Thesis Report on CRM

DISSERTATION REPORT ON

IDENTIFY THE IMPACT OF CRM ON PROFITABILITY OF BUSINESS.

SUBMITTED BY AMIT DEPANI

DISSERTATION GUIDE RISHABHA NAYYAR

IN PARTIAL FULFILMENT OF THE POST GRADUATE PROGRAM IN MARKETING MANAGEMENT TO THE GENESIS INSTITUTE OF BUSINESS MANAGEMENT PUNE 412 308 IN THE ACADEMIC YEAR 2010-12

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CERTIFICATE

This is to certify that Mr. / Miss. _____________________________________________ is a student of the Genesis Institute of Business Management, Pune.

He / She in the partial fulfillment of the course has submitted to us a dissertation report titled __________________________________________________________________ .

This work is original to the best of my knowledge and is therefore being submitted towards the partial fulfillment of the course.

Dissertation Guide

Director

VIVA VOCE RECORD

Roll No. ________________

Date _____________

Internal Examiner

External Examiner

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ACKNOWLEDGEMENT

No Project is ever a work of only one person and this one is no exception
This project is the product of many hands, and countless hours from many people. My thanks go out to all those who helped, whether through their comments, feedback or suggestions.

It gives me immense pleasure to express my deep sense of gratitude to Mr. Rishabha Nayyar (Faculty guide) for his valuable guidance, constant supervision and above all his continuous encouragement & support during the tenure of this project.

I also thanks to my other faculty guide Ms. Madhu for their guidance and support during this project tenure.

Sincere thanks to all the people who have worked under this project. Lastly, no words could adequately convey my heart full thanks to the family members and friends who indirectly co operated with us. I could not have done it without you all!

Amit Depani PGP-2

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EXECUTIVE SUMMARY

Customer relationship management (CRM) gained recognition in the mid-1990s, primarily driven by its perception as information technology (IT). However, not enough attention has been given to the fundamental drivers of CRM success.

Successful CRM is about competing in the relationship dimensionnot as an alternative to having a competitive product or reasonable pricebut as a differentiator. If your competitors are doing the same thing you are (as they generally are), product and price wont give you a longterm, sustainable competitive advantage. But if you can get an edge based on how customers feel about your company, its a much stickiersustainablerelationship over the long haul.

The issue is decided to be investigated mainly because the researches regarding CRM systems focus on general themes. However, there are many specific topics that could be explored regarding the application of CRM systems. There is need to increase the limited knowledge regarding the implications and effects of CRM systems in profitability of business. This study proposes to focus on marketing activities of organizations.

The study could provide a better understanding of CRM and its impact on overall business activities. From a broader sense, this research could significantly contribute to corporate decisionmaking whether the application of CRM systems is the best option for the company based on actual research as primary and secondary.

The research will utilize a descriptive method. As a descriptive research, this dissertation report will present facts that concern that nature and status of the situation. The study could describe present conditions, events or systems based on the impressions or reactions of the respondents of the research as well. The relationships and practices that exist, the beliefs and processes that are ongoing, the effects that are being felt or the trends that are developing could be also explore in descriptive researches.

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Table of Contents

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14.

Certificate Acknowledgement Executive Summary Introduction to Topic Conceptual Approach CRM and Technology The rise of relationship base differentiation Loyalty and Bottom line Research Measurement Statistical analysis Hypothesis proven Conclusion Supportive documents Bibliography

