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Skyline Business School |
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Skyline Business School |
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Issue:11
A critical analysis of Customer Relationship
Management (CRM) with focus on the Hospitality Industry.
(Case Study : The Grand Intercontinental - A leading 5 Star Hotel in Delhi)
Anecdote1
…one of the Big Three Detroit auto-makers put together a Customer Relationship
Management system. The system was to help it decide which cars to make based on what was
going out of dealer's lots. Everything went on happily ever after…until…one
day…
The marketing team had just created a sales incentive to get rid of a lot of lime-green
cars, which no one wanted. The CRM software did not know that. It noticed the surge of
sales in lime-green cars as customers lapped up the special offer. The system, as
expected, instructed the factory to produce more lime-greens. Eventually, realization
dawned, but the auto-maker had already lost millions of dollars.
This episode is just another reminder of the fact that CRM is a double-edged sword, which
can cut both ways.
Chasing the "CRM Mirage"
·An Introduction…(and research map)
They say, there has never been a worst time to implement CRM; there has never been a
better time either.
CRM…enduring loyalty…greater retention…lower costs…soaring
profits…the chain of thoughts seems only logical. However thoughts, like dreams need
to be rooted in reality.
In this era of global competition, high attrition rates and fickle-minded customers, no
one questions the need for CRM anymore. It is the implementation of CRM that is still a
gray area.
CRM allows companies to gather customer data swiftly, identify the most valuable customers
over time, and increase customer loyalty by providing customized products and services. It
even reduces the cost of servicing these customers and makes it easier to acquire similar
customers down the line.
CRM is great. However, look at it in a new
backdrop.
Almost half of US (CRM) implementations and 80% of European
implementations are considered failures .
In a Bain & Company survey of 451 senior
executives, CRM ranked in the bottom 3 category amongst 25 tools evaluated for customer
satisfaction
55% of CRM projects do not produce results. In fact, they end up
diluting earnings. Gartner Group
The verdict is clear; not all is well.
The revolution called "IT" has enabled companies to decide how they want to
interact with their customers. Forget Customer's, companies can even decide how they want
to interact with each customer. Technology has made it possible to target extremely
specific segments, cost effectively.
All this has given companies "choice", and choice has raised many questions.
There are a million questions running through the minds of top-managers.
·Should we customize?
·Should we try one2one relationships?
·Should we retain?
·Who should we retain?
…and the list is endless.
While this study hasn't answered all those questions, it has certainly got the ball
rolling.
An answer to the question, "how to implement CRM", seemed too complicated.
Therefore, this study takes a round about route by answering "how not to implement
CRM". By analyzing some of the past failure cases, it highlights the stumbling blocks
on the road to a CRM success.
As expected, any high growth area is marked by turbulence. Even the CRM industry is going
through rapid changes. Old areas and concepts are becoming obsolete and new growth areas
are emerging. This research will also cover the major trends (globally) that are
transforming CRM
Going further, the study shifts its focus to the Indian scenario. World over, the
hospitality industry is seen as a pioneer of CRM. It has set numerous trends for other
businesses to follow. Hence, it was an obvious choice to study "the current state of
CRM in India".
The hospitality industry perspective
Traditionally, classical marketing theory and practice have focused on customer
acquisition rather than customer retention. It is the service industry, which has broken
this norm. The shift has come due to a strong need for managing relationships in the
service industry. Services can potentially deliver greater value through relationships.
Keeping this in mind, one can safely say that the service sector (and specifically the
hospitality industry) has always been a trendsetter in the field of CRM.
Salient features of the hospitality industry
Perishability: A hotel room can't be inventoried. It must be
sold "now" or with time, it expires.
Intangibility: The core benefit is intangible. While the
hotel may try to tangebalise its offering by stressing on the physical evidence, the
entire experience largely remains intangible.
Inseparability: Production and consumption of the service
cant be separated. After all, the infrastructure at a hotel may be ready but the service
can only be produced when the customer has arrived to consume.
Variability: The service delivery process gives rise to
numerous possible scenarios and outcomes. One reason for this is the high involvement of
"the human element", the consumer.
Methodology
The study used a combination of Exploratory and Conclusive research.
Exploratory research seeks to discover a new relationship or hypothesis on any given
issue. This kind of research is especially useful when the researcher is setting out on a
topic with relatively lesser clarity. Interestingly, Exploratory research has no formal
design and an investigator must exercise his/her own individual initiative in spotting and
following leads.
Secondary data forms an important part of any exploratory research. It is undoubtedly one
of the quickest and most economical ways of research. Above all, there is no point in
"re-inventing the wheel" if some one has already worked on the particular area.
For the purpose of this study, a lot of secondary data was scanned. This included articles
from some very well known journals like the Harvard Business Review, The McKinsey
Quarterly, etc. Some research reports from consultants were also studied. In addition,
some research done by other students (on the subject) was also consulted.
The secondary data helped in forming the base of the study by clarifying the concept of
CRM, its intricacies and issues involved.
This Exploratory research was followed by Conclusive research to reach certain conclusions
regarding the CRM scenario in India.
Conclusions
It is quite clear from the analysis (in the last section) that the Indian-hotel-industry
customer is still largely price sensitive rather than relationship sensitive.
Either our CRM has not evolved or, it is just not delivering. My guess is that the former
has more weight than the latter. In support of my argument I'd like to highlight the
"state of CRM"(already discussed), in the organization I chose to study, The
Grand Intercontinental.
Any CRM initiative faces a double challenge. First, increase the number of visits per
customer per month, and then improve the quality of those visits through better, more
personalized offers and service.
However, the Indian companies must not forget a very important aspect of CRM: Customer
selectivity. It would be detrimental to launch a full-fledged CRM initiative without
developing the required competencies in customer selectivity. The importance of the above
mentioned comes out very clearly in the Analysis section (Analysis 7: Willingness to act
as word of mouth marketers). If Word of mouth (WOM) marketing is a CRM priority, companies
must take into account the huge difference in willingness to act as WOM agents, between
the Corporate and Leisure segments.
It has also become quite evident that there are differences (in behavior and attitude)
amongst customers. Some of these differences are quite large when comparing the Corporate
and Leisure segments.
The usual industry practice of predicting future loyalty based on "loyal
behavior", (like frequency of purchase), doesn't seem to hold out too well. After
all, a customer my be visiting a hotel regularly for the simple reason that it is
conveniently located. Hence, one can't be sure of his loyalty. Behavioral parameters when
clubbed with Attitudinal parameters, are much better indicators of future loyalty. When
effective CRM is added to the above combination, it may prove to be just the right
customer-wining formula.
Recommendations
It has often been said that CRM begins with the customer. I would, however, strongly
recommend that the Grand Intercontinental begin with itself.
A "focus on CRM" would require a crystal-clear layout, pan organization, of what
the company does to manage relationships with its customers, in a structured manner
(something that was found to be absent). Once that has become clear, each employee must
know his own "little role" in the larger picture.
To put it simply, the company is doing the right things, but if they put it all together,
there could be greater synergies.
This study also points out some of the common mistakes that organisations have made in the
past.
Before launching any CRM initiative, the Grand Intercontinetal must ensure it has covered
the common failure points.
That way, it can avoid any expensive mistakes and ensure that it makes the most of
"starting late".
While implementing its CRM, the company needs to define its CRM objectives and work its
way back. In light of the findings of this report, working backwards may be very
beneficial.
Dissertation Summary
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By Arihant Kothari, BBA (Hons) Marketing,
Batch - 2000 - 2003
Comments and questions: info@skylinecollege.com
URL: http://www.skylinecollege.com
