Customer Relationship Management
Customer Relationship Management
Customer Relationship Management
Management
Published by : Mrs. Meena Pandey for Himalaya Publishing House Pvt. Ltd.,
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Preface
In today’s highly competitive business world, both CRM and excellence in customer
service are strategically important. Business managers know that providing quality customer
service is essential to increase satisfaction in order to increase relationship share and
subsequently to achieve revenue growth. The main idea of CRM is to have better
understanding about customers so that the firm can serve them in an improved way, and
thus enhance customer satisfaction. It will lead to better customer perception about firm and
positively affect relationship share.
Customer Relationship Management is putting the customer at the heart of the business.
With the support of technology, the organization can have a 360-degree view of the customer,
which will enable them to improve the quality and satisfaction of each customer interaction
and maximize the profitability of customer relationships, a win-win for both organization
and customers. CRM is a business strategy that apply to every organization. It means
working with customers such that they receive great service and are motivated to return
again and again to do more business with the organization. Depending on how one look at it,
CRM can be practiced in companies at different levels. It can be practiced at the
organizational level (ideally). It can be practiced at a front end (customer facing level) –
anything that has to do with interactions with customers, marketing, sales and service. Or it
can be practiced at the very functional level, like in a call center within a sales force, etc.
CRM requires a customer-centric business philosophy and culture to support effective
marketing, sales and service processes. CRM applications can enable effective customer
relationship management, provided that an enterprise has the right leadership, strategy and
culture. Customer Relationship Management is about maximizing value with your customer.
In this competitive global economy, a key business strategy is focused on infrastructure and
delivery of business processes to manage and deliver customer value across multiple
channels.
Over the last two decades, a significant amount of effort has been devoted to the study
of relationship marketing, which is concerned with the activities organizations undertake in
an attempt to develop and maintain successful relational exchanges with their customers.
While the voluminous literature on relationship marketing has and continues to enhance
understanding about the characteristics, antecedents and consequences of relational
exchange, it has also generated numerous related insights which are starting to exert a strong
influence upon current marketing research, practice and thought.
The effective and efficient management of customer relationships presents a difficult
challenge for service providers, a challenge which grows in complexity as the heterogeneity
in a firm’s customer base increases. That is, when providers are compelled (by market
conditions) to pursue customers who differ in terms of their needs and preferences, it
becomes significantly more difficult for them to build the right type of relationship with the
right type of customer. This added difficulty arises from the inherent intricacies associated
with: (1) distinguishing between “customer types” based on their apparent needs and
preferences, and (2) having to behave differently towards each individual customer (i.e.,
crafting relationship-appropriate interactions) given their particular “customer type”. As a
consequence, the quality of a provider’s customer portfolio is ultimately determined by how
well it is able to balance two conflicting organizational needs: the need to market its products
and services to a heterogeneous customer base, and the need to effectively and efficiently
manage its exchange relationship with each individual member of that customer base.
On the one hand, global competition has become more intense, while on the other,
opportunities for cooperation across borders have never been greater. Long-term survival of
businesses, and indeed entire economies, depend on how well these forces are understood
and leveraged. Students of customer relationship will be at considerably advantage in these
respects when they embark on their careers. It has become essential for business managers,
policy makers and researchers involved in the global environment to understand customer
relationship. In the 21st century, goods, services and knowledge flow across country borders
much more easily than in the past. For business, the implications of these flows and the
increased mobility of human resources are profound and can be taken care if they
understand their customers.
The author has undertaken the research work in the area of customer relationship
management in different industries in India. There are many research papers published in
refereed international and national journals by the author. This has provided the desired
foundation to built the strong pillars and valuable insight on the subject and writing the
present book. There are number of the books of Indian and foreign authors available in the
market dealing with this subject, still the need was felt to write a book which covers the
syllabus of leading Indian universities and the professional courses of master degree in
Management/Business Administration. Keeping in view this fact, the attempt has been
made to write text book which can cover the syllabus of such courses. The present book is an
attempt in this direction.
The author feels that the text book will be useful for all Universities in the country as the
subject is not only discussed at length but also presented with several examples and case
studies. Several questions, exercise problems and objective type questions have also been
provided at the end of each chapter for the benefit and better understanding of students. The
author wishes the students, research scholars and faculty to read the book and give
invaluable suggestions or corrections that are required for better improvement of the
presentation of the subject content, although, care has been taken to make it error-free text.
