Customer relationship management

STRATEGIC APPLICATION OF IT -

Seema Agarwal

History of CRM

B&S CIMS CRM RM

B&S – Buying & SellingRM – Relationship MarketingCIMS – Customer Information Management SystemsCRM – Customer Relationship Managemente-CRM- A subset of CRM that focuses on enabling customer

interactions via e-channels (The web, email and wireless)

Time line

e-CRM

Late 80’s

Mid 90’s 2002 - Future

Early 90’s

CONCEPT & APPLICATION OF C.R.M. IN BUSINESS

• C.R.M: THE STRATEGIC IMPERATIVE

STRATEGIC USE OF INFORMATION TECHNOLOGY

- Can help a business cut cost, differentiate, innovate products & services, promote growth, develop alliance, lock-in / retain customers, create switching cost, raise barrier to entry, develop new customers

- Leading SW players like Siebel Systems, Oracle, SAP, PeopleSoft etc

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BUILDING CUSTOMER FOCUSED BUSINESS with use of internet, intranet & extranet, e-commerce websites & services to keep track of customers preference to provide services tailored to individual needs of customers.

EX: HILTON HOTEL CASE. OnQ / MITSUBISHI MOTOR SALES  C.R.M. is an inherent element of business strategy in

the new millennium. Firms in services, goods & consumer industry as well as business market (B2B) are using CRM tools.

Hilton OnQ• Hilton OnQ –IT Infrastructure created by the Hilton gave their firm

a nervous system. • CRM – CRM was an addition made to the OnQ infrastructure. It

utilized technology to give Hilton a solidified relationship with its premier customers.

• Using Call Centers to gather more information about their customers during the reservation process.

• “OnQ Reservation allows the agents to access callers’ personal dossiers and update their preferences. This information shortens the time on the phone and it enables better cross-selling.”

• Best Guest Arrival Report.• The Satisfaction and Loyalty Tracking (SALT)

CRM Benefits to MitsubishiThe Beginning

• Mitsubishi started CRM in 1999 by condensing their 18 service lines and call centers to one using “call center software” by Siebel systems.

• The next year a new customer-centric database was consolidated in-house, to power the call center.

• About half of customer calls were handled by an interactive voice response unit rather than a person!

• Smart Scripts Workflow software from Siebel was also implemented in March 2001.

• Happier customers – satisfaction rate rose 8%

• Career growth and higher pay for call center employees.

• Greatly reduced call center turnover (20% to about 7%).

• 66% reduction in cost per call.

• Able to handle 38% more calls.

C.R.M. IS ABOUT

• “is a business strategy with outcomes – that optimise profitability, revenue and customer satisfaction – by organizing around customer segments, – fostering customer-satisfying behaviors and – implementing customer-centric processes.”

• “is a strategy used to learn more about customers' needs and behaviors

in order to develop stronger relationships with them.” Acquiring & Retaining customers Improving customer Loyalty. Gaining customer insight. Implementing customer focused strategies.

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WHAT IS C.R.M.?

– C.R.M is a business strategy that enables organizations

to get closer with their customers, to better serve their needs, improve customer service, enhance customer satisfaction maximize customer loyalty & retention.

CRM StrategiesCustomer Acquisition• Gain the greatest number of new “Best” customers as early in their

“lifespan” as possible.

Customer Retention• Retain and expand your business and relationships with your customers

through up-selling, cross-selling and servicing.

Customer Loyalty• Offer programs to ensure that your customers happily buy what you offer

only from you.

Customer Evangelism• Enable loyal customers to become a volunteer sales force.

Cost Reduction• Reduce costs related to marketing, sales, customer service and support.

Improve ProductivityEnhance your e-business strategies.

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• Every business has to focus on the needs of the customer & C.R.M. Is the array of processes that help a company to understand the preference or dislikes of individual customers in order to build lasting relationships.

– C.R.M. Solutions help to safely store volumes of customer data in an organized manner for easy to use & access.

