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What is CRM?
One person's excellent service may represent barely adequate service to someone else. What
impresses one customer may make absolutely no impression on another. To complicate matters,
what a customer believes to be good service in one context may be unacceptable in another
situation or at another time. Service is perceptual; it is individualized; and it is situational. So
how can you figure out what customers want from you in terms of service? The kind and level of
service that you must deliver depends on who the customer is, what her expectations are, what
experience she has had with you and other firms, what your strategy is and what role customer
service plays in its delivery—along with a host of other things.
Many managers and executives are uncomfortable with this notion of variable service delivery;
they would much prefer to be able to pin down service and to be able to standardize it so that it
can be consistently delivered. But I don't believe service should be the same for everyone. In
fact, the value of service as a relationship-building tool is its customizability. Simply out, some
customers require and deserve better service than others. In some situations, you will want to be
able to provide service that will impress customers so as to make an emotional connection.
Whenever your employees can say to a customer, "Let me take care of that for you," you are
delivering a higher level of service than the customer was expecting.
Yet customer service gets far less attention than it deserves in many companies, simply because
managers do not realize or accept its importance in influencing customer satisfaction and loyalty.
Many view customer service provision as a cost, rather than an investment. Many spend a great
deal of time looking for ways to reduce that cost, without appreciating the impact it has on the
customer's feelings toward the firm.
At the same time, managers tend to focus on what I call the functional side of service provision:
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the speed and accuracy of service delivery, in particular. Do we arrive on time? Do we have
things in stock? Do we answer incoming calls within 20 seconds? These are the aspects of
service with which managers in many firms are most comfortable, mainly because they are most
easily and frequently measured in conventional customer satisfaction surveys. But they are a
dangerously limiting view of service and not nearly as all-encompassing as the customer's view
of service.
To the customer, service involves more than just the functional delivery of service (the first level,
which, in a world where companies like FedEx have practically perfected technical service
provision, customers take as a given). Customers care how easy you make it for them to
communicate with you. This opens the door to a discussion of your phone system, your web site
and your customer service center—not to mention whether customers can find someone to serve
them in your store. Increasingly, when you keep them on hold for 20 minutes, don't respond to
their email inquiries and ask them to deal with unknowledgeable and unhelpful staff, they will
walk away.
At the third level, companies need to understand how customer service is linked to the people
they employ. My experience suggests that customers are most likely to equate the notion of
service with the way they are treated by employees. Finally, the level of service that customers
experience is a powerful influence on how customers feel emotionally toward a company. Poor
service can make a customer feel neglected, unimportant, frustrated, angry or even humiliated.
Surprisingly good service leads to emotions such as comfort, relief, delight or excitement.
That holistic view again
Yet, many companies have a less-than-holistic view of their value proposition. Customer service
must be seen to be an integral part of what we offer the customer. I recently encountered a major
company that has separate marketing, sales and customer service departments, each of which
prepares its own annual plan and sets its own budgets, without consulting with the others. In that
firm, customer service is defined mainly as the operation of the call center. To the customer,
service means much more.
It is far too simplistic to ask customers to rate your customer service on the predictable 10-point
scale. It's much too complex a concept for customers to reduce it to a single number. You can't
interpret it, anyway. So last month they gave us a rating of 8.1 on customer service. What does
that mean? Very little. There's no direction on how we can improve. Anyway, the only people
who are rating you are current customers. How would those customers who stormed out or hung
up in disgust rate your customer service? You will never know. Yet theirs is a much more
important number.
Customer service is not optional. It's not trivial. And it's not easily standardized. Don't make the
mistake that one Canadian bank made of treating customer service as a promotion. That bank
offered customers $5 if they had to wait in line more than five minutes in its branches.
Customers were generally not impressed. To them, a wait time of five minutes was not the issue.
Of course, wait time is important—but not nearly as important as being served politely and
efficiently once you reach the counter.
Customer service is extremely complex, much like value, satisfaction and the increasingly
popular customer experience. To apply such concepts effectively, management must appreciate
their complexity. To utilize customer service to increase customer loyalty, to reinforce the
positioning of the brand and to gain a competitive advantage, companies much have a strategy to
guide its development and implementation.
What is Customer Relationship Management?
