Easy Anna Univ Customer - Relationship - Management Book

CUSTOMER RELATIONSHIP MANAGEMENT
SYLLABUS
UNIT-I
INTRODUCTION - Defi nitions - Concepts and Context of relationship Management – Evolution - Transactional Vs
Relationship Approach – CRM as a strategic marketing tool – CRM signifi cance to the stakeholders..
UNIT-II
UNDERSTANDING CUSTOMERS - Customer information Database – Customer Profile Analysis - Customer
perception, Expectations analysis – Customer behavior in relationship perspectives; individual and group customer‟s -
Customer life time value – Selection of Profi table customer segments.
UNIT-III
CRM STRUCTURE - Elements of CRM – CRM Process – Strategies for Customer acquisition – Retention and
Prevention of defection – Models of CRM – CRM road map for business applications.
UNIT-IV
CRM PLANNING AND IMPLEMENTATION - Strategic CRM planning process – Implementation issues – CRM
Tools- Analytical CRM – Operational CRM – Call center management – Role of CRM Managers.
UNIT-V
TRENDS IN CRM - e- CRM Solutions – Data Warehousing – Data mining for CRM – an introduction to CRM software
packages.
CUSTOMER RELATIONSHIP MANAGEMENTE
SCHEME OF LESSONS
Page No.
UNIT I
Lesson 1 Introduction to Customer Relationship Management (CRM) 7
UNIT II
Lesson 2 Customer Information Database and Data Analysis 51
UNIT III
Lesson 3 Customer Acquisition and Retention 93
Lesson 4 Structure of CRM 146
UNIT IV
Lesson 5 CRM Planning and Implementation 171
Lesson 6 Analytical Customer Relationship Management 201
UNIT V
Lesson 7 E-CRM 229
Lesson 8 Customer Data Analysis 256
Model Question Paper 273
Lesson 1 - Introduction to Customer Relationship Management (CRM)
Notes
UNIT I
LESSON 1 - INTRODUCTION TO CUSTOMER
RELATIONSHIP MANAGEMENT (CRM)
CONTENTS
Learning Objectives
Learning Outcomes
Overview
1.1 Meaning and Definitions of CRM
1.2 History of CRM
1.3 Needs of CRM
1.4 Significance of CRM
1.4.1 Benefits of CRM to Organisation
1.4.2 Cost of CRM to Organisation
1.4.3 Benefits of CRM to Customers
1.4.4 Cost of CRM to Customers
1.5 Concepts and Context of Relationship Management
1.6 Evolution
1.7 Transactional vs. Relationship Approach
1.7.1 Transactional Approach
1.7.2 Relationship Approach
1.7.3 Comparing and Contrasting
1.8 CRM as a Strategic Marketing Tool
1.9 CRM Significance to the Stakeholder
1.9.1 Rationale of CRM
1.9.2 Critical Issues in CRM
Summary
Keywords
Self-Assessment Questions
Further Readings
ANNA UNIVERSITY 7
Customer Relationship Management
Notes LEARNING OBJECTIVES

After studying this lesson, you should be able to:
 Understand the term of CRM
 Elaborate the History of CRM
 Know the Needs of CRM
 Explain the Concepts and Context of Relationship Management
 Differentiate the Transactional and Relationship Approach
 Describe the CRM as a strategic marketing tool
LEARNING OUTCOMES
Upon completion of the lesson, students are able to demonstrate a good
understanding of:
 that the basic objective of CRM is to increase marketing efficiency and
effectiveness.
 the benefits of customer relationship management are considered abound. It
allows organisations not only to retain customers, but enables more
effective marketing, creates intelligent opportunities for cross selling and
opens up the possibility of rapid introduction of new brands and products
 evolution, The reason for this is because it allowed companies to interact
with their customers on a whole new level
 how your business interacts with current and potential customers will
determine the profit increase over time
OVERVIEW
The slogans "the customer is king" or "the customer is god" or "the customer is
always right" indicate the importance of customers to businesses – although the
last expression is sometimes used ironically.
However, "customer" also has a more generalized meaning as in customer
service and a less commercialized meaning in not-for-profit areas. To avoid
unwanted implications in some areas such as government services, community
services, and education, the term "customer" is sometimes substituted by words
such as "constituent" or “stakeholder". This is done to address concerns that the
word "customer" implies a narrowly commercial relationship involving the
purchase of products and services.
Customer satisfaction has always been a key element in the pursuit of
corporate goals and objectives. However, the current competitive environment
fostered by liberalization and globalization of the economy, and the rising
customer expectations for quality; service and value have prompted many
8 ANNA UNIVERSITY
companies to organize their business around customers they serve, rather than Notes
around product lines or geographic business units. This is partly because
customer contact, care and insight have been rendered increasingly more
practicable and economical through computers, telecom technology and
internet, historically, customer relationship existed even in the pre-industrial
era due to the direct interaction between producers and customers as between
farmers and buyers of agricultural products, or as artisans and craftsmen
produced customized products for each customer. It was when mass production
of goods in the industrial era led to the emergence of middlemen and
transaction-oriented marketing, that direct interaction between producers and
customers became less frequent.
In recent years, however, several factors shave contributed to the rapid
development of direct interaction between producers and customers. The
concept of customer relationship management as a co-operative and
collaborative process has thus tended o be more common. Its purpose is mutual
value creation on the part of the marketer and customer. Customer Relationship
Management (CRM) solutions provide customer-oriented services for
planning, developing, maintaining, and expanding customer relationships, with
special attention paid to the new possibilities offered by the Internet, mobile
devices, and multi-channel interaction. CRM enables a company to capture a
consolidated customer view through multi-channel interactions in a data
warehouse solution.
Sophisticated analytical techniques are then applied to this customer
information to better understand and predict customer behaviour. CRM can
then be used to strategically implement acquired customer knowledge in every
area of the company, from the highest management level to all employees who
come into direct contact with customers. CRM thus enables an organization to
address its customers ’preferences and priorities much more effectively and
efficiently. CRM is a tool that can help organizations to profitably meet the
lifetime needs of customers better than their competitors.
1.1 MEANING AND DEFINITIONS OF CRM