WHY C.R.M. IS IMPORTANT

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– By analyzing this data business person can determine individual customer behavior, analyze preference & provide one-to-one services to maximize satisfaction.

– Such a customer centric approach helps to augment customer loyalty & increase their value to the company.

Underpinning Theory• Customers have many points of contact with an

organisation

• Retaining customers is far most cost effective than recruiting new ones

• Some customers are more profitable than others– The “80/20” rule– For most firms, 80 percent of profit comes from 20 percent

of customers

• Use of Technology

Why CRM is a Customer and Competitive Necessity

• It typically costs 5-10 times as much to acquire a new customer as it does to retain an existing one.

• “Some companies can boost profits by almost 100% by retaining just 5% more of their customers.” Harvard Business Review (Reicheld & Sasser)

• A recent McKinsey study showed that the average new customer spends $24.50 at a given web site in the first 3 months as a shopper. The average repeat customer spends $52.50 every 3 months.

• Most companies lose 50% of their customers in 5 years (Harvard University)

• On average only 15% of a site’s customers consider themselves loyal to it. The loyalty rating among people who had experienced a problem was only 6%. Customers who had not experienced problems indicated a customer loyalty rating of 19%. The loyalty rating among customers who had experienced problems but were satisfied with the way they were handled: 21%. (Digital Idea)

• The web customer is ‘only 1 click away from your competition’.

An example

Call center telephone sales

E-commerce

Field sales

Retail

Web-basedself service

Field servicesand dispatch

Third-party brokers,Distributors, agents

Call CentersManaging aspects

Of customer contact

Data analysisAnd business

Intelligence tools

Contentmanagement

Campaignmanagement

Data warehouse and data cleaning tools

The Elements of CRMSales

force automatio

n

Customer service/call center management

Marketing automatio

n

*Source: Computerworld

C.R.M. TYPICALLY INTEGRATES THREE CORE CUSTOMER RELATED ACTIVITIES:- (1) SALES (2) MARKETING (3) CUSTOMER SERVICE.

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– CONTRACT MANAGEMENT / SALES / ADMINISTRATION / CUSTOMER PREFERENCE MGMT./LEAD MGMT. & ANY OTHER TOOLS SUPPORTING THE SELLING PROCESS.

C.R.M. TOOLS FOR SALES

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– BUSINESS USERS TO CREATE & MANAGE MARKETING CAMPAIGNS & TO TRACK MARKETING CAMPAIGN SUCCESS RATES ETC.

– DATA ANALYSIS AND BUSINESS INTELLIGENCE TOOLS

C.R.M. TOOLS FOR MARKETING

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– ALLOW A BUSINESS TO CREATE A REPOSITORY OF CUSTOMER SERVICE, ENQUIRIES TO ANALYZE CUSTOMER SATISFACTION & TO CREATE A KNOWLEDGE BASE OF ESTABLISHED CUSTOMER SERVICE PRACTICES.

VALUE OF C.R.M.: is measured by its ability to improve customer service & relationship, streamlining the business processes by creating a comprehensive system to manage & analyze data.

C.R.M. TOOLS FOR CUSTOMER SERVICE

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– C.R.M. Solutions can yield immediate productivity benefits by consolidating customer records

– C.R.M. Tools also provide business users with reporting & analysis tools, allowing easy creation of reports, forecasts & other key performance functions.

Building customer relationship Relationship building as a process:– C.R.M. is built on an iterative process of

learning & customization

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– Companies interact with customers & learn about who they are what they want, how much they buy & how much it costs to serve these customers

– By analysing these data’s, customers can be segmented (identify the profitable customers)

– To retain these customers, companies have to tailor the offerings to meet these customers requirement.

– So, an iterative learning process helps in building a relationship

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1. IDENTIFY- requires the company to locate & contact a large number of customers & know as much details.

– most organizations will have scattered data base and requirement is for centralised data.

2. DIFFERENTIATE- customers can be differentiated on the basis of the value they represent & also on their needs.

– ideal measure for customer value is the profit they contribute. More valuable they are, more the company should be interested in retaining them.

