32 Customer Relationship Management

P.G. Padma Gowri

epgp books

 

 

 

Introduction:

 

Customer Relationship Management (CRM) can be defined as an organized approach of developing, managing, and maintaining a profitable relationship with customers.

 

Customer Relationship Management is an information industry term for methodologies, software and usually Internet capabilities that help an enterprise manage customer relationships in an organized way.

 

CRM is the process of managing all aspects of interaction a company has with its customers, including prospecting, sales and service.

 

Objectives:

  • To understand the concepts of Customer Relationship
  • To know Ingredients of Customer Relationship Management
  • To understand Operational Components of CRM
  • To know the Concepts of evaluation of CRM

Customer Relationship Management:

 

CRM is a disciplined approach to developing and maintaining profitable customer relationships, and that technology may or may not have a role. The primary goal of CRM is to increase customer loyalty and in turn improve business profitability.

 

The IT organizations define CRM as software that assists marketing, merchandising, selling, and smooth service operations of a business.

 

Objectives of Customer Relationship Management:

  • Improves Customer Satisfaction
  • Expands the Customer Base
  • CRM manages the existing customers and also creates knowledge for customers who are yet to convert.
  •  Enhances Business Sales
  • CRM creates new sales opportunities this increases business revenue.
  • Improve Workforce Productivity CRM creates organized manners of working for sales, sales management staff for business.

Important ingredients of Customer Relationship Management:

 

Analytics

 

To observe market trends, it is the process of handling, studying and representing data in graphical formats such as tables, charts, trends, etc.,

 

Customer Service

 

It collects and sends the customer related information to the concerned department:

  • Personal information like name, address, age, etc.
  • Requirements and preferences.
  • Previous purchase patterns.
  • Complaints and suggestions.

Business Reporting

 

It involves in reporting of sales, marketing, and customer care.

 

Human Resource Management (HRM):

 

The responsibilities of a human resource manager is in three major areas: staffing, employee compensation and benefits, and designing work.

 

Lead Management Marketing:

 

Lead management is a set of systems, methodologies, and practices designed to generate new potential business clientele, generally operated through a variety of campaigns or programs. Lead management facilitates an Entrepreneurship connection between its outgoing consumer advertising and the responses to that advertising. These processes are designed for business to business and direct-to-consumer strategies.

 

Sales Force Automation

 

It involves forecasting, processing, recording sales and keeping a track of the potential interactions.

 

Workflow Automation

 

This schedules various processes that run in parallel and it reduces costs and time and prevents allotting the similar task to many employees.

 

Marketing:

 

It is an activity or business process which promoting and selling products or services, including market research and advertising.

 

CRM types:

 

There are four types of Customer Relationship Management systems:

Operational Components of CRM

  • Sales Force Automation
  • Enterprise Marketing Automation
  •  Services Automation

Sales Force Automation (SFA)

 

It is the application to manage selling activities and to standardize sales cycles. It is acommon terminology for sales issues among the sales employees in a business.

 

Following modules are:

  • Product Configuration:Salespersons/customers automatically design the product, decide the price for a customized product based on if-then-else structure.
  • Quotation and Proposal Management Salesperson generate a quotation of products prices, proposal by entering details such as customer name, product code, number of pieces, delivery requirements, etc.

Accounts Management

 

Manages entries, credit and debit amounts for transactions and it also stores the of transaction as records. details

 

Lead management

 

It allows users to qualify leads and allows to assign to appropriate salespersons.

 

Contact Management

 

These are stored as computerized record by using the application an user communicate with the customers.

 

Opportunity Management: It allows users to identify, follow leads from lead status to closure and beyond closure.

 

Marketing Automation:

 

It involves campaigns management, market segmentation, event based marketing, and promotions. The campaign modules allows the marketing force to access data related to customer for designing, evaluating targeted offers, executing and communications.

 

Event based (trigger) marketing

 

It is about messaging, presenting offers in certain duration.

 

For Example. When a customer calls and speaks to the customer care number and asks about the rate of interest for credit card payment. This activity is read by CRM as the customer is comparing interest rates and can be diverted for a better deal. In this case, a customized offer is triggered to make the customer retain

 

Service Automation:

 

It involves resolving issues or cases, service level management, and addressing inbound communication and diagnosing and solving the issues about product.

 

With the Interactive Voice Response (IVR) system, we can interact with business computers by entering appropriate menu options. Automatically calls can be routed to the most capable employee.