The author humbly requests the readers to bear with, if any mistakes are found and
intimate the author by email at shamsher_1965@rediffmail.com
Author
Acknowledgements
Writing a text book is an arduous task that requires enormous perseverance, endurance
and sustained commitment over a long period of time. It also involves incredible sacrifices of
other opportunities, social occasions, family leisure and social gathering not only for me but
also for entire family especially my wife Ms Rajkumari and children Raveena and Ravish,
making this book in its real sense our book rather than my book. I would like to extend my
sincere gratitude to my all family members for their continuous support and inspiration.
The motivation to write the book entirely goes to my students to whom I have taught
this subject several times. I would like to extend my sincere thanks to all of them as well as to
all those students who will be my future students. The subject matter of this book has been
adopted from my research work, other books on the subject, professional journals,
magazines, other publications as well as internet. However, while adopting the relevant
subject matter, the emphasis has been given on its relevance in Indian context. I thank all
those writers and researchers whose thoughts and theories have been helpful in bringing out
this book. Their contribution has been duly acknowledged. My deep gratitude and sincere
thanks to all of them, without their contribution this book would not have been possible. I
am grateful to all of them.
I owe a debt of gratitude to my professional colleagues for their support. A special note
of thanks is due to my publisher to Himalaya Publishing House Pvt. Ltd and their staff in
extending their wholehearted support and encouragement. I would like to extend my thanks
to numerous prospective readers of the book and welcome their suggestions. Last but not the
least I should thank God, for this grace and inspiration, word of thanks appear so inadequate.
I eagerly look forward to receive your valuable comments, feedback and suggestion for
further improvement of the book at shamsher_1965@rediffmail.com, for which I would be
highly grateful.
Author
Contents
INTRODUCTION
The term CRM was first used in 1993 by Tom Siebel, hence it is closely connected to
Siebel System – an IT company. Therefore, many executives are under the misconception
that CRM is principally an IT implementation, this is the exact cause of many failures – and
there have been many of them. If technology is applied to a faulty business strategy, all that
is going to happen is that the company is going to become more efficient at doing the wrong
things. If the core business strategy isn’t put right first, there will be failure. As CRM is
viewed more as a strategy than a process, organizations must get the business strategy right
first. Decide which customers or segments to target. Develop sensible customer acquisition,
retention and development plans. Sort out the channel strategy first (direct or indirect) then
sort out which products, services and bundles of value to offer to the chosen customers.
Once that’s in position, then one may start looking for IT to support it – but not until then.
As in a business of one sort or another, the goal of marketers is to have CRM help to
acquire, grow and retain profitable customer relationships to create a sustainable
competitive advantage. Without a doubt, customer loyalty is a key driver of profitability.
Creating customer loyalty must be an integral part of your organization’s strategy –
particularly in a time of industry consolidation. Understanding customers’ requirements is
fundamental to business success. Reichheld’s (1996) research which demonstrated that a
strong link exists between customer loyalty and corporate profitability. Customer acquisition
costs, 5 to 7 times higher than customer retention costs (Kotler, 1997), can be held in check;
while profits can be boosted by 25% to 85% by reducing customer defections by a mere 5%
(Reichheld and Sasser, 1990).
The following are the different types of business imperatives for a successful CRM
strategy:
Creating a customer-focused organization and infrastructure.
Assessing the lifetime value of the customer’s profitability.
Maximizing the profitability of each individual customer.
Methods to attract and retain the best customers.
Establishing and maintaining long-term relationship with customers.
Offering contractual safeguards like guarantees, warranties and building the
customer confidence.
The organization should impart the training programs, so as to familiarize the
employees with their role and the rationale for change. The training programs
should teach managers the ways to track, recognize and reward activities related to
CRM.
In today’s highly competitive business world, both CRM and excellence in customer
service are strategically important. Business managers know that providing quality customer
service is essential to increase satisfaction in order to increase relationship share and
subsequently to achieve revenue growth. The main idea of CRM is to have better
understanding about customers so that the firm can serve them in an improved way, and
thus enhance customer satisfaction, which may lead to better customer perception about firm
and positively affect relationship share.