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INTRODUCTION TO TOPIC
The customer relationship management (CRM) literature recognizes the long-run value of potential and current customers. Increased revenues, profits, and shareholder value are the result of marketing activities directed toward developing, maintaining, and enhancing successful companycustomer relationships. These activities require an in-depth understanding of the underlying sources of value that the firm both derives from customers, as well as delivers to customers. We built our review from the perspective that customers are the building blocks of a firm. In order to endure long-term success, the role of marketing in a firm is to contribute to building strong market assets, including a valuable customer portfolio. CRM is an integral part of a companys strategy, and its input should be actively considered in decisions regarding the development of organizational capabilities, the management of value creation, and the allocation of resources. CRM principles provide a strategic and tactical focus for identifying and realizing sources of value for the customer and the firm and can guide five key organizational processes: making strategic choices that foster organizational learning, creating value for customers and the firm, managing sources of value, investing resources across functions, organizational units, and channels, and globally optimizing product and customer portfolios. For each organizational process, we identify some of the challenges facing marketing scientists and practitioners, and develop an extensive research agenda. Companies are increasingly focused on managing customer relationships, the customer asset, or customer equity. Customer relationship management (CRM) explicitly recognizes the long-run value of potential and current customers, and seeks to increase revenues, profits, and shareholder value through targeted marketing activities directed toward developing, maintaining, and enhancing successful company-customer relationships. These activities require an in-depth understanding of the underlying sources of value the firm both derives from customers and delivers to them. The overall aim of this paper is to explore and to investigate the impact of the CRM systems and its implementation on marketing applications and how it leads to overall profitability of business. Specifically, this paper will try to reveal the general customer behaviors in existence. This will also include the exploration on patterns of customer satisfaction, retention and loyalty.

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Conceptual Approach
What is CRM?

Whatever the customer buys for him, every experience should be completely satisfactory, some delightful. Best CRM strategies should be implemented helping the customers to save the money, time and heartburn by providing comprehensive customer reviews at a click. CRM stands for Customer Relationship Management. It is a process or methodology used to learn more about customers' needs and behaviors in order to develop stronger relationships with them. There are many technological components to CRM, but thinking about CRM in primarily technological terms is a mistake. The more useful way to think about CRM is as a process that will help bring together lots of pieces of information about customers, sales, marketing effectiveness, responsiveness and market trends.

Dimensions of CRM:
Identifying the customers Acquiring the customers Retaining the customers

Through all these we can achieve good profit.

Foremost thing for better CRM: Getting value out of real time customer information.

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Customer Relations Management (CRM) and Technology

Customer Interfacing Systems:

Bar Coding and Scanners

Point of sale systems use scanners and bar coding to identify an item, use pre-stored data to calculate the cost and generate the total bill for a client. Tunnel Scanning is a new concept where the consumer pushes the full shopping cart through an electronic gate to the point of sale. In a matter of seconds, the items in the cart are hit with laser beams and scanned. All that the consumer has to do is to pay for the goods. The new developments create an easy way for users to generate bar codes on demand for asset tracking, compliance labeling, document tracking, and other business productivity improvements.

RFID (Radio Frequency Identification) is now the buzzword in retail. It is real time tracking of every single product, from manufacture to checkout and compared to Universal Product Code (UPC) bar coding, which RFID promises to replace, RFID proactively transmits information, eliminating the manual point-and-read operations needed with bar coding. This enhanced visibility could significantly decrease warehouse, distribution, and inventory costs; increase margins; and enhance customer service.

Internet
Internet is also rapidly evolving as a customer interface, removing the need of a consumer physically visiting the store.

Operation Support Systems

ERP System

Various ERP vendors have developed retail-specific systems which help in integrating all the functions from warehousing to distribution, front and back office store systems and

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merchandising. An integrated supply chain helps the retailer in maintaining his stocks, getting his supplies on time, preventing stock-outs and thus reducing his costs, while servicing the customer better.

CRM Systems

The rise of loyalty programs, mail order and the Internet has provided retailers with real access to consumer data. Data warehousing & mining technologies offers retailers the tool they need to make sense of their consumer data and apply it to business. This, along with the various available CRM (Customer Relationship Management) Systems, allows the retailers to study the purchase behavior of consumers in detail and grow the value of individual consumers to their businesses.

Advanced Planning and Scheduling Systems

APS systems can provide improved control across the supply chain, all the way from raw material suppliers right through to the retail shelf. These APS packages complement existing ERP packages.

Companies are increasingly focused on managing customer relationships, the customer asset, or customer equity. Customer relationship management (CRM) explicitly recognizes the long-run value of potential and current customers, and seeks to increase revenues, profits, and shareholder value through targeted marketing activities directed toward developing, maintaining, and enhancing successful company-customer relationships. These activities require an in-depth understanding of the underlying sources of value the firm both derives from customers and delivers to them.