Before we begin to examine the conceptual foundations of CRM, it will be useful to define what
CRM is. A narrow perspective of customer relationship management is database marketing
emphasizing the promotional aspects of marketing linked to database efforts.
Another narrow, yet relevant, viewpoint is to consider CRM only as customer retention in which
a variety of after marketing tactics is used for customer bonding or staying in touch after the sale
is made.
Shani and Chalasani define relationship marketing as “an integrated effort to identify, maintain,
and build up a network with individuals consumers and to continuously strengthen the network
for mutual benefit of both sides, through interactive, individualized and value-added contacts
over a period of time”.
In today’s hyper competitive scenario, more than three quarters of the money and time spent by
companies go towards acquiring and retaining customers. Customer-centricity has become the
buzzword and the ones with clear and relentless focus on customers, enjoy a better competitive
position. This is proved time and again. Yet, companies go through meticulous processes to
gradually and consistently mature into an “organization for the customers”. But, how would you
mature into a customer-focused or customer-centric organization? The answer is: By reading and
understanding your customers. Yes, this is all you need to do! And this you need to do not just
once, but regularly and consistently over the lifetime of your customer and beyond.
Reading the customer demographics and understanding their needs (both explicit and implicit) is
what customer insight is all about. Customer insight is the basic point or the foundation for
building a customer centric organization. Everything in the value chain revolves around this.
This is the raw material. This is more a conversion process rather, since the end product is
Customer Loyalty! Over decades, many organizations had successfully completed the conversion
process and tasted higher returns, most organizations miserably failed in their efforts.
Customer Insight goes through a set of processes to get converted into Customer Loyalty- the
finished product. The set of processes include use of machine, process and people to obtain the
final outcome - just like a manufacturing process in a factory. The machine here is technology -
information technology to be precise, process - the custom made steps based on set objectives;
and people - those who are trained to efficiently carry out the conversion process. This whole
scheme of activities that begin from customer information and end in processes and interactions
that result in customer loyalty - in entirety, is what CRM is all about.
CRM relies on customer data to create customer loyalty. The concept of CRM was again the
result of an evolution born out of necessity. When companies understood the need to obtain and
maintain customer data, which was exhaustive and scattered in nature and were desperately
looking for a tool that could compile, preserve use the data in a way they want, technology came
to the rescue with exclusive methods called data mining, data warehousing and thus data base
management techniques were born. Technology is mechanistic and didn’t know what is required
and what is not. A managerial tool was needed to perform the director’s role in order to decide
the path and processes. Thus CRM was engineered as a tool to manage customer data using IT-
enabled techniques.
CRM gives a framework for the activities. It decides on what to do - the objectives, what is
required to do it - the resources, who should do it - the people, how to do it - the processes, how
long to do it - the time frame. CRM could be ready made, tailor-made or hand made depending
on the specific objectives it is set to achieve. CRM is unique in the respect that it follows a set of
pre-determined processes to accumulate and manage customer data, which was hitherto
unpracticed. Hence, CRM is defined as:
“Customer relationship management (CRM) is a business strategy to acquire and
manage the most valuable customer relationships. CRM requires a customer-centric
business philosophy and culture to support effective marketing, sales and service
processes. CRM applications can enable effective customer relationship management,
provided that an enterprise has the right leadership, strategy and culture.”
All customers are not equal; recognize and reward best customers disproportionately.
Understanding each customer becomes particularly important. And the same customers’
reaction to a cellular company operator may be quite different as compared to a car dealer.
Besides for the same product or the service not all customers can be treated alike and CRM
needs to differentiate between a high value customer and a low value customer.
What CRM needs to understand while differentiating customers is:
– Sensitivities, Tastes, Preferences and Personalities
Grading customers from very satisfied to very disappointed should help the organisation in
improving its customer satisfaction levels and scores. As the satisfaction level for each
customer improves, so shall the customer retention with the organisation.
Exploit up-selling and cross-selling potential. By identifying life stage and life event trigger
points by customer, marketers can maximize share of purchase potential. Thus the single
adults shall require a new car stereo and as he grows into a married couple his needs grow
into appliances.
• Increase Loyalty
Loyal customers are more profitable. Any company will like its mindshare status to improve
from being a suspect to being an advocate. Company has to invest in terms of its product and
service offerings to its customers. It has to innovate and meet the very needs of its clients/
customers so that they remain as advocates on the loyalty curve. Referral sales invariably are
low cost high margin sales.
