CUSTOMER RELATIONSHIP MANAGEMENT Concepts

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CUSTOMER RELATIONSHIP MANAGEMENTConcepts
CasesUNIT-I
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Customer Relationship Management A Conceptual
Foundation

• 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

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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.

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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,
  co-development, 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.

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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 andin 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.

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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)
•  

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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)

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• 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 companys 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
  companys brand ambassador.
• Employees involvement and Empowerment is a must
  for its successful implementation.
• Adequate technological support is also an
  essential for successful CRM.

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CRM
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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.

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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.

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• For example, in the airline industry, most of the
  airline companies are now de-intermediating 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).

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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.

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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).

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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 ever-changing
  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.

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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 up-selling. Then retention of
  existing customers takes place. The organisation
  also benefits from the new customers that it
  acquires through positive referrals.

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Customer life cycle management
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Stakeholders in CRM

• There are four principal stakeholders who play a
  major role in the 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 acompany'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 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

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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 thecompany's bottom
  line.

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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
  up-sell, the customer acquisition becomes easier
  and consequently leads to reduced marketing time.

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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.

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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.

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Strategic Issues. . . Contd.

• Berry (1983) recommended the following five
  strategies for practising 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.

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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.

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CRM Success Factors

• Several studies brought forth the need,
  importance and enlistment of 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.

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CRM Success Factors. . . Contd.

• Wilson et al. (2002) described five groups of
  success factors within 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.

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CRM Success Factors. . . Contd.

• Chen and Chen (2004) found following as critical
  success factors for CRM
• top management,
• systems integration,
• knowledge management and
• alignment of IT.
• King and Burgess (2007) presented following CRM
  success factors
• Top management support,
• communication of CRM strategy,
• KM capabilities,
• willingness to share data / processes,
• technological readiness,
• cultural/customer change,
• process change, and
• system integration capabilities.

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A typical customer service process
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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.

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CRM Comprehension. . . Contd.
Input
feedback

• Repeat purchase
• Customer retention
• Positive referral
• Cross-selling up-selling

Perceived Performance(PP)
Customer Satisfaction
Companys Marketing Program
Offers
Physical Facilities
Customer Cognitive Ability
When PPgtCE
Service Delivery
Employee Behavior
When PPltCE
Grievance Handling
Customer
Ø Negative Publicity Ø Loss in Sale Ø Customer
Dissonance
Customer Dissatisfaction
Customer Expectation(CE)
Customer Evaluation Process
feedback
Input
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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.

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Components. . . Contd.

• Competitors' offers These play an important
  role in determiningcustomer 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.

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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.

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CRM Process A Historical Perspective
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• 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
• 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
  customers (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 companys 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.

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1. 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.
2. 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.
3. 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.

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CRM Process Modern Variables

• There can be a standard process suggested to
  implement CRM in service organisations. It
  consists of the following steps
• 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 whilethe 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 alarge 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.

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Customer matrix analysis
High
Future Potential Margin
Low
Low
High
Past Margin
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CRM Process. . . Contd.

• 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.

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CRM Process. . . Contd.

• 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.
• 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 technology-based tools as SMS, phone or
  internet while reserving costlier support options
  for the more valuable customers and transactions
  types.

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CRM Process. . . Contd.

• 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.
  
• 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

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Designing a CRM. . . Contd.

• Customer segmentation based on CLV Since all
  customers are notequal, 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 tobe 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 requirements, 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.

46
Designing a CRM. . . Contd.

• Employee participation in CRM design Another
  very critical factorin the design of CRM is
  participation of the employees through
  theiropinion, views and suggestions as it is the
  employees only whoultimately 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 theemployees only
  who are entrusted with the responsibility of
  effectiveimplementation of the CRM programme
  they need to be adequately motivated.
• Making CRM an enterprisewide activity CRM, in
  many of theorganizations, is considered as a
  marketing function, hence losesthe 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.

47
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 atime start CRM with a bang,
  but get engaged in the routine activityover a
  period of time. A very critical aspect in the
  success of CRMprogramme is its consistency in
  practice. A mechanism needs to bedevised to keep
  checking the system if it is responding as per
  theschedule.
• 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
• Critically define the meaning of Customer
  Relationship Management.
• What reasons do you attribute to the increased
  implementation ofCRM in business organisations?
• "Superior customer service would be the only
  differentiator in thecoming days." Comment.
• "CRM brings in lots of advantages to the
  organisation". What arethose 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
• 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.

50
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