Notes

Outline

Customer Relationship Management Christopher C. Doyle Regional Director - India Hilton International

CRM : Myths CRM is a software tool that will manage customer relationships for you CRM is simply advanced direct marketing : identifying your best customers and raising loyalty through more targetted marketing CRM uses customer databases to increase loyalty CRM is the facility of the customer being able to interact with the organisation through any channel they wish

"CRM is practised and relationships..." CRM is practised and relationships are built by the sales or marketing departments

And therefore …. According to Bain’s 2001 survey of management tools, CRM ranked in the bottom three for satisfaction out of 25 popular tools one in every five users reported that their CRM initiatives not only had failed to deliver profitable growth, but also had damaged long standing customer relationships

And therefore... One manufacturer retailer, for instance, invested $ 30 million in a CRM solution in 1999 only to scrap the entire project in early 2001. The company abandoned the project because customers had become increasingly irritated instead of loyal, as did the employees trying to deal with them. And while the company was struggling with CRM deployment, its rivals steadily moved into stronger market positions

And therefore... A report from the Meta Group, the IT consultancy, estimates that 55 to 75 % of CRM projects fall well short of their objectives A study from Gartner has predicted that the proportion of unsuccessful CRM projects will rise from about 65 % today to about 80 % !!

Slide 7

So what does CRM do ? It allows companies to gather customer data swiftly it allows companies to identify the most valuable customers over time it enable companies to provide customised goods and services, thereby increasing loyalty it reduces the costs of serving valuable customers

So what does CRM do ? It makes it easier to acquire valuable customers down the road it aligns business processes with customer strategies it tries to understand what customers want and give them what they want

My definition of CRM Customer Relationship Management is the continuous process of managing the customer experience,  and a search for opportunities to create value for the customer with the ultimate objective of generating customer loyalty based on the constant interaction of the customer with the product and employees of the organisation.

How much does it cost ? According to Forrester Research : $ 60 million to $ 80 million

How long does it take to implement ? Generally, 24 months

So how do we make CRM effective ? Avoid the pitfalls Remove the barriers Do the right things

The Pitfalls Implementing CRM before creating a customer strategy rolling out CRM before changing your organisation to match assuming that more CRM technology is better stalking, not wooing customers marketing at the customer rather than understanding the customer

The Pitfalls Trying to identify valuable customers without the proper resources overriding reliance on customer loyalty programmes

Implementing CRM before creating a customer strategy CRM can only work at attracting high value customers after a traditional customer acquisition and retention strategy has been conceived of and implemented this is because effective CRM is based on segmentation analysis and is designed to achieve specific marketing goals however, most executives mistake CRM technology for a marketing strategy

"So either the software vendors..." So either the software vendors drive the approach to customer management or, companies retrofit a customer strategy to match the CRM technology they have purchased or worse, they delegate CRM to the CIOs technology that affects customers must  always be aligned with an overarching strategy if it is to work

Rolling out CRM before changing your organisation to match First create a customer focused organisation revamp the key business processes that relate to customers, from customer service to order fulfilment a CRM rollout will succeed only after the organisation and its processes - job descriptions, performance measures, compensation systems, training programmes etc - have been restructured in order to better meet customer needs

"According to a survey conducted" According to a survey conducted, when asked what went wrong with their CRM projects, 4 % of the managers cited software problems, 1 % said they received bad advice, but 87 % pinned the failure of their CRM programmes on the lack of adequate change management

Assuming that more CRM technology is better The objectives of CRM can be fulfilled without huge investments in technology eg. motivating employees to be more sensitive to customer needs it is more important to have your processes and systems structured to meet customer needs; technology cannot help you understand the customer, but only support your efforts in fulfilment

Stalking not wooing customers Managers often end up tryin gto build relationships with the wrong customers or trying to build relationships with the right customers the wrong way relationships are two way streets : you may want to forge more relationships with affluent customers, but do they want them with you ?