History of CRM
Customer Relationship Management (CRM) is one of those magnificent concepts that swept
the business world in the 1990’s with the promise of forever changing the way businesses
small and large interacted with their customer bases. In the short term, however, it proved to
be an unwieldy process that was better in theory than in practice for a variety of reasons.
First among these was that it was simply so difficult and expensive to track and keep the high
volume of records needed accurately and constantly update them.
In the last several years, however, newer software systems and advanced tracking features
have vastly improved CRM capabilities and the real promise of CRM is becoming a reality.
As the price of newer, more customizable Internet solutions have hit the marketplace;
competition has driven the prices down so that even relatively small businesses are reaping
the benefits of some custom CRM programs.
In the beginning…
The 1980’s saw the emergence of database marketing, which was simply a catch phrase to
define the practice of setting up customer service groups to speak individually to all of a
company’s customers.
In the case of larger, key clients it was a valuable tool for keeping the lines of communication
open and tailoring service to the clients needs. In the case of smaller clients, however, it
tended to provide repetitive, survey-like information that cluttered databases and didn’t
provide much insight. As companies began tracking database information, they realized that
the bare bones were all that was needed in most cases: what they buy regularly, what they
spend, what they do.
This was the beginning of the now familiar frequent flyer programs, bonus points on credit
cards and a host of other resources that are based on CRM tracking of customer activity and
spending patterns. CRM was now being used as a way to increase sales passively as well as
through active improvement of customer service.
Real Customer Relationship Management as it’s thought of today really began in earnest in
the early years of this century. As software companies began releasing newer, more advanced
solutions that were customizable across industries, it became feasible to really use the
information in a dynamic way.
Instead of feeding information into a static database for future reference, CRM became a way
to continuously update understanding of customer needs and behavior. Branching of
information, sub-folders, and custom tailored features enabled companies to break down
information into smaller subsets so that they could evaluate not only concrete statistics, but
information on the motivation and reactions of customers.
The Internet provided a huge boon to the development of these huge databases by enabling
offsite information storage, where before companies had difficulty supporting the enormous
amounts of information. The Internet provided new possibilities and CRM took off as
providers began moving toward Internet solutions.
With the increased fluidity of these programs came a less rigid relationship between sales,
customer service and marketing. CRM enabled the development of new strategies for more
cooperative work between these different divisions through shared information and
understanding, leading to increased customer satisfaction from order to end product.
Today, CRM is still utilized most frequently by companies that rely heavily on two distinct
features: customer service or technology. The three sectors of business that rely most heavily
on CRM -- and use it to great advantage -- are financial services, a variety of high tech
corporations and the telecommunications industry.
The financial services industry in particular tracks the level of client satisfaction and what
customers are looking for in terms of changes and personalized features. They also track
changes in investment habits and spending patterns as the economy shifts. Software specific
to the industry can give financial service providers truly impressive feedback in these areas.
In recent years however, several factors have contributed to the rapid development and evolution
of CRM. These include: -
1. The growing de-intermediation process in many industries due to the advent of sophisticated
computer and telecommunication technologies that allow producers to directly interact with
end-customers. For example, in many industries such as airlines, banks insurance, software
or household appliances and even consumables, the de-intermediation process is fast
changing the nature of marketing and consequently making relationship marketing more
popular. Databases and direct marketing tools give them the means to individualize their
marketing efforts.
2. Advances in information technology, networking and manufacturing technology have helped
companies to quickly match competition. As a result product quality and cost are no longer
significant competitive advantages.
3. The growth in service economy. Since services are typically produced and delivered at the
same institution, it minimizes the role of the middlemen.
4. Another force driving the adoption of CRM has been the total quality movement. When
companies embraced TQM it became necessary to involve customers and suppliers in
implementing the program at all levels of the value chain. This needed close working
relationships with the customers. Thus several companies such as Motorola, IBM, General
Motors, Xerox, Ford, Toyota, etc formed partnering relations with suppliers and customers
to practice TQM. Other programs such as JIT and MRP also made use of interdependent
relationships between suppliers and customers.
5. Customer expectations are changing almost on a daily basis. Newly Empowered customers
who choose how to communicate with the companies across various available channels.
Also nowadays consumers expect a high degree of personalization.