FOUR KEY STEPS IN RELATIONSHIP BUILDING:-

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3. INTERACT- Purpose of interaction is to learn more about the customers - starting with more valuable customers.Different point of contact: purchase , using

service or even making complaint.Use of electronic channels

4. CUSTOMISE- The last step is most critical as it builds upon all the learning about the customer to offer tailor made service based on the data collected.

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(6) PARTNER  ADVOCATE(5) (4) SUPPORTER  CLIENT (3) (2) CUSTOMER  PROSPECT (1)

THE LADDER OF LOYALTY

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THE LADDER OF LOYALTY SHOWS HOW A PROSPECT BECOMES A CUSTOMER, A CLIENT & FINALLY A PARTNER

1. PROSPECT:- The prospect is an individual in retail market (B2C) or an organization in the business market (B2B), which fulfils the requirements of the marketers definition of target: (potential buyers)

2. CUSTOMER:- The prospect becomes a customer when gets attracted by the marketers offerings & buys the product/service.

BMW Turns prospects into Customers

Prospects who interact with the company are 3 times more likely to buyTrack path a customer takes before buyingBrochure , visit to dealer , attend an event , design virtual car, test drive , collect the data from all touch pointsParse the relevant dataContinue the dialog via email, direct email , personal invitation to some eventsLearn about the customers needs and preferences turn prospect to customerAfter customer , feedback thru CSF and back to dealersResolve the problems and suggestions so that he moves up the ladder.

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3. CLIENT:- A customer becomes client when he buys the product/service more than once. A customer may make an initial purchase as trial or test. If satisfied, makes repeat buy. Services – customer satisfaction is very important. E.g. in Retailing , Hospitality , airlines or FMCG –fast switching

4. SUPPORTER:- A client becomes supporter when he is satisfied with the offering & recommends it to his friends & acquaintances. Positive word of mouth (POM) has major impact - Evangelism required to convert Prospects into Customers

5. ADVOCATE:- Is a supporter who in addition to referrals, proactively works with the company to improve its products or services.

EX:- S/W Companies depend on the feedback of lead clients in Beta test phase.

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6. PARTNER:An advocate becomes a partner when they become actively involved in the decisions of the company.In many cases there are joint investments resulting in structural bonding for mutual business gain (B2B).EX:- P&G and WAL-MART . Wal-Mart shares scanner data from 4,500 stores checkout counters about movement of P&G products , stocks in order to plan replenishments.It helps P&G to plan Production , low inventory as decision is based on actual sales data rather than sales forecast.EX:- FEDERAL EXPRESS & IBM for stocking & moving spare parts

for IBM on the instructions from IBM service personnel. The reliability , operational efficiency of FedEx services makes it cheaper and faster for IBM.

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The marketer’s emphasis during the first two steps in the ladder - prospects & customers is

Customer Attraction While during subsequent steps is Developing

& Enhancing Relationships.

Greater value is added by involvement of customers, sharing of information and bonding between customers and marketers.

BONDING FOR CUSTOMER RELATIONSHIP

1. FINANCIAL BONDS:- Volume & Frequency Rewards (frequent flyers /reward program for hotels) , Bundle and Cross selling (Magazines, credit card ,telecom & Internet services) and stable pricing .

2. SOCIAL BONDS:- Personal Relationship(Doctors, Teachers , Accountant), Social bonds among customers (Clubs – Harley Davidson Owners Club , Hero Honda Passport program , Airtel’s ‘Friends and Family offer’ .

Thanks to a CRM System, Hero Honda Adds 1.7 lakh Customers Each Month

Hero Honda’s CIO, Vijay Sethi, launched project Goodlife, a CRM initiative

The CRM project changed the way Hero Honda’s customers viewed the world’s largest motorcycle manufacturer

It took an existing idea called the Hero Honda Passport program (that allows customers to collect points on purchases or servicing) and widened it

Use IT to reach a larger customer base.