The purpose of this chapter is to describe how companies can effectively cultivate customer relationships and develop customer portfolios that increase shareholder value in the long run. We review the extensive literature on customer relationship management, customer asset management, and customer portfolio management, and summarize key findings.

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Customer relationship management requires the alignment of three building blocks: insight into customer decision-making, information about customers, and information-processing capability. However, its emphasis on the latter has outpaced the first two, so that CRM rarely realizes its full potential. The guidelines presented here can help managers build a full spectrum information portfolio for CRM that, through the thoughtful integration of existing tools, information properties, and communication channels, can provide a more complete picture of customers and form the basis for long lasting and profitable relationships with them.

The essence of customer relationship management (CRM) is understanding customer needs and leveraging that knowledge to improve a companys long-term profitability. When successfully deployed, CRM can have a dramatic effect on bottom-line performance. In a span of 18 months, Lowes Home Improvement Warehouse achieved a 265 percent ROI on its $11 million CRM investment. Virgin Wines achieved a 12 percent customer conversion rate (the percentage of customer visits to its website that resulted in sales) compared to a 4 percent rate before adopting the program. These examples clearly demonstrate CRMs potential.

Customer Retention Customer Satisfaction Profitability

Customer Loyalty

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The Rise of Relationship-Based Differentiation
CRM is a business strategy to acquire, grow and retain profitable customer relationships, with the goal of creating a sustainable competitive advantage. Product/price-based differentiation is waning because of four broad trends: maturing markets, global trade, efficient manufacturing and the Internet. Now CRM is emerging as a critical strategy simply because relationships are coming to the forefront of the competitive battleground. CRM should mean creating mutual wins for customers and all the company stakeholders, including employees and business partners. Its just common sense. Would you willingly continue to do business with a company if you didnt feel you were a winner in the relationship?

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Loyalty and the Bottom Line

Frederick Reichheld, author of The Loyalty Effect and Loyalty Rules, found that loyalty leaders grow, on average, more than twice as fast as the industry average across a wide variety of industries. And they do it more cost-effectively. The reason for this so-called loyalty effect is that loyal customers tend to spend more, cost less to serve and refer others.

The net result is that loyalty leaders are head and shoulders above their competitors in growth and profitability. Leading examples, according to Reichheld, range from Harley Davidson to Chickfil- A to Enterprise Rent-A-Car. The key question: How does a company create loyal relationships? And remember, were talking about relationships where customers have real choices. Dont include monopolist industries (as is the case with some utilities or government services) or customers trapped behind high exit barriers (such as database software or factory equipment that cant be easily replaced). Reichheld and other loyalty experts have studied this issue for years and concluded that loyal attitudes and behavior are driven by the customers perception of value, which is an amalgamation of what the customer receives; how its sold, delivered and supported; and how much it coststhe price or total cost of ownership. Experts in customer psychology say that customers emotional states influence about 50 percent of the value they perceive. Jim Barnes, author of Secrets of Customer Relationship Management: Its All About How You Make Them Feel, sums it up by saying, Value is created every time a customer is made to feel welcome, important and valued.

To be successful with CRM, you must start by understanding your customers and do the best job you can of listening to their needs. As Michael Dell said in his book, Direct From Dell: Strategies That Revolutionized an Industry, If youre constantly getting feedback from your customers, and youre willing to listen, you can make the most of the opportunities implicit in those needs.

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RESEARCH DESIGN
This survey was conducted among the customers who are part of one or more CRM or Loyalty or Reward Program.

Research Objectives: To study the perception of customers towards the CRM strategies implemented by the different companies or mainly retail stores.

To study the association between the companies and its customers.

THE RESEARCH INSTRUMENT

The research instrument used was developed to measure both the expectations and perceptions of the customers of different companies or stores. The questionnaire was developed hypothesis was formulated to reflect the associations between the different companies or Stores and the customer service offered by them. The main body of the questionnaire included 10 questions reflecting how customers perceive about loyalty or reward program and relationship with customers. Use was made of a five-point Likert scale. Structured questionnaires, to measure the respondents perceptions and expectations, were distributed to the people who are part of one or more loyalty or reward program.