6. Emerging real time, interactive channels including e-mail, ATMs and call centre that must be
synchronized with customer’s non-electronic activities. The speed of business change,
requiring flexibility and rapid adoption to technologies.
7. In the current era of hyper competition, marketers are forced to be more concerned with
customer retention and customer loyalty.
8. As several researches have found out retaining customers is less expensive and more
sustainable competitive advantage than acquiring new ones.
9. On the supply side it pays more to develop closer relationships with a few suppliers than to
develop more vendors.
10. The globalization of world marketplace makes it necessary to have global account
management for the customers.
Chapter 2:
CRM Programs & Activities
CRM Programs
One-to-one Marketing
Meeting and satisfying each customer’s need uniquely and individually. In the mass markets
individualized information on customers is now possible at low costs due to the rapid
development in the information technology and due to availability of scalable data warehouses
and data mining products. By using online information and databases on individual customer
interactions, marketers aim to fulfill the unique needs of each mass-market customer.
Information on individual customers is utilized to develop frequency marketing, interactive
marketing, and aftermarketing programs in order to develop relationship with high-yielding
customers. In the context of business-to-business markets, individual marketing has been in place
of quite sometime. Known as Key Account Management Program, here marketers appoint
customer teams to husband the company resources according to individual customer needs.
Partnering Programs
The third type of CRM programs is partnering relationships between customer and marketers to
serve end user needs. In the mass markets, two types of partnering programs are most common:
co-branding and affinity partnering.
Missing process of CRM
Traditionally customer relationship management (CRM) revolves around the three functions of
selling, marketing and support. Various process models have been built around how these
functions are integrated and operated in a customer oriented enterprise. There is however a fourth
critical function that is lacking in most CRM models.
The fourth function that often is the source of a competitive edge is that of innovation.
Companies must continually reinvent themselves to deliver an improved and often a totally new
value offering to their customer base. CRM must provide the customer intelligence that feeds
information back into the enterprise’s knowledge management processes where it can trigger
new innovation processes. When CRM is integrated into the innovation process, significant value
can be derived from faster time to market cycle times and with new processes and services.
Marketing automation must ensure that the innovation processes are actually market driven. A
market driven innovation process must include both strategies that are focused on satisfying
customer requirements as well as strategies focused at redefining customer requirements. Sales
automation should be integrated with the innovation process by ensuring that all sales channels
are prepared and ready to take new processes and services to market before competitive forces
can react. Customer service automation must be designed to empower the customer with the
option of assisting with the design of the value offering. Redefining CRM around innovation,
sales, marketing and service can identify new competitive opportunities for an enterprise.
The remaining question is whether companies are prepared to take the initiative and expand the
definition of customer relationship management to include the process of innovation. The
pressure to deliver results within the traditional definition of CRM already overwhelms
companies. The dialog must start rather earlier than later because the competitive window of
traditional CRM is decreasing and customer demands for a more innovative and responsive
enterprise will increase
Architecture of CRM
There are three parts of application architecture of CRM:
• Operational - automation to the basic business processes (marketing, sales, service)
• Analytical - support to analyze customer behavior, implements business intelligence alike
technology
• Collaborative - ensures the contact with customers (phone, email, fax, web, sms, post, in
person)
Operational CRM
Operational CRM means supporting the "front office" business processes, which include
customer contact (sales, marketing and service). Tasks resulting from these processes are
forwarded to resources responsible for them, as well as the information necessary for carrying
out the tasks and interfaces to back-end applications are being provided and activities with
customers are being documented for further reference.
Operational CRM provides the following benefits:
• Delivers personalized and efficient marketing, sales, and service through multi-channel
collaboration.
• Enables a 360-degree view of your customer while you are interacting with them.
• Sales people and service engineers can access complete history of all customer
interaction with your company, regardless of the touch point.
The operational part of CRM typically involves three general areas of business:
• Sales force automation (SFA)
SFA automates some of the company's critical sales and sales force management functions, for
example, lead/account management, contact management, quote management, forecasting, sales
administration, keeping track of customer preferences, buying habits, and demographics, as well
as performance management. SFA tools are designed to improve field sales productivity. Key
infrastructure requirements of SFA are mobile synchronization and integrated product
configuration.
CSS automates some service requests, complaints, product returns, and information requests.
