Download Customer relationship management

There is only one boss; the customer. And he can fire everybody in the company,
from the chairman on down, simply by spending his money somewhere else.
— SAM WALTON: FOUNDER, WAL-MART STORES
Learning Objectives:
After studying this chapter, you should be able to:
 Provide the conceptual understanding of Customer
Relationship Management.
 Identify the stakeholders of CRM practices of an
organisation and their role.
 Apprehend the advantages accruing to the
organisations on account of successful CRM practices.
3
Introduction
 Developing close, cooperative relationship with customers is more
important in the current era of intense competition and demanding
customers than it has been ever before.
 Many scholars are interested in strategies and processes for customer
classification and selectivity; one-to-one relationships with individual
customers; key account management and customer business
development processes; frequency marketing, loyalty programmes,
cross-selling and up-selling opportunities; and various forms of
partnering with customers including co-branding, joint marketing, codevelopment, and strategic alliances (Sheth and Parvatiyar 2000).
 A majority of these promises are to individualise and personalise
customer relationships by providing vital information at every point of
customer interface.
4
CRM: A Historical Perspective
 CRM is often considered as database marketing primarily linking marketing of the
organisation with the database of the customers.
 Some theorists have been considering it as an exercise for customer retention as
many theories and studies have been emphasizing on the rationale for keeping the
customers. This requires a variety of techniques, especially post-sale initiatives, to
keep the customers for life. This was believed to be a mechanism to keep the
existing customers happy so that they remain with the organization and may, if
possible, generate positive referral for the company's products and services.
 Shani and Chalasani (1992) define relationship marketing as "an integrated effort to
identify, maintain and build up a network with individual consumers and to
continuously strengthen the network for the mutual benefit of both sides, through
interactive, individualized and value-added contacts over a long period of time".
 Similarly, Jackson (1985) applies the individual account concept in industrial
markets and sees CRM as, "marketing-oriented towards strong, lasting relationships
with individual accounts".

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Strategic Orientation in Marketing
 McKenna
(1991) emphasized on
strategic orientation and argued that
organisations need to put the
customer first and shift the role of
marketing from manipulating the
customer (telling and selling) to
genuine
customer
involvement
(communicating and sharing the
knowledge) for long-term growth of
the business.
 Berry (1995) focused on developing
closer relationship with the newly
attracted customers. To turn them
into loyal customer category required
deep-rooted strategic intent on the
part of the corporates.
 According to Berry, merely attracting
new customers should be viewed only
as an intermediate step in the
marketing process. He proposed
relationship marketing as "attracting,
maintaining and—in multi-service
organisations— enhancing customer
relationships".
 An important dimension of CRM
study is selecting the profitable
customers. Companies need to
understand who the profitable
customers are and accordingly design
marketing programme as per the
exclusive requirements of those
customers.
6
Definition
 "Enterprise
approach
to
understanding and
influencing
customer
behaviour
through
meaningful communications in order
to improve customer acquisition,
customer retention, customer loyalty,
and customer profitability".
(Swift 2001)
 CRM is a comprehensive strategy and
process of acquiring, retaining and
partnering with selective customers to
create superior value for the company
and for the customers.
( Sheth and Parvatiyar 2001)
 CRM
is considered as “strategic,
process oriented, cross-functional and
value creating for buyer and seller and
a means of achieving superior
financial performance”
(Lambert, 2004)
 The practice of CRM is described as
the process for achieving a continuing
dialogue with customers across all
available touch points to offer them
customized treatment, based on their
expected response to available
marketing initiatives, such that the
contribution from each customer to
overall profitability is maximized.
(Bohling et
al., 2006)

7
Definition. . . Contd.
 “A
customer
relationship
management (CRM) systems is a
combination
of
people,
processes, and technology that
seeks to provide understanding
of a company's customer and to
support a business strategy to
build
long-term,
profitable
relationship with customers".
(Shang and Feng Ko,
2006)
 CRM is an enterprise approach
to understand and influence
customer behaviour through
meaningful communications to
improve customer acquisition,
customer retention, CL and
customer profitability.
(Ngai et al., 2009)
 CRM is defined as an effective
tool to achieve the objectives
such as satisfied and loyal
customers and increased market
share.
