16 CUSTOMER RELATIONS

S. Thilagamani

Objectives:

This module will enable the learners to

a.compile the role of customer relations in food service

b. explain the usability of the customer relationship tool for effective management

Introduction

A customer is a person who purchases or rents something from an individual or organisation. The word customer seems to historically derive from “custom,” meaning “habit”. It refers to someone who frequented a particular place to purchase goods or use the services. Hospitality industry is one of the vast service sectors that meet the needs of the customers as the food service segment is considered “a home away from home”, as it takes care of both boarding and lodging facilities. Customers are considered as the king of the business. Customers have needs and expectations and that need has to be met by the organisation.

Classification of Customers:

Customers are classified into two main groups namely internal and external customers. An internal customer refers to an employee who works for the organisation. External customers are essentially the general public who use the services of the food service. These two groups can be further segmented as follows

1.Internal customers: Employees working in different departments Employees working in different branches

2.External customers: Individuals – Free Independent Traveller, Group Inclusive Tour Guests from corporate Guests through travel agents

Customer Relationship Management (CRM)

CRM is a strategic process and infrastructure that enables the delineation of and increase in customer value and the correct means by which to motivate valuable customer to remain loyal and indeed to buy again” (Dyche’, 2001). CRM programmers are implemented for several reasons

Food Service operations need to thoroughly understand their customers needs. Increase customer satisfaction and thus lowering dissatisfaction.

Enable a great degree of customer differentiation in order to deliver unique customer interactions.CRM is used by service industries to gain more intimate knowledge of their customers so that marketing efforts can be directed towards those customers they wish to keep and those they are willing to lose.

Characteristics of CRM

CRMs are also claimed to be able to improve customer relationships. CRM technology can track customer interests, needs and buying habits as they progress through their life cycles, and tailor the marketing effort accordingly. These way customers get exactly what they want as they need. A CRM solution is characterised by the following functionality

• Scalability: Ability to be used on a large scale, and to be reliably expand to whatever scale is necessary
• Multiple communication channels: Ability to interface with users via many different devices.
• Workflow: The ability to automatically route work through the system to different customers based on a set of rules
• Database: Centralised storage of all guest information relevant to the hotel
• Customer privacy consideration: Data encryption and the destruction of records to ensure that they are not stolen or abused.

CRM based marketing tactics yield the following results:

Budget money (and shift money) towards marketing campaign more likely to generate high interest in products and services.

Understand and profile high-value customers.

Improve the effectiveness of high-cost channels in order to maximise returns. Institutionalise personalized communications for specific segments.

Comprehend  buyer  purchase  patterns  and  helps  to  delineate  customer segmentation and improve future interactions and stimulate one-to-one marketing.

• When done correctly, food service operations can expect:
• Better customer service.
• More efficient communication.
• Effective cross-selling capabilities.
• Discovery of new marketing segments and customers. Increase customer loyalty.
• Increase customer revenues.

Although a recent phenomenon, the CRM concept has already been extended to include the whole enterprise in dealing with customers and ECRM (where E-enterprise) has emerged as its current manifestation. Research to date would suggest that service industries in particular must adopt an enterprise wide perspective, with front-office and back-office integration, if they are to become truly ‘customer-centric’ and capitalise on the opportunities provided by the information which this makes available to them.

E: E-business and more importantly the integration of activities within the framework of all existing and future commercial activities. e-business

C: Channel management- the channel of greatest impact and interactive channels of access and distribution.

R:  Relationships-real commercial relationships built on service excellence, value and convenience among customers

M:  Management of the total enterprise-total back-office/front-office process integration.

