24 Customer Relationship Management

Dr. Puja Waalia Mann

1.0 Introduction

Let us suppose you buy a new Sedan. Having enjoyed the drive for a few days, you get a call from the Company’s executive asking if you are happy driving the car, if you are satisfied with the purchase you made, clarifying any doubts that you have regarding the running and maintenance of the vehicle. How would you feel? You might be amazed that company executives generally call up, that too very frequently, before the purchase of any expensive good is made. They may not bother once the payment has been made and the transfer of ownership done to the consumer! Yet, if an organization bothers to call and remind you about the maintenance service which is due or provide you a pick and drop facility for the vehicle service thereby making it convenient for you and saving you time, will you be a delighted consumer? Well, this is what the modern marketers aim to do through all these extra efforts of making a consumer happy. Such initiatives by marketers to build a relationship with the consumers even after the sale has been done is called as Customer Relationship Management.

1.1. Learning Objectives

In this module, you will learn:

a)      Meaning of Customer Relationship Management

b)      Importance of Customer Relationship Management

c)      Process of CRM

d)      Determinants of effective CRM

e)      CRM and application of Technology

f)       Implications of CRM on Service Managers

1.2. Key Words:

CRM, Customer Relationship Management

1.3. Customer Relationship Management- meaning and importance

A smart marketer knows that retaining an existing consumer is much economical and more profitable than attracting a new customer. Also, a positive word of mouth from an existing consumer to a potential consumer has more impact as compared to a paid advertisement in the media. Thus a savvy marketer would like to work out to gain consumer satisfaction and retention through any and every cost efficient strategy. Thus, in simple terms, Customer relationship management (CRM) refers to the set of all activities that an organisation undertake to reach out to its actual and potential consumers through various means with a purpose of developing a personal touch or relationship building with them. The aim of Customer Relationship Management is to increase organizational profitability in the long run by showing a personal concern with the actual customers, potential customers, suppliers, society etc.

The term CRM was first coined during the decade of 1990s with the literal meaning of managing relations with the customers. Gradually the term has become vast in scope and incorporates the effective use of technology in managing such relationships which may accrue long term profitability.

CRM activities are more than what any sales and marketing department does to please its potential consumers. These are often disassociated with the sales and marketing department and done before or after the purchase is being considered by a consumer. Marketers can plan personalized messages to be sent to the consumers on their birthday and anniversary, provide customized service to them, anticipating needs and offering service over and above what may be expected by a consumer for the purpose of delighting them. Customer Relationship Management is a process of providing customized services to its existing or prospective consumers and use the information generated for targeted marketing efforts.

One of the most important reasons for taking up CRM activities is to attract new consumers and retain the existing consumers for new sale as well as for a referral sale. This aims to enhance the company’s profitability by developing a positive Brand image in the market. These days, technology is increasingly being used to offer a variety of plans and activities to attract and retain the consumers. From a consumers point of view, this special and customise treatment from the company is a treat. However, from the organizational point of view it is an expensive and time consuming task. Therefore, the organizations need to plan the customer relations in such a way that a balance is struck between the nurturing of consumer needs and the cost to the company for plan and delivering such services. For this purpose, marketers grow relationships by making all the consumers feel that they are getting quality services and in the process target the most profitable consumers and concentrate their marketing efforts in serving them. CRM is a set of strategies and action plans that an organization undertakes to develop and maintain a relationship with the most valuable assets i.e. customers, with the aim of building preference for the marketer thereby improving long term profitability of the firm as a result of this association. Due to the advantages, many organizations rush to adopt the CRM programme. They also commit a handsome amount of budget in the same yet may not reap the desired benefits due to lack of a clear vision and roadmap of the implemented programme. For a successful CRM it is important to build “deeper relationships with valuable customers” instead targeting anyone and everyone.

CHECK YOUR PROGRESS

1.      “CRM, is a broad term that covers concepts used by companies to manage their relationships with customers.” Do you agree? Why/ Why not?

