) for different purposes like loans,

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deposits and demat accounts in a bid to minimize tax; they would fall prey tosegmentation.

This ‘one face of the customer’ strategy also integrates the individual CRMinitiatives of different business lines of a bank like saving accounts, credit cardsor loans, and also various channels of service delivery like ATM or the Internet orphone banking. Since it concentrates on the total value of the relationship withcustomers, both for products and services, it helps the banks on two fronts:customer servicing and cross-selling products. Girish G Vaidya, senior vice-president and head, banking business unit, Infosys, said at a recent conference:‘In the present scenario, when the technology can be duplicated in banks, theability to connect with and maintain a relationship, with the customer is whatgives 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 involvesthe 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?