Prof. Samir V.

Charania CRM CRM Implementation – Issues & Challenges

Chapter 6 CRM Implementation – Issues & Challenges

6.1 CRM Implementation Road Map
CRM implementation road map helps a firm to develop a positive cultural acceptance of
CRM. This road map enables the firm to deal with the organisational changes, new
businesses, customer needs and CRM technologies.
The different stages of a CRM implementation road map are shown in Figure below:

1. Scenario Analysis:
The creation of an enterprise CRM strategy requires a firm to take a hard look at its business
and environment. The firm needs to answer such questions as below:
 What is the present business scenario and how is it likely to evolve in the future in short-,
medium- as well as long-terms?
Scenario analysis helps a firm to understand its position vis-a-vis its competitors. The firm
can then define what it needs to do to improve its performance in the market and develop
relationships with its customers.

2. Purpose Definition:
After the analysis of its environment, the firm needs to define its purpose for going in for a
CRM exercise. This may be to build more effective, efficient and long lasting relationships
with their customers. The firm should not embark upon a CRM exercise just because its
competitors have done so or it is the latest fad in the industry.

3. Planning:
The next very important step in the CRM implementation road map is the planning stage.
The most critical operation here is to define CRM’s over all objectives at the department and
the enterprise level. The planning phase includes documentation of high-level CRM business
goals in the form of a business document that becomes the focal point for strategy
development. Planning also includes details on what needs to be done and the people who
would be responsible for the same. Many fundamental changes may occur in an
organisation because of such an exercise. There are five interrelated areas that are subject
to changes. These include:
 Business Focus
 Organisational Structure
 Business Metrics
 Marketing Focus
 Technology

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Prof. Samir V. Charania CRM CRM Implementation – Issues & Challenges

In the planning stage the firm should take a hard look at the changes liable to happen and
prepare for it. Teams need to be set up that will handle various aspects of such changes.
Communication is extremely critical and vital during this stage.

4. Process design:
CRM entails changing the entire focus of the organisation to customer-centric with the
processes and operations getting designed around the customer. The process design is an
important phase wherein the firms look at their current processes and try to redesign the
processes to make them more customer focused. Other factors such as effectiveness of
these processes and their efficiency are also considered at this stage.

5. Technology and Vendor Selection:

In this stage, various technologies and vendors are evaluated. Factors such as alignment of
the technology with the current systems, capability of the CRM solutions in terms of their
functionalities and other such factors are considered while evaluating the products from
different vendors.

6. Solution Development:
The solution development stage consists of various activities such as customization of
features, development of new features that are not present in the product, process
integration and testing by using the prototype and the design of the database. Sometimes,
integration of different CRM solutions with each other and also with the back-end systems
takes place at this stage.

7. Implementation
In this stage, the organisation deploys the solution and documents it. End- users need to be
trained and the system needs to be sold internally so that it is used.

8. Measurement:
The final stage in the CRM implementation road map involves development of metrics for
measuring the performance of the CRM solution and comparing it with the desired
performance. If the CRM solution falls short of expectations, the firm might go back and
refine its CRM requirements. Developing metrics, enable the firm to measure the success of
the CRM implementation in terms of how well it has solved the business problem.
Sometimes, the improvement may be gradual as users become more familiar with the new
technology and business processes.
Thus, the development of a CRM strategy and its implementation as a road map consists of
many interrelated stages. All these stages take place one after the other and require
corrective feedback at each stage

6.2 Customer Retention Plans

Customer retention is increasingly becoming more and more important as firms understand
the value of a loyal customer. Most firms offer loyal customers rewards for their loyalty.
It has been increasingly seen that rewards can and do build customer loyalty. However, in
practice, many rewards programs are misunderstood and often wrongly applied. Unless
rewards programs are properly designed, they will at best return only a fraction of their