2.      Define CRM in Service firms, with the help of an example.

3.      Differentiate between original and modern CRM outlook? Describe with the help of an example.

4.      Is spending money in building relationships with customers worth?

1.4 Process of CRM

a) Identifying the valuable consumers

The first and the most important step in developing a CRM programme is identifying those consumers who are most valuable to the organization. Valuable consumers means those actual or potential consumers who may give a big business themselves to the organization or who may provide a strong referral sale to the marketer. A new phrase in the Service industry is “Customer data is as important as financial data”. It is important to identify such segment of the consumers so that the CRM programme may be initiated towards them for a more receptive attention and action. For example, a beauty clinic owner wants to build customer relations with some of her customers, she may like to first generate a list of those clients who have been a frequent visitor to the parlour. It is important to note that she may use a computer programme to identify the frequently visiting clients from her daily appointment schedule, which is a use of technology; or may do so manually from a register that is being maintained; or may make a random recall of the clients and thus develop a list.

b) Designing a CRM Vision

Having identified the valuable customers, the next step in CRM is to design a suitable CRM activity to please these customers. The marketer must identify the attributes which a consumer may perceive as useful for them as well as for the organisation. The activity should be such that is considered as worth for the customers to bond with the organisation and at the same time not exert high financial burden on the marketer. In the above example, if the beauty clinic owner wants to please her customers, she may either offer them some gift voucher or a concession on subsequent services or may even plan a fitness session. The choice of any of the three options will rest what is it that the consumers will like to receive and secondly whtheer it is affordable for the marketer. Giving a discount is anytime less burdensome for the marketer as compared to planning a fitness session, which will include a lot of cost in inviting and arranging the session along with the payment to the trainer.

c) Restructuring

In the pursuit of developing strong customer relations, sometimes, service organizations may even need to restructure their hierarchical structure to suit the needs of its few but important customers. The service provider may like to adapt the organizational structure to smoothen the building of customer relations. For example, a big professional service firm like an Advertising agency or a Chartered accountant firm may prefer to modify its existing Line and Staff organizational structure and may rather customize itself as a team structure to cater to the needs of big customers. Such teams may consist of personnel drawn from different backgrounds to offer a basket of varied skills and backgrounds.

d) Follow up of CRM initiatives

Having organized and successfully conducted a CRM action plan is not the end of the process. What is important now is to have a regular follow up of the initiative being taken up. The customers should not feel that once contacted, the marketer is not bothered about them anymore. Hence, what is more important than starting a CRM programme is to consistently maintain the same with the same vigor. For example, if a Service Marketer intends to start the practice of wishing the customers on their birthday and anniversary, it must make sure that it is done every year. Having done it the first year and not wishing the next year will leave a negative impression as the customers might feel that since the company is doing good business now, it is not concerned about the existing customers.

e) Meeting enhanced service expectations

Every service marketer wants its CRM action plan to leave its positive image amongst the existing and potential consumers. If designed and executed efficiently it might as well result in a higher Brand perception of the organization. However, having built personal relationships and customized services for the consumers, it is extremely important to ensure a higher quality service in future, to meet the enhanced service expectations as a result of CRM activities. If the service delivery after the successful execution of CRM activities is not of higher quality measure, the entire CRM programe may not only go waste it may even back fire with negative word of mouth.

f) Measuring the CRM program

As discussed, there is a cost involved in the designing and implementation of a CRM program. Hence, it is imperative for the service organisation to check the return on investment (ROI) of the CRM action plan. Often, the reason for taking up a CRM initiative is to be able to assess the cost– benefit analysis of certain customer related promotional programmes of the organization. If an organization fails to identify the ROI for any of its program it may end up wasting its resources and not being able to achieve the profitability which is the key objective behind implementing a CRM program. There may even be individual customer cost analysis for checking customer profitability while measuring the CRM program cost effectiveness. The financial benefits of a CRM plan can be calculated through increased business of a customer himself, or through his referrals or through co-creating or co-marketing the service. Meaurements also facilitate the organisations in taking a decision about how much promotional budget to be allocated for designing a message for developing relations with the existing consumers and how much should be earmarked for the purpose of attracting new customers.

g)      Redefining the CRM Vision

Many a times as a service marketer evolves a CRM program and is successful, he may intend to redefine a higher service level and thus design a new CRM program with a redefined Vision. For example, a Bank may initiate a CRM program by developing an Information system of every customer. For this the manual data registers were transferred online for getting one click information about the profile of the account holder along with his photograph and signatures and the account details. However, with due course of time, the Bank moves ahead and implements a system of retrieving a customer’s detailed transactions in saving and current account, ATM and credit card or debit card transaction, his loan or insurance policy details, fixed deposits and locker facility etc. While this process of moving ahead with the information system may sound simple, it may actually take a long period in building a databank for a big service organization with multiple products on offer.