(Shafia et al., 2011)
8
 Based on the understanding
available
of
Customer
Relationship Management, it
can be defined as ;
“Customer
Relationship
Management
is
a
continuously updated process
of identifying relative value
of customers and designing
customized
company
interaction to delight them so
that they do not just remain
with the company profitably
but also be the company’s
ambassador. Full involvement
and
empowerment
of
employees and appropriate
technology are two essentials
for successful CRM.”
 The above definition tries to lay the
foundation of CRM along with the
objective for which it should be
designed. The definition implies:
• CRM is a process
• It needs continuous revision and
updation.
• Customer value identification is a
must
• Company
interaction
requires
customization
suiting
to
the
exclusive profile of the customer.
• It strives for customer delight.
• CRM process aims at Profitable
relation with the customers.
• It also aims to convert them to act as
a company’s brand ambassador.
• Employees
involvement
and
Empowerment is a must for its
successful implementation.
• Adequate technological support is
also an essential for successful CRM.
9
CRM
(Source: www.siebel.com/whatiscrm)
10
Emergence of CRM Practice
 Sheth and Parvatiyar (1995) had observed that developing customer
relationship had been there since pre-industrial days.
 The earlier businesses were between the agriculture producers and
their customers. They used to have direct interaction.
 Similar was the case with the people of other industies which were
primarily cottage-based and have been making other essential items
such as cloth and handicrafts. They have offered customised products
to the customers.
 Since, in most of these cases, there was direct interaction between the
seller and the buyer, some of relationships tend to be built. The
indirect form of marketing came only when the concept of mass
production started and a mass production society was created. This
process separated the production and consumption functions, leading
to the emergence of middlemen in the marketing function.
11
Factors Responsible for Growth of
CRM
 The recent growth of CRM can be attributed to various factors. These
include the reduced role of intermediaries, especially with the advent
of sophisticated computer and telecommunication technologies. This
growth in technology again allowed the producers to directly
communicate and get in touch with the customers 24 x 7 at a very low
cost.
 The technology has given marketers more means at lesser cost to
customise the marketing efforts. Hence, a modern service provider
does not require middlemen to the same extent as it once used to.
 Modern consumers are also found to be more interested and happy
dealing with the company directly. The recent success of online
banking, online shopping, selling of books, etc. are just a manifestation
of the interest shown on both sides, i.e. the buyer as well as the seller.
12
For example, in the airline
industry, most of the airline
companies
are
now
deintermediating the ticketing
system. Till recently, the sale of
airline
tickets
had
been
dominated by agents who, from
time to time, have been
dictating their terms and
conditions and have been
controlling
the
flow
of
customers. But now, most of the
airline companies have done
away with this format and have
introduced e-ticketing where
the customers can directly buy
ticket from the company
website.
 This success of doing without intermediaries
is also on account of the growth of service
economy.
 Since services are produced and delivered at
the same time, the role of intermediary gets
lessened.
 Since the customers transact directly with
the service provider, he develops greater
relational bonding with the company and its
people. This leads to greater need of
maintaining and enhancing the relationship
which provides greater fruits. This makes
CRM so important for all those people
involved in marketing of services in some
form or the other (Berry and Parsuraman
1991; Bitner 1995; Crosby and Stephens 1987;
Crosby et al. 1990; Gronroos 1995).
13
Factors Responsible. . . Contd.
 Another factor which has been responsible for the increased need and
use of CRM, is enhanced emphasis that companies lay on adopting
total quality management as an essential component of modern
business.
 This increased use of total quality in all functions of the management
by the companies has forced them to involve the suppliers and the
customers across the value chain.
 The application of various supply chain initiatives such as Just in Time
(JIT), Material Resource Planning (MRP), and Enterprise Resource
Planning (ERP) is not possible unless the company works in close
relationship with all the stakeholders.
 The advent of digital technology has enabled companies to sell even
complex products.
14
Factors Responsible. . . Contd.
 Earlier cars were sold only through
dealers. Today, the concept of
permission marketing is doing the
rounds. Marketers have become so
personal in their service offers and
delivery that they seek permission
even before making a visit and asking
for sale. The car salesmen take prior
appointment with the prospective
buyer, visit him with all the details
along with a demo car to get him the
taste of the drive. At times, they also
take a person from the finance
company along to get the finance issue
resolved then and there. Such
procedures have led to the foundation
of strategic partnering within the
overall
domain
of
Customer
Relationship Management.