Now a days global marketplace fostered by the proliferation of the internet, the ability to develop, retain and grow mutually beneficial relationship with customers enables many corporations to gain competitive advantage. It is easier than ever for consumers and customers to shop comparatively, and as a consequence, click as easily to competitor’s website. Customer’s expectations are growing as well, as business implement e-business marketing concepts, raising the bar on several levels. Creating a customer focused firm begins with the customer relationship management (CRM ), a strategy were by firm reengineers change its organizational culture and vision the ultimate goal is to transform customer relations into greater profitability by increasing repeat purchase rates and reducing customer acquisition costs. CRM initiatives will help marketers to better understand customer behaviour and help them focus on those customers who can derive long-term profits.

Best metrics for measuring CRM

Measuring CRM revolve around the customer themselves. Three important measures are

Customer satisfaction Customer attrition

Customer life-time value (CLV)

Customer satisfaction can be measured by observing behaviour, but it is more likely to be captured by utilising surveys. Satisfaction should be evaluated around the customers, relationship with the hotel property and the extent of meeting the needs of the customer.

Customer attrition means measuring churn rates compared to industry bench-marks. Attrition is best analysed by segment, since customer value can vary widely.

Customer life-time Value (CLV) is calculated as the revenues the customer will generate over the life of their relationship with a organisation, the net value of the variable cost of achieving these sales and the cost to serve. Historically, CRM efforts are targeted at attracting new customers and retain, up sell, or cross sell to existing customers. Revenue is the most frequently used metric in measuring the success of CRM efforts.

Application architecture of CRM

Application Architecture of CRM comprise

1.OPERATIONAL: Automation to the basic business processes

2.ANALYTICAL: Support to analyze customer behavior, implements business intelligence alike technology.

3.COLLABORATIVE : Ensures the contact with customers through telephone, email, fax, web, SMS, by post or in person)

1. OPERATIONAL CRM

Operational CRM means supporting the so-called “front office” business process, which

includes customer contact. Tasks resulting from these processes are forwarded to employees responsible, information necessary for carrying out the tasks and interfaces to back-end applicants are being provided and activities. With customers are being documented for further references. Operational CRM provides the following benefits:

• Delivers personalised and efficient marketing, sales and service through multi-channel collaboration.
• Enables a 360 degree view of all customers.
• According to Gartner Group, the operational part of CRM typically involves three general areas of business:

Sales Force and support (SFA): SFA automates some of the critical sales and sales force management functions, for example, keeping track of customer preferences, buying behaviour, forecasting of room reservations and revenue, accounts management, contact management, SFA tools are designed to improve sales productivity.

Customer Service and Support (CSS): CSS automates service request of customers, complaints, product returns and informational requests. Traditional internal help desk and traditional inbound cell-center support for customer inquiries are now evolved into the “customer interaction center” (CIC), using multiple channels. Key infrastructure requirements of CSS include computer telephony integration which provides high volume processing capability, and reliability.

Enterprise Marketing Automation (EMA): EMA provides information about the food service environment, including competitors, industry trends, and macro environmental variables. The intent of EMA applications is to improve marketing campaign efficiencies. Functions include demographic analysis, variable segmentation, and predictive modelling.

Integrated CRM software is often also known as “front office solution”. This is because they deal directly with the customer. Many call centers use CRM software to store all of their customer details. When a customer calls, the system can be used to retrieve and store information relevant to the customers. By serving the customer quickly and efficiently, and also keeping all information on a customer in one place, a company aims to make cost savings, and also encourage new customers. CRM solutions can also be used to allow customers to perform their own service via a variety of communication channels.

2.  ANALYTICAL CRM

In analytical CRM, data gathered within operational CRM are analyzed to segment customers or to identify cross and up selling potential. Data collection and analysis is viewed as a continuing and interactive process. Ideally, decisions of the food service operations are refined over time, based on feedback from earlier analysis and decisions. Business intelligence offers some more functionally as separate application software.