"Fail to build relationships with..." Fail to build relationships with key customers who value them, and you are bound to lose them try to build relationships with disinterested customers and you will be perceived as a stalker, annoying potential customers

Marketing at the customer Today the technology exists to track information about the customer's history, lifestyle, spending habits, relationship details and helps to build a database which can actually capture information about the customer which can help to understand the customer's buying patterns, the customer's preferences and what the customer actually wants. What is happening is that most companies are using this technology to target customers, marketing at customers rather than using it to understand the customer.

"The relationship goes beyond databases..." The relationship goes beyond databases and customer preferences: It involves the use of this information to not only target customers with appropriate products, but more importantly, to create value for the customer through customisation.

Trying to segregate consumers without the proper resources One of the basic objectives of CRM is to segregate high value customers from low value customers so that relationships can be appropriately established however, many organisations do not give enough thought to the process of identifying which customer falls into each category

"As a result," As a result, the organisation runs the risk of wrongly categorising customers and alienating customers who may have a high potential, but are treated as low value customers Eg. first time customers personal vs corporate usage percentage of business

"There could be several reasons..." There could be several reasons why customers are unprofitable : Maybe the lion's share of the business is going to competition and only the dregs are coming to you Maybe there is a temporary slump in the customer's business which is affecting their purchases; this can be very quickly seen in the hotel and airlines businesses Maybe the customer is growing right now, so is unprofitable now, but has the potential to be profitable later

"the challenge is to find..." the challenge is to find out which customers need to be satisfied in the long run and which should be discarded. Most organisations do not have the systems and processes in place to capture the data required to make a decision of this nature and which takes into account both monetary and non monetary factors which determine the true worth of a customer. The firm may actually alienate customers with high potential if they are not satisfied with the firm. So this sounds good in theory, but is difficult to practice without risks.

Customer loyalty programmes 52 % of UK customers are involved in two or three points based programmes 83 % of all shoppers in the UK participate in frequent shopper loyalty programmes. Yet 24 % of shoppers switch stores every year. 40 % of consumers in the UK said they did not consider these loyalty programmes to be worthwhile

"Switzerland had the lowest participation..." Switzerland had the lowest participation in buyer loyalty schemes and the lowest percentage of customers switching stores : only 7 % one size does not fit all : one loyalty programme for all customers often does not work

Removing The  Barriers Attitude Culture Implementation of CRM

Attitude “oh no, not that customer again !” attitude should flow from the top CRM is based on attitude not technology. If the attitude to serve the customer is incorrect or does not exist, technology cannot help concern for the customer sensitive to customer needs

"Sears has been able to..." Sears has been able to demonstrate that a 5 point improvement in employee attitudes leads to a 0.5 % improvement in revenue growth. The relationship exists at the store level and the company knows that if they can improve employee attitude by 5 units, this will lead to a 1.3 unit increase in customer impressions and a 0.5 % increase in store revenue growth

Culture In July 2001, Xchange, a provider of customer value management solutions, carried out a survey looking at the components of, and barriers to, an effective CRM strategy across the retail, banking, insurance, telecoms, and media market sectors company culture was seen as the major barrier to building an effective CRM strategy by 74 % of respondents

"A CRM implementation can only..." A CRM implementation can only be successful if a customer service culture permeates the organisation, from the top down it is important to recognise that all personnel in the organisation and all departments which come into contact with the customer (including dealers) can help build customer relationships

Implementing CRM As mentioned earlier, CRM implementation should be based on a segmentation strategy it is important to first identify the objectives of the CRM process with respect to marketing the CRM implementation should then be able to capture all the information which is required to make the strategic decisions which are critical to the success of the strategy

Doing the right things Use technology to understand the customer Empowerment value trust and reliability communication service recovery

Using technology to understand the customer If the CRM implementation is matched to strategy, the appropriate technology can be selected, which yields valuable information which helps to understand the customer better armed with a better understanding of the customer, it is then possible to customise products or develop new products which meet customer requirements by adding value as perceived by the customer

Empowerment Trust your employees While attitude can be inculcated through training, this can only be translated into implementation through empowerment It is difficult to deliver services efficiently if constant approval is required from supervisors or senior managers for even basic service delivery.

