Listening to customers must become everyones business.

With most competitors moving ever faster, the race will go to those who listen and respond more intently. Tom Peters, Thriving on Chaos

Chapter 1: Conceptual Framework for CRM

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 individual 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. The core theme of all CRM and relationship marketing perspectives is its focus on co-operative and collaborative relationships between the firm and its customers, and/or other marketing actors. CRM is based on the premise that, by having a better understanding of the customers needs and desires we can keep them longer and sell more to them. Growth Strategies International (GSI) performed a statistical analysis of Customer satisfaction data encompassing the findings of over 20,000 customer surveys conducted in 40 countries by Infoquest. The conclusions of the study were: A Totally Satisfied Customer contributes 2.6 times as much revenue to a company as a Somewhat Satisfied Customer. A Totally Satisfied Customer contributes 17 times as much revenue as a Somewhat Dissatisfied Customer.

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 A Totally Dissatisfied customer decreases revenue at a rate equal to 1.8 times what a Totally Satisfied Customer contributes to a business. By reducing customer defection (by as little as 5%) will result in increase in profits by 25% to 85% depending from industry to industry. An important facet of CRM is customer selectivity. As several research studies have shown not all customers are equally profitable (In fact in some cases 80% of the sales come through 20% of the customers). The company must therefore be selective and tailor its program and marketing efforts by segmenting and selecting appropriate customers for individual marketing programs. In some cases, it could even lead to outsourcing of some customers so that a company better utilize its resources on those customers it can serve better and create mutual value. However, the objective of a company is not to really prune its customer base but to identify appropriate customer programs and methods that would be profitable and create value for the firm and the customer. Hence, CRM is defined as: Customer Relationship management is a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value for the company and the customer. As is implicit in the above definition, the purpose of CRM is to improve marketing productivity. Marketing productivity is achieved by increasing marketing efficiency and by enhancing marketing effectiveness. In CRM, marketing efficiency is achieved because cooperative and collaborative processes help in reducing transaction costs and overall development costs for the company. Two important processes for CRM include proactive customer business development and building partnering relationship with most important customers. These lead to superior value creation. The basic concept is that the customer is not someone outside the organization; he is a part of the organization.

Key CRM principles

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Differentiate Customers: 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 Lifestyle and age Culture Background and education Physical and psychological characteristics Differentiating Offerings Low value customer requiring high value customer offerings

Low value customer with potential to become high value in near future High value customers who value a a high level of service are maintained without expandi High value customer customershighrequireservice level of service are maintained without expandin High value requiring who require high High value customer requiring low value service

value customers who alue customersHigh who re high levels of service e high levels of service either purchase the higher level of service or become our competitors low value/high cost customers ither purchase the higher level of service or become our competitors low value/high cost customers Service Requirement Low Low Customer Value Fig. 1 Customer value Service Matrix High Keeping Existing Customers -3-

Grading customers from very satisfied to very disappointed should help the organization in improving its customer satisfaction levels and scores. As the satisfaction level for each customer improves so shall the customer retention with the organization. Maximizing Life time value 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. (Fig 2. Categorizing Customers) High Low Strategic Importance To Your Business Plan
*You have No Choice But To Handle Them Very Carefully. Will Consume Energy # Think Of Innovative Ways of Getting them On Your Side, But The Cost Of Acquisition Must Be Controlled *Cultivate Relationship. Spend Energy. Go Out Of Your Way. #Think Of Strategies TO Move Them Away From Competition. Will Consume Disproportionately High Energy. *Very cautious decision needed. Re-examine business Plan & Strategy. Evaluate That Your Loss (i.e. Your competitors gain) Doesnt become nightmare for you. #Needs In-depth strategic review as acquisition alone and dissatisfaction later could be more harmful

*Existing Customers #Potential Customers

*Focus On Short Term Profitability. Spend Minimum Energy To Meet Your Objectives. #Dont Pursue. Use Opportunity As It Comes. Short Term Acquisition Shouldnt Affect Long Term Image.

Low High Relationship & Profitability Potential

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Summarizing CRM activities: The CRM cycle can be briefly described as follows: 1. Learning from customers and prospects, (having in depth knowledge of customer) 2. Creating value for customers and prospects 3. Creating loyalty 4. Acquiring new customers 5. Creating profits 6. Acquiring new customers
Creating Profits Acquiring new customers Learning from customers a& prospects

Fig.3 CRM Activities 4

1
Creating value for customers & prospects

5 3

Creating loyal customers

Figure 4 Customer Life Cycle Management Customer Need Assessment & Acquisition

Customer Retention and referrals for new customers

Customer Development through personalization and customization

Customer Equity Leverage through Cross Selling and Up Selling

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The Emergence of CRM Practice

The Past: Looking back at a snapshot history of marketing, we can see the following clear developments and progression over the last four decades: 1960s the era of Mass Marketing, when Gibbs SR toothpaste began the first marketing of this kind with its black and white campaign. 1970s saw the beginning of segmentation, direct mail campaigns and early telemarketing (such as publishing) 1980s where Niche marketing made millionaires of those who were best at it. 1990s Relationship Marketing. The explosion of telemarketing and call centres, all set up to develop relationships with customers. The recognition of the true value of retention and the use of Lifetime Value as a business case. In addition to this, a number of key marketing concepts can also be used to see where CRM has developed from: Satisfying Needs, Customer Orientation The organisation needs to be arranged so that all functions contribute Profit must be the consequence of delighting customers (Kotler)

Developing customer relationship has historical antecedents going back into the pre industrial era. Similarly artisans often developed customized produce for each customer. Such direct interaction led to relational bonding between the producer and the consumer. It was only after industrial eras mass production society and the advent of the middlemen that there were less frequent interactions between producers and the consumers leading to transactions oriented marketing. The production and consumption factions got separated leading to marketing functions being performed by the middle men and middlemen are in general oriented towards the economic aspects of buying since the largest cost is often the cost of goods sold. 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

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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 customers 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.

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10. In addition several marketers are concerned with keeping customers for life than making one time sale. There is a greater opportunity for up selling and cross selling. In a recent study, Naidu, et al(1999) found that relational intensity increased in hospitals facing a high degree of competitive intensity 11. The globalization of world marketplace makes it necessary to have global account management for the customers.

CRM Formation Process

In the formation process, three important decision areas relate to defining the purpose (or objectives) of engaging in CRM, selecting parties (or customer partners) for appropriate CRM programs and developing programs (or relational activity schemes) for relationship engagement with the customer.

Purpose Increase Effectiveness Improve Efficiency Programs Account Management Retention Marketing Partners Criteria Process

Role Specification Planning Process Team Structure Process Alignment Monitoring Process Communication Employee Motivation Employee Training Evolution Enhancement Improvement Fig 5. CRM Process Framework Relationship Performance Strategic Financial Marketing Retention Satisfaction

CRM Purpose The overall purpose of CRM is to improve marketing productivity and enhance value for parties in involved in the relationship. By seeking and achieving

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operational goals, such as lower distribution costs, streamlining order processing and inventory management, reducing the burden of excessive customer acquisition cost, and through customer retention economics, firms could achieve greater marketing efficiencies. They can enhance marketing effectiveness by carefully selecting, customers for its various programs, individualizing and personalizing their market offerings to anticipate and serve the emerging needs of individual customer, building customer loyalty and commitment, partnering to enter new markets and develop new products, and redefining the competitive playing field for their company. Thus, stating the objectives and defining the purpose of CRM in a company helps clarify the nature of CRM programs and activities that ought to be performed by the partners. Defining the purpose would also help in identifying suitable relationship partners who have necessary expectations and capabilities to fulfill mutual goals. It will further help in evaluating CRM performance by comparing results achieved against objectives. These objectives could be specified as financial goals, marketing goals, strategic goals, operational goals, and general goals. Customers are motivated to engage in relational behavior because of psychological and sociological benefits associated with reduction in choice decisions. In addition, to their natural inclination of reducing choices, consumers are motivated to seek the rewards and benefits associated with CRM programs. Relational Parties In the Initial phase, a company has to decide which customer type and specific customers or customer groups will be the focus of their CRM activities. CRM Programs A careful review of literature and observation of corporate practices suggest that there are three types of CRM programs: continuity marketing; one-to-one marketing; and, partnering programs. These take different forms depending on whether they are meant for end-consumers, distributor consumers, or business-tobusiness customers. Table 1 presents various types of CRM programs developed for different types of customers.