CHECK YOUR PROGRESS

5.      What do you understand by CRM Vision and redefining CRM Vision?

6.      How is it possible to identify valuable service customers? Explain with the help of an example.

7.      What is the need of Restructuring while implementing CRM in service firms?

8.      How can the CRM program be measured?

1.5 Determinants of effective CRM

For any CRM plan to be successful it is important to identify the capabilities of the service organization to be able to deliver what it intends to design. The most important capabilities crucial in the implementation of the CRM programe are:

a) Technology

The means to deliver an efficient CRM system in modern times is through the organisation’s technical capabilities. The technical capabilities that support the CRM activities can help the organization to take the full advantage of the CRM plan. With the advent of computers and Internet, a number of activities can be done in a better and efficient manner than before. We shall discuss the role of technology in effective CRM program in a subsequent section.

b) People

People here refer to the Human resources of a service organization. In the absence of any tangible thing being on offer, the HR plays the most critical role in designing, communicating and implementing the CRM plan. The skills, capabilities and attitude of the HR responsible for executing the CRM plan is a major determinant in the success or otherwise of the organizational CRM.

c) Process

The designing of the CRM incorporates the process of developing relationship with the customers for the purpose of building positive Brand image. This process also is one of the key components of determining the receptiveness customers show in favoring the CRM initiative. Let us assume that an organization expects to build a database of its existing customers for the purpose of designing some CRM activities. For this purpose, it has started generating personal databank of all the individual customers by administering a long questionnaire to them. For filling this long questionnaire, the customers may not be really interested in sparing 10 minutes. Thus, while the vision of the organization is very clear and appreciable, the process adopted for the same is such that the consumers may not be willing to cooperate.

d) Knowledge

This is one of the most useful components of making a CRM program successful in accomplishing its vision. Knowledge here refers to the valuable details of an individual customer which may play a crucial role in designing and delivering a CRM plan. The approach used to gather such information and putting this valuable information to good use may deepen the customer relationship of may offend a customer.

1.6 CRM and application of Technology

Technology has come as a saving grace for the service marketers who intend to develop strong Customer relations. There are a number of ways in which technology can be useful in developing Customer Relations.

a) Identify Valuable customers

With the help of computers, it may be convenient to identify the most valuable customers for a service organization either in terms of frequency of doing business or in terms of value of the business transacted. Digging out data manually may not be feasible for a large organization with a wide consumer base. Herein the technology can make screening of data convenient.

b) Setting reminders

Discussing about the previous example of wishing the consumers on birthdays etc., a software programmed accordingly can facilitate the concerned executive in reminding about the dates to execute the desired action. Additionally, there could be reminders set for the due dates for service of consumer vehicle, or dates for clearing of any interest dues or insurance policy premiums etc.

c) Automated messages

Sending personalized short message texting and e-mails may be conveniently done through computers, especially for bulk messaging.

d) Queuing

Technology can be used for the purpose of queuing the customers for the service delivery.

e) Online Customer interaction

Internet has come as a boon for the service industry. Interacting with the consumers, offering 24*7 customer support service, offering tracking of service deliver flow status etc all can be conveniently done with the use of Internet. The interacting executive can quickly lay his hands upon the service history of the customer along with his past and current billing which can facilitate the query handling of routine nature. Assuming that a mobile phone subscriber contacts a customer care executive to enquire about the reason for balance deduction of his pre paid sim card, the executive

f) Identifying the consumers

While interacting with the consumers, with the help of technology, the consumers history can be retrieved while addressing his concern. This makes the customer positive about the efficiency of the service delivery. For instance, assume that you are giving a food order to Pizza Hut on phone. Having given your identification through a registered contact number, the tele executive can instantly greet you with your name and identify your address with the landmark. This is a way to save time of order taking by not requiring the consumer to repeat his address and also a means to develop a personalized interaction with the consumers by calling him by his name.

