One Day International Conference - Changing Perspectives of Management:

REVISITING THE PAST, ANALYSING THE PRESENT AND EXPLORING THE FUTURE
SURYA GROUP OF INSTITUTIONS SCHOOL OF MANAGEMENT STUDIES

CUSTOMER RELATIONSHIP MANAGEMENT

AUTHOR: S.RAJA, M.Sc.,MBA.,M.Phil.,PGDIB., Lecturer Department of Management Studies, Sri Venkateswara Institute of Science & Technology, Kolundhalur 631 203 [email protected] -93808 32357

CO- AUTHOR: K.VISHAL DEEP Department of Management Studies, Sri Venkateswara Institute of Science & Technology, Kolundhalur 631 203 [email protected] -96001 85255

ABSTRACT CUSTOMER RELATIONSHIP MANAGEMENT

Customer Relationship Management (CRM) aids in increasing efficiency, serves to aid the sales department in all of its efforts, manages to boost sales, and fundamentally contributes to the overall development of the company. It also manages to work towards organizational goals. This is achieved through a concise study of potential customers. The main aims to combining the abilities to respond directly to customer requests and to provide the customer with a highly interactive, customized experience, companies have a greater ability today to establish, nurture, and sustain long-term customer relationships than ever before. The essence of the information technology revolution and, in particular, the World Wide Web is the opportunity to build better relationships with customers than has been previously possible in the offline world. A major purpose of this paper is to provide a managerially useful, end-to-end view of the CRM process from a marketing perspective. The basic perspective taken is that of the customer, not the company. In other words, what do managers need to know about their customers and how that information is used to develop a complete CRM?
The ultimate goal is to transform these relationships into greater profitability by increasing repeat purchase rates and reducing customer acquisition costs by using the Customer Relationship Management Models and Customer Retention Programs. Customer Relationship Management Models Create Database Analysis Customer Selection Customer Targeting Relationship Marketing Privacy Issues Metrics

Customer Retention Programs Customer Service Frequency and Loyalty Program Customization Rewards Programs

Customer relationship management is to compete effectively in todays market place and improve the profitability of the organization objective goals.

CUSTOMER RELATIONSHIP MANAGEMENT Introduction The essence of the information technology revolution and, in particular, the World Wide Web is the opportunity to build better relationships with customers than has been previously possible in the offline world. By combining the abilities to respond directly to customer requests and to provide the customer with a highly interactive, customized experience, companies have a greater ability today to establish, nurture, and sustain long-term customer relationships than ever before. The ultimate goal is to transform these relationships into greater profitability by increasing repeat purchase rates and reducing customer acquisition costs. Indeed, this revolution in customer relationship management or CRM as it is called has been referred to as the new mantra of marketing. The need to better understand customer behavior and focus on those customers Who can deliver long-term profits has changed how marketers view the world. Traditionally, marketers have been trained to acquire customers, either new ones who have not bought the product category before or those who are currently competitors customers. This has required heavy doses of mass advertising and price-oriented promotions to customers and channel members. Customer relationship models Step1: Create Database A necessary first step to a complete CRM solution is the construction of a customer database or information file. This is the foundation for any customer relationship management activity. For Web-based businesses, this should be a relatively straight forward task as the customer transaction and contact information is accumulated as a natural part of the interaction with customers. For existing companies that have not previously collected much customer information, the task will involve seeking historical customer contact data from internal sources such as accounting and customer service. What should be collected for the database? Ideally, the database should contain information about the following: Transactions: This should include a complete purchase history with accompanying details (price paid, SKU, delivery date) Customer contacts: Today, there are an increasing number of customer contact points from multiple channels and contexts. This should not only include sales calls and service requests, but any customer- or company-initiated contact. Descriptive information: This is for segmentation and other data analysis purposes. Response to marketing stimuli: This part of the information file should contain whether or not the customer responded to a direct marketing initiative, a sales contact, or any other direct contact. The data should also be over time. Companies have traditionally used a variety of methods to construct their databases. Durable goods manufacturers utilize information from warranty cards for basic descriptive information. Unfortunately, response rates to warranty cards are in the 20-30% range leaving big gaps in the databases. Service businesses are normally in better shape since the nature of the product involves the kind of customer-company interaction that naturally leads to better data collection

Step2: Analyzing the Data Traditionally, customer databases have been analyzed with the intent to define customer segments. A variety of multivariate statistical methods ranging such as cluster and discriminate analysis have been used to group together customers with similar behavioral patterns and descriptive data which are then used to develop different product offerings or direct marketing campaigns. Direct marketers have used such techniques for many years. Their goals are to target the most profitable prospects for catalogue mailings and to tailor the catalogues to different groups. More recently, such segmentation approaches have been heavily criticized. Taking a large number of customers and forming groups or segments presumes a marketing effort towards an average customer in the group. Given the range of marketing tools available that can reach customers one at a time using personalized messages (what has been referred to as 1-to-1 marketing), there is less need to consider the usual market segmentation schemes. Rather, there is increased attention being paid to understanding each row of the database, that is, each customer and what he or she can deliver to the company in terms of profits. Step3: Customer selection The construction and analysis of the customer information contained in the database, the next step is to consider which customers to target with the firms marketing programs. The results from the analysis could be of various types. If segmentation-type analyses are performed on purchasing or related behavior, the customers in the most desired segments (e.g., highest purchasing rates, greatest brand loyalty) would normally be selected first. Other segments could also be chosen depending upon additional factors. For example, if the customers in the heaviest purchasing segment already purchase at a rate that implies further purchasing is unlikely, a second tier with more potential would also be attractive. The descriptor variables for these segments (e.g., age, industry type) provide information for deploying the marketing tools. In addition, these variables could be matched with commercially-available databases of names to find additional customers matching the profiles of those chosen from the database. If individual customer-based profitability is also available through LCV or similar analysis, it would seem to be a simple task to determine on which customers to focus. The marketing manager can use a number of criteria such as simply choosing those customers that are profitable (or projected to be) or imposing an ROI hurdle. The goal is to use the customer profitability analysis to separate customers that will provide the most long-term profits from those that are currently hurting profits. This allows the manager to fire customers that are too costly to serve relative to the revenues being produced. While this may seem contrary to being customer-oriented, the basis of the time-honored marketing concept, in fact, there is nothing that says that marketing and profits are contradictions in terms. The 80/20 rule often holds in approximation: most of a companys profits are derived from a small percentage of their customers. Step4: Targeting the Customers Mass marketing approaches such as television, radio, or print advertising are useful for generating awareness and achieving other communications objectives, but they are poorly-suited for CRM due to their impersonal nature. More conventional approaches for targeting selected customers include a portfolio of direct marketing methods such as telemarketing, direct mail,