Traditional internal help desk and traditional inbound call-center support for customer inquiries
are now evolved into the "customer interaction center" (CIC), using multiple channels (Web,
phone/fax, face-to-face, kiosk, etc). Key infrastructure requirements of CSS include computer
telephony integration (CTI) which provides high volume processing capability, and reliability.
Customer database
A good customer information system should consist of a regular flow of information, systematic
collection of information that is properly evaluated and compared against different points in
time, and it has sufficient depth to understand the customer and accurately anticipate their
behavioral patterns in future. The customer database helps the company to plan, implement, and
monitor customer contact. Customer relationships are increasingly sustained by information
systems. Companies are increasingly adding data from a variety of sources to their databases.
Customer data strategy should focus on processes to manage customer acquisition, retention, and
development.
Call Centre
A call centre is a centralized office used for the purpose of receiving and transmitting a large
volume of requests by telephone.
A call centre is operated by a company to administer incoming product support or information
inquiries from consumers. Outgoing calls for telemarketing, clientele, and debt collection are
also made. In addition to a call centre, collective handling of letters, faxes, and e-mails at one
location is known as a contact centre.
A call centre is often operated through an extensive open workspace, with work stations that
include a computer, a telephone set/headset connected to a telecom switch, and one or more
supervisor stations. It can be independently operated or networked with additional centres, often
linked to a corporate computer network, including mainframes, microcomputers and LANs.
Increasingly, the voice and data pathways into the centre are linked through a set of new
technologies called computer telephony integration (CTI).
Most major businesses use call centres to interact with their customers. Examples include utility
companies, mail order catalogue firms, and customer support for computer hardware and
software. Some businesses even service internal functions through call centres. Examples of this
include help desks and sales support.
Systems Integration
While CRM solutions are front office automation solutions, ERP is back office automation
solution. An ERP helps in automating business functions of production, finance, inventory, order
fulfillment and human resource giving an integrated view of business, where as CRM automates
the relationship with customer covering contact and opportunity management , marketing and
product knowledge, sales force management, sales forecasting, customer order processing and
fulfillment, delivery, installation, pre-sale and post-sale services and complaint handling by
providing an integrated view of the customer. It is necessary that the two systems integrate with
each other and complement information as well as business workflow. Therefore, CRM and ERP
are complementary. This integration of CRM with ERP helps companies to provide faster
customer service through an enabled network, which can direct all customer queries and issues
through appropriate channels to the right place for speedy resolution. This will help the company
in tracking and correcting the product problems reported by customers by feeding this
information into the R&D operations via ERP.
Chapter 4:
Implementation of CRM
When you work with an ASP, the first thing you'll want to know is the degree to which you can
customize the interface and the software so that your other business software will talk to your
CRM software. After all, your CSRs need to know what a customer has purchased to handle
inquiries from that customer, requiring integration between the order-management system and
the CRM system. If the customer database doesn’t talk to the CRM system, then your marketing
department can’t segment customers based on purchases and use the analytical tools frequently
built into CRM software to make intelligent decisions on what kind of promotions to make to
attract the highest-value customers.
There are several advantages to either kind of ASP described above. First, the cost of getting
started is usually low — certainly much lower than the cost of implementing software on your
own servers. Second, the implementation time is usually short. Finally, no additional
infrastructure or support are required from your IT department. However, some ASPs will tell
you that they'll implement whatever CRM software you'd like (at your expense, of course), in
which case you don't get to take advantage of speed, reduced cost, or experienced tech support.
Rather than choosing the software and the ASP separately, let the software dictate the ASP you
select.
Outsourcing Customer Service
While you can outsource customer service, which is one component of CRM, you can't
outsource business intelligence, which is the strategic component of CRM. If you don’t need to
integrate with existing systems, or you only need limited integration, then the fastest route to
take is to outsource your customer service to a full-service provider who will give you Web
access to the business-intelligence tools. Most full-service customer-service providers will work
with the best-of-breed CRM vendors and offer you a choice of CRM systems with which to
manage your customers. Some are also willing to purchase and install the CRM software of your
choice on their servers, but be aware that this will eliminate the advantage of a quick
implementation, lower entry costs and CSRs who already know the software. The cost associated
with outsourcing CRM is usually a significant startup cost for developing your materials, their
training materials and your knowledge base, then a monthly fee based either on the number of
hours of CSR you want available or on the number of calls/messages they receive for your site.