Customer Relationship Management is putting the customer at the heart of the business.
With the support of technology, the organization can have a 360-degree view of the customer,
Introduction: Customer Relationship Management | 3
which will enable them to improve the quality and satisfaction of each customer interaction
and maximize the profitability of customer relationships, a win-win for both organization
and customers. CRM is a business strategy that apply to every organization. It means
working with customers such that they receive great service and are motivated to return
again and again to do more business with the organization. Management Guru Peter
Drucker said “The true business of every organization is to make and keep customers”.1
Depending on how one look at it, CRM can be practiced in companies at different levels. It
can be practiced at the organizational level (ideally). It can be practiced at a front end
(customer facing level) – anything that has to do with interactions with customers, marketing,
sales and service. Or it can be practiced at the very functional level, like in a call center
within a sales force, etc. While CRM requires a customer-centric business philosophy and
culture to support effective marketing, sales and service processes, CRM applications can
enable effective customer relationship management, provided that an enterprise has the right
leadership, strategy and culture.2 Customer Relationship Management is about maximizing
value with your customer. In this competitive global economy, a key business strategy is
focused on infrastructure and delivery of business processes to manage and deliver customer
value across multiple channels.3
DEFINITIONS OF CRM
CRM has been defined as tracking customer behavior in order to develop marketing and
relationship-building programs that bond consumers to a brand often by development of
software systems to provide one-to-one contact between the marketing business and their
customer. CRM is the core of any customer-focused business strategy and includes the
people, processes, and technology associated with sales, marketing, and service.4
Various scholars have defined CRM in different ways. Some of these definition are:
It is core business strategy for managing and optimizing all customer interactions
(Sowalskie, 2001) which helps in learning about the needs, wants and buying
behavior of its customers. This understanding of customer’s need/want and buying
behavior helps the firm customize products to satisfy them. This positively effects
customers’ satisfaction and thus potentially enhance customers’ attitude towards
the firm, subsequently enhancing customers’ intention to accept a relationship with
the firm.
Customer Relationship Management is also defined as “a comprehensive strategy
and process of acquiring, retaining and partnering with selective customers to
create superior value for the organization and the customers” (Jadish N. Seth, Atul
Parvatiyar and G. Shainesh, 2001).
G.C. Beri (1995) has defined CRM as “a process of attracting new customers,
maintaining, developing close relationship and enhancing customer relationship”.
According to Shani and Chalasani (1992), CRM is “an integrated effort to identify,
maintain and build up a network with individual customers and to continuously
strengthen the network for the mutual benefits of both sides, through interactive,
individualize and value added contacts over a long period of time”.
According to Jackson (1985), CRM mean “marketing oriented towards strong,
lasting relationship with individual customers”.
Gronroons (1990) states it as “marketing to establish, maintain and enhance
relationship with customers and other partners, at a profit so that objective of the
parties involved are met through mutual exchange and fulfillment of promises”.
Morgan and Hunt (1994) suggest it as “all marketing activities directed towards
establishing, developing and maintaining successful relationships with the
customers”.
Zablah (2004) has defined CRM as an “ongoing process that involves the
development and leveraging of market intelligence for the purpose of building and
maintaining a profit-maximizing portfolio of customer relationships”.
CRM means attracting, maintaining and enhancing customer relationship. It
included following activities: developing core services to build customer
relationship, customization of relationship, augmenting core services with extra
benefits, enhancing customer loyalty and fine tuning internal marketing to promote
external marketing success (Leonard L. Berry, 1983).
Christopher (1990) consider CRM as “a tool to turn current and new customers into
regularly purchasing clients and then progressively move them through being
strong supporters of company and its products to finally being active and vocal
advocate of the company.
James J. Lynch (1996) defines CRM as “selling by using psychological rather than
economic inducement to attract and retain customers”. It seeks to personalize and
appeals to the heart, mind and purse of the mass consumers.
Ian H. Gordon (1998) considers CRM as “an ongoing process of identifying and
creating new values with individual customers and then sharing the benefits from
this over a lifetime association.” It involves the understanding, focusing and
management of ongoing collaboration between suppliers and selected customers
for mutual value creation and sharing through interdependence and organizational
alignments.