3.  COLLABORATIVE CRM

Collaborative CRM facilities interactions with customers through all channels and supports coordination of employee teams and channels. It is a solution that brings customers, processes and industry together enabling the food service operations to serve better and retain their customers. The activities can be structured, unstructured, conversational and transactional in nature. Collaborative CRM provides the following benefits:

Enables efficient productive customer interactions across all communications channels

Enables web collaboration to reduce customer service costs

Benefits of CRM

CRM s are claimed to improve customer service. Proponents say they can improve customer service by facilitating communication in several ways:

• Provide product information, product use information, and technical assistance on websites that are accessible 24 hours a day, 7days a week round the clock Help to identify potential problems quickly, before they occur
• Provide a user-friendly mechanism for registering customer complaints (complaints that are not registered with the company cannot be resolved, and are a major source of customer dissatisfaction)
• Provide a fast mechanism for handling problems and complaints (complaints that are resolved quickly can increase customer satisfaction)
• Provide a fast mechanism for correcting service deficiencies (correct the problem before other customers experience the same dissatisfaction)
• Identify how each individual customer defines quality, and then design a service strategy for each customer based on these individual requirements and expectations
• Use internet cookies to track customer interests and personalize product offerings accordingly
• Use  the  internet to engage in collaborative customization or real-time customization
• Provide a fast mechanism for managing and scheduling follow up sales call to access post-purchase cognitive dissonance, repurchase probabilities, repurchase times, and repurchase frequencies
• Provide a fast mechanism for managing and scheduling maintenance, repair and ongoing support (improve efficiency and effectiveness)
• Provide a mechanism to track all points of contact between a customer and the company, and do it in an integrated way so that all the sources and types of contact are included, and all the users of the system see the same view of the customer(reduces confusion)
• The CRM can be integrated into other cross-functional systems and thereby provide accounting and production information to customers when they want it

Operating in this new ecosystem has a number of implications. These are:

• Reduce cost of business.
• Increase service levels.
• Reduce entry barriers.
• Extend global reach.
• Challenge brands.
• Bundling and unbundling products and services.
• Dislocation of location.
• Returns power and control back to the customer.

BENEFITS OF CUSTOMER RELATIONSHIPS

The benefits of customer relationship are as follows

1.  Strategy development process

Most industries today recognise that their future depends on the strength of their business relationships, and most crucially, their relationships with customers. CRM will be management approaches operating within the organisation and must actively reflect and reinforce the wider goals of the business to be successful. The strategy development process therefore demands a dual focus on the organization’s business strategy and its customer strategy.

Business strategy:

A comprehensive review of the business strategy will provide a realistic platform to construct the CRM strategy, as well as generate recommendations for general improvement. It is also vital that everyone in the organization are alert to changes which might signal opportunity or disaster. This is especially important where the organization is in transition from a product orientation to customer orientation. Consideration of the following key business issues, present and future, will serve to re-affirm the appropriate course and direction for the organisation

• Company’s profile, purpose, performance and position. Stage of the industry’s evolution.
• Competitor profile and activity. Delivery channels.
• Information of technology platform.

Customer strategy:

The other half of the strategy equation is deciding which customers the business wants most to attract and to keep. Consideration of following customer issues will help to refine customer selection and thus customer strategy

• Nature and status of customer strategy. Customer segments.
• Customer relationships.
• Knowledge of and value of customer base.
• Product / service involvement and complexity of purchasing behavior.

2.  Value creation process:

The value creation process is concerned with transforming the outputs of the strategy development process into programmes that both extract and deliver value. A balanced value exchange will ensure that both parties enjoy a good return on investment, leading to a good relationship.

The value process consists of 3 key elements: determining what value the company can provide to its customers (the ’value customer receives’); determining the value of the organization receives from its customers (the ‘value organization receives’); and, by successfully managing this value exchange, maximizing the lifetime value of desirable customer segments.

The value the customer receives:

The value the customer receives from the supplier organization is the total package of benefits derived from the ‘core product’ and the ‘product surround’, or the added values that enhance the basic features such as service and support.