Goodlife replaced the paper membership cards of the Passport program with magnetic cards.When a magnetic card is swiped, representatives at Hero Honda showrooms or workshops can view all of that customer’s information, speeding up and racking up points for them  

It’s a claim that the business backs. “90,000 people registered as members [of the Passport program] every month until last year,” .now an average of 1.7 lakh customers  every month.”

3. CUSTOMISATION BONDS:- Mass Customization & Innovation by knowing deep knowledge about customers which is increasing with every interaction.

Marriot Hotels knows the likes, dislikes and special habits of its over 5 Million customers

Mass Customization: Customize your own Jeans by Lewis , NBC , Japan makes varieties of bicycle (11 million) using flexible manufacturing systems

4. STRUCTURAL BONDS:- Joint Investments & shared process & Equipments.

EX:- P&G and WAL-MART FEDERAL EXPRESS ties its customers thru PowerShipsAmerican Express bonds with the customer thru use of Debit Cards and

TRS ( Travel Related Services) TRS takes care of travel & stay need of executive for its corporate client.

Amex consolidates expenses and present it to the client organization in the format required by accounting system- Executive wise , Location wise , Budget vs Actual

CRM in B2B MARKETS

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C.R.M. IN B2B MARKETS

Business markets are many times bigger than consumer market.

B2B MARKETING STRATEGIES:-1. Focus on key customers & build strong

relationship.2. Proactively generate high level of customer

satisfaction with every interaction.3. Anticipate customer needs by careful study of

customer process & behavior.4. Build close ties with customer sometimes by

integrating their systems.

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5. Finally, create a value perception for customer – should see the relationship bringing value & adds to their competitive advantage.

C.R.M & KEY ACCOUNT MANAGEMENT

Key account management is one of the most popular & successful approaches used for customer retention & development.

It has been recognized as an important part of the C.R.M in B2B marketing.

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Key account can be defined as a customer in a B2B market identified by a selling firm as of Strategic Importance.

Other terms are national accounts or major accounts.

Key account may be based on profitability or can be on prestige or Reference value or because they permit access to new markets and technology.

KEY ACCOUNTS

Lifetime value of a customer

•Lifetime value of a customer Revenues and intangible benefits such as referrals and customer feedback that a customer brings to the seller over an average lifetime, less the amount the company must spend to acquire, market to, and service the customer.

C.R.M. s/w package have account management modules that offer scope for profitability analysis. They generate financial analysis report & help assess impact of key decisions.

ELECTRONIC DATA EXCHANGES AND WEB SERVICES

• Electronic data interchanges (EDI) Computer-to-computer exchanges of invoices, orders, and other business documents.

• Web services—allow companies to communicate even if they’re not running the same or compatible software, hardware, databases, or network platforms.

B2B in Railways – Freight Case StudyDemand forecasting module for planning of RakesStudy of customer data for analysis of movement of goodsKEY ACCOUNTS – FCI , COAL India Limited , IOC , CCI , JNPT ,Fertilizers Corp of India etcSidings are made so that no other mode of transportLoading / Unloading – weight , tonnage and freight calculationModule for tracking of movement of Rakes for ETAE transmission of RRE payments from corporate accountsGeneration of reports for analysis of data

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C.R.M. IN B2C MARKET

A major factor for services sector (telecom/banking/airline/hospitality etc) – kind of contact with customers.

Since customer contact is not one time but repeated, it is essential that service delivery method is perfect as much as possible

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Competitive pressure in the banking & financial services sector is increasing due to deregulation & globalisation.

– It has become imperative for banks to move away from traditional transaction based view of banking to total relationship orientation for long lasting profitable relationship.

– Banks now provide multiple channel of service – across counter, phone ,ATM, internet.

– Provide more services, wider range of products to select from reduce routine & minor interaction.

CRM in BANKING INDUSTRY

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– A successful C.R.M strategy in banking industry considers following aspects:-

– First step is to emphasis customer relationship to the staff who are in contact with the customer & play important role.

