CRM

Customer Relationship Management

New Challenges in Business - I

Technological advancement and globalization of markets has created new challenges which must be met in order to remain in business. Increasing competition: With deregulation of economies, privatization of government monopolies and globalization of trade through the WTO regime, greater supply capacity is chasing every unit of purchasing power. Smaller margins: With increased competition, margins between production costs and customer value are being reduced. Companies can no longer afford the luxury of large marketing budgets and inefficient selling.

New Challenges in Business - II

Less differentiation among competitors: With technological advancement in production processes and automation of some service functions, there is a less differentiation among competing products. Thus customer interaction and service assume greater importance for gaining and maintaining a competitive edge. Multiple channels of communication with customers: With the great strides that have occurred in communication technology, there is a reduced opportunity for face-to-face interaction with the customer. This makes it difficult to gauge immediate customer reaction and to adjust further interactions with the customer to ensure a positive experience.

Meeting the Challenges

To meet these new challenges, companies need to: Fully understand the needs and expectations of customers. Improve efficiencies not only of production processes, but also of marketing, sales and service processes for cost competitiveness. Provide greater value for money and enhance customer experience in all transactions with customers.

Concentrate on developing relationships with customers rather than making individual quick sales.
Develop customer focus throughout the organization to sustain customer loyalty. One of the mechanisms that can be used to help achieve this, is the adoption of CUSTOMER RELATIONSHIP MANAGEMENT (CRM).

Origins of CRM
Customer Relationship Management is not really a new subject. Since the 1960s management Gurus like Peter Drucker and Theodore Levitt have been propagating a gospel which can be summarized in one sentence:
The true business for every company is to make customers, keep customers and maximize customer profitability. This remained a theoretical concept taught at business schools, due to the lack of tools to manage information about vast numbers of often widely distributed customers.

What is CRM - I
Customer Relationship Management (CRM) came into the business lexicon in the late 1990s and is one of the newer management mantras that include ISO 9000, TQM, Six Sigma, Business Process Re-engineering etc.

With CRM hype coming mainly from CRM software vendors, CRM is often confused with technology. It should be realized that CRM is not a particular technique or set of tools that happen to be marketed with a CRM nomenclature.
At its core, CRM is a set of business policies and processes designed to acquire, retain and service customers. The aim of CRM is to increase customer satisfaction, revenue and business efficiency by building strong customer relationships - with the entire organization sharing and contributing to that view.

What is CRM - II

According to a 2001 study by the Economist Intelligence Unit and Andersen Consulting, about 70% of large companies are expected to implement CRM during the next five years. Market experts predict that billions of dollars will be spent on CRM tools and services to help businesses in managing customer relationships through different channels. But there is still confusion about the exact nature of CRM. What is CRM? Why the hype? What does CRM mean for you? Is it applicable to your business? What are the returns? These questions are addressed in the following slides.

CRM Definition I
Peter Keen, the well-known author of Shaping the Future (1991) and The Process Edge (1997) defines CRM as: Customer relationship management is the commitment of the company to place the customer experience at the centre of its priorities, and to ensure that incentive systems, processes and information resources leverage the relationship by enhancing the experience. In terms of technology CRM is the design, communication and use of information to ensure that customers develop more and more confidence, trust and sense of personal value in their relationship with the company.

CRM Definition II
According to CRM portal, CRM Guru.com, CRM is a business strategy to select and manage customers to optimize long-term value. CRM requires a customer-centric business philosophy and culture to support effective marketing, sales and service processes.
It must be emphasized that core of CRM is creation of a customer focus throughout the organization. This requires committed leadership and the development of new work culture among people - which cannot be done by IT tools alone.

CRM Definition III

A company embracing the CRM paradigm must: Identify its most profitable customers. Align its strategy to acquiring and retaining these customers. Improve all aspects of the customer experience by ensuring that all functions, not merely customer facing ones, become customer centric based on characteristics of the profitable customers or segments. Repeat the above steps periodically. In the following slides, we examine this definition in more detail.

CRM Definition IV

2. identify attributes of most profitable customers

3. re-formulate strategy to focus on profitable segments

1. conduct profitability analysis

4. modify processes to create the best possible experience for target segments 6. measure for effectiveness and communicate strategy & success metrics

5. modify organizational structure and compensation to align employees to strategy