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SAMPLES:

Sample Size: 20 Sample Frame: Mumbai City Sample Unit: Mumbaikar who are part of CRM program Sampling Method: Simple Random Sampling Constraints: Time, No. of Respondents Survey: Questionnaire

Hypothesis:

CRM helps business to increase its profitability through maintaining long term relationship with customers.

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Statistical Analysis
Profession:

Business Man 4

Service 13

Self-Employed 2

House Wife 1

Profession
2 1 4 Business Man Service Self-employed 13 House wife

Are you a part of which companys Loyalty/Reward program? Life style 4 Westside 3 Shoppers stop 1 Vishal Mart 1 D-Mart 1 Big Bazaar 2 Planet M 3 Crome 1 Spencers 1 Reliance Mart 2 Star Bazaar 1

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Companies
Life style 1 3 1 1 2 1 3 2 1 1 4 Shoppers stop D-Mart Reliance Mart Westside (Tata) Vishal Retail Big Bazaar Spencer's Planet M

After analysis we can easily identify that premium segment stores like Westside and Lifestyle are using CRM as its main tool to increase profitability and to nurture long relationship with its premium customers. Even some customers of these premium stores are not ready to change store as they become loyal to the brand. Some of the respondents are part of more than one loyalty or reward program. So I prefer to mention what they told me first preference.

How long you associated with this company? 6 months or fewer 1 1 year 9 2 years 7 3 years or more 3

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Association
3 1 6 months or fewer 1 year 9 7 2 years 3 years or more

Most Respondents have long term relationship with their associated companies as more than 1 year. This show that most companies offers customized products to its customers to build long term relationship with them and get more profits through nurturing relationship with existing customers.

I am part of this program because it makes me feel closer to the brand.

SA 3

A 17

SD

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Feel closer to the brand

3 SA A N D SD 17

Some respondents being part of loyalty or reward program of one or more retail stores strongly agree that they feel closer to the brand because of this CRM program. And most of other respondents agree that they feel closer to the brand. In short CRM or loyalty or reward program helps companies to nurture long relationship with their existing customers.

I am part of this program because I get the best prices / offers from the brand.

SA 13

A 7

N 0

D 0

SD 0

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Best prices/offers from the brand

SA A N D 13 SD

Most of the respondents strongly agree with the fact that they become loyal to the brand because of brand offers best price and best service to them. For every brand in retail setup it is important to offer something extra to the existing customers for nurturing relationship with them. Retail store brands like Westside, life style, shoppers stop; Reliance Mart etc use price benefit to the existing customers as in terms of discounts and other attractive schemes.

I am part of this program because I feel a sense of commitment towards the brand. SA 6 A 14 N 0 D 0 SD 0

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Sense of commitment towards the brand

SA A N D

14

SD

Most of the respondents agree with the fact that they become part of one or other loyalty program because of sense of commitment towards the brand. The brand cares for me. SA 2 A 17 N 1 D 0 SD 0

Brand cares for me

1 2 SA A N D SD 17

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Most of agree with the fact that if customer participate in one or other loyalty or reward program so brand support them and cares for them with customized offer and discount to the customers and profiting through nurturing relationship. I would like to remain part of this Loyalty/Reward program in future. SA 9 A 11 N 0 D 0 SD 0

Remain part of this program in future

SA 9 11 A N D SD

Most of the respondents agree with they will remain part of their respective loyalty or reward program in future also to enjoy the power of relationship with their respective brands and they remain in contact with the brand. So in short customers enjoy shopping with their existing companies and also companies enjoying to get profiting through nurturing relationship with their existing customers.

If competitor offers same product and service so would you like to switch? Yes 0 No 20

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Same product or service

Yes No

20

Every respondents agree that they will continue with the same brand and will not consider any other brand if their competitors offer same product or service to them.

So it is clear that it would be very difficult for competitor brand to get existing customers of their competitor brand. Brand generally give something extra to their existing customers and nurture existing relationship with their customers and customers also enjoying long term relationship with brand and get some attractive discounts and offers and best prices.

If in future new competitor enter into market and offers great product and service so would you like to switch?