 

Analytical CRM

 

It is based on capturing, segregating, interpreting, storing, modifying, processing, and reporting customer related data. It contains internal business wide data such as Sales Data, FinanceData and Marketing Data

 

Customer Relationships

 

To build and maintain customer relationship- investment of time, trust, transparency, care and communication are important Emotional element of affection and care is also needed.

 

Evolution of Customer-Supplier Relationship:

Business states five phases through which a customer-supplier relationship evolves:

 

Awareness: The parties come in contact with each other and see each other as a possible customer or supplier.

 

Exploration: The parties find out more about one another’s capabilities and business prospects. Trial purchasing takes place and performance is assessed. If deal is not smooth then the relationship terminates with the damage of less costs.

 

Expansion: It is composed of attraction, communication, bargaining, development of rules, and development of expectations from each other.

 

Commitment: Trust begins to develop and deals are executed as per the norms and expectations. Mutual understanding and cooperation develops, and number of transactions start building up.

 

Dissolution: Not all relationships can survive. Some relationships are terminated either bilaterally (both parties agree to end) or unilaterally (one party decides to end).Dissolution can be avoided by reducing cost-to-serve.

 

Reasons for customers want relationships with suppliers:

 

There are a number of circumstances when a B2B customer might want a long-term relationship with a supplier:

 

Product complexity: if the product or its applications are complex, for example, networking infrastructure.

 

Product strategic significance: if the product is strategically important or mission-critical, for example, supply of essential raw materials for a continuous process manufacturer.

 

Service requirements:if there are down-stream service requirements, for example, for machine tools.

 

Financial risk: if financial risk is high, for example, in buying large items of capital equipment.

 

Reciprocity: a financial audit practice may want a close relationship with a management consultancy, so that each party benefits from referrals by the other.

 

Business-to-consumer relationship:

 

In a business-to-consumer (B2C) context, relationships may be valued when the customer experiences benefits over and above those directly derived from acquiring, consuming or using the product or service.

 

Recognition: customers may feel more valued when recognized and addressed by name, for example at a retail bank branch, or as a frequent flyer.

 

Personalization: products or services can be customized. For example, over time, a hairdresser may come to understand a customer’s particular preferences or expectations.

 

Power: relationships with suppliers can be empowering. For example, some of the usual power asymmetry in relationships between banks and their customers may be reversed when customers feel that they have personal relationships with particular bank officers or branches.

 

Risk reduction: risk takes many forms – performance, physical, financial, social and psychological.

 

High levels of perceived risk are uncomfortable for many customers.

 

Status: customers may feel that their status is enhanced by a relationship with a supplier, such as an elite health club or a company offering a platinum credit-card.

 

Affiliation: people’s social needs can be met through commercially based, or non-commercially based, relationships.

 

Reasons for customers do NOT want relationships with suppliers

 

Fear of dependency: this is driven by a number of worries. They may also fear the reduction in their flexibility to choose alternative suppliers. There may also be concerns over a loss of personal authority and control.

 

Lack of perceived value in the relationship: In other words, there is no perceived value above and beyond that obtained from the product or service.

 

Lack of confidence in the supplier: customers may choose not to enter a relationship because they feel the potential partner is unreliable, too small, and strategically insignificant, has a poor reputation or is insufficiently innovative.

 

Customer lacks relational orientation: not all company cultures are equally inclined towards relationship building. Some are much more transactional. For example, some retailers make it a policy to buy a high proportion of their merchandise through special offers.

 

Rapid technological changes: in an industry with rapidly changing technology, commitment to one supplier might mean that the customer misses out on new developments available through other suppliers.

 

Reasons companies do Not want relationships with customers:Companies sometimes resist entering into relationships with customers.

 

Loss of control: a mature relationship involves give and take on both sides of the dyad. In bilateral relationships, suppliers may have to give up unilateral control over their own business’s resources.

 

Exit costs: not all relationships survive. It is not necessarily easy or cost-effective to exit a relationship. Sometimes, investments that are made in a relationship are not returned when a relationship breaks down.

 

Resource commitment: relationships require the commitment of resources such as people, time and money. These would not normally be taken into account when deciding whether to continue in a relationship.

 

Opportunity costs: if resources are committed to one customer, they cannot be allocated to another. 

 

 

Relationships carry with them high opportunity costs.