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Customer Types Program Types Continuity Marketing

Mass Markets

Distributors

Business Business Markets Special Sourcing

to

After- Marketing Loyalty Programs Cross-Selling Permission Marketing Personalization Affinity Partnering Co-Branding

Continuos Replenishment ECR Programs Customer Business Development

One-to-One Marketing

Arrangements Key Account Global Account Strategic Partnership Co-Design CoDevelopment

Partnering/CompanyMarketing

Logistics Partnering Joint Marketing

Table 1 Continuity Marketing Programs

CRM Programs

Take the shape of membership and loyalty card programs where customers are often rewarded for their member and loyalty relationships with the marketers. The basic premise of continuity marketing programs is to retain customers and increase loyalty through long-term special services that has a potential to increase mutual value through learning about each other. One-to-one Marketing Meeting and satisfying each customers 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

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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. CRM Governance Process Greater the scope of CRM program and associated tasks, and the more complex is the composition of the relationship management team; the more critical is the role specification decision for the partnering firms. It is essential to establish intra-company communication particularly among all concerned individuals and corporate functions that directly play a role in managing the relationship with a specific customer or customer group. With mass-market customers frequent face-to-face interactions will be uneconomical. Thus marketers should create common bonds through symbolic relationships, endorsements, affinity groups, and membership benefits or by creating online communities Involving customers in the planning process would ensure their support in plan implementation and achievement of planned goals. All customers are not willing to participate in the planning process nor is it possible to involve all of then for relationship marketing programs for the mass markets. Operating process between the company and customer partners: Operating alignment will be needed in order processing, accounting and budgeting processes, information systems, merchandising process, etc Human resources decisions are also important in creating the right organisation climate for managing relationship marketing. Training employees to interact with customers, to work in teams, and manage relationship expectations are important. So is the issue of creating the right motivation through incentives and rewards.

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Periodic evaluation of goals and results, initiating changes in relationship structure, design or governance process if needed, creating a system for discussing problems and resolving conflicts.

CRM Performance Evaluation Process Without a proper performance metrics to evaluate CRM efforts, it would be hard to make objective decisions regarding continuation, modification, enhancement, or termination of CRM programs. If co-operative and collaborative relationship with the customers is treated as an intangible asset of the firm, its economic value add can be assessed using discounted future cash flows estimates. Here the term relationship equity comes in where you measure the intangible assets of the firm. Another global measure used by firms to monitor CRM performance is the measurement of relationship satisfaction. By measuring relationship satisfaction, one could estimate the propensity of either partys inclination to continue or terminate the relationship. Such propensity could also be indirectly measured by measuring customer loyalty.

CRM Implementation Issues

One of the most interesting aspects of CRM development is the multitude of customer interfaces that a company has to manage in todays context. Until recently, a companys direct interface with the customers, if any was primarily through sales people or service agents. In todays environment most companies interface with their customers through a variety of channels including sales people, service personnel, call centres, Internet websites, marketing departments, fulfillment houses, market and business development agents, etc. For large customers it also includes cross-functional teams that may include personnel from various functional departments. While each of these units could operate independently, they still need to share information about individual customers and their interactions with the

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company on a real time basis. For example, a customer who just placed an order on the Internet and subsequently calls the call centre for order verification expects the call centre staff to know the details of his or her order history. Similarly a customer approached by a sales person unaware that she has recently complained about dissatisfactory customer service, is not likely to be treated kindly by the customer. Therefore effective CRM requires a front-line information system that shares relevant customer information across all interface units. Relational databases, data warehousing and data mining tools are thus very valuable for CRM systems and solutions. However, the challenge is to develop and integrated CRM platform that collects relevant data input at each customer interface and simultaneously provides knowledge output about the strategy and tactics suitable to win customer loyalty and support. If a call centre personnel cannot identify or differentiate a high value customer and does not know what to up-sell or cross sell to him then it would be a tremendous loss of opportunity for the company. Although most CRM software solutions based on relational databases are helping share customer information, they still do not provide knowledge output to the front line personnel. As shown in Figure.6, CRM solutions platform needs to be based on interactive technology and processes. It should assist the company in developing and enhancing customer interactions and one-to-one marketing through the help of suitable intelligent agents that help develop front-line relationship with customers. Such a system would identify appropriate data inputs at each customer interaction site and use analytical platforms to generate appropriate knowledge output for front-line staff during customer interactions. In addition, implementation tools to support interactive solutions for customer profitability analysis, customer segmentation, demand generation, account planning, opportunity management, contact management, integrated marketing communication, customer care strategies, customer problem solving, virtual team

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management of large global accounts, and measuring CRM performance would be the next level of solution sought by most enterprises.

Sales Group
Knowledge Output Data Input Knowledge Output Data Input

Internet

Market Development

Data Input Knowledge Output

Integrated Marketing Information Platform Information Content Relational Databases Decision Support System Active Intelligence Business Rules Collaborative Communication User Profiles

Knowledge Output Data Input Knowledge Output Data Input

Call Centre

Data Input

Marketing

Knowledge Output

Customer Operations/ Service

Figure 6 . Information Platform for CRM Since CRM implementation comprises a significant information technology (IT) component, these companies have handed over the responsibility of CRM implementation to information technology departments. They are focussed on simply installing CRM software solutions without a CRM strategy or program in place. This leads to creating an operational tool within the company, but the usability and effectiveness in producing desirable results from such tools is limited. CRM tools would be valuable when they are used to identify and differentiate individual customers and to generate individualized offer and fulfill customized solutions. The lack of CRM strategy or CRM programs, would leave the front-line people without any knowledge of what they should be doing with the additional customer information that they now have access to. For those who apply themselves and develop improvised solutions, it could backfire as ad hoc solutions could cause

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unintended deterioration in customer relationships. Appropriate strategy and excellent implementation are both needed for obtaining successful results. From a corporate implementation point of view, CRM should not be misunderstood to simply mean a software solutions implementation project.

Chapter 2: CRM and Related Concepts

Knowledge Management (KM) with focus on CRM
As Peter Drucker defined Information is data endowed with relevance and purpose. To effectively implement a CRM solution it is very important to identify real knowledge about different types of customers (Viz. Most valued customers, Most growable customers, Below zero customers) from plethora of internal and external data, figures, surveys, etc. A straightway technique is to create a data warehouse, thereafter information which is required to effectively implement principles of CRM, could be mined out of this data warehouse. Marketing, sales after-sales people would be knowledge workers. Front office could be more productive if they could utilize customer knowledge. Knowledge Management (KM) is about embracing a diversity of knowledge resources, like legacy systems, existing data warehouses, portals, websites, customers, suppliers, partners, external marketing research agencies and cultivating the knowledge where it resides. Metrics, ROI, Balance Scorecard method, benchmarking are some of the common technique of KM system evaluation. KM implementation is the key to CRM. Its a proven fact that 80% of an organisation revenues come from 20% of its customers, it becomes imperative to design CRM solutions keeping in mind these most valuable customers and to leverage 80% non structured data of about 20% of these most valuable customers. Just as more tangible corporate assets like computer systems have a finite shell life, so too does knowledge, it must be available at the right time to be able to act upon it.

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Retaining tacit knowledge (derived from experiences, data and documents) means retaining the individual, which is invariably not possible. It is possible to generate explicit knowledge from tacit knowledge, but its a complex exercise. The key ingredient of this exchange is face to face sharing of knowledge or virtual environmental tools like Lotus Notes, which can facilitate tacit knowledge exchange. Hence for tacit knowledge exchange text mining is very useful and important. There are ways to do text mining, like search engines, web solutions, text analysis tools, etc. The key to successful customer KM is personalization, i.e. how to extract the knowledge that is pertinent to the user and translate it into a format that is easily understood. The choice of Customer Knowledge Management (CKM) architecture should have a layered approach. Existing systems should be seamlessly linked with the proposed layer. The choice for CKM system could be Web (Enterprise information portal) or a packaged solution such as Lotus Notes, Microsoft solution.

Role of CRM in the Context of SCM

In the context of SCM, where alliances and partnerships are keys to success, CRM plays an important role in building long-term relationships. Apart from the endusers, it involves internal employees, channel members and other external entities such as advertising agencies and consulting organisations. The success of relationships depends upon sharing of savings from the supply chain, which may be reinvested to further enhance its efficiency, and sustain the competitive advantage. The supply chain of tomorrow will look like a virtual organisation, seamlessly integrated through sharing data and savings as well. The bonding between partners will be closely held by CRM practices.