and, when the nature of the product is suitable, direct sales. Writers such as Peppers and Rogers14 have urged companies to begin to dialogue with their customers through these targeted approaches rather than talking at customers with mass media. In particular, the new mantra, 1-to-1 marketing, has come to mean using the Internet to facilitate individual relationship building with customers. An extremely popular form of Internet-based direct marketing is the use of personalized e-mails. When this form of direct marketing first appeared, customers considered it no different than junk mail that they receive at home and treated it as such with quick hits on the delete button on the keyboard. However, sparked by Godins call for permission-based programs whereby customers must first opt-in or agree to receive messages from a company, direct e-mail has become a very popular and effective method for targeting customers for CRM purposes. Companies such as Kana and Digital Impact can send very sophisticated e-mails including video, audio, and web pages. Targeted e-mails have become so popular that Jupiter Media Metrix projects that over 50 billion of them will be sent in 2001. Step5: Relationship Programs While customer contact through direct e-mail offerings is a useful component of CRM, it is more of a technique for implementing CRM than a program itself. Relationships are not built and sustained with direct e-mails themselves but rather through the types of programs that are available for which e-mail may be a delivery mechanism. The overall goal of relationship programs is to deliver a higher level of customer satisfaction than competing firms deliver. There has been a large volume of research in this area. From this research, managers today realize that customers match realizations and expectations of product performance, and that it is critical for them to deliver such performance at higher and higher levels as expectations increase due to competition, marketing communications, and changing customer needs. In addition, research has shown that there is a strong, positive relationship between customer satisfaction and profits. Thus, managers must constantly measure satisfaction levels and develop programs that help to deliver performance beyond targeted customer expectations. Customer Retention Program: A comprehensive set of relationship and includes Customer service Frequency/loyalty programs Customization Rewards programs Community building. Customer Service Because customers have more choices today and the targeted customers are most valuable to the company, customer service must receive a high priority within the company. In a general sense, any contact or touch points that a customer has with a firm is a customer service encounter and has the potential to gain repeat business and help CRM or have the opposite effect. Programs designed to enhance customer service are normally of two types. Reactive service is where the customer has a problem (product failure, question about a bill, product return) and contacts the company to solve it. Most companies today have established

infrastructures to deal with reactive service situations through 800 telephone numbers, faxback systems, e-mail addresses, and a variety of other solutions. Proactive service is a different matter; this is a situation where the manager has decided not to wait for customers to contact the firm but to rather be aggressive in establishing a dialogue with customers prior to complaining or other behavior sparking a reactive solution. This is more a matter of good account management where the sales force or other people dealing with specific customers are trained to reach out and anticipate customers needs. Loyalty/Frequency Programs Loyalty programs (also called frequency programs) provide rewards to customers for repeat purchasing. A recent McKinsey study20 found that about half of the ten largest retailers in the U.S. in each of the top seven sectors (category killers, department stores, drugstores, gasoline, grocery, mass merchandisers, and specialty apparel) have such programs with similar findings in the U.K. The study also identified the three leading problems with these programs: they are expensive, mistakes can be difficult to correct as customers see the company as taking away benefits, and, perhaps most importantly, there are large questions about whether they work to increase loyalty or average spending behavior. A problem that can be added to this list is that due to the ubiquity of these programs, it is increasingly difficult to gain competitive advantage. A number of Web-based companies providing incentives for repeat visits to Web sites include My Points and Incentives. Although these have not been wildly successful, it is clear that the price orientation of many Web shoppers creates the need for programs that can generate loyal behavior. Customization The notion of mass customization goes beyond 1-to-1 marketing as it implies the creation of products and services for individual customers, not simply communicating to them. Dell Computer popularized the concept with its build-to-order Web site. Other companies such as Levi Strauss, Nike, and Mattel have developed processes and systems for creating customized products according to customers tastes. Slywotzky refers to this process as a choice board There customers take a list of product attributes and determine which they want. The idea is that it has turned customers into product makers rather than simply product takers. Shapiro and Varian argue that such customization is cheap and easy to do with information goods. Such customization is termed versioning. Community One of the major uses of the Web for both online and offline businesses is to build a network of customers for exchanging product-related information and to create relationships between the customers and the company or brand. These networks and relationships are called communities. The goal is to take a prospective relationship with a product and turn it into something more personal. In this way, the manager can build an environment which makes it more difficult for the customer to leave the family of other people who also purchase from the company.

Conclusion Hence this paper reveals the steps to improve customer relationships in the modern scenario. If the company adopts these above stratagems in their business practices, may they succeed in their business.

References:
1. Customer Relationship Management: A Framework, Research Directions, and the Future

by Russell S, Winer Haas School of Business, University of California at Berkeley.