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EXAMINATIONS CRM MAY 2012 SOLUTIONS Section A 2012 MAY CRM SUGGESTED SOLUTIONS Answer to Question 1 The ultimate goal of customer relationship management is to acquire and retain customers profitably better than competitors. A business can only achieve growth goals when it is able to keep the customers it acquires longer. It is five times cheaper to retain customers than to attract new ones. Commercial banks in Malawi thrive to achieve this goal through ways such as the following: a) They calculate the asset value of their customers and make informed decisions regarding investments in acquisition, retention, and add-on selling. b) They adjust marketing investment levels as customer relationships move through the dynamic life cycles; c) They organise processes and structures around acquisition, retention and add-on selling to maximise the profitability of each over the customer life cycle; d) They address the “whole customer” who buys, influences and uses a broad range of services and products; e) They use customer interactions to reinforce relationships and acquire new customers. Answer to Question 2 2a) There are many disruptive changes to banking and business that indeed make customer management a necessity. i) Target marketing approach: Information-based marketing is becoming more efficient and effective than blanketed mass marketing; ii) Competition Competition is cutthroat. As a result, mass marketing strategies that achieve targeted profits by counting on more profitable customers to subside less profitable ones will fail as the more attractive customers are stolen away by competitors’ targeted acquisition effort; iii) Near perfect information: As customers gain near-perfect information on their alternatives, switching barriers are dropping dramatically; iv) Companies that use the deluge of available data on customer purchase behaviour are acquiring customers, retaining existing customers and cross-selling more effectively than those who do not and can link their insights with cost data to do so efficiently as well; v) Companies can no longer depend on orderly vertical channel system to control customer’s buying behaviours; pg. 1 2b) Ways by which banks can enhance long term relations with their customers include: Lower interest loans Credit facilities Joint research sponsorships Engaging in social responsibility initiatives Enhancing service levels ANSWER TO QUESTION 3 CRM should be cross-functional. The programme must include all the organisations that face customers. Role of Sales Department in CRM Selling is and will always be the primary role of sales representatives. Sales interactions are critical to building positive customer relationships. The new CRM role of sales is to sell customer solutions. Sales Department must focus on understanding and meeting the customer’s real needs even at the expense of commission cuts. Sales representatives must be true custodians of customer information that is key in building and maintaining long term relationships. IT Department IT department plays a critical role in CRM programme. The IT function will provide the technology and information components without which CRM cannot succeed. IT must understand what the business and customers want since they are part of the solution and need to be integrated into the team IT has the responsibility to support the business and solve business issues As a customer enabler, IT is responsible for implementing the system tools that make it easier for customers to do business with us. Marketing Department Traditionally marketing department has the responsibility for communications and branding. Marketing plays the role of customer advocate. Marketing leads the overall CRM programme and keeping it focused on the customer. Marketing manages and monitors the overall plan that governs how the various touch points work together to influence the total customer experience. ANSWER TO QUESTION 4 pg. 2 5a) A customer profile is an outline of the type of customer likely to purchase your product. It is a description of a customer or set of customers that includes demographic, geographic, and psychographic characteristics, as well as buying patterns, creditworthiness, and purchase history. These must be updated regularly. A customer profile may vary from one product to another and developing a customer profile will help you target your advertising and marketing and is an essential analysis tool. This will cut your advertising costs and allow you to concentrate on real potential customers rather than too wide a range of people. Concentrating on potential customers will save you time and money. 5b) Benefits of building customer profiles Why do you need customer profiles? It takes out the guesswork of marketing your business. It helps you focus activities and programs with those customers who will buy from you on a regular basis so you can grow you business. A profile of your key customers, includes information that helps you understand what is important to them, their buying behaviour, their interests, how engaged they are with your brand etc. The key business benefits of building customer profiles are: 1- Better Communication If you think about your communication with long-time friends, versus those you don’t know very well, you quickly realise how much easier it is because you know more about them. With customers the same is true and if you have a profile you are in a better position to know what to communicate, when to communicate and by what method. 2- Greater Opportunities It is far easier to develop opportunities for your brand because you will find they will provide feedback and suggestions. You will be able to refine your product or service offerings to better meet their needs and new opportunities to develop other products and services that are important to them. 3- Reduces Competition If you have a profile you will know the key elements of how to maintain strong relationships so they are not vulnerable to competitive offers. A profile helps you refine pg. 3 what you do in customer service, pricing, offers, staying in touch etc so they do not become dissatisfied. 4- Increases Profit Once you have a profile of your key customers, then it becomes a lot less expensive in time and money spent developing the relationship. You will be able to plan ahead instead of marketing on the run and have a higher return on your efforts. 