ERP and CRM

Like ERP, CRM solutions focus on automating and improving business processes, albeit in front-office areas such as marketing, sales, customer service, and customer support. Whereas ERP implementation can result in improved organisational efficiency, CRM aims to provide organisational effectiveness by reducing sales cycle and selling cost, identifying markets and channels for expansion, and improving

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customer value, satisfaction, profitability, and retention. While CRM applications provide the framework for embodying, promoting and executing best practices in customer facing activities, ERP provides the backbone, resources and operational applications to make organisations more efficient in achieving these goals.

Regain Management
The cost of acquiring a new customer is 9 to 12 times that of holding on to an existing customer.-Philip Kotler A study conducted by Andersen Consulting in conjunction with EIU found that businesses are intensifying their focus on customer and are taking a more process oriented approach to customer relationship management. Key Findings of the study are: (a) the number of businesses citing customer retention as a critically important measure in the next 5 years has jumped to nearly 60%, as companies shift their focus from attracting new customer to retaining their more profitable ones; (b) by 2002, 83% of companies expect to have customer data warehouses, up from about 40% today; and (c) companies predict their use of Internet to collect customer data will surge by 430% Consumer Life Time Value Quantifying the value of customers is absolutely essential in regain management. In fact, the percentage of profit a company makes from continued sales to its own customer base is consistently higher than the profit made on original sale.. Each of the customers then delivers an income stream and the stream of profit far exceeds the value of original purchase. Income streams contribute cash flows in terms of years for any single product. Regain Strategies: Customization Differentiation Strategies The lost customer would be segmented differently from the existing customer. Base and the company could provide additional features and benefits to win them back. Wow Syndrome

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For example, a client checks into a hotel and his/her room isnt ready. The clerk could respond by You are in luck! Your room isnt ready. That means you get to eat breakfast on us and use our business centre for free!

Chapter 3: Technological Tools for CRM

Tools
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.

Other Technologies that are used are as follows: Electronic Point of Sale(EPOS) Sales Force Automation Customer Service Helpdesk Call Centres Call Centre helps in automating the operations of inbound and outbound calls generated between company and its customer. These solutions integrate the voice switch of automated telephone systems (e.g. EPABX) with an agent host software allowing for automating call routing to agents, auto display of relevant customer data, predictive dialing, self service Interactive Voice Response systems, etc. These systems are useful in high volume segments like banking, telecom and hospitality.

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Today, more innovative channels of interacting with customers are emerging as a result of new technology, such as global telephone based calls centres and the internet. Companies are now focusing to offer solutions that leverage the internet in building comprehensive CRM systems allowing them to handle customer interactions in all forms. 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.

CRM A FRAMEWORK Traditional Approach to CRM Customer Contact by Telephone Mail In Person Personal Selling After Sales Service Complaint Handling Account Management Customer care Customer Satisfaction Web-Enabled & Integration Approach Customer Information System Integration with Customer Database technology Electronic Point of Sale Sales Force Automation (Web & Internet) Automation of Customer Support Call Centres Systems Integration Lifetime value of a Customer
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Data Mining for CRM: Some Relevant issues

Data mining is an important enabler for CRM. Advances in data storage and processing technologies have made it possible today to store very large amounts of data in what are called data warehouses and then use data mining tools to extract relevant information. Data mining helps in the process of understanding a customer by providing the necessary information and facilitates informed decision-making. Operational CRM solutions involve integration of business processes involving customer touch points. Collaborative CRM involves the facilitation of collaborative services(such as e-mail) to facilitate interactions between customer and employees. All this effort produces rich data that feeds the Analytical CRM technologies. Operational CRM Analytical CRM Collaborative CRM

Customer

Fig.8 Interactions between CRM Technologies Information Requirements Of An Effective CRM Solution The employees of a firm employing CRM would require rich information about their firm and customer base including: etc) Information about the market Information about the firm The current segment Demographic Distribution (by age, sex, education, income, marital status,

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The firms best customers and the segment they belong to, products they buy, preferences, habits and tastes of each segment. Individual level information consisting of: Customer personal details such as name, address, family details, education, etc The customer group /segment to which the individual belongs History of present and past behavior Likes, dislikes, habits and preferences Events coming up in their personal life etc. Levels of data mining operations The aggregate or the Macro level Mining at the macro level gives us a broad overview of the data e.g. when customer of the retail store are segmented by profitability criteria, we obtain clusters who are profitable to various extent. Knowledge obtained by mining at macro level is useful when dealing with situations where: We are dealing with a customer about whom we do not have individual information . Hence, we need to extrapolate the characteristics of the group to which he/she might belong. In retail store example, a store can segment its customers on basis of age and characteristics can be extracted. When a new customer enters the store, the salesman could use his intuition in arriving at the customers age and recover the characteristics of that age group such as the frequently bought products, colour preferences, etc. Targeting new set of customers. If the retail chain has opened a new store it can use the data from the most similar current store to predict the behavior of the new prospects. We are dealing with aspects of the service, which influence a majority of the customer and therefore cannot be customized to suit individual tastes, example being the design of the physical layout of a retail store. Predicting the possibility of an action that the cu has never undertaken. A customer might not have tried out a new product because he/she was not aware

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of it. A salesman can encourage him/her to try out the product if his/her profile matches that of the current product users.

The Individual or Micro level

As interactions of the individual with the firm increases, the firm obtains more data about him/her. Offering individualized value adding propositions can strengthen relationship with the individual customer. For this, we need to track the cu and mine at the individual or micro level. Some important features to note about mining at this level are:

Micro-level mining provides specific information about a particular customer. For example, the retail store can go to the extent of finding out the preferred colours of his shirt A firm takes up micro level mining to build a detailed customer profile of a regular customer. Data mining this level might be expensive if the data mining tool has to cull out individual information from a large database. Having a separate database for profitable customer might be helpful. Knowledge obtained at the individual level is useful in situations where: The firm wants to customize its offering to the customer based on the customers tastes and preferences e.g. the retail store can offer discounts on the purchase of a bundle of products that the customer prefers buying together. The firm wants to assist the purchase of a new product based on the information it has of the last purchase. For example, if a customer has bought a suit in his visit, then the store might offer a discount on the purchase of a tie of a matching colour. The firm wants to take advantage of the personal events in a customers life (e.g. birthdays, anniversaries, birth of child etc.) to further cement the precious relationship. Current patterns that go against usually observed customer behavior point to interesting phenomenon. If retail customer suddenly switches brand then he/she might not be satisfied with the last purchase. The most common operations used at this level are: -

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Classification: Classification is a process that maps a given data item into one of the several predefined classes. CRM uses classification for a variety of purposes like behavior prediction, product and customer categorization. Regression Regression is the operation of learning a function that predicts the value of a real valued dependent variable based on values of other independent variables. Regression finds application in a CRM environment where prediction needs to be made about the behavior regarding real value added variables. Suppose the retail store collects data on the monthly visits of the customers viz. Frequency, time spent on each visit. And purchases made during each visit. If the manager has a strong intuition that total purchase is linked to frequency of visit, then this situation can be modeled by regression. This model can then be used to predict future purchases of a customer. Regression needs sufficient amount of data to be reliable and valid. Link Analysis Link Analysis seeks to establish relationship between items or variables in a database record to expose patterns and trends. Link analysis can also trace connections between items of record over time. The most important link analysis application in CRM, called market basket analysis, is an operation that seeks relationship between product items characterizing product affinities or buyer preferences. The retail store collects thousands of interactions daily. A link analysis task performed on this data will point to items that are bought together e.g. bread and butter are bought together rather than bread and orange juice. Such information can be used to design store layouts, design coupons, etc. Segmentation Segmentation aims to identify a finite set of naturally occurring clusters or categories to describe data. Deviation Detection Deviation Detection (DD) focuses on discovering the most significant changes in the data from previously measured, expected or normative values. Most CRM solutions have a DD task running in parallel on a regular basis. Suppose a retailer finds out

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that the sales from a particular section of the store have been much less than expected. This deviation on further analysis points out to non-stocking of a popular brand. Tools such as decision trees, rule induction, case based reasoning, visualization techniques, nearest neighbor techniques, clustering algorithms, etc are used for the above purposes. The existing CRM Solutions Delivering the 360 view requires automation to bring together all the data concerning a customer. This implies the organisation has to change from: Mass Marketing Product Focus Economies of Scale 1 way communication Response Time Product Focus Customer Focus Economies of time Interactive Real Time

Present CRM Alternatives Present CRM solutions are offered by host of vendors that are to a great extent not industry specific. While there are some vendors, who have come up with industry specific solutions, the broad model around which the CRM solutions are built remain the same. Adopting a similar or a look a like solution across industries is what causes major strain in servicing a customer. Typical offerings of the current CRM solutions (such as Siebel, Oracle Apps or MySap.com, etc) vary from solution consist of: Field Call Centres, Field Service Internet Customer Service Service Interaction Centre Business Partner Collaboration to solution. However typical CRM offerings Customer Development sales, Tele sales, Internet Sales Service Centre Sale management and support Market Analysis Internet, Tele marketing Product and brand management

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The Customer focussed organisation: CRM Model

The idea here is to develop systems that allow flexibility, work on not completely predefined processes so as to enable front office to be proactive to each customer needs The Mindset impact on CRM A typical data warehouse will have the following components: While developing a data warehouse one takes into account all the legacy and operation systems. But typically sales teams could be managing leads on an excel worksheet. Sometimes critical DSS input like Profitability Analysis itself may reside on a worksheet. Data Warehouse

Legacy & Operation Extract & Transfer

Risk Cube

FP&A Cube

Mktg & Sales Cube

Campaign Mgmt

OLAP Tool Thus a Data Warehouse solution must be able to accept information from such unstructured sources as well as budget for an open architecture to enable plug-in for systems to be developed in the future. a) Generally the existing information is mapped into a data warehouse. Since a customer centric info-base is being developed, its is critical that extensive customer research is done to identify their information needs and thus what profile data will be relevant for us. Thus any data-warehousing project needs to work closely with the research team.