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potential value. Firms can profit from their current customers through customer portfolio
analysis, a customer retaining marketing mix and reorganization for customer retention.
1. Customer Portfolio Analysis:
Before developing customer plans or reward programs, a firm needs to know the purchasing
history of a product or firm's customers. A customer portfolio is a combination of customer
types for each product that generate sales and resulting profit. An optimal customer
portfolio consists of a balance of new and repeat customers yielding target sales and profits
The design of a portfolio begins by seeking meaningful customer classifications based on
market research of actual purchase patterns. The portfolio segments can be measured in
terms of number of customers, number of purchases, demographic and psycho graphic
profiles and contributions to sales and profits. For example, a firm can analyze how the
customer portfolio contributed to the sales in terms of contributions from each segment
and this can be used to fix the next year's sales figures
Customer categories Actual Sales (2018) Target Sales (2019)
First Time Customers 28% 25%
Repeat Customers 40% 60%
Switched Away, Then 10% 5%
Returned
Last Time (Defectors) 22% 10%
Total 100% 100%

2. Reorganization for Customer Retention:

An important factor that frequently contributes to the loss of customers is the lack of
organizational control and coordination. This problem takes two forms.
(i) Lack of sensitivity to customer turnover rates and
(ii) Insufficient linkage between the marketing function and the operations group.
Realistic target turnover rates should be set for evaluating market performance, otherwise
organisations would find it very easy to rely on promotions to recruit new batches of
customers rather than retain customers.
Another approach that would emphasize customer retention is executive accountability for
customer retention. This would send clear signals all over the organisation about the
importance that the firm is attaching to customer retention. In many types of firms and
industries, there exists inadequate coordination between the marketing and the operations
group. This frequently results in problems such as over selling wherein the marketing
function sees its task solely as attracting customers by promising virtually anything.
Customer expectations are raised to such an extent that invariably the end result is
customer disappointment, in spite of the product or service being as good as the best in the
industry. One way of improving the coordination between the two functions is by specifying
the -interdependency of both functions.

3. Customer Retaining Marketing Mix

The customer retaining marketing mix is a set of programs and strategies that aim at
customer retention. Ideally, a firm should have two separate marketing mixes - one for
customer retention and the other for customer acquisition. Several elements such as
product extras, reinforcing promotions, sales force connections, specialized distribution and
post-purchase communications are usually parts of such a mix.

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(a) Product Extras: This entails providing customers with more than the basic product that
initially attracted them. The main approach is to create a total product service system that
contains not only the items that the customer purchased initially, but also related benefits
by giving other items from the product line. Example: McDonalds no longer just sells
burgers, but complete meals. The customers get involved with the system and might remain
with the firm as opposed to when just delivered with the basic product that might be
subject to aggressive competition.
When a product breaks down or a service goes unperformed, the situation can be retrieved
by anticipating such problems in advance and providing the customer with easy to repair
features (with which the customer can him/herself repair) or having preventive
maintenance schedules and adhering to them carefully.

(b) Reinforcing Promotions: Product promotions work better when aimed at existing
customers because the customer already knows about the firm's products and thus the firm
can look towards advancing the knowledge of the customer about the product. Such types
of promotions can also introduce customers to the firm's other products. A firm can
reinforce customers by promoting customer-only publications that are targeted at buyers
'who have exhibited some degree of commitment to the product or the firm by one or more
purchases. Post purchase dissonance can be reduced considerably by communicating after
the customer performs the purchase act either by direct mail or by telephone calls. This also
helps clear any consumer doubts or confusion regarding the purchase.

(c) Sales Force Connections: A sales force must be oriented to serving a long-term
relationship with the customer. In many industries, it is the sales person who is in direct
touch with the customer. Sales persons who are inadequately trained, lack preparation and
knowledge about the product line and try to sell a product rather than solve customer
problems usually do not keep customers for long. In some retail banks, relationships with
customers are sought to be enhanced through the concept of a 'personal banker'. An
employee is given a few customer accounts to look after and the customer's interface with
the bank takes place only through this employee.
As time passes, the relationships with customers are strengthened through such an
arrangement ultimately resulting in more personalized services. CRM solutions and other
supportive expertise (like specialists, etc.) enhance the sales force's ability to help
customers.