 In this era of hyper competition,
marketers are forced to be more
concerned with customer retention
and loyalty (Dick and Basu 1994;
Reicheld 1996). As several studies have
indicated, retaining customers is a less
expensive and, perhaps, a more
sustainable competitive advantage
than acquiring new ones (Rosenberg
and Czepiel 1984).
15
Factors Responsible. . . Contd.
 On the supply side, it pays more to develop closer relationships with a
few suppliers than develop more vendors. In addition, several
marketers are also concerned with keeping customers for life, rather
than making a one-time sale (Cannie and Caplin 1991). There is greater
opportunity for cross-selling and up-selling to a customer who is loyal
and committed to the firm and its offerings. In the world of everchanging customer expectations, cooperative and collaborative
relationships with customers seem to be the most prudent way to keep
track of their changing expectations and appropriately influencing
them.
16
CRM Cycle
 The Customer Relationship Management cycle consists of those stages
that conform to the objectives laid down in its definition. That is, from
acquisition of customers by creating value to them to learning from the
customers, going by the route of earning profits from them for the
organisation on a sustained basis.
 Customer acquisition starts either through the traditional advertising
or through referrals. The next stage is of customer development
through personalisation of communication and customisation of
products and services by way of a mutual learning process. As a result,
leveraging of customer equity occurs through cross-selling and upselling. Then retention of existing customers takes place. The
organisation also benefits from the new customers that it acquires
through positive referrals.
17
Customer life cycle management:
(Adapted from Vijay Ahooja (2001), Changing Patterns of e-CRM Solutions in the future. CRM: Emerging Concepts, Tools
18
and Applications,Tata McGraw-Hill, New Delhi, p. 94)
Stakeholders in CRM
 There are four principal stakeholders who play a major role in the
1.
2.
3.
4.
entire process of Customer Relationship Management:
Customers: Customers, of course, are the most important persons
in the CRM design for whose delight the whole exercise is conducted.
Employees: They are the set of people who execute the CRM
design. They include those right from the frontline staff who actually
executes to the top management who designs the CRM.
Suppliers: They are the part of system who provide input to a
company's value chain.
Partners: They are the creators of additional value for the
customers.
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Significance of CRM
 The American Society of Quality and Arthur Anderson Consulting Inc., in
1.
2.
3.
4.

their report published in 1977, have brought out following findings about
customers:
Customers tell eight friends about a satisfying experience and 20 friends
for a negative experience.
It is easier to influence existing customers to buy 10% more than
increase the customer base by 10%.
Eighty per cent of successful new product and service ideas come from
existing customers.
Repeat customers cost one-fifth less than new customers and can
substantially increase profits.
CRM is a company-wide initiative and is a process to be continued with the
organisation. The return on investment of CRM is overestimated in the
short run and underestimated in the long run. But what is sure is that
companies do accrue certain definite advantages of implementation of
CRM. The advantages could be as follows:
20
Advantages:
 Perpetual stream of revenue: A
better served and delighted
customer gradually becomes loyal.
Once customer loyalty is built, the
customer remains with the
company and proves to be a
perpetual source of revenue and
profit often increasing over a
period of time.
 Positive referral creation:
A
satisfied customer often spreads
positive things about the company
to the would be customers. Such
positive opinion proves to be more
reliable and authentic than
companies' propaganda, including
advertisements and consequently,
brings in more customers.
 Provides premium:
A customer
satisfied with the service of a
particular company is found to be
ready to pay a little premium on
the products/services and does
not want to take risk with a new
company.
 Helps customer retention: One
of the biggest advantages of CRM
is that through personal and
effective customer care and
service, it helps the company keep
customers for life. Retaining
customers with the company
helps in many ways and
contributes straight away to the
company's bottom line.
21
Advantages. . . Contd.
 Lowers cost of sale:
A satisfied
customer does not require to be
lured every time by the company
and, hence, his subsequent
acquisition cost to the company
decreases. This helps the company
lower cost of sales.