The pay-as-you-go model can be very attractive to smaller merchants. The ability to grow
quickly can be an advantage for any size Web merchant.
Critical Success Factors for Implementation of CRM Systems
Critical success factors have been defined as the elements that make a project a success, and as
the ‘events and conditions in a few key areas which absolutely must go right for the business to
succeed’. These include trust, effective communication, and top management support. For this to
occur, proper measurement tools and metrics must be utilized to effectively control the project.
The key CSF for CRM projects are:
Key Stakeholder Support
Support from all stakeholders in the organization, including top management and all
management levels, employees, government, suppliers, strategic partners, and investors.
Includes the timely reporting of the project status with accurate information.
Sufficient Resources
Resources of money, equipment and expertise available with appropriate support structures in
place. Includes time and budget allocations for training.
Clearly Defined Objective
A clearly defined mission with a set of defined goals and objectives communicated to all
stakeholders through clearly defined communication channels, with alignment of project and
corporate goals. This is managed through a detailed project plan.
Managing Change
Project changes are implemented through a formally defined process with appropriate
approvals sought. Any scope changes are mutually agreed and documented, with appropriate
analysis of resource requirements.
Challenges of CRM Implementation
Organizations face a number of key challenges in implementing CRM systems. These include:
Methodology driven by end users
IT personnel do not have knowledge or authority to influence corporate decision makers
Lack of executive sponsorship
CRM projects are mostly driven by a functional head, such as a VP or sales/marketing, and
rarely produce an enterprise view of customers
Lack of customer centric culture
An acceptable return on investment will no be achieved if the organization does not have a
strong customer centric culture
Inappropriate design approach
CRM is designed to model a single functional view not an enterprise wide customer view,
resulting in failure
Over automation
Focus on functionality and process design leads to highly automated business functions Lack
of network infrastructure Inadequate IT infrastructure and networking facilities prevent the
CRM from being implemented enterprise wide
As can be seen from the challenges faced, it is important for organizations to realize that a CRM
system implementation will only succeed when it is supported by a customer focused
organizational culture. The CRM system will be the main driver for a paradigm shift, becoming
an enabler for communication between the organization and its customers, and within the
organization itself.
Chapter 5:
CRM Related Concepts
• Knowledge Management
Knowledge Management (KM) refers to a range of practices used by organizations to identify,
create, represent, and distribute knowledge for reuse and learning across the organization.
Knowledge Management programs are typically tied to organizational objectives and are
intended to lead to the achievement of specific business outcomes such as improved
performance, competitive advantage, or higher levels of innovation.
While knowledge transfer (an aspect of Knowledge Management) has always existed in one
form or another, for example through on-the-job discussions with peers, formally through
apprenticeship, through the maintenance of corporate libraries, through professional training and
mentoring programmes, and — since the late twentieth century — technologically through
knowledge bases, expert systems, and other knowledge repositories, Knowledge Management
programs attempt to explicitly evaluate and manage the process of creation or identification,
accumulation, and application of knowledge or intellectual capital across an organization.
Knowledge Management, therefore, attempts to bring under one set of practices various strands
of thought and practice relating to:
– intellectual capital and the knowledge worker in the knowledge economy
– the idea of the learning organization;
– various enabling organizational practices such as Communities of Practice and corporate
Yellow Page directories for accessing key personnel and expertise;
– various enabling technologies such as knowledge bases and expert systems, help desks,
corporate intranets and extranets, Content Management, wikis, and Document Management.
While Knowledge Management programs are closely related to Organizational Learning
initiatives, Knowledge Management may be distinguished from Organizational Learning by its
greater focus on the management of specific knowledge assets and development and cultivation
of the channels through which knowledge flows.
The emergence of knowledge management has generated new organizational roles and
responsibilities an early example of which was the Chief Knowledge Officer. In recent years,
Personal Knowledge Management (PKM) practice has arisen in which individuals apply KM
practice to themselves, their role in the organisation and their career development.
Knowledge Management is a continually evolving discipline, with a wide range of contributions
and a wide range of views on what represents good practice in Knowledge Management.
Knowledge Management Plays a Key Role in CRM Success
CRM and knowledge management (KM) were once considered entirely different disciplines, with the
two sharing little but perhaps the same data warehouse hardware and a vague understanding that
both efforts were meant to improve business efficiency and customer satisfaction. It has become clear,
however, that the two disciplines were really working toward the same goal, and that to deliver
continuous improvement to business clients, they would have to start speaking the same language.