(d) Specialized Distribution: Firms can try and retain customers through separate
distribution channels, through special functions. This depends on the distribution strategy
adopted by the enterprise. For example, in the retail market, the layout of facilities can be
designed so that attracting and retaining customers are handled separately.
Banks can have two types of counters one manually operated by a teller for new customers
while another that has an automated teller machine for old customers who favour speed of
service and are not averse to self-service. Dealer support is also important to foster repeat
buying of a firm's brands. Dealers develop commitment towards a brand and might aid
selling if they get adequate attention from the manufacturers:

(e) Post-purchase Communication: A firm must anticipate that some of its customers might
experience minor or serious problems after purchasing. Post-sale service can be helpful in

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preventing customers from defecting. Customer complaints should be looked into promptly
and this function can be assigned to those personnel already dealing with those customers.
The firm should encourage customers to initiate contact whenever needed - to clarify
instructions, request further information, point out a problem or seek a remedy. Having toll
free hot lines and service desks can facilitate this process.

6.3 Evaluating Retention Programmes

A firm needs to review its customer retention, rewards and loyalty Programmes at regular
intervals to see if they have the desired effect and are valued by the customers. A firm
launches a rewards programme to increase its loyal following by rewarding those customers
who are loyal to the firm. It might give a lot of freebies and other rewards. However, it
should also get equivalent value from its customers. Following points need to be taken into
consideration while evaluating the retention Programmes:

1. Targeting the Right Customers:

A firm should periodically review the customer retention programmes to see if the
programmes are targeting the right customers - loyal customers and customers with
potential for long lifetime value. In case the .firm designed the programme with the
intention of attracting a particular segment of its customers and ultimately found it being
used by another segment, then it would do well to review the continuation of the
programme. The most valuable customers should be targeted and rewarded.

2. Value Provided:
The firm should also periodically review whether customers value the programme and
consider their views about it. If it is seen that the customers are not valuing rewards
provided by the firm then it is appropriate to change the reward structure. The firm should
also not provide more value than what can be generated by the programme. If so then the
firm stands to be at a loss. For example, an airline might start a frequent flyer programme to
reward its customers. However, in some cases it might find that it does not have the
capacity to service its customers and that many of its future flights consist of travelers who
are redeeming their free mileage. In such circumstances, it is better to exit the programme
rather than face losses as a result of the inappropriately designed programme.
A rewards programme generates a lot of data about the customers and the purchase
patterns followed by them. This should be tracked and insights obtained should be used
profitably for providing further incentives to the customer to stay loyal. Particularly data
that needs to be tracked include, customer usage patterns, customer redemption patterns,
sales achieved, repurchase volumes and value, etc.

3. Measuring Increase in Loyalty:

A rewards programme should generate an increase in loyalty. This should be seen in the
increase in the amount of purchases and repurchases made by the customer. If a rewards
programme does not result an increase in sales or profits then its continuation should be
reviewed. If the firm does not derive any benefit from the programme then it is better to
discontinue it.
Sometimes, competitors might copy a rewards programme easily. If customers shift from
your firm to the competitor then it obviously means that the competitors are providing
better value than your firm to the customers.

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Now, we can say that the main yardstick by which retention programmes should be
evaluated is by the value they provide to the firm and their effectiveness in generating a
loyal following of customers.