 Helps understanding consumer
behaviour:
By providing
personal service to its customers,
the company understands the
consumers and can adapt itself
to their changing requirement.
This also helps companies offer a
complete set of personalised
solutions to customers.
 Provides opportunity to cross-
sell and up-sell:
A satisfied
customer is expected to come
back to the same company for
repeat purchases. In case of any
cross-sell and up-sell, he again
comes back to the same company
and with no extra expense, the
company is able to get him for
more products.
 Reduces
marketing
time:
Through positive referrals and
opportunities to cross-sell and upsell, the customer acquisition
becomes easier and consequently
leads to reduced marketing time.
22
Advantages. . . Contd.
 Channel
cost
rationalisation: An effective
CRM provides an opportunity
to the companies to value the
cost of various channels with
respect to its profitability and
the customers may be served via
a channel that is cost-effective
for the company and suitable for
the customer.
 Enables business process re-
engineering: CRM programmes
enable a company to have an
insight of individual customer
and helps in assessing its
profitability for the company.
The company may subsequently
redesign its offer to various
customers
as
per
their
profitability for the company
and can, thus, re-engineer their
business process.
23
Strategic Issues in Relationship
Marketing
 Still relationship marketing appears to be an expensive alternative to
firms practising mass marketing due to the relatively high initial
investments. Firms would adopt relationship marketing only if it has
the potential to benefit them. The benefits come through lower costs of
retention and increased profits due to lower defection rates (Reicheld
and Sesser, 1990).
 In the context of service, relationship marketing has been defined as
attracting, maintaining and in multi-service organisations, enhancing
customer relationships (Berry 1983).
 Here, attracting customers is considered to be an intermediary step in
the relationship-building process with the ultimate objective of
increasing loyalty of profitable customers.
24
Strategic Issues. . . Contd.
 Berry (1983) recommended the following five strategies for practising
1.
2.
3.
4.
5.
relationship marketing:
Developing a core service around to build a customer relationship
Customizing the relationship to the individual customer
Augmenting the core service with extra benefits
Pricing services to encourage customer loyalty
Marketing to employees so that they perform well for customers.
25
Strategic Issues. . . Contd.
 Although customised and off-the-shelf technological solutions are
available in the marketplace, businesses need to do a lot more than just
adopt these solutions to implement Customer Relationship
Management (CRM) practices.
 Successful implementation of CRM requires a strategic approach which
encompasses developing customer-centric processes, selecting and
implementing technology solutions, employee empowerment,
customer information, knowledge-generation capabilities to
differentiate them, and the ability to learn from best practices.
26
CRM Success Factors:
 Several studies brought forth the need, importance and enlistment of

1.
2.
3.
4.
factors contributing to success of Customer Relationship Management
programs. Recent researches focused hugely on success factors. Many
publications of researchers and practitioners have addressed the area
of CRM success factors few of them are presented below:
Good hue et al. (2002) provided four general success factors:
top management support,
vision,
willingness to change processes,
willingness to share data.
The above presented factors have been found to be essential for success of any CRM process/program.
27
CRM Success Factors. . . Contd.
 Wilson et al. (2002) described five groups of success factors within
1.
2.
3.
4.
5.

1.
2.
3.
which he identified specific factors for success
determine the intent,
access the context,
describe content,
construct intervention process and
manage intervention process
Siebel (2004) found the CRM success factors as:
Integration of back office processes
software customization,
clear communication of the CRM strategy.
The above presented factors have been found to be essential for success of any CRM process/program.
28
CRM Success Factors. . . Contd.
 Chen and Chen (2004) found following as critical success factors for CRM
1.
top management,
2.
systems integration,
3.
knowledge management and
4.
alignment of IT.
 King and Burgess (2007) presented following CRM success factors:
1.
Top management support,
2.
communication of CRM strategy,
3.
KM capabilities,
4.
willingness to share data / processes,
5.
technological readiness,
6.
cultural/customer change,
7.
process change, and
8.
system integration capabilities.
The above presented factors have been found to be essential for success of any CRM process/program.
29
A typical customer service process:
30
CRM Comprehension
 A services company's marketing programme consists of the offers,
tangibles, service delivery, employee behaviour, and grievance
handling. When these get exposed to customers, they evaluate the
whole process.