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b) After extracting the data from various systems, we need to scrub and clean the data, deduplicate. c) Even though we may find 80% of the names in a database of a million customers using combinations of lets say a 1000 first and last names, to take into account all possible combinations we may actually need a database of 10,000 first and last names. Even then we may not be able to comprehensively cover all future combinations. Now, the system must expect this kind of input on a regular basis rather than it happening by exception, as is the case with updating masters in a traditional system. d) Ad-hoc querying is a tool that is most often used in such applications. Unfortunately not much effort is made to make this tool end-user friendly so that even a layman could run his/her reports. Typically a data-warehouse and data mining person is placed in information technology to manage all queries. With the advent of tools like MetaData Repository, drill down OLAP tools and Palm Pilots it is now possible for hardcore marketing and sales types to directly access and run their queries. Infact we need to budget for training the sales and marketing team with the use of data-warehouse. e) The real power of the CRM system is its ability to provide a rich, value added experience to our customers at all touch points call Centres, kiosks, retail outlets, mobile devices, Internet and branches. Integration and information dissemination must happen at all these points. Thus the CRM specialist in marketing must be well versed with all these tools and techniques.

eCRM
What is eCRM? In simplest terms eCRM provides companies with means to conduct interactive, personalized and relevant communications with customer across both electronic and traditional channels. It utilizes a complete view of the customer to make decisions about messaging, offers and channel delivery. It synchronises communication across otherwise disjoint-customer facing systems. It adheres to permission based practices, respecting individuals preferences regarding how and whether they wish

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to communicate with you and it focuses on understanding how the economics of customer relationship affect the business. eCRM Vs CRM CRM is essentially a business strategy for acquiring and maintaining the right customers over the long term. Within this framework, a number of channels exist for interacting with customers. One of these channels is electronic and has been labeled e-commerce or e-business. This electronic channel does not replace the sales force, the call Centre, or even the fax. It is simply another extension, albeit a powerful new one, to the customer. The thrust of eCRM is not what the organisation is doing on the web but how fully the organisation ties its on-line channel back to its traditional channels, or customer touch points. Why employ eCRM? Companies need to take firm initiatives on the eCRM frontier to Optimize the value of interactive relationship Enable the business to extend its personalized reach Company-ordinate marketing activities across all customer channels. Leverage customer information for more effective emarketing and ebusiness Focus the business on improving customer relationship and earning a greater share of each customers business through consistent measurement, assessment and actionable customer strategies. The six Es of eCRM 1. Electronic channels 2. Enterprise 3. Empowerment 4. Economics 5. Evaluation 6. External Information eCRM Architecture The primary inputs to this module are mainly from the eCRM Assessment and strategy alignment modules. During this stage the company will try and develop a Connected Enterprise Architecture (CEA) within the context of the companys own

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CRM strategy. The following is a set of technical eCRM capabilities and applications that collectively and ideally comprise a full eCRM solution: Customer Analytical Software Data mining software Campaign Management software Business Simulation A real time decision engine

Review and Assessment of CRM solutions

CRM software applications embody best practices and employs advanced technologies to help organisations achieve these goals. Categories of CRM solutions Any enterprise , which wants to implement CRM solutions can choose from four categories of solutions Integrated applications suite Interfaced applications bundle Interfaced best of breed solutions Best of cluster Selecting an interfaced best of breed approach for pure functionality or a front office application suite solely for integration limits enterprise choices. Enterprises need to start with a clear picture of the basic truths of integration, interfacing and functionality. An integrated application suite is a set of application that employs a common architecture, referencing a common logical database with a single schema. Some suites are more often interfaced application bundle i.e. a set of interfaced application from a single vendor containing more than one technical architecture or more than one logical database- frequently assembled by the vendor through the process of acquisition or partnership An alternative approach to suites is an interfaced best of breed solution an approach whereby an enterprise selects from multiple vendors a set of applications that must be interfaced to work together, either by the enterprise, one of the selected vendors or a third party integrator. The individual applications are not the best in any objective sense. Rather, some enterprises select the applications because they

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best meet the particular needs. The challenge of this approach is that, in some cases, the enterprise fails to complete the necessary interfaces to get the individual applications working together; consequently, the applications remain stove pipes. Best of cluster is similar to best of breed except that here best is chosen from the cluster and they are interfaced. Key requirements for CRM solutions Some of the functional and technical requirements for CRM solutions are as listed below: Business intelligence and analytical capabilities Unified channels of customer interactions Support for web based functionality Centralized repository for customer information Integrated work flow Integration with ERP applications Functional Components of CRM solution CRM applications are a convergence of functional components, advanced technologies and channels. Functional components and channels are described below: Sales applications Common applications include calendar and scheduling, contact and account management; compensation; opportunity and pipeline management; sales forecasting; proposal generation and management; pricing; territory assignment and management; and expense reporting. Marketing applications These include web based and traditional marketing campaign planning, execution, and analysis;list generation and management; budgeting and forecasting; collateral generation and marketing materials management. Customer service and support applications These include customer care; incident, defect and order tracking; field service; problem and solution database; repair scheduling and dispatching; service agreements and contracts; and service request management.

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Given below is a brief review of what some of the known vendors in this area have in their applications for these verticals. The table 2 at the end gives comparative assessment of the products discussed below for the above verticals: SIEBEL It continues to out market and out sell the competition. It is one of the few front office suite vendors having vertical specific functions. Its functionality is compelling. It can be integrated with most of the back office solution like SAP and Oracle. It has solutions for automotive, public sector (US), communications, consumer goods, apparel and footwear, energy, finance, insurance, health care, life sciences and high technology industry sectors. The solutions for the verticals described above are discussed below: For Consumer goods: a Siebel eConsumer goods offers eBusiness solution spanning the entire demand chain from the end consumer, through the retailer and the wholesaler, to the manufacturer. It has robust trade promotions planning functionality allowing users to manage customer promotion plans and the funds to support them, while comprehensive route planning functionality enables integrated account targeting. Using Siebel eConsumer Goods, organisations can also identify customer-buying behaviors and translate this understanding into new trade promotions and product offerings For Financial Services: Siebel eFinance enables banking, brokerage, insurance, and capital market organisations to establish and maintain long term profitable relationship with consumers, small businesses, and corporate customers. The organisations can capitalize on information captured during each customer interaction to more effectively cross-sell and up-sell additional products and services. Additionally, Siebel eFinance provides a comprehensive view of the entire customer relationship across multiple product lines, enabling financial service organisations to provide a personalized experience across all channels. For Healthcare: Siebel eHealthcare gives organisations the ability to streamline and improve sales, member services, medical management, and network management services. By using multiple distribution channels, including the Internet, call Centres, home office staff and independent brokers, Siebel

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eHealthcare provides organisations with a single view of their customers, thereby ensuring better service and improved quality of care. For telecom service providers: Siebel eCommunications helps wireless, cable, and Internet service providers to target and win the right customers, accelerate service delivery, and provide service across all touchpoints. Siebel eCommunications embodies the industrys best practices for generating accurate service orders, managing billing inquiries and adjustments, and upselling and cross-selling additional services. By using Siebel eCommunications integration technology, service representatives and salespeople can instantly access information such as billing, order management, and network management from Operation Support Systems (OSS), to deliver highly responsive customer support and significantly increase sales. Siebel 99, the vendor's major release, boasts 117 applications that span sales and service and incorporate multiple vertical markets. A major effort in the new application release is it integrates all the channels companies use to contact customers: Web, E-mail, voice, wireless and face-to-face contact. Some of Siebel employee- Some of Siebel customerSome of the additional products facing applications are: facing applications are: available in version 6.0 Siebel eBusiness Connector for SAP Siebel Call Center Siebel eChannel R/3 Siebel eMail Response Siebel eCustomer Siebel Communications Server Siebel Field Service Siebel eMarketing Siebel Distance Learning Siebel Marketing Siebel eSales Siebel Global Enterprise Support Siebel Sales Siebel eService Siebel Language Extensions Siebel Service Siebel Wireless

Clarify
It offers customer service & support and field service suite; however its sales functionality is immature.