1.7 CRM Implications for the Service Marketers

While it may be a convincing argument to offer an effective CRM program for the long term profitability of the organization, there may be more than only money needed to bring about the changes in the service organization. The most important is the commitment of the top level management to initiate and sustain a CRM program. Besides the monetary part, the service marketer may need to take on add on responsibilities for the purpose of sustaining a CRM initiative. Some of these new roles and responsibilities related to the designing and implementing of the CRM for a long term include the following:

· Developing a Vision to guide the CRM strategies and tactics in real time and redefining the Vision, once accomplished.

· Collection of complete customer related data at a single location with an easy and customized retrieval process.

· Providing the necessary funds and organisational resources including technology for an effective development and implementation of the CRM plan.

· Taking the opinion of the front desk service personnel for the designing of the CRM plan, since they are the ones who are most frequently in touch with the customers and may be able to provide valuable insights into the customers perceived valuable variables .

· Establishing quantifiable performance standards related to CRM for the HR with the purpose of aligning their actual performance with the vision of the CRM program. There may be an individual or a group reward or incentive for meeting these performance standards for motivating the employees of the CRM team.

· Communicating and training the organizational HR in the vision of CRM and the means to deliver the same before putting the plan into practice.

· Regular evaluation and monitoring of the CRM plan to ensure it is being delivered with the same intentions with which the programme was initially designed.

CHECK YOUR PROGRESS

9. What are the determinants of effective CRM in a service firm?

10.   Differentiate between original and modern CRM outlook? Describe with the help of an example.

11. How will the role of Service manager undergo a change if the firm implements CRM?

1.8 Conclusion

Customer Relationship management is an increasingly being adopted as a strategy for interacting and offering customized services to the customers with the target of potential sales, resulting in long term profitability. Customer is the most important resources of an organization. CRM is an initiative to keep the customer not only happy but delighted so as to get a positive word of mouth, a repeat sale and a referral sale. CRM plays an important role in the marketing function but for the marketing of services, it has an increased importance, due to the very nature of services. Since the services are intangible, it is the positive service personnel interaction and relationship building which may result in favorable customer attitude and long lasting loyalty. CRM has a very wide scope and is being implemented increasingly in traditional sector of consultancy, insurance, fitness and in unconventional sectors like health, education, media, banking, to name a few. Technology is one of the most important determinants in the success of such a plan as data organization, automation and retrieval for usage which can efficiently be done through technical capabilities of the service firm. However, it is not only the technology but a synchronization of people, processes, consumer knowledge along with technology which can reap desired results for a service organization.

Summary

Customer Relationship Management comprises of all systematic interactions which a service provider has with the actual or potential consumer for the purpose of nurturing personalized relationships and offering customized services for winning the trust and business from the customer. The purpose of all such activities is to complement the sales and marketing department activities with the aim to achieve long term profitability. For the purpose of implementing a CRM program, the commitment of the top level management is essential as the program will require commitment of limited resources of the service organization including funds and employees. The process of designing a CRM plan commences with the development of a CRM vision followed by its communication to the entire organization for its strict adherence. If required necessary training may also be imparted to the employees engaged in carrying out the CRM activities especially with regard to their attitude and mannerism in carrying out these designated program. Sometimes, the organization may be required to bring some changes in its organizational structure to suit the implementation of the CRM vision. Once achieved, the Vision may have to be redefined. The most important determinants of an effective CRM plan are technology, People, processes and knowledge about the consumers. Implementation of the CRM program may have long lasting implications on the roles and responsibilities of the Service managers.

Learn More:

1. a) Boon Kiat Loh, et al. (2011), A Review of Customer Relationship Management System Benefits and Implementation in Small and Medium Enterprises.
2. b) George K. Amoako, et al. (2011), The impact of effective customer relationship management (CRM) on repurchase: A case study of (GOLDEN TULIP) hotel (ACCRA-GHANA). African Journal of Marketing Management.
3. c) Hossein Vazifehdust, et al. (2012), Investigation of Critical Success Factors of Customer Relationship Management & Implementation.
4. d) Sunil Mithas, M.S.K., & Claes Fornell (2005), Why Do Customer Relationship Management Applications Affect Customer Satisfaction? Journal of Marketing.