Customer Relationship Management Final

Contents ➢ Definition ➢ Why CRM? ➢ Types of CRM solution ➢ How to implement a CRM solution? ➢ Benefits of Implementing a CRM Solution ➢ Potential drawbacks of CRM ➢ Goals of CRM ➢ How to Measure CRM Success ➢ Impact of CRM in India

Defini ti on Custo mer r ela tions hip ma nag ement (CRM ) is a term applied to processes implemented by a company to handle their contact with their customers. CRM software is used to support these processes, storing information on customers and prospective customers. Information in the system can be accessed and entered by employees in different departments, such as sales, marketing, customer service, training, professional development, performance management, human resource development, and compensation. Details on any customer contacts can also be stored in the system. The rationale behind this approach is to improve services provided directly to customers and to use the information in the system for targeted marketing and sales purposes. CRM stands for Customer Relationship Management. The genesis of CRM lies in the observation that one element in competitive advantage is the ability of companies to retain customers. Companies have moved to implement a strategy of satisfying the customer so as to optimise potential future earnings. This seems to be an especially valid approach considering the current Internet focus of “your competitor is only a click away”. Many companies have spent millions of dollars on SFA/ERP/CRM/eCRM solutions only to see them fail miserably. Gartner Group, the leading industry research group defines CRM as “a customer focused business strategy designed to optimise profitability, revenue and customer satisfaction.” The key word here is “strategy”. CRM is not a piece of software, nor is it any other type of technical solution. Any company that sees the way to CRM as implementing a software package will see their CRM project fail. CRM is a philosophy for managing relationships with your customers; the software package is a tool that you can use to reach your goals. You must define your CRM strategy before you go shopping for a technical solution. Then you

must see how the solution fits with your strategy, and not how your strategy can be made to fit with the technical solution.

Why CR M? In the commercial world the importance of retaining existing customers and expanding business is paramount. The costs associated with finding new customers mean that every existing customer could be important. The more opportunities that a customer has to conduct business with your company the better, and one way of achieving this is by opening up channels such as direct sales, online sales, franchises, use of agents, etc. However, the more channels you have, the greater the need to manage your interaction with your customer base. Customer relationship management (CRM) helps businesses to gain an insight into the behaviour of their customers and modify their business operations to ensure that customers are served in the best possible way. In essence, CRM helps a business to recognise the value of its customers and to capitalise on improved customer relations. The better you understand your customers, the more responsive you can be to their needs. CRM can be achieved by: • finding out about your customers' purchasing habits, opinions and preferences • profiling individuals and groups to market more effectively and increase sales • changing the way you operate to improve customer service and marketing Benefiting from CRM is not just a question of buying the right software. You must also adapt your business to the needs of your customers.

Type s of CR M soluti on Customer relationship management (CRM) is important in running a successful business. The better the relationship, the easier it is to conduct business and generate revenue. Therefore using technology to improve CRM makes good business sense. CRM solutions fall into the following four broad categories. ➢ Ou tso urc ed s olu tions Application service providers can provide web-based CRM solutions for your business. This approach is ideal if you need to implement a solution quickly and your company does not have the in-house skills necessary to tackle the job from scratch. It is also a good solution if you are already geared towards online e-commerce. ➢ Off -t he-sh elf so lut ions Several software companies offer CRM applications that integrate with existing packages. Cut-down versions of such software may be suitable for smaller businesses. This approach is generally the cheapest option as you are investing in standard software components. The downside is that the software may not always do precisely what you want and you may have to trade off functionality for convenience and price. The key to success is to be flexible without compromising too much.

➢ Bespo ke so ft wa re For the ultimate in tailored CRM solutions, consultants and software engineers will customise or create a CRM system and integrate it with your existing software. However, this can be expensive and time consuming. If you choose this option, make sure you carefully specify exactly what you want. This will usually be the most expensive option and costs will vary depending on what your software designer quotes.

➢ Mana ge d sol ut ions A half-way house between bespoke and outsourced solutions, this involves renting a customised suite of CRM applications as a bespoke package. This can be cost effective but it may mean that you have to compromise in terms of functionality.

How to imple ment a CR M soluti on? The implementation of a customer relationship management (CRM) solution is best treated as a six-stage process, moving from collecting information about your customers and processing it to using that information to improve your marketing and the customer experience. ➢ Sta ge 1 - C ol lecti ng in fo rm ation The priority should be to capture the information you need to identify your customers and categorise their behaviour. Those businesses with a website and online customer service have an advantage as customers can enter and maintain their own details when they buy. ➢ Sta ge 2 - S tor in g i nf or mat ion The most effective way to store and manage your customer information is in a relational database - a centralised customer database that will allow you to run all your systems from the same source, ensuring that everyone uses up-todate information. ➢ Sta ge 3 - Access ing in fo rm at ion With information collected and stored centrally, the next stage is to make this information available to staff in the most useful format. ➢ Sta ge 4 - An al ysin g c usto mer beh avi ou r

Using data mining tools in spreadsheet programs, which analyse data to identify patterns or relationships, you can begin to profile customers and develop sales strategies. ➢ Sta ge 5 - M ar ketin g m or e e ff ecti vely Many businesses find that a small percentage of their customers generate a high percentage of their profits. Using CRM to gain a better understanding of your customers' needs, desires and self-perception, you can reward and target your most valuable customers. ➢ Sta ge 6 - E nh ancin g t he c usto mer expe rie nce Just as a small group of customers are the most profitable, a small number of complaining customers often take up a disproportionate amount of staff time. If their problems can be identified and resolved quickly, your staff will have more time for other customers.