"Empowerment can be useful in..." Empowerment can be useful in the process of identifying profitable customers. Your customer contact personnel should be empowered to investigate and take decisions regarding the value of the customer, irrespective of their current status with respect to profitability

Value From the customer’s point of view linked to understanding the customer : understand what the customer values customers define value in four ways  : low price whatever I want in a product or service the quality I get for the price I pay what I get for what I give

"Morris Holbrook observes that value..." Morris Holbrook observes that value is a relativistic (comparative, personal, situational) preference characterizing a subject's experience of interacting with some object. Value involves a preference -- a favourable disposition, a liking, a positive affect, or a judgment as being good. It also involves an interaction between subject and object, the subject here being the customer and the object being the firm. Value is also relativistic in three respects -- it is comparative (involves rating one option against another), personal (differs across individual consumers), and situational (varies widely from situation to situation). Holbrook's final and very important point is that value is associated with an experience in that it pertains not to the acquisition of an object but to the consumption and use of its services.

Trust and reliability Foundation of a successful relationship Trust is two way : a) the customer trusting the organisation b) the organisation trusting the customer. If the customer feels that the customer does not trust her, then there will never be a perception of value in the transaction and she will never return.

"Consistency builds trust and a..." Consistency builds trust and a sense of reliability : once customers have experienced good service or a good product performance, they expect the same level every time they interact with the company or they consume the product. And if their expectations are not met (at the very least), they experience negative emotions about the product or service, which influence repeat purchase. Even if the customer has been regularly experiencing good service or high performance, one or two bad experiences result in the customer feeling let down which affects the trust/reliability factor and loss or lack of value in the offering

"trust and reliability are powerful..." trust and reliability are powerful switching costs which are not forced upon the customer, but are emotional in nature warranties if any should be honoured without making the customer feel that the organisation does not trust her

Communication Communication should be two way Not only should the  communication be complete, but it should also be accurate. Always leave a channel for the customer to communicate with you. Very often, organisations focus on communication directed at the customer, but are inaccessible when the customer wants to communicate with them

Service recovery service failure is inherent in the service delivery process, subject as it is to so many factors including the human element of variability Service recovery is essentially the process of recovering from the failure of a moment of truth and rebuilding relationships with customers

"It is very important for..." It is very important for customer contact employees to find out as soon as possible when the service has failed to meet customer expectations The other important thing about recovery is the speed with which action is taken, since most relationships can be successfully salvaged and rebuilt if the action taken is speedy and appropriate

"In fact," In fact, if the service recovery is managed well, it is possible that the relationship may be stronger than it would have been without the service failure Service recovery can also be performed during the production process itself, rather than wait for long after the service failure, since if expectations have not been met during the early stages of the service process there is often the possibility that it may be recovered by significantly exceeding expectations at a later stage

Bibliography Valarie A. Zeithaml and Mary Jo Bitner, Services Marketing : Integrating Customer Focus Across the Firm, 2d Ed. (New York : Irwin/McGraw Hill, 2000), 441 Morris B. Holbrook, "The Nature of Customer Value : An Axiology of Services in the Consumption Experience," in Service Quality :  New Directions in Theory and Practice, ed. Roland T. Rust and Richard L. Oliver (Thousand Oaks, Calif : Sage, 1994), 21-71

"Palmer A (1998),..." Palmer A (1998), Principles of Services Marketing, Berkshire, England: McGraw Hill James G Barnes, Secrets of Customer Relationship Management, It's all about how you make them feel, (Toronto : McGraw Hill, 2001). Darrell K Rigby, Frederick F. Reichheld and Phil Schefter, Avoid the Four Perils of CRM, Harvard Business Review, February 2002.

"Christopher C." Christopher C. Doyle, “Customer Relationship Management : Lessons from the Hospitality Industry”, in Customer Relationship Management : Emerging Concepts, Tools and Applications, ed. Jagdish N. Sheth, Atul Parvatiyar and G. Shainesh, (New Delhi : Tata McGraw Hill, 2001), Pp 399-407