5- Brings in More Customers It is much easier to attract more customers when you actually know about your current customers. You will be able to build a target list of potential customers who are more likely to be attracted to your products and services. You will also find that you receive more referrals and recommendations from your current customers to others similar in profile. Section B ANSWER TO QUESTION 5 With the ever-increasing competition, banks have come to accept that they need to be both customer- as well as competitor-oriented in order to excel in business. A bank that ignores the power of customers and competitors does so at its peril. Whether a company is a market leader, challenger, follower or nicher, it must watch closely what its competitors are doing and find a position that can guarantee its survival both in the short- and long-term future. Being competitor-oriented means that you spend most of the time tracking competitor moves and market shares and try to develop strategies to counter them. This approach obviously has its pros and cons. A competitor-oriented company develops a fighter orientation and trains its marketers to be on a constant alert to find answers to such gut questions as the following: Who is the competitor? What objectives are they pursuing? What are their strategies? Answers to such questions should help in the development of strategies for doing better in the industry. Being competitor oriented also has disadvantages. For example, in being so obsessed with what your rivals are doing, you end up following their strategies and stifle your own creativity in pg. 4 serving your customers and dealing with competition. If companies must develop innovative customer solutions, they must think outside the box and not necessarily base their strategies and or tactical plans on the competition. Being customer oriented means that you focus more on customer development. You stay close to your customers to better understand them and their buying criteria. To do that, they engage in customer analysis, attempting to figure out the needs and wants of customer both actual and potential. Customer analysis, seeks to answer questions such as who is customer or who buys? What are their choice criteria? When does the customer buy from? When does the customer buy? How frequently does he buy? Who else influences the buying decision? Clearly, a customer-oriented customer is in a better position to identify new opportunities and set long-run strategies that make sense. By watching how customer needs evolve, this company can decide what customer groups and what emerging are the most important to serve and use its resources to deliver customer value profitably. ANSWER TO QUESTION 6 The service sector constitutes over 70% of most modern economies and thus a very important component of business today. Services are activities whose benefits when transferred to clients do not result in the ownership of anything. They are intangible, heterogeneous/variable, perishable, and often consumed the time they are produced or provided. Each of these characteristics has significant implications for customer satisfaction or delight. Quality has generally been described as a major factor in services marketing and comprises many dimensions. These are the popular ones as cited by experts: a) Reliability: The ability to perform the promised service dependably and accurately. It also means accuracy in billing, account statements and keeping records correctly. pg. 5 b) Responsiveness: The willingness to help customers and provide prompt service. For example, giving prompt service, mailing a transaction slip immediately to the customer on request c) Competence: It means possessing the required skills and knowledge to perform the service, knowledge and skills of the contact personnel and support staff d) Courtesy: This entails politeness, respect, consideration and friendliness of contact personnel such as tellers, receptionists, etc e) Access: This entails approachability and ease of contact with bank’s personnel. The service should be easily accessible by telephone, email, etc. Convenient locations of service facilities such as ATMS f) Communication: This means keeping customers informed in a language they can understand and listening to them g) Credibility: This is as a result of exhibiting trustworthiness, believability, honesty. The bank’s should have the interests of its customers at heart. h) Security: Security of customers, and their finances and the confidentiality of their information are key. i) Assurance: employees' knowledge and courtesy and their ability to inspire trust and confidence. j) Empathy: caring, individualized attention given to customers. k) Tangibles: appearance of physical facilities, equipment, personnel, and written materials ANSWER TO QUESTION 7 9a) Business travellers have high time demands and expect efficiency from the bank. The practical approaches the bank could undertake to improve customer care are as follows: i) Improved communications Customers need to be kept informed about the delays ii) Regular updates on the Internet iii) Personal communications The bank needs to have a proactive help desk which customers can easily access for information. If delays occur, people usually want an explanation. This helps them to re-plan their day. iv) Smoothing delays pg. 6 Banks should provide newspapers or food and drink coupons in order to make wait more bearable to the customers 9b) v) Proactive approach Banks should not wait for customers to complain. Good customer care anticipates customers’ needs and wants. If there is a dip in service levels, management should immediately focus on how to address it. This is how organisations retain loyal customers and improve their reputation. vi) Customer questionnaires These could be sent out asking how the service could be improved in these circumstances Practical steps in establishing an effective customer care programme. It is important that a customer care programme is managed effectively and that there is an understanding of total quality management. This should impact on the quality of service, availability, service, support and reliability. In essence the following issues should be considered Identify customer needs and perceptions Establish a strategic vision and mission and communicate to staff Specify service level standards and specifications Establish management processes and communicate this to all staff Define tasks to time factors Establish a basic minimum level Ensure effective response to complaints Management commitment Effective and continuous measurement of the programme ANSWER TO QUESTION 8 10a) E-banking is the use of electronic technologies and systems to facilitate and enhance transactions between a bank and its customers located in different parts of the world. It presents many advantages to banks such as the following: i- Access. E-banking has provided unprecedented ability to deliver information, goods and services to business and consumers at any time that is convenient to the customer. It’s available 24/7 ii- Control. Customers have total control in terms of what information and services to select when they visit the bank’s website. iii- Speed. E-banking is fast iv- Automation. One can choose to deal with their bank from home or office or indeed from any point in the world. pg. 7 v- Globalisation. E-banking has effectively eliminated country/geographical barriers, offering an opportunity to deal with global customers. vi- E-banking is extremely cost-effective. 10b) The Internet connects the company with outside world. Extranets connect mostly members of the firm’s value chain such as customer, suppliers, distributors and agents. Intranets are for in-house connectivity. The use of these can improve customer relationships in the following ways: Speedy sharing of information with strategic partners Prompt response to queries Low expenditure on connecting with stakeholder to both company and external stakeholders Speedy decision making ensures that customers are served promptly Cost-effective ways to create databases pg. 8