Oracle
Oracle is betting everything on its thin, Web Based, centralized computing model. The Internet computing architecture is compelling for connected non-mobile users; Oracle is rebuilding functionality on the new platform and integrates its various acquired products. It offers a broad set of functionality across e-commerce, front office and business intelligence applications.

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Vantive
Vantive offers a compelling customer service and support and field service suite. The rest of its front office functionality makes it suite more of a bundle. The solution is integrated with PeopleSoft at the back office. Table 2 Comparative Assessment of CRM Products for Vertical Specific Requirements CRMApplicationRequireme nt Consumer Products
Category Management Promotion Management Demand Planning Interactive Selling

Siebel

Clarify

Oracle

Vantive

Available Available Available Available Available N.A. Available Available Available Available N.A. N.A. Available N.A. Available Available

Available Available N.A. Available Available N.A. Available Available Available Available N.A. N.A. N.A. Available N.A. Available

Available Available Available Available Available N.A. Available Available Available Available Available Available Available N.A. N.A. N.A.

Available Available N.A. Available Available N.A. N.A. N.A. Available Available N.A. N.A. N.A. N.A. N.A. Available

Telecom Service Providers

Blended Sales & service contact Centre Competitive Pricing Analysis Integration with Billing System Churn management

Commercial Banking
Contact Centre Profitability Analysis Integrated Targeting Marketing Datamining

Pharma & Healthcare

Contract Management Marketing Analysis Disease Education System Knowledge Management System

Some frequent modules that most CRM have is: Forecast Management, Encyclopedia Management, Campaign Management, Brand Management, Opportunity Management, and Event Management. CRM solutions are interwined combinations of technology and business processes. In order to be effective CRM service providers will need a balanced understanding

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of both products and services. Its necessary to have an expertise in not CRM technology but also customer service processes. The potential use of CRM lies in it being the leading indicator of future revenue than just being used as a customer facing transaction-processing tool or as a lagging indicator communicating past consumer grievances. The complete concept of CRM can be mapped on a technology solution as per the following blue print. The databases feed the technology infrastructure which links You with the customer touch points. Thus we have four components of a CRM initiative rollout Customer Value Management Strategy CRM roadmap keeping in mind industry nuances Database solutions Customer access channels

Case Study 1: Implementing a Technology- Based CRM Solution

The DFCU Experience DFCU set up as Development Bank over four decades ago to provide products and services for the corporate segment, diversified into the retail segment of the financial markets in the early 1990s. Later it established DFCU bank as a commercial bank that is flexible, innovative and prompt in meeting customer requirements. The Retail Strategy As part of plans, it is implementing various projects to establish world class CRM practices, which would provide an integrated view of its customers to everyone in the organisation. CRM at DFCU involves increased communication between the virtual universal bank and its customers and prospects, as well as within the group itself. The underlying idea is to enhance every instance of contact with the customer.

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DFCU believes that a true customer centric relationship can only be accomplished by considering the unique perspectives of every single customer of the organisation. Hence the pressing need to put in place a technology enabled CRM solution. The CRM Roadmap CRM, at DFCU, is viewed as a discipline as well as a set of discrete software technologies, which will focus on automating and improving the business processes associated with the customer face to-face, call Centre, ATM, web, telephone, kiosk, bank branch, sales associates, etc so as to allow DFCU to carry out cradleto-grave customer management more efficiently. It should allow DFCU to engage in one-to-one marketing by tracking complete customer life-cycle history. To begin with it will automate process-flow tracking in the product sales process, and be able to generate customized reports and promote cross selling. It will also enable efficient campaign management by providing a software interface for definition, tracking, execution, and analysis of campaigns. From an architecture perspective, the enterprise-wide CRM solution should seamlessly integrate non-transactional related customer information housed in the front-office with the transactional information housed in the back office. Implementing CRM A very detailed and comprehensive CRM action plan was developed based on the understanding that CRM will require enterprise wide transformation. The CRM Business Transformation Map below shows the various aspects of that change.
BUSINESS FOCUS Product Sales Channel Marketing Service Customer

ORGANISATIONAL STRUCTURE Product Management Place Management Promotion Management Channel Managemen t BUSINESS METRICS Contact Managemen t Customer Management

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Product Performance

Place Performance

Program Performance

Customer Revenues

Customer Patterns & Profitability

Customer Lifetime Value Loyalty and

MARKETING FOCUS

Mass Advertising TECHNOLOGY

Sales Promotion

Marketing Campaigns

Integrated Marketing Communications

Segment Specific Marketing

CRM

Transaction Processing

Data Maintenance

Data Access

Data Warehouse

Data Marts

Customer Touchpoint Systems

Interviews with key individuals throughout the organisation helped identify different initiatives that have been launched, all focussed on CRM. The next step in the planning process was a Gap Analysis. This analysis essentially compared current stage against optimal relative to the five aspects of business, to identify and specifically describe the gaps. The CRM Business Cycle: Understand and Differentiate Organisations cannot have a relationship with the customer unless they understand them what they value, what types of services are important to them, how and when they like to interact, and what they want to buy. True understanding is based on a combination of detailed analysis and interaction. DFCU groups customers need to see that the company is differentiating service and communication based on both what they have learned independently and on what the customer has told them. At the same time, differentiation should be based on the value customer are expected to deliver. Develop and Customize DFCU believes that the extent of customization should be based on the potential value delivered by the customer segment.

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Interact and Deliver DFCU is strongly of the opinion that value is not just based on the price of the product or the discounts offered. In fact, customer perceptions of value are based on a number of factors including the quality of products and service, convenience, speed, ease of use, responsiveness, and service excellence. Acquire and Retain The more DFCU learns about customers, the easier it is to pinpoint those that are producing the greatest value for the organisation. Successful customer retention basically involves getting it right on an ongoing basis. And that is exactly what DFCU group aims to achieve out of its CRM initiatives. Successful customer retention is based very simply on the organisations ability to constantly deliver on three principles: Maintain interaction; never stop listening to customers Deliver on customers value definition. Remember that customers change as they move through differing life stages; be alert for the changes and be prepared to modify the service and value proposition as they change. Prioritizing Changes Because there might be many gaps, therefore many changes that an organisation will need to make, prioritization was critical. The evaluation of each of the strategies identified to resolve the gaps at DFCU were based on: Cost to implement including initial one time costs, as well as anticipated ongoing expenses. Overall benefit some changes may have higher impacts on an organisations ability to increase customer value and loyalty. Feasibility based on the organisation readiness, data and systems support, resource skill sets and a number of other factors. Time Required including the time necessary for training and addressing cultural change management issues related to a specific strategy Creating an Action Plan The next step in the planning process was the development of a very detailed action plan. While the complete plan might span three or more years, it was

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based on three-month phases with clear deliverables that will demonstrate both progress and quick hits or measures of success. The plan identified interdependent activities and should comprehensively detail the time and resources required for each activity. Another key factor for the planning process was the Leadership Action Plan. Advancing on the CRM transformation map required significant organisation change. This part of the action plan helped assess the drivers and restraints of change and the organisations readiness to assess the change. Selecting and Implementing a Technology Based Solution Technology The success of the CRM initiatives were contingent on various decisions pertaining to technology. Some of the key issues were: (a) Make or Buy: - The decision to buy was based on an evaluation of an identified set of criteria. Some criteria were Functionality, Flexibility, Scalability, Fit with existing architecture, etc. was decided to purchase an off-the-shelf CRM solution and customize it to suit DFCUs requirements. (b) From whom to buy: Some Criteria included were CRM expertise, Retail Finance Experience, Credentials including financials, client list, life history, etc. A detailed Request for Information (RFI) was sent to each of the shortlisted companies. After receiving the RFIs, another round of evaluation was done. After shortlisting two product vendors and system integrators, reference calls were made to several of the past clients of all shortlisted companies. Processes All processes were mapped on to product by understanding the details. During the course of the process mapping, several opportunities for improvement were identified and implemented. The Sales Process Pre CRM and Post Implementation of CRM Independent Databases