 This customer evaluation process is done based on customer's
expectation from the service and its perceived performance.
Customer's cognitive ability plays an important role in this process. If
perceived performance is more than that of customer expectation, it
results into customer satisfaction which has a lot of advantages
associated with the company such as repeat purchase, customer
retention, cross-sell and up-sell. If perceived performance is less than
that of customer expectation, it leads to customer dissatisfaction and
results into a behaviour that is detrimental to the company's interest as
negative publicity, loss in sale and so on.
31
CRM Comprehension. . . Contd.
Input
feedback
Perceived
Performance(PP)
Offers
Physical Facilities
Company’s
Marketing
Program
Customer
Satisfaction
When PP>CE
Service Delivery
Repeat purchase
Customer retention
Positive referral
Cross-selling & upselling
Customer
Cognitive
Ability
Employee Behavior
When PP<CE
Grievance Handling
Customer
Customer
Expectation(CE)
feedback
Customer
Dissatisfaction
Negative Publicity
Loss in Sale
Customer Dissonance
Customer Evaluation Process
Input
32
Components of CRM Programme
 Company's marketing programme: This consists of five important
determinants of the company's offering, viz. the offer, tangibles, services
delivery, employees and their approach towards customers and its
requirements, and the company's grievance handling mechanism.
 Customer expectation: The expectation created by the company about
the service also plays an important role in satisfaction determination. If
hype is created about the product, customers tend to expect more and if
the expectation is not fulfilled, it leads to greater dissatisfaction. The same
level of service may at one point in time result into satisfaction but at
another point in time may lead to dissatisfaction. This depends upon what
service expectation level it generates in the minds of the customers.
 Perceived performance: This is largely guided by the customer's
cognitive ability. So, it is important for the companies to realise that the
service has got not just to be the best but it has to be perceived as the best
as well. It is this perception of the service that determines if it would lead
to satisfaction or dissatisfaction.
33
Components. . . Contd.
 Competitors' offers: These play an important role in determining
customer satisfaction. They normally act as a benchmark for measuring
the strength of the offer, i.e. the cost, the service guarantee, the fringe
benefits etc. The growing service level of the competitor also increases the
service expectation of the customer. If it remained at the same service level
it might experience loss of sale not because of its lowering of services but
by the increase in service level of competitors.
 Customer's resultant behaviour: Based on the analysis of the
components discussed above, the customer would decide upon his further
behavior regarding the company and its offers. One option could be that he
may become the brand ambassador in addition to the regular benefit he
delivers to the customers, the other extreme may be that he starts
propagating negative publicity about the company and its offers.
34
CRM Value Chain
 To achieve success through CRM, a CRM value chain needs to be
designed. By this, data received from customer could be converted into
meaningful information. These information may help companies
acquire knowledge about the customer and design their relationship
programs to create customer delight.
Customer data
Customer information
Customer knowledge
Wisdom to satisfy
CRM Value Chain
 As per the above sequence of activities, initially data regarding the
customers is gathered, then it is converted into meaningful format
depending objective and usability of the company. A compilation of
only those data which has got significance for the organisational
decision making is put forth. A set of knowledge is then required to be
created and CRM program is designed accordingly.
35
CRM Process: A Historical
Perspective
Unorganised
and
Unstructured
No
technological
support
Confined to
individual
discretion
Limited to
specific trade
Restricted to
smaller group
of customers
Constraints of CRM practice
36
 CRM has long been practiced by the services sector
players, but in a different format. That practiced was
constrained by certain factors which are mentioned
below:
1.
2.
Unorganised and Unstructured: The practice of
relationship marketing has always been there, but
was unorganised and unstructured, i.e. it did not
follow any set pattern. It was highly spontaneous in
nature. It did not follow any specific trend resulting
out of a structured format.
CRM at individual discretion: This has been
another limitation of the older form of relationship
marketing. The degree of care would be given to a
customer not depending upon his value to the
organization but upon the relationship he is able to
develop with the person sitting behind the desk.