6.4 CRM in Services

Service Quality Themes in CRM
Customer Relationship Marketing (CRM) is essentially about building long-term and
mutually beneficial relationships with customers. While providing services to customers, the
issue of building relationships with customers takes on a different dimension due to the very
nature of services.
The important characteristics of services:
(a) Intangibility: Customers find it difficult to evaluate the quality of services offered to
them. This is because of the intangible nature of services. Unlike goods, services cannot be
touched, smelt, seen or experienced through our sensory organs and hence it is difficult for
customers to evaluate them.
(b) Simultaneity: Services are consumed as they are produced. Thus, the chances of error
are greater than that of the goods that can be inspected for quality before sale.
(c) Perishability: Most services cannot be stored or inventoried. If a flight leaves with a few
seats vacant, they are lost. Similarly if a hotel has unoccupied rooms on a day, the potential
revenue is lost.
(d) Heterogeneity: Most services are people intensive as they require employees to render
a service in the presence of other customers. Therefore, the quality of the offering will vary
depending upon the person providing the service, and standardization is not easy to
achieve.
Relationship marketing gives high emphasis on attracting, maintaining and in multi-service
organisations, enhancing customer relationships.
Berry (1997) has identified three situations in which relationship marketing is most
applicable to a service firm. These are:
1. There is an ongoing or a periodic desire for the service on the part of the customers.
Example: A telephone service is an ongoing service and the service provided in a hospital is
a periodic service.
2. The customer decides which service provider he/she wants use. For example, a customer
may decide which restaurant to go for dinner as opposed to sitting in the first taxi or auto
outside the railway station. In the latter case, the customer may not have a choice.
3. There are alternative service suppliers and switching of customers from one supplier to
another is common. It is easy for the customer to do this as it involves negligible or no
switching costs for the customer. For example: A customer may fly by an airline of his/her
choice as opposed to buying the electricity supply from a monopoly in the area.
When such conditions exist, as described above, then there is a need and an opportunity for
the service firms for attracting customers and building relationships with them.
Promising and delivering quality service is one of the most important ways for
differentiation on dimensions that are meaningful to the customers and difficult to
duplicate.
Parasuraman, Berry and Zeithaml (1985) developed a conceptual model that defines service
quality from the customer's perspective and identifies key service provider gaps potentially
responsible for poor service. Perceived service quality is defined as 'the degree and direction
of discrepancy between the consumer's perceptions and expectations'.

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Parasuraman, et al. (1988), identified the following five dimensions that determine the
service quality:
1. Reliability - ability to perform the promised service dependably and accurately.
2. Assurance - knowledge and courtesy of employees and their ability to inspire trust and
confidence.
3. Tangibles - physical facilities, equipment and appearance of personnel.
4. Empathy - caring and the individualized attention that the firm provides to its customers.
5. Responsiveness - willingness to help customers and provide prompt service.
However, these dimensions are not equally important for service quality. In most services,
reliability and responsiveness emerge as the most important dimensions

THE COST OF LOSING A CUSTOMER

Firms underestimate or even worse, ignore the cost of losing a customer. They assume that
a lost customer can be replaced and one should not worry as long as the revenues are
coming in. However, this is an imperfect thinking. It does not look at the quality aspect and
the implicit costs of losing customers. When managers do not measure the actual cost of
losing a customer, they will not be able to focus on reducing defections as they will not
know the worth of a customer. Defecting customers are clear indicators of a drop in profits
in the future. There are many ways in which loss customer cost the firm.
1. A lost customer reduces cash flows for the firm in the future. Served correctly, customers
generate increasingly more profits each year they stay with a firm. This is because of the
increasing familiarity with the service that the firm provides to the customers. Familiarity
with the service further increases the volume of the business that the customers do with the
firm. Example: A customer grows more comfortable with using a credit card, he/she will use
it for more purchases over a period of time.

2. If a firm wants to maintain the same volume of business, it has to attract new customers.
Replacing an existing customer with a new customer costs up to five times more in
advertising and other costs. Also in the first year the new customer would spend less than
an old customer would have done.

3. Servicing customers over a period of time becomes more cost-effective for service firms
as they discover new traits of the customer and his likes and dislikes. Therefore, a firm can
serve old customers more efficiently than it can serve new customers.

4. Firms with long-term customers, in whom they have developed a higher level of loyalty,
can charge more for their products and services. A customer will often willingly pay more to
stay at a hotel they know or consult a doctor they are used to rather than take chances with
some unknown hotel or less expensive doctor.

5. Highly satisfied long-term customers are likely to refer new customers to the firm. This
means that the firm has to spend less on advertising and other expenses for attracting new
customers.
When a firm considers all the costs that result due to the loss of a customer, the managers
of the firm become conscious of the actual situation. They realise that the continuous
improvement in the quality of the service is not a cost but an investment in form of a
customer who generates more profit than the margin on a one-time sale. Estimation of the

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costs of losing customers makes it easier for managers to justify the cost of continuously
improving service quality versus things like cost reduction that have more tangible
measures.