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Call Centre

Sales Agent

Scrutiny

Credit Agent

Operations

Database

Call Centre

Sales Agent

Scrutiny

Credit Agent

Operations

Lessons so far from the DFCU experience

If CRM involves optimizing product, price, place of distribution, promotion, sales and service, why are so many companies struggling? Hasnt anyone really mastered the art and science of CRM, and if not, why is it so difficult? CRM is difficult because it is an enterprise wide initiative. CRM is not a technology initiative. Many have confused CRM as a technology initiative, and assigned the CRM implementation project to their information system or information technology group. CRM conferences often equate to technology exhibits and demonstrations. Technology is needed in order to implement CRM particularly the customization part but technology is not the driver of CRM, or the solution to successful CRM implementation. CRM is not exclusively a marketing initiative. Many organisation have merely equated CRM with customer focused marketing, or data-driven/database marketing. CRM results in more effective, data driven marketing efforts; CRM requires marketing experience. But CRM is strictly not a marketing initiative. CRM is not exclusively a sales initiative. Similar to marketing, CRM is often lodged within the sales department. The sales-force, after all, is extremely close to their customersunderstanding their needs and wants., and trying to fulfill them.

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Sales, however, is just one functional area that can benefit from CRM, and that is necessary for effective CRM. CRM is not exclusively a service initiative. As with sales and marketing, customer service is one functional aspect of successful CRM implementation. But customer service is not the sole driver of the process. CRM involves marketing, sales, service, and technology, as well as the other inner workings of the organisation. Having even one broken spoke in the wheel. one area of the organisation that is less than committed to CRM can make the difference between success and failure.

Case Study 2: Building Relationship with Doctors For Effective Marketing

The Case of the Indian Pharmaceutical Industry Introduction The Indian Pharmaceutical market is worth approx. Rs. 140000 million growing at a healthy 10%. There are around 16,000 players both in the organised and the unorganised market vying for a piece of this pie. It is a very fragmented market with the number one player, Glaxo Wellcome, having a market share of 5.8%. Infact the combined of the top 5 companies does not exceed 20%. Earlier MNCs used to sell on the quality plank but today quality is a table stake condition where even the smallest player is able to meet the highest quality norms. Doctor Population There are approximately 500,000 doctors in India who are registered with the Indian Medical Association. The largest of the pharmaceutical companies cannot meet more than 125,000 of this doctor population. As a result most of the doctors are being met by atleast 60-100 companies.

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Out of the total doctor population as much as 60-65% are general practitioners within the basic MBBS degree. The higher specialties constitute the remaining 3540%. Promotion In an ethical market product promotion is directed solely to the qualified directors. No advertising mentioning the brand names is allowed in the lay press. The medical representative (MR) is the major means of promotion though other media like direct mail, journal advertising, conferences, also play a role albeit a limited one.

Starting a CRM initiative Having understood the major characteristics of the industry, the identification, differentiation, interaction and customization (IDIC), model as suggested by Don Peppers and Martha Rogers would be used to understand the steps to a CRM initiative. Identification The first step towards any CRM initiative is identification of the customer. Each medical representative maintains a list of doctors in his area. This list is generated through interviews with stockists, retailers, as well as his peers from other companies. The list called the MSL (must see list), MVL (Must Visit List), Customer list, etc typically lists the name, address, telephone no., specialty, qualification, visit timings, and other basic data of the doctor. The key driver for a CRM program is integration of this data from all the MRs to a central database. The next step is to add to this data by collecting details from other sources like Membership directories of association: Almost all cities have their branches of the Indian Medical Associations (IMA). These have a directory of all their members listing their contact details and some personal information. These are a good source to begin with but most are updated at very long intervals and hence the veracity of

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the data has to be checked. Similarly, there are individual associations for almost all the specialties whose membership directories are also easily available. List of conference participants: each specialty of doctor organises a national level conference every year where members from all over the country attend. Details can be collected through the sponsorship of the front-desk; organising contests, or distributing give always in exchange for information. Doctors Referral: Another route would be akin to a member get member scheme wherein doctors would be encouraged to refer follow practitioners. Thus a semblance of a database would take shape. The term is a misnomer, since at best it is a customer list, as it contains nothing more than contact information along with some basic information. But nevertheless it is a starting point. The database at no stage can be termed as final as collection of doctor details is an ongoing process. Continuos additions, updations and deletions are always taking place. The list cam be mined for details of specialty wise break-up, geographical coverage etc, to serve as a tool for the marketing decision making process. Differentiation The success of any loyalty program lies in differentiating the key customers. Typically, a MSR would classify his doctors using the ABC Method as core, important and others based on the amount of business he gets.(or expects to get) from them. The number of sub-classes would vary but the principle would be the same. In a typical pyramidal fashion the top-rung doctors who are the least in number would be commercially most important and the importance would linearly decrease as one goes down the pyramid. The numbers would propotionately increase as per the Pareto principle. The point to be borne in mind is that the whole basis of diffrentiation is being done on very subjective terms of the perception of the local MR unlike other industries viz. Airlines, who would classify frequent fliers based on data collected from reservation. Since there is no formal mechanism of capturing data about the revenue generated from a doctor, the MR is the sole and final judge. Thus the database formed is step one, can be now classified into the important doctors and the not so important ones.

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Interaction Now comes the stage of building on the database collected and refined in the above 2 stages. The basic idea now is to build on the data collected in the first stage. The idea is get to know the doctor intimately. His hobbies, likes, dislikes, family details,etc. The fundamental premise being that the doctor is as human as anybody else is and hence we should recognise his individuality. It is of utmost important that it is decided beforehand what kind of information would be collected and much more importantly how it will be used. Interaction can be done at two levels: Firstly, personally at the MR level: the most productive would be using human intervention. The MR can easily collect most of the information from his day to day interaction with his customers. Alternatively a formal structured questionnaire can also be administered. The biggest hurdle to this approach is not surprisingly enough the MR. A level of conviction has to e brought into him that the data he would collect would actually be used and more importantly will help him do his job better. Numerous instances abound of companies who have gone about collecting loads of information on their doctors through their MRs and finally not using them at all. Secondly. Direct at the corporate level. : The structured questionnaires requesting further details can also be mailed to doctors with each response entitled to a token gift, etc. This approach typically would yield a lower rate of return but the quality of information would be superior to the first approach as it is coming directly from the doctor. The information collected is then incorporated to the basic database earlier formed. Just to give an idea of the type of information collected by companies consider the following: Personal information : date of birth, marriage anniversary, details of children, qualification and experience, etc Hobbies and Interests: Activities during spare time, tv channels watched, general interest, magazines read, favorite vacation destinations, etc Professional Interests: Type and name of medical journals read, professional membership of associations, attendence at national conferences, etc Ownership Details: Household durables owned, vehicle ownership, etc

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Companies have been able to collect enormous amount of such data, through either of the means elaborated earlier. What is important to note that they have been able to demonstrate their sincerity in actually using this data. Customisation This is the time to start using the data. The easiest and the most preliminary step is to start greeting the doctor on his birthday and marriage anniversary. From a simple card personally signed to a personal phone call from the head office anywhere in the country to a birthday cake being actually presented are some of the ideas. Even bouquets can be delivered at the doorstep. A company even arranges for the doctor to have dinner with spouse on their marriage anniversary, with the tab taken care ofcourse! But more important to customise the interaction with the doctor based on the data we have on him. Gifts based on the interests and hobbies can be presented. If a doctor has expressed interest in national conferences of his specialty the same can be arranged. The success of the whole programme hinges on how well can the companies pass on the data of the doctor to their field force and train them on how to use this data. He is actually the man of the moment. It is necessary that the information received on an interaction be fed into the system so that it can be used for the next interaction. A sort of master-database can be generated which would recover every contact with a doctor through the field, mail, telephone, web, etc. this master database would be the key driver to foster a learning relationship. Loyalty programme The next obvious step is to have a loyalty programme as a frequency marketing initiative. An ideal loyalty programme would be able to identify its key accounts, reward them for their custom and encourage them to increase their spend. This concept in case of the pharmaceutical industry has a twist since the customer (the doctor) is not the actual consumer (the patient) of the product. Thus there are ethical issues involved in rewarding points in return for prescriptions.n One cannot have a reward programme based on the redemption of these points. One approach would be to set the whole programme based on the classification into which the doctor falls. Thus the lowest rung would be restricted to the basic of