Benefits of

I mpl eme nt ing a CRM So lu tion

There are some important benefits to implementing one of the many CRM solutions available today, but you must be sure that these benefits match your strategy. None of these will benefit your company if the CRM project fails. These benefits include: ➢ Sy stem izat ion CRM solutions can enable you to implement particular methodologies across your teams. Note that the CRM solution does not implement the methodology it merely enables it. You cannot implement a CRM system that supports something such as Miller Heiman’s Strategic Selling, without also providing the Miller Heiman training. (Miller Heiman’s Strategic Selling is one of many sales methodologies that are currently available worldwide). ➢ Inf or mat ion S ha re Because everyone who is using the CRM solution has the ability to share information, it enables people in your organisation to “pick up the ball” in an

emergency. A well-implemented CRM system will see Marketing feeding leads to Sales and Sales feeding intelligence back to Marketing, with Support feeding intelligence to everyone, which can help improve the customer relationship. Focus. If the system is used well, to perform the simple or repetitive tasks, then your sales team can focus on selling – which leads to higher revenue. There are many others benefits or perceived benefits, but it is worth remembering that many of these could be accomplished with a simple contact manager such as ACT! Be careful that any proposed solution will give you enough of a differential over a contact manager to be worth the investment. ➢ Pl ann ing Any CRM project needs to be planned out in advance, just like any other project that you might run. There needs to be a team appointed to plan out exactly what CRM strategy the company is going to adopt and then to decide on whether any proposed solution fits the strategy. Members of this team should include: ➢ Pro ject Sp onso r This is someone of senior rank (preferably board level) who has authority to make decisions and to allocate resources. It is important to have a high level person on the team because of the “buy-in” factor. If the sponsor is at a senior level in the company then it shows to the other employees that the project is important to the company. If there is no senior person on the team then there is no perceived investment by the company in the project. It is just “another” project. ➢ Pro ject Man ag er The project manager will generally be either a sales manager or a customer services manager. I would recommend the sales manager drive the project as sales is where the revenue is made. Customer Service reps are generally more accepting of new systems than Sales reps. The sales manager driving the project

will give a better impression to the sales team and help with the “buy-in”. IT specialist. There should be an IT specialist on the team to assist in the decision making about potential systems. This person should be able to assist the team in understanding the technical differences between systems. ➢ Top S elle r Your top sales person needs to be on the team. If they are on the team then they have bought into the system already (or are perceived to have) and this will help with buy-in from the rest of the sales team. Technically best sales person. This is your sales person who is most adept with computer systems. He will be one of the most enthusiastic about the project and being a member of the project team. Use him to sell the project to the rest of the sales team. Once the team has defined the company’s CRM strategy (and if necessary it is signed off by the board), they must prepare a request for proposal document (RFP), which lays out the strategy and requests vendors to propose a solution that matches the strategy.

Po tential dr awbacks of CRM There are several reasons why implementing a customer relationship management (CRM) solution might not have the desired results. There could be a lack o f com mit ment from people within the company to the implementation of a CRM solution. Adapting to a customer-focused approach may require a cultural change. There is a danger that relationships with customers will break down somewhere along the line, unless everyone in the business is committed to viewing their operations from the customers' perspective. The result is customer dissatisfaction and eventual loss of revenue. ➢ Po or co mm unicat ion

Poor communication can prevent buy-in. In order to make CRM work, all the relevant people in your business must know what information you need and how to use it.

➢ Wea k le ade rsh ip

Weak leadership could cause problems for any CRM implementation plan. The onus is on management to lead by example and push for a customer focus on every project. If a proposed plan isn't right for your customers, don't do it. Send your teams back to the drawing board to come up with a solution that will work.

Goa ls of CR M CRM was invented because customers differ in their preferences and purchasing habits. If all customers were alike, there would be little need for CRM. Mass marketing and mass communications would work just fine. Typically, the top 20% (or some small percentage) of customers of any enterprise (the Gold Customers) provide 80% (or some large percentage) of the revenue and the profits. The bottom 20% of customers of many enterprises are not only not profitable, they may actually generate losses to the firm. It is useful to know this and to identify who the valuable and the worthless customers are so that you can: •

Work to retain the valuable ones

•

Try to acquire more customers like Gold customers

•

Get other customers to move up to Gold

•

Re-price or reconfigure the products and services offered to the

worthless customers so as to move them towards profitability (or the exit).

How to Me asure CR M Succes s

To understand what CRM is, it is useful to contrast it with Database Marketing. Database Marketing consists of building a marketing database of customers and prospects. The database contains their names, addresses, demographics, purchases, web activity and promotion history. It is used to analyze customers, and to direct the company’s customer and prospect communications programs. It helps with acquisition and retention. It is typically measured by return on investment and by customer lifetime value. A typical marketing database for a medium sized company may cost about $1 million or less to build.

Imp act of CR M in India Although CRM was supposed to transform business, its impact in India has been mixed. Let’s look at how CRM can help the Indian enterprise and how CIOs can craft an enterprise-wide strategy to get the most out of these solutions.