Yes 14

No 6

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Great product or service

6 Yes No 14

Most of the respondents agree with if they will get something better than what they are getting now with their existing brand so they would like to switch the brand but some of them still have their long term relationship with their brand so they dont want to change brand anyway they prefer to shop at the same store only. So for brand which using CRM as their tool to nurturing existing relationship with their customers so they should provide something better than what they competitors are offering so its a best way to maintain long term relationship with their existing customers. If brand ignore what their competitors are providing new and something better in the market so they might be loose their customers and also lost their existing long term relationship with their existing customers.

I would like to purchase other products if company introduce its new product line in future.

SA 13

A 7

N 0

D 0

SD 0

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Introduce new product line in future

SA A N D 13 SD

Most of the customers agree that they would like to purchase new product if their existing brand offer new product as they add in their new product line. So it is clear that CRM program or reward or loyalty program help brand in nurturing existing relationship with their customers and in future if brand launch new product line so they will sell within existing customers so it will ultimately increase the profitability of the brand.

So in short CRM program helps brand to nurture relationship with brand and brand can profiting through long term relationship with customers and sell more among the existing customers and increase in satisfaction on both sides so as it creates win-win situation for both parties.

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Hypothesis Proven

As in every thesis or report Hypothesis creation and prove that hypothesis is an important aspect. Before research we assume something as it might be possible or might not be it is called hypothesis and its a very crucial part in any thesis presentation.

Hypothesis created before real research work and then we do some research to support created hypothesis.

In this thesis of CRM I also created one hypothesis as bellow:

CRM helps business to increase its profitability through maintaining long term relationship with customers.

So to prove this hypothesis I did some primary research and some kind of secondary research to see if this research result prove the hypothesis or not.

Primary research done by using questionnaire and also we can see analysis of all questions it is clear that CRM or loyalty or reward program helps businesses to nurture long term relationship with their existing customers and also according to parato law of 80-20 businesses get more profit through maintaining long term relationship with their existing customer base.

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Conclusion

In closing we can say that CRM is a new name of marketing as it helps to nurture the relationship with your existing customers and how to get more revenue for the business by providing customize solution to our existing customer base and motivate them to buy more and more and stay in touch with them to get more out of this type of CRM or loyalty or reward program.

Research on managing customer relationships has the potential to provide a unifying framework for studying diverse marketing issues, and to contribute more broadly to business practice. It also identifies fruitful new areas for theoretical and methodological advances in addressing organizational challenges at the cultural, strategic, and tactical levels. This thesis clearly mention and indicate all areas of CRM and how it use by todays businesses to get more profit by following law of parato 80-20 rule.

Also clearly indicate by primary research by questionnaire that customers also feel closer to the brand and they would like to remain part of this type of loyalty or reward program to get something better and it also create win-win situation for both the parties as profiting through nurturing long term relationship.

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Supportive Documents
Questionnaire Name:-.............................................................................. Profession:-....................................................................... 1. Are you a part of which companys Loyalty/Reward program? .................................................................................... 2. How long you associated with this company? 6 months or fewer 1 year 2 years

3 years or more

3.

I am part of this program because it makes me feel closer to the brand. Strongly Agree Agree Neutral Disagree Strongly Disagree I am part of this program because I get the best prices / offers from the brand. Strongly Agree Agree Neutral Disagree Strongly Disagree I am part of this program because I feel a sense of commitment towards the brand. Strongly Agree Agree Neutral Disagree Strongly Disagree The brand cares for me. Strongly Agree Disagree

4.

5.

6.

Agree Strongly Disagree

Neutral

7.

I would like to remain part of this Loyalty/Reward program in future. Strongly Agree Agree Neutral Disagree Strongly Disagree If competitor offers same product and service so would you like to switch? Yes No If in future new competitor enter into market and offers great product and service so would you like to switch? Yes No

8.

9.

10. I would like to purchase other products if company introduce its new product line in future. Strongly Agree Agree Neutral Disagree Strongly Disagree

Thank you for your precious time!

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Bibliography
Customer Lifetime Value: Marketing Models and Applications Berger, Paul D, Nada I Nasr.

Managing Customer Relationships - Ruth N. Bolton and Crina O. Tarasi

CRM: Profiting from understanding customer needs - Anne Stringfellow, Winter Nie

WWW.GOOGLE.COM

WWW.CRMGURU.COM

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