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activities. The number and the level of activities would increase as the important of the doctor grows. A branded programme can be started for the most important doctors. It is important that it is clearly defined at the onset what will be the objective of the programme and more importantly convey the exclusivity of the programme. The doctor has to be made to realise that he is the chosen one. All activities and inputs should only reinforce this communication. The success of such a programme hinges on making the doctor covet the membership to the programme. Thus a continuos monitoring is required of the returns generated from the doctor. If they fall below a predefined limit then the doctor can be downgraded and his privileges reduces. Direct Marketing It is a valuable tool for effective CRM. Since a captive database has been put into place it can easily lend itself to direct marketing initiatives. As the primary fields captured are the contact address a program through mail is easiest to accomplish. Brand awareness mailers, new launches, contests all can be conducted by mail. Information technology has several advantages It is very cost effective: A large audience can be touched at a relatively cheaper cost as compared to personal selling. It can be targeted and specific to the right target audience in term of specialisation or geographical area. It is measurable with use of reply devices one can immediately gauge the efficacy of a campaign. In fact since the target audience for a brand is usually sharply defined in terms of their specialisation e.g. An allergy product to ENTs, Dermatologists and GPs, the response received is usually much higher then that accepted as a norm in other industries. A response of 15-20% can be easily achieved through such communications. Most of the pharmaceutical companies have realised the advantages of this mode of communication. The primary rationale is to save the time of the field by promoting the low involvement (for the doctor) products, promote brand recall for a new product, exploit alternative avenues for brand promotion etc.

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Apart from mail other DM media like telemarketing and web have also been tried. While telemarketing has been tried for promoting new launches to get instant feedbacks the web has still to achieve its potential. The PC penetration in India is still very low which handicaps the growth of this mode. Using the e-mail to correspond and interact with doctors is being tried. It is especially useful for targeting higher specialties, which is more technology savvy and information hungry. Call Centre In case of chronic therapies like hypertension, serious conditions like AIDS and in hitherto unknown conditions like erectile dysfunction the call centre provides the answer. The medium lends an ear to three types of customers 1. Doctors, who would like to more about the drug profile, discuss a specific case, ask for a reference on use in a specific condition. 2. Patients who seek counseling, the nearest physician or chemist shop. The telephone provides anonymity to the caller especially when discussing taboo subjects 3. Retailers asking for pricing details, product availability With the advent of paging companies who can provide a single number nation wide, facility of leased lines from DOT and the toll free numbers in select metros this medium is set for take-off. There are certain factors to be borne in mind whilst setting up a call centre. The sheer diversity of the country means that callers would speak different languages and may not be comfortable with English. This is especially relevant if the centre would cater to calls from patients. Also doctors would not prefer their queries being answered by a lay person without any medical knowledge. Thus most medical queries have to be escalated to a qualified physician who responds to a doctors queries within a set time limit. These limitations notwithstanding, the call centre is an excellent medium to come closer to the customer and pharmaceutical industry is realising the potential. Measurement Systems

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The measurement system would require studying the prescription profile of the doctors who are being exposed to the CRM programme vis a vis a control sample who are met by the field force but not exposed to CRM activities. The prescription given by the doctors can be studied over a particular time frame and the amount of prescriptions before exposure to the programme can be measured. The idea is to check if the prescription levels have increased after the doctor has been made the member of the loyalty programme. This method would at best provide a qualitative idea but would nevertheless give an idea of the success or failure of the programme. Conclusion The importance of internally marketing the CRM programme is very important. The success of the whole programme hinges on the support of the top management who can act as a mentor. The programme takes time to take off and much more time to actually show results.

Chapter 4: Organising for CRM

Assessing Need
How do you know your business requires CRM? It is very easy for a business to get caught in the latest customer trap when it is being driven by the information technology (IT) market. Every business does require CRM; the question is to what level? Trends Many businesses are pushed by the current trend to change their business strategy, especially around CRM. There are basically three trends that effect a business: Consumer The customer is an ever-changing image, to be really successful with CRM you must recognize the customer trends that are effecting the business. If a business does not understand a customer profile and the changes that have occurred then it is not possible to provide true customer relationship management. Products

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It is the business providing the products that meet the changing customer trends. Products need to be reviewed constantly perhaps enhanced or even removed. Supermarkets are a perfect profile to look at for viewing product trends, they constantly add and remove products and they constantly view customer buying profiles and set out the pattern of the store to meet the strongest buying trend. This may not always be by using the latest technology, it could be by just reviewing shells at the end of the day, but the super market is at the minimum watching for the two basic trends in CRM. Technology Ensure that the business is ready to install the new technologies, is the customer data upto it, or is it time to start again? Do you need to review every technology being used or just one area. Will it assist the business, is it going to grow with the business requirements or is the technology just another trend? Relationship management should not be an alternative to existing functions/technology; it could be a logical extension to enhance those in existence, though it could radically change some of the operational processes. Is your Business ready? Are your customers Ready? What are the costs, monetary, time, people and long-term issues? Does CRM really matter? Whatever the business activity is all companies have to ask themselves is CRM the real factor for their company to succeed. Some customers do not need long-term relationship with their suppliers; therefore only minimal information is required from that customer. That however is still a form of CRM. Other companies have high quality and high value customers that they need to know information about, they need to provide exceptional service, the pedigree of CRM. Whatever the business is, if it has customer it has to ask, does customer relationship management matter? What does it man to them in business terms? At what cost? What is the overall loss if not adhered to?

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CRM: Yes it does really matter the strategy needs to last, be constantly reviewed and can evolve over time.

Employee Empowerment and CRM

Relationship between Employee Satisfaction, Customer Satisfaction & Market Share Productivity Satisfaction With Manager

Market Share

Customer Satisfaction -ve -ve Cost Of Quality

Employee Satisfactio n

Job Satisfaction Satisfaction with Right Skills Market Share

ESS CSS

40%

35% 30%

25% 1990 91 CSS 92 ESS 93 94 95 96 97 Market Share

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Initiatives for Employee satisfaction A demotivated, unenthusiastic and unhappy employee will never care for the customers. Also organisations willing to spend money when they are doing well should spend on employees more rather than less when things get bad. An employee satisfaction survey should be carried out on a regular basis.

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Chapter 5: Status of CRM In Uganda

A Survey of Service Firms
Successful implementation of CRM requires a strategic approach, which encompasses developing customer centric processes, selecting and implementing technology solutions, employee empowerment, customer information and knowledge generation capabilities to differentiate them, and the ability to learn from best practices. Research Objectives The current research was aimed at determining the approach being adopted by businesses in Uganda for relationship marketing. The research focused on the following major issues: Do managers in service firms believe that their processes are customer centric? Do they select technology on the basis of an understanding of customer needs? Have they empowered their employees to deliver superior services? Do they have a customer knowledge strategy? How well do they manage their customer relationships? Methodology The research was exploratory in nature and adopted a two-stage process. During the first stage, 50 managers of service firms operating in Uganda were surveyed through respondent administered questionnaires. These managers belonged to the following three categories: a) Hospitality Industry encompassing hotels and restaurants b) Information technology and Telecom industry which included software firms and telecom providers c) Financial Services included commercial banks and mutual funds

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The survey focused on the quality and the customer centric processes, technology selection, employee empowerment, and customer knowledge strategy to gauge the status of CRM practices in these firms. In the second stage, managers of select firms in each category of services were interviewed to understand the relationship marketing practices adopted by them. These interviews explored the following issues: 1. What are the various CRM initiatives undertaken by the firm? 2. How do they develop these programs? 3. How do they measure the effectiveness of these programs? 4. How successful are these programs in retaining customers?

Analysis of Findings Processes The managers reported a wide divergence with respect to the adoption of quality assurance across the three sectors. The I.T and telecom sector is at the forefront of adopting a formal quality management organization. Most of the players in the hospitality and the finance sector report having some methods in place to ensure quality management initiatives. About 8% of the overall sample have indicated the absence of any quality initiatives in their organisations. At the broad level, most managers believe that they understand most of the interactions between customers and their business processes. About 50% of them have indicated that they have a full understanding of all possible interactions between customers and their business processes. Customer-centric marketing emphasizes understanding and satisfying the needs, wants, and resources of individual customers rather than those of mass markets. Therefore it is very important to have an understanding of all linkages between the customers and the business processes which help fulfill the customer needs. Technology Selection

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Information Technology (I.T) is a major facilitator for CRM implementation. In response to the question on whether they take into consider customers needs when selecting and implementing information technology, about 30% of managers have indicated that they have considered customer needs. Only 14% of managers in financial services do customer validation when selecting technology. While only 23% of the managers in information technology & telecom firms believe that their technology selections are customer centric whereas this was over 50% in the other two sectors.