CRM is similar to “relationship marketing” or “lifetime value marketing” because it
allows firm to create long-term, mutually beneficial customer relationship that
result in high customer satisfaction (David, 1999).
CRM requires that a firm views customer relationship as a means to learn about
customers need and wants and how to create, satisfy and sustain them thus
enabling the firm to meet its objectives (Ragin and Greco, 2003). As a process geared
towards the increasing value of customers over the lifetime of the relationship.
CRM includes systematic processes used to attract and retain customers, prospects,
business partners and other constituents.
Introduction: Customer Relationship Management | 5
IMPORTANCE OF CRM
5 Verma Saket (2003), “Implementing a Technology Based CRM Solution” in Customer Relationship Management- Emerging
Concepts, Tools and Applications, Tata McGraw-Hill Publishing Company Ltd., New Delhi, pp. 143-149 by Sheth, Jagdish,
Parvatiyar, Atul and Shainesh, Ganesh.
Introduction: Customer Relationship Management | 7
organization strategy, people, and technology and business process. Therefore, CRM is an
intelligent blend of marketing and information technology for serving the customer with
greater care and value.
Customer Relationship management is the strongest and the most efficient approach in
maintaining and creating relationships with customers. Customer relationship management
is not only pure business but also create strong personal bonding within people.
Development of this type of bonding drives the business to new levels of success. Once this
personal and emotional linkage is built, it is very easy for any organization to identify the
actual needs of customer and help them to serve them in a better way. It is a belief that more
the sophisticated strategies involved in implementing the customer relationship
management, the more strong and fruitful is the business.
In the present scenario, the customers are well informed and have the knowledge of
their rights. They scrutinize products and services before spending on them, they exercise
their consumer rights and with the advent of social media they are more capable now to
influence the purchasing decision of others as well. In such a environment, businesses are
bound to employ customer relationship management strategy to promote their product and
create a loyal customer base. These loyal customers again promote products and services
through their own networks. This is the additional advantage that a business can achieve
through its patrons. In order to survive in today’s competitive marketplace, organizations
must strive to offer improved customer services. Consumers have started looking for
professional and better services and with this the importance of customer relationship
management are being given due considerations in the new economy.
Through customer relationship management, a business promises of offering a
distinguished level of satisfaction to its customers. In their efforts towards offering a better
level of customer satisfaction, companies should attract and retain customers and give them
the advantages that others in the same niche don’t provide. The key attributes bringing
success in customer relationship management are ultimate product experience, quality
performance, timely response to customer queries and exemplary customer services. In
Customer Relationship Management, resourcefulness is the key. A business need to be
always prepared and things must be in place to satisfy a client’s needs.
The image of a caring organization stands between its failure and success. If a business
manages to create its image with better customer services, more and more people will show
their interest to be part of its ever-growing customer base. For this, businesses should adapt
to the consumers’ needs and preferences. For the success of Customer Relationship
Management, businesses need to prepare a pool of professional and efficient customer
service representatives who must be ready to address the issues of the customers promptly
and positively. Whenever felt, appropriate training should be provided to these
representatives to remain updated and skilful to help them perform their jobs efficiently.
Customer relationship management is not all about answering to the queries of the
customers and clearing their doubts. Businesses implement lots many innovative programs
to engage customers and promote their products or businesses. Customer survey is a
popular form of Customer Relationship Management where customers’ opinions on their
experience with the products are recorded. These opinions form the basis of decision-making
8 | Customer Relationship Management
while deciding on advertising, promotion and product attributes. These improved product
attributes play a significant role in retaining patrons and luring new customers as well.
In real sense, customer relationship management reinforces an organization’s
commitment to go the “extra mile” in an attempt to please its customers and keep them
interested in its brand. In a cut-throat competition scenario, where everyday a new product
hits the market, businesses need to implement strategies to develop a long-lasting
relationship with its customers. When you successfully add a “wow” factor to your product
and services, customers cherish your brand and ensure your dominance in the industry.
new ways of marketing and business in an efficient manner. Hence, in the era of business,
every organization should be recommended to have a full-fledged CRM system to cope up
with all the business needs.
DISCUSSION QUESTIONS