SERVICE RECOVERY
It is important to know that even if a firm makes its service delivery as faultless and as
perfect as possible, mistakes can be committed due to heterogeneous nature of services.
In services, often performed in the presence of customers, errors are inevitable. Firms may
not be able to prevent all their problems, however, they can learn to recover from them.
A good recovery can convert angry and frustrated customers into loyal ones. For a good
service recovery. Employees must be willing to put in that extra bit of effort and act quickly
to retrieve the customer
Example: In one of the resorts that usually hosts the meetings and conferences, guests
were checking in for a conference on a Monday morning. At the same time a group of
tourists were checking out after they had spent a weekend at the resort. In the confusion at
the reception area, one of the guests who was checking out picked up a suitcase of a
customer who was checking in for the conference. This guest then proceeded to the airport
to catch a flight. When the loss was detected by the customer and reported to the manager
of the resort, the manager rightly concluded that the suitcase must be with the group that
had checked out. The manager took all details regarding the suitcase and its contents .. After
assuring the customer that everything would be done to recover the suitcase, he persuaded
the customer to attend the conference. He first sent a bellboy to the airport to recover the
suitcase and at the same time, proceeded to buy a new suitcase of equivalent value and
filled it with similar contents. The manager first gave this suitcase to the guest telling him
that the resort takes responsibility for what has happened and wanted to make good his
loss. The guest was even more delighted when the bellboy who had gone to the airport was
able to retrieve his suitcase. Finally. the resort manager gave the guest both the suitcases as
a sort of compensation for the trauma that the guest had undergone. This gesture was very
much appreciated by the guest and the resort got lots of business through him in the next
few years not only directly but also by referrals. It should be noted that .the resort was not
at fault because it was the customer who did not bother to look after his baggage before
checking in. However, by rising up to the occasion and taking a very bold decision, the
managers averted a potentially embarrassing situation for the resort and convert it to the
resort's advantage.
There are many opportunities that exist for service firms for a service recovery. Any problem
that employees, who are close to the customer, can discover and resolve is a chance to go
beyond the call of duty, win a customer for life and create more goodwill even though
service would have gone smooth in the first place. First of all no business can afford to lose
customers for the simple reason that it costs more to replace an old customer with a new
one. Firms that alienate and frustrate their customers will soon realise that most of their
customers leave them to join the competitors, who go out of their way to please customers.
Although, good recoveries from service problems do happen because of some exceptional
individuals, firms should not depend on such rare instances of resourcefulness.
Firms should take steps to ensure that everyone in the organisation has the skill, motivation
and authority to make service recovery an integral part of operations.

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6.5 Key Account Management

Key Account Management (KAM) is one of the most popular and successful approaches
used for customer retention and development. It has been recognised as an important part
of the customer relationship management in business-to-business (B2B) marketing.
Key Account
A key account can be defined as a customer in a B2B market identified by a selling firm as of
strategic importance. All customers are not equally profitable or equally important. In fact,
some sellers and vendors consider some customers as key accounts not because of their
profitability, which may be low, but because of other issues such as prestige or reference
value or because they permit access to new markets and technologies. All key accounts are
considered to be of strategic importance by the seller. However, with respect to the other
variables, they may vary widely. Example: They may be small or large in comparison with
the seller or operate locally or globally, etc.

Stages of Key Account Management

KAM is an organisational process that assumes relationships are not static, and they evolve
over a period of time. Each interaction is a consequence of the relationship that exists
between the customer and the supplier.
The stages of this model is as follows
1. Pre-KAM: In the pre-KAM stage it is essential for the firm to identify those accounts that
have the potential of moving towards key account status. This is important so that the firm
does not waste time and money in those accounts that do not hold this potential.

2. Early KAM: In the early KAM stage, a firm explores opportunities for closer collaboration
with its customers by examining the motives, behaviour, culture, strengths and weaknesses
of the customers. A detailed understanding of three aspects is very important at this stage.
These are: the decision- making process, the nature of the decision-making unit and the
buyers business and problems.

3. Mid-KAM: As the relationship of a firm with the customers deepens, the level of trust and
the range of problems that are addressed increases. The number of contacts between the
employees of the firm and the customers also increase to a much higher level. This implies
that the sales person's role in the relationship with the customers will decrease and the top
management's role in the relationship will increase.

4. Partnership KAM: This represents a mature stage of key account development. Joint
problem resolution is the main focus at this stage of the relationship development.

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