 

Implementation of CRM

 

It involves technology implementations, people and processes play a large part.

 

CRM implementation

Five major phases of a CRM implementation

1.  Develop the strategy of CRM

2.  Build project foundations of the CRM

3.  Select partner and Specify needs

4.  Implements the project

5.  Evaluate performance.

  1. Developing CRM Strategy  This is the first stage. CRM strategy is a top management level plan of aligning employees, CRM process, and technology to achieve business goals. By considering internal and external factors the business conducts situation analysis this is known as SWOT (Strength, Weakness, Opportunities, and Threats) analysis, helps in finding out the objective of examining readiness for CRM

Build project foundations of the CRM:

 

Identifying Business Processes

 

The processes can be of the following types:

 

  • Vertical: Located within a department. Customer acquisition is marketing related process, whereas annual revenue and tax calculation are accounts processes.
  • Horizontal: Product manufacturing is cross functional across R&D, finance, material management, sales, etc.
  • Primary: They have impact on the business costs / revenue. Picking and delivering is primary process.
  • Secondary: They have minor impact on the cost or revenue of the business.
  • Front-Office: They encounter the customers. For example, complaint handling.
  • Back-office: Customers are directly involved and are not known to the customers. For example database management, procurement, etc.

 

Specifying Requirements

 

In this step, the business identifies the stakeholders (staff, marketing team, sales team, channel partners, IT specialists, etc.) processes, data requirements, and technology.

 

Data Requirements

 

The business needs to create the inventory for the data for the CRM purposes. There are different data requirements for CRM types:

To store the customer information the business develops a customer related database, such as contact data, contact history, communication preferences, transaction history, opportunities with customer, and so on.

 

Creating Proposals

 

A well-structured Request for Proposal (RFP) is formed by the business it lists down the idea and vision and type of CRM, process, technology, costs, contracts, time frames and staff issues. The business invites three and at the most six technology vendors by the proposal. The proposal gives the description to give idea to the vendor about the structure and requirements of business.

 

Selecting Partner

 

Business needs to select a right vendor since it receives response from various vendors. The proposal responses is assessed by the business management based on the scale of importance of issues included in the RFP.

 

Implement project: The project was implemented with the guidance of above four steps.

 

Performance Evaluation

 

Finally, the business evaluates how well does the CRM perform. When a new technology is implemented by the business, the users may take time to get acquainted and comfortable with the technology.

 

Two variables considered by the business:

 

Project outcomes: Whether the project went as per the plan without overrunning budgets, costs, and time.

 

Business outcomes: The business objectives set initially have achieved or not.

 

Emerging Trends in CRM

 

In this new trend of CRM it exploits the power of internet. Electronic Customer Relationship Management (ECRM) aims at developing and establishing all CRM functions with the use of digital communication tools such as Email, chatrooms, instant messaging, forums, etc.

 

ECRM is motivated by the ease of internet access from various computing devices such as desktops, tablets, laptops, and smartphones.

 

Features of ECRM:

  • It enables the businesses to interact with their customers and employers using internet.
  • It offers seamless integration of CRM processes.
  • It is speedy and reliable.
  • It is highly secured from threats.

Advantages of CRM:

  • The primary goal of CRM is to improve long-term growth and profitability through a better understanding of customer behaviour.
  • CRM aims to provide more effective feedback and improved integration to better gauge the return on investment (ROI) in these areas.
  • It is used to provide insight into and improve the company/customer relationship by combining all these views of customer interaction into one picture.
  • CRM is an integrated approach to identifying, acquiring and retaining customers. It enabling organizations to manage and coordinate customer interactions across multiple channels, departments, lines of business and geographies.
  • CRM helps organizations maximize the value of every customer inter action and drive superior corporate performance.
  • CRM is an integrated information system that is used to plan, schedule and control the pre-sales and post-sales activities in an organization.

 

Conclusion:

Customer Relationship Management (CRM) is a business strategy that maximizes profitability, revenue and customer satisfaction by organizing around customer segments, fostering behaviour that satisfies customers and implementing customer centric processes. Many companies doing research on customer requirements and expectations to find out what is important for customers, and then measure customers perceptions of their performance compared to the performance of competitors. The businesses using CRM are placing the activities related to making, and make their customers feel good about the product and service.

 

The Customer Relationship Management create their product will be the highest priority for the customer.

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