KM focuses largely on finding the right solution to a problem that requires detailed insight, be it
locating the right expert at the right time, or ensuring that the solution to a complex problem can
be written once but reused many times. It is not difficult to understand why that capability is of
great interest to CRM strategists. Industry estimates suggest that upwards of three quarters of
variable support costs come from the time and energy put into the resolution of customer support
inquiries, rather than routing and post-call management.
Better KM/CRM integration can help companies navigate complex support problems more
easily. Many manufacturers, such as computer companies, sell a single product that may
incorporate dozens or even hundreds of other components. Being able to cross-reference the
entire collected library for technical support and conflict resolution can make the difference
between first-call resolution and a lingering headache.
Many companies still have not attained the level of deep integration that ties knowledge base
activity (particularly at the self-service level) to a CRM-facing customer record, but companies
like computer peripheral manufacturer Adaptec use the intersection of CRM and KM to guide
product and service decisions and attempt to waylay customer service overloads before they
begin.
Conquering their own individual demons will not mean the end of the road for CRM and
knowledge management leaders, as they must join forces to realize even more value from the
spheres of customer and product knowledge.
• Regain Management
“The cost of acquiring a new customer is 9 to 12 times that of holding on to an existing
customer.” - Philip Kotler
Goal of customer regain management is to reinitiate valuable customer relationships, which have
beenalready terminated. Regain management has to detect such ‘lost’ customers, select valuable
relationships and attempt to regain them in an effective and effic ient way, for which a systematic
process is necessary. Addition to this process structure, there is an information base needed,
which enables the exchange of collected information along the customer regain process.
- An incentive strategy tempts to regain business relations by offering customers some form of
incentives like for example tickets for events, gifts and discounts.
- A compensation strategy aims to compensate some (real or perceived) disservices, which as the
motive for termination. For example the company could offer some form of vouchers.
- A dialogue strategy tries to regain trust through a dialog (e.g. personal call).
- A convincing strategy aims to persuade customers by means of use argumentations and
explanation of some product advantage.
• CRM-ERP Integration
ERP’s foundation (which evolved from either manufacturing-based manufacturing resources
planning (MRP) applications and its later incarnation, MRPII applications), it is based on
creating internally stable business functions and predictable process control. The concept of ERP
was the integration of all back-office functions so that the basic problems responsible for
interruptions and breaks in the processes were smoothed out and the incompatibilities of the best
of processes were smoothened and the incompatibilities of the best-of-breed applications were
eliminated or reduced. This doesn’t work with CRM, which is external. How can you be in
command of the processes when they are based on your customers’ behaviour? Conceptually,
one important reason for CRM is real-time response to the constantly liquid-shifting of customer
demands, which is not controlled internally at all. It also means the psychology of the front-
office is quite different from the psychology of the back-office.
The simplest option is to hire a systems integrator to come in and integrate the systems.
However, the obvious hazard here is that they are not only dealing with ERP and CRM
applications they may not know much about, they are also dealing with your legacy systems,
which they know nothing about. But integrating all of that is what you could hire the ERP vendor
for and implement the ERP vendor’s CRM solution. But many of the solutions remain
vapourware or poorly integrated. The third solution is what many companies are increasingly
turning to Enterprise Application Integration (EAI).
EAI applications, previously known as middleware, can be the most cost-effective way of
integrating the back and front offices. EAI’s purpose is mainly to integrate data between
disparate applications that don’t natively speak with each other.
What is eCRM?
In simple terms, eCRM provides to companies a means to conduct interactive, personalised and
relevant communication with customers across both electronic and traditional channels. It utilises
a complete view of the customer to make decisions about messaging, offers, and channel
delivery. It synchronises communications across disjointed customer-facing systems. It focuses
on understanding how the economics of customer relationships affect the business. Advocates of
eCRM recognize that a comprehensive understanding of customer activities, personalization,
relevance, permission, timeliness and metrics is a means to an end optimizing the value of your
most important asset: your customers.