The value the organisation receives:

It focuses not on the creation of value for the customer but on the value outcome that be derived from delivering superior customer value. The pursuit of more, and more attractive, customer at lower cost must be based on a sound understanding of how acquisition costs vary at both the segment and channel levels. In many instances customer acquisition can be improved through insight drawn from the value proposition and the value assessment. While the financial implications of emphasising customer retention is greater than or least equal to, customer acquisition is significant, remarkably few organisations have reacted to benefit from this knowledge.

Customer segment lifetime value analysis:

The relative amount of emphasis that should be placed on customer acquisition and customer retention is necessary to understand acquisition and retention economics at a service segment. The key metric used to evaluate customers’ profit potential is customer lifetime value (CLV), which is defined as the net value of the profit flow over a customers’ lifetime.

Front office and Back office applications of Customer Relationships:

Front office applications are the technologies used to support all those activities that involve direct interface with customers, including sales force automation (SFA) and call-centre management. These applications are used to increase revenues by improving customer retention and raising sales closure rates. Back-office applications support internal administration activities and supplier relationships, involving human resources, procurement, warehouse management, logistics software and some financial processes. A key concern about front and back-office systems is that they are sufficiently connected and co-ordinated to optimise customer relations and workflow. Clearly, the information management process is playing an increasingly important role in CRM, supporting the collection, analysis and use of enormous volumes of complex customer data.

The linkage model of customer relations

The impact of employee value and customer value on financial performance of the organisation is as follows

The ‘linkage model’ connected between good leadership and management behaviour, improves employee attitude and thereby result in consistent customer satisfaction, and increased sales, profit of the organisation.

Challenges of CRM

The ultimate goal of CRM is to attract and retain customers and increase the profits. CRM is a complex process that requires, on one hand, a redesign of current business processes and, on the other hand, integrated IT support. The key factor is how well an organization manages its customer relationship from the first contact through the sales process, customer service, and ongoing customer retention activities. Organisations are now realizing the critical importance of every customer contact and the potential of the call centre for customer relationship management strategies. The proper application of call centres can improve the overall quality of customer interaction while streamlining customer request and orders. In addition, call centre are nowadays increasingly responsible for business interactions that are being conducted through alternative emerging communications channels, such as e-mail, internet, fax, voice mail, pager, etc. Call escalations are usually very time and resource consuming and decrease the customer satisfaction; therefore it is desirable to avoid them as much as possible. These are often provided by rule-based engines which help to translate customer needs into sales opportunities and, at the same time, simplify the spelling of complex product and services.

Current script generators enable call centre agents to create personalized, one-to-one correspondence based upon the customer’s profile and information gathered during the contact so that the company presents one face to the customer. In fact, many call centres are developing into multimedia communication centres. It is crucial that business workflows in a call centre can be integrated with the back office workflows. Workflow automation software allows for directing and monitoring work that goes outside of the call centre to assure completion or tracking progress. This helps reduces fulfilment time of new product orders and allows call centre agents to be better informed of the current status of a customer request. This can increase revenues through improved cross-spelling and up-spelling capabilities, and, moreover, they help companies improve their understanding of buying patterns and customer preferences as well as the targeting of their marketing efforts.

Conclusion

The main ways of cost reduction that is most relevant to CRM are deploying electronic systems, such as automated telephony services, which lower cost by enabling reduction in staff and overheads and utilise new electronic channels, such as online self-service facilities, which lower the cost of customer acquisition, transaction and servicing in all service industries. In particular, more detailed standards, measures and key performance indicators are needed to ensure CRM activities and can be designed specific to the needs of food service industry.

Book References

1. William J. Rothwell and H.C. Kazanas, 2006, Planning and Managing Human Resources, 2nd edition, Jaico Publishing house, Delhi
2. Aquinas P G, 2009, Human Resource Management Pricniples and Practice, Vikas Publishing House Pvt ltd, New Delhi
3. Pravin Durai, 2010, Human Resource Management, Pearson Publications, New Delhi
4. Jill Dyche, 2003, The CRM handbook, Pearson Publications, New Delhi