Employee Empowerment When asked whether their employees are empowered to make decisions in favor of the customers, less than a quarter of the managers across the three sectors indicated that every employee is empowered to take actions to ensure the ultimate satisfaction of the customer. Most of them feel that their employees have been empowered to take independent decisions within the guidelines. This aspect of limited empowerment gets reinforced when one looks at the linkage between the employees rewards with the customer centric behavior. Over 18% of the respondents across the sectors have reported no linkages or use of ad hoc methods to reward customer centric behavior. Facilitation of employees for their role fulfillment through information technology is another aspect of employee empowerment. Information technology helps employees respond to customer queries and provide support in a fast and timely manner. It helps employees respond to customer queries and provide support in a fast and timely manner. It helps them access information, which is normally spread across the organisation. Over 54% of I.T and Telecom firms have provided the most effective technology to all employees who interact with customers. This reduces to 42% for the hospitality and 19% for the financial services sector. Customer Knowledge Strategy Customer knowledge gets built when information is collected systematically over a period of time. This can be done through regular surveys and also during customer

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interactions. But importantly this information has to be combined with the organisations experiences with customers to build rich customer profiles, buying behavior, preferences and usage patterns. Over 60% managers in the hospitality industry have indicated that they have a continuous strategy for collecting customer information. In most of the services, opportunities to come in direct contact with their customers are high in comparison to other businesses that have intermediaries and hence have an arms length relationship with their customers. Therefore it is natural for service firms to collect customer information on a regular basis. But information collection is just the first step in generating customer knowledge. This information has to be combined with experiences to develop consumer insights which help them serve their customers better. When it comes to combining customer information with experiences, service firms seem to be economizing. Most of them seem to be doing it for select customers. Hotels do it for their regular guests specially those who have enrolled for their membership schemes. Financial service providers selectively do it for their high net worth individuals who typically use multiple offerings of the service provider. Most service firms rely on periodic surveys to understand their customers expectations and also understand and anticipate their behaviors. Over 40% of managers in the financial services have indicated that they work with customers as a team to ensure that their expectations are met or exceeded. It is very important to work with customers to understand their expectations as research has consistently indicated that one of the major reasons for poor service quality is the gap between managers perceptions about customers expectations and actual customer expectations (Parasuraman, Zeithmal and Berry 1985). The purpose of collecting customer information and developing knowledge is to be able to differentiate customers and meet their specific requirements. Peppers, Rogers and Dorf (1999) have recommended a four-stage process of Identification, Differentiation, Interaction, and Customization for implementing one to one

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relationships with customers. Over 50% managers in financial services have indicated that they have critical business information about their relationships with individual customers. This falls to about 40% in the hospitality and IT services. Customer knowledge can be used to initiate customization of the service for customers based on their needs. By tailoring the elements of services marketing mix, firms can customize their offerings to all or select customers. A majority of the marketing programs are targeted for smaller segments of the markets. But there is a growing trend towards individualizing these programs. With the emergence of e-commerce, this trend is going to further intensify. Some of the important findings of the depth interviews with managers of these services are: (a) The relationship initiatives undertaken by firms have been directed towards customer retention. The initiatives were mostly membership /privilege schemes with gradations based on frequency and value of usage / purchase. (b) Most of them also indicated that these schemes were table stakes i.e. they cannot survive in the business without these schemes if everyone else offers them. But the race is always to differentiate on the basis of convenience for customers. (c) The source and reasons for adopting these programs were found to be diverse frontline initiatives, adaptation of successful programs in parent organisations abroad especially for the multinational firms, or copying competitors offerings. Pioneers in the industry like one of the multinational bank, which introduced the concept of relationship manager, adopted the practices of their parent organisation. (d) A common finding, across sectors, was the absence of measures for determining the effectiveness of these programs. Managers were convinced that these retention programs had long-term benefits but they were still grappling with metrics which would indicate that the investments were paying off. (e) In several cases, there was a lack of coordination across functional departments. Although managers admitted that cooperation and coordination were crucial, they accepted that many a times, only marketing and customer service ended up

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as the 'program champions'. This had impact on the success of the overall program. (f) The managers of firms who have been successful in relationship management reported strong top management support for their initiatives as well as complete employee involvement cutting across departmental boundaries. Conclusions Relationship marketing is emerging as a new area of focus for service firms in Uganda. But these are mainly based on some loyalty programs and investments in technology for enhancing the capability of databases. Managers should ensure that while investing in databases, technology, human resources and relationship marketing programs, attempts should also be made to develop milestones, which help them sustain these initiatives. These milestones become benchmarks against which future programs get evaluated. Measurement metrics get developed over a period of time when one starts collecting information about customers, their buying patterns, usage behavior, referrals, etc and start linking them to the marketing programs. Successful firms take a long term strategic view of customer relationship management. It cannot be solely managed through periodic programs. To be successful, firms need to be marketing oriented before initiating relationshipmarketing initiatives. A holistic approach which leads firms to develop customer centric process, integrate technology through customer oriented approaches, motivate employees to perform to their full potential through empowerment are prerequisites for firms to successfully utilise their customer knowledge for customized or even one to one marketing.

Financial Framework for CRM

There are organisational constraints encountered in execution of CRM programs. Mainly they are as follows:

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A mismatch between resource allocated and service levels desired for building customer relationship Absence of financial business case and ROI for investments in Customer Relationship Horizontal non alignment of organisations to customers line of sight Balance to be achieved between maximisation of revenue and customer satisfaction. Direct selling machinery would have costs that are significantly higher than referral sale hence the need to invest in customer relationship with an eye on acceleration of referrals so as to bring down costs or increase productivity of sales. (higher cold call to order ratio) . Figure1 illustrates the phenomenon that organisations can drive referral sale line in a manner that can reduce time T1 and with that in figure 1(a) the overall unit selling cost (average of direct sales cost + referral sale cost) can be reduced with higher sales productivity.
100%
Direct Sale

100%

Composite Costs

% 50% of ove rall sale

Unit Selling cost

Referral Sale

Time

T1

Time

T1

Fig. 1. Torpedo Graph

Fig. 1.(a) Sale Cost Line

Figure 2 illustrates that with a given investment in direct sale channel the productivity can at best be only slightly increasing line, while a referral line will be an exponentially increasing trend line with growing subscriber numbers. This creates a multiplier effect that quickly overtakes the direct sale numbers. Organisation dependency on direct sale can gradually be reduced since they stand to account for reduced numbers in the overall sums.

Direct sale

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Sale Unit No.

Referral Sale T1

Time

Figure 2

Organisational measure of referral propensity can be taken through customer feedback on their willingness to recommend the product to their friend and acquitances.

References Gruen, T. W. (1997), Relationship Marketing: The Route to Marketing Efficiency and Effectiveness, Business Horizons, November December, Berry, L. L. (1983), Relationship Marketing of Services: Growing Interest, Emerging Perspectives, Journal of the Academy of Marketing Science,

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 Parasuraman, A., Zeithaml, V. A., and Berry, L. (1985), "A Conceptual Model of Service Quality and its Implications for Future Research," Journal of Marketing Payne, A. (2000), Relationship Marketing: The UK Perspective, in Sheth, J. N. and Parvatiyar, A. (eds.) Handbook on Relationship Marketing, Sage Publications, Inc.: Reichheld, F. F. and Sasser, W. E. (1990), 'Zero Defections: Quality Comes to Services', Harvard Business Review, September October Sheth, J. N. and Parvatiyar, A. (1995) Relationship Marketing in Consumer Markets: Antecedents and Consequences', Journal of the Academy of Marketing Science Jagdish And Sheth, Atul Parvatiyar, G Shainesh, CRM Emerging Concepts, Tools and Applications

Websites
www.crmassist.com www.crmguru.com www.crmfoundation.com www.crmindia.org www.crmsearch.com www.crmcommunity.com www.CRM-forum.com Philip Kotler: Marketing Management

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Annexure 1:

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Sample Questionnaire asked to 50 managers across various companies in the service industry.
1. What are the various CRM initiatives undertaken by the firm? 2. How do they develop these programs? 3. How do they measure the effectiveness of these programs? 4. How successful are these programs in retaining customers? 5. What are the quality and customer centric processes that they follow? 6. How do they decide the technology that is to be implemented? 7. What steps have they undertaken for employee empowerment? 8. What strategy do they follow to acquire more knowledge about the customer?

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