So, this was relationship of another kind. A bank
clerk may do the required job of a customer if he
knows him and may let a high value customer wait
if he is not known to him. Similarly, a restaurant
waiter may offer a degree of personalness to
customers not in proportion to his profitability to
the restaurant but to himself, i.e. the tip he gets
from the customers.
A restaurant may offer a
discount to a low value
customer if he has asked for
and may not offer that to a
high value customer if he did
not ask for. In a general
insurance company, a low
value customer’s (having only
a car of average value) claim
might be settled in a week
and dealt on priority because
his agent was having good
relations with the company’s
employee
and
a
comparatively high value
customer owning number of
cars that too of high value,
might be ignored and those
claim settlement takes longer
time because his agent is not
as
befriend
with
the
employees.
37
3.
4.
5.
Restricted to smaller group of customers: Since individuals have
memory constraints, one cannot offer the same set of relationship
attributes to everyone as it is not possible for individuals to know.
This restricts the effective and successful practice of CRM to a larger
set of customers. For a hotel, it is difficult to always identify what is
the colour of the bedsheet the customer prefers in the room or which
is the flower he would like to be greeted with or whether he prefers
tea or coffee in the morning.
Confined to specific trade: In the absence of a clear set of CRM
programme, it is not possible to derive the expected result where the
customers are in masses. The unstructured relationship marketing
exercise may work only in cases where the customers are very small
groups and all the individual information can be placed easily.
No technological support: There was absence of any technological
tools to support the affairs of relationship. Unlike modern CRM
softwares and sophisticated hardwares, the retailers in unorganized
sector largely used to maintain a copy (Bahi-Khata) to enter the
records of all the transactions, especially in the case of all credit
purchases. That was the only record they had about the purchase
history and pattern of the consumers.
38
CRM Process: Modern Variables
There can be a standard process suggested to implement CRM in service
organisations. It consists of the following steps:
I.
Customer Segmentation
Every customer is not equal to the company. They differ according to their
profitability to the company. An analysis of the revenue and profit
contribution of customer base of banks in the US, Europe and Australia
showed:
 The top 20% of the customers contribute to 150% of the profits while
the bottom 20% drain 50% of the profits and the rest 60% just break even.
 The experience of Indian banking industry is on similar lines. In a
large public sector bank, the top 23% of the customers contribute to 77% of
the revenues.
Hence, some conditions which has got strategic significance with customer
need to be defined. To perform this process effectively, a customer matrix
analysis may be conducted.
39
Customer matrix analysis:
New
solution
required
Top
strategic
customers
High
Waste of
money
Budget
reduction
required
Low
Low
High
Future Potential
Margin
Past Margin
(Adapted from Customer Matrix Analysis Payne (2001): Customer Relationship Management, Cranfield
University.)
40
CRM Process. . . Contd.
II. Customer Life Time Value
 There has to have a basis for defining the customers of the company. Not
all customers should be treated as equal. Company should first decide who
the profitable customers are, what the requirements of these customers
are, and how best the companies can serve them. This may help companies
allocate sales resources and service design to the customers. A big question
here is how the company decides who the profitable customers are. The
most widely accepted practice for identifying profitable customers is
calculating the customer's lifetime value. It is important because every
service comes with a cost. So, the organisation should conduct a
comprehensive cost-benefit analysis and accordingly, needs to prepare a
customer databank depending upon the customer lifetime value to the
organisation.
 New contact strategies: Insight into customer histories and contact
preferences is essential to re-engineering the customer experience and
maximise the value of each interaction.
41
CRM Process. . . Contd.
III. Customer Service Cost
 It refers to developing a detailed and accurate picture of what it really
costs to execute current sales and service models by the customer
segment. Care needs to be taken to assess the cost of the service being
proposed to be offered.
IV. Cost-Revenue Parity
 Organisations need to determine service levels to be offered to the
customer's needs and profitability as defined by the strategy. This
largely means offering services to the customers through technologybased tools as SMS, phone or internet while reserving costlier support
options for the more valuable customers and transactions types.
42
CRM Process. . . Contd.
V. Employee Motivation
 Given that labour costs make up for more than 60% of a contact
centre's operating budget, the right organisational structure and
performance tools are especially important for optimising head count
and for increasing agent proficiency and motivation. Employees need
to be properly trained and educated about application of CRM
programmes.