For Fortune 500 companies, evolving to eCRM requires process and organisational changes, a
suite of integrated applications and a non-trivial technical architecture to support both the eCRM
process and the enterprise applications that automate the process. Mid-size companies may
benefit from less sophisticated and easier-it-implement (and affordable), hosted solutions offered
through Application Service Providers. But regardless of the size of the firm, you have no choice
but to evolve to eCRM quickly.
eCRM v/s CRM: The Differences
Being able to take care of your customer via the Internet, or, customers being able to take care of
themselves online: That’s the difference between CRM and eCRM. It implies a myriad of issues,
questions, approaches, technologies, and architecture that are different from client/server-based
CRM. Many of them are issues general to the Internet. Others are issues related to the creation of
applications for the Internet. The third group is related directly to eCRM and its actual value to
business.
Companies agree that eCRM is critical to their business, but unfortunately very few understands
exactly what it is or how to evolve from their existing database marketing practices to an eCRM
solution.
•Enable the business to extend its personalized messaging to the Web and e-mail.
•Focus business on improving customer relationship and earning a greater share of each
customer’s business through consistent measurement, assessment and “actionable” customer-
contact strategies.
Chapter 6:
Problems and Drawbacks
There are several reasons why a customer relationship management (CRM) solution might not
have the desired results.
There could be a lack of commitment from people within the company to the implementation of
a CRM solution. Adapting to a customer-focused approach may require a cultural change. There
is a danger that relationships with customers will break down somewhere along the line, unless
everyone in the business is committed to viewing their operations from the customers'
perspective. The result is customer dissatisfaction and eventual loss of revenue.
Poor communication can prevent buy-in. In order to make CRM work, all the relevant people in
your business must know what information you need and how to use it.
Weak leadership could cause problems for any CRM implementation plan. The onus is on
management to lead by example and push for a customer focus on every project. If a proposed
plan isn't right for your customers, don't do it. Send your teams back to the drawing board to
come up with a solution that will work.
Trying to implement CRM as a complete solution in one goes is a tempting but risky strategy. It
is better to break your CRM project down into manageable pieces by setting up pilot programs
and short-term milestones. Consider starting with a pilot project that incorporates all the
necessary departments and groups but is small and flexible enough to allow adjustments along
the way.
Don't underestimate how much data you will require, and make sure that you can expand your
systems if necessary. You need to carefully consider what data is collected and stored to ensure
that only useful data is kept.
You must also ensure you comply with the eight principles of the Data Protection Act that govern
the processing of information on living, identifiable individuals. For more information, see their
guide on how to comply with data protection legislation.
Avoid adopting rigid rules which cannot be changed to be more flexible to the needs of
individual customers.
Reasons for CRM Implementation Failure
An understanding of the challenges and critical success factors is paramount to project success.
In this way, the organization is aware of those factors by which success can be measured, and
will ensure the CRM system is implemented in a manner to satisfy all stakeholders. The main
reasons for CRM failures include:
Customer focus
Organizational culture is not customer focused, with limited involvement of customer facing
personnel in the design and implementation phase
Organizational Management
Lack of support and understanding form senior management, lack of CRM understanding,
lack of communications and changing business needs
Project Management
Misalignment between project and business requirements, with unrealistic goals, timelines,
coupled with a lack of planning and insufficient reporting and control
Team Members
Lack of support, incentives, and lack of technical knowledge
Data & Warehouse Requirements
Poor quality data, inconsistent data between different systems
Technical Factors
Short term solution focus not aligned to long term architectural infrastructure growth, no
prototyping or testing, misunderstanding technical requirements.
CRM is failing because the correct capabilities are not being built at the enterprise level. The
requisite changes in organizational culture, behavior and attitude are not being implemented.
Overall, in failed projects, there is little or no alignment between stakeholders on success criteria,
critical success factors, performance metrics, project drivers, nor on the dynamics of how these
parameters may change over the project life cycle. The requirements of the customer are either
misunderstood, or not taken into account. The result is an inconsistency in focus, with less than
optimum system design and implementation.
Hence CRM is failing due to two primary reasons: a) technical; due to the size, complexity, and
lack of knowledge of technology, and b) human behavior; due to general change management
issues in the organization. What is required is a coherent, all encompassing strategy that focuses
on key stakeholder requirements. Companies underestimate the complexities of CRM projects,
lack clearly defined business objectives, and tend to invest inadequately in the provision of CRM
software.
Chapter 7:
CEM: Future Concept
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