– Classify customer by transaction volume, channels used, products & services used to get a better understanding. This needs effective information systems for tracking product & channel usage.

BANKING INDUSTRY

BANKING INDUSTRY

– All employees need to be trained for relationship management.

– Appropriate policies & relationship pricing to reward loyal customers.

– Initiate customer contact programme from time to time.

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C.R.M. IN AIRLINES INDUSTRY

– High capital intensive industry with huge initial capital investment recovered over a period of time.

– Prolonged customer contact like hospitality industry.

– Intense competition with relative ease of switching by customers.

– Various strategies to retain customers: - differential pricing & Service for business class travelers/frequent flier program

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providing accommodation for flight disruption/advance booking-lower price/travel concession etc.

– Training of staff in C.R.M. To cope with irate passengers, help desk/IVR for flight schedule change etc.

C.R.M. IN TELECOM SERVICE

– Service range from basic telecom to value added service like internet access, cellular phone etc.

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– With opening of telecom sector competition increased, switching is easy & attracting / retaining customer needs focus on C.R.M.

– Fundamental idea of a C.R.M. Program is to retain customer & increase their life time value by building loyalty.

– Provide quality service by using technology to cater to peak loads/channel noise, cross talks to be reduced & provide services that differentiate from competitors.

C.R.M. in Telecom Industry

C.R.M. in Telecom Industry

Use CRM tools like data mining to identify the customers who are likely to defect.Prevent them by giving them better offersCall centers to provide effective information about the services they providePayment optionsAttend to customer complaints about billing , services and other such problemsLoyalty programs where old and heavy users are rewarded with differential pricing , free air time or other incentives.

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C.R.M. IN HOSPITALITY & TOURISM INDUSTRY

– Largely people based & driven by people– Customer interaction takes for longer time

duration (stay) from booking of room to check out.

– Hence, employees, environment (eating place, rooms etc) & process have a significant role.

– Main philosophy is to cultivate understanding & caring for customers, anticipate their needs, warmth & concern.

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– Idea is to retain customers & make them visit again. Value for Money

– Employees to not only meet expectations but exceed them again and again.

– First step is to know the customer well & information systems can capture such information from various contact points.

– These are analyzed & shared across organization.– Such info helps employees to serve the customer

better.– Ex:- Hilton hotels.

C.R.M. IN HOSPITALITY & TOURISM INDUSTRY

CRM in hospitality

Employees are important part – training , morale , welfareWell defined processes and proper feedbackFrequent usage program – points accumulated which can be redeemed for free stays or serviceMembership program – regular customers are encouraged to be member of exclusive club – choice of hotel , location , free stay for childrenKeep in touch with frequent newsletters and publications which offer sightseeing or advisory services.

POM or loyalty . Hospitality is one industry where referrals play important role.

Titan Watch Repair Services

• The Titan Signet CRM initiative was undertaken in May 1995 to provide that ‘extra’ touch to its special customers at the exclusive World of Titan stores.

• Its mission was to create a sense of belonging of the customer to the store and vice versa by:Building a special relationship with high life time value Titan customers• Recognizing and rewarding his/her loyalty to Titan• Providing a platform for direct feedback from these valued customers to the company

• It initially started in 6 showrooms in Bangalore. Today the Titan Signet has been extended to 102 World of Titan showrooms across 59 cities all over India.

While the program has taken customer bonding one step further in Titan, there are many behind-the-scene activities as follows: -

Showroom Personnel are trained not only in the operations of the program at the showroom but also in the finer details of CRM.

Enrolments in the program are tracked on a monthly basis for each showroom, along with data on purchases made by Signet members who have returned to the showroom to buy again.

Signet operations form a part of the quarterly appraisal for their showrooms, thereby ensuring that they earn more marks on their efficient and effective performance.

A grievance redressal system is in place to ensure that our valued customers are responded to within stipulated time.

Steps to improve CRM

1. Build a database

2. Analyse, define types, profitability

3. Customer selection

4. Activities to delight selected customers

5. Analyse again to see how we’re doing