VI. Sourcing Models
 Effective partnering through outsourcing and "co-sourcing" is critical
in transforming the economics of customer interaction. Even banks
may decide on which service to carry out on its own and which to
outsource. This outsourcing, at times, helps in optimising cost offering
a flexible alternative to traditional CRM investment models by
lowering the fixed to variable cost ratio in customer sales care.
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Designing a CRM Implementation
Model
 Success of a CRM program depends on how well it is designed and
implemented. The CRM process lacks a standard universally acceptable
model. Finding a standard process for practicing CRM is the key issue
for its success. The following is the process proposed for effective and
successful implementation of CRM in an organization. The process
goes in the sequence shown in figure below:
44
Designing a CRM. . . Contd.
 Customer segmentation based on CLV: Since all customers are not
equal, segmentation is a must. But certainly, there has to have a basis for
segmentation of customers. In CRM, the customer's lifetime value for the
company acts as the most prudent basis for segmentation.
 Customer profiling: After segmentation, customer profiling needs to
be conducted and the basic customer information, tastes, preferences,
buying habits, likings and dislikings and all the informations of
significance about the customers need to be stored in such a manner that
the same can be used effectively for all the business customer- interest
purposes.
 Offer customisation: After studying the specific customer require
ments, the company's offers are so designed that they meet the exclusive
needs of the customers.
 Matching service cost and revenue: An important factor needs to be
taken care of while designing the offer is that the offer should in no way be
more that the corresponding benefit coming out of the customers.
45
Designing a CRM. . . Contd.
 Employee participation in CRM design: Another very critical factor
in the design of CRM is participation of the employees through their
opinion, views and suggestions as it is the employees only who
ultimately have to deal with the customers and face the implication of the
proposed CRM programme. The practicality and implementability of the
programme needs to be seen from the perspective of employees.
 Motivating employees for effective implementation: Since it is the
employees only who are entrusted with the responsibility of effective
implementation of the CRM programme they need to be adequately
motivated.
 Making CRM an enterprisewide activity: CRM, in many of the
organizations, is considered as a marketing function, hence loses
the real benefit. CRM actually needs to be made and understood as an
enterprise wide activity. All the people of the organization need to believe
that their existence is because of the customers and their ultimate reason
of existence is betterment of the customers.
46
Designing a CRM. . . Contd.
 Adequate technology support for CRM implementation: Adequate




technology support also needs to be arranged for successful implementation of the CRM programmes. These technological tools include
hardwares and CRM softwares.
Consistency testing of CRM programmes: Organisations many a
time start CRM with a bang, but get engaged in the routine activity
over a period of time. A very critical aspect in the success of CRM
programme is its consistency in practice. A mechanism needs to be
devised to keep checking the system if it is responding as per the
schedule.
CRM practice evaluation: To verify how successful is the implementation
of the CRM programmes, regular feedback mechanism needs to be
devised. This feedback has to be from the following perspectives:
(i) Customer experience perspective
(ii) Employee participation perspective
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Project Assignment
Prepare a case study of
Airtel, a leading mobile
service operator of India,
and study its CRM
practices. Also, enlist the
advantages that Airtel
has garnered for itself on
account of superior CRM
practices.
 REVIEW QUESTIONS
1.
2.
3.
4.
Critically define the meaning of
Customer Relationship Management.
What reasons do you attribute to the
increased
implementation
of
CRM in business organisations?
"Superior customer service would be the
only
differentiator
in
the
coming days." Comment.
"CRM brings in lots of advantages to the
organisation".
What
are
those advantages and what could be
their future?
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PROJECT
ASSIGNMENT
Companies are stuck with the
problem of how to implement
CRM designed by the company
and also whom to apply it.
Another issue that haunts the
marketing manager of these
companies is how the left out
customers react and behave to
the differential treatment while
segmenting. As a marketing
manager of a telecom service
provider, how would you design
the CRM value chain and
implement the CRM?

REVIEW QUESTIONS:
1.
Why is it necessary to keep the
customers in good humour?
What do you mean by CRM process?
Discuss in detail.
What are the essentials of a CRM
programme?
What is customer matrix analysis?
What do you mean by CRM value chain?
Explain.
2.
3.
4.
5.
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