Customer Relationship Management refers to the holistic approach an
organization can take to manage their relationships with customers, including
policies related to contact with customers, collecting, storing and analyzing
customer information and the technologies needed to perform these tasks. You
should think of CRM as a strategic process that will help you understand your
customer's needs and how you can meet those needs and enhance your bottom
line at the same time. CRM (Customer Relationship Management) is a
comprehensive strategy and process of acquiring, retaining and partnering with
selective customers to create superior value for the company and the customer.
The basic objective of CRM is to increase marketing efficiency and
effectiveness. It is co-operative and collaborative processes that help in
reducing transaction costs and overall development costs of the company.
ANNA UNIVERSITY 9
Notes CRM can be defined as an alignment of strategy, processes and technology to

manage customers and all customer-facing departments & partners. CRM in
short is about effectively and profitably managing customer relationships
throughout the entire lifecycle.
Most CRM initiatives begin with a strategic need to manage the process of
handling customer related information more effectively. For beginners it could
simply mean better lead management capabilities or sales pipeline visibility.
However, as organisations mature in their CRM initiatives, shall visualize as a
tool to acquire strategic differentiators, it includes adoption of IT related
systems, training of employees and amendments in business processes related
to customers. It is not just software but an approach to update and enhance
business methods to improve customers’ relationship with the organization.
Some of the CRM Software systems now offer marketing modules which
specifically integrate a marketing campaign, seamlessly into a sales effort, then
on to customer management as a single CRM Software package. Some CRM
vendors offer the Marketing Software module separately, and others include it
with the basic CRM Software.
Few definitions of CRM are:
Shani and Chalasani (1992): defined relationship marketing as "An integrated
effort to identify, maintain and build up a network with individual consumers
and to continuously strengthen the network for the mutual benefit of both sides
through interactive, individualized and value added contacts over a long period
of time.”
Jackson (1985): CRM means marketing oriented toward strong, lasting
relationship with individual accounts.
Sheth, Parvatiyar and Shainesh (2001): Customer Relationship Management
is a comprehensive strategy and process of acquiring, retaining and partnering
with selective customers to create superior value for the company and the
customer.
Kotler: Customer relationship marketing (CRM) enables companies to provide
excellent real-time customer service by developing a relationship with each
valued customer through the use of individual account information.
Gronroos (1990): Relationship marketing is about establishing, maintaining,
enhancing and commercializing customer relationship through promise
fulfillment.
Brent Frei: CRM is a comprehensive set of processes and technologies for
managing the relationships with potential and current customers and business
partners across marketing sales and service, regardless of the communication
channel.
Peter Keen: Customer relationship management is the commitment of the
company to place the customer experience at the centre of its priorities and to
10 ANNA UNIVERSITY
ensure that incentive systems, processes and information resources leverage the Notes
relationship by enhancing the experience.
Robert Thompson: CRM is a business strategy to select and manage customers
to optimize long-term value. CRM requires a customer-centric business
philosophy and culture to support effective marketing sales and service
processes. CRM applications can enable effective CRM provided that an
enterprise has the right leadership strategy and culture.
Craig Conway: A good experience by the customer may increase his loyalty
and tendency to buy again. A poor experience may transfer their business to
the competitor. The ability to recognize this process and to actively manage to
forms the basis for Customer Relationship Management.
1.2 HISTORY OF CRM

Customer relationship management is a concept that became very popular
during the 1990s. It offered long term changes and benefits to businesses that
chose to use it. The reason for this is because it allowed companies to interact
with their customers on a whole new level. While CRM is excellent in the long
term, those who are looking for short term results may not see much progress.
One of the reasons for this is because it was difficult to effectively track
customers and their purchases. It is also important to realize that large
companies were responsible for processing tremendous amounts of data. This
data needed to be updated on a consistent basis.
In the last few years, a number of changes have been made to Customer
relationship management that has allowed it to advance. These capabilities
have allowed CRM to become the system that was once envisioned by those
who created it. However, the biggest problem with these newer systems is the
price. A number of personalized Internet tools have been introduced to the
market, and this has driven down the cost of competition. While this may be a
bane for vendors who are selling expensive systems, it is a bonanza for small
companies that would otherwise not be able to afford CRM programs. The
foundation for CRM was laid during the 1980s.
During this time, it was referred to as being database marketing. The term
"database marketing" was used to refer to the procedure of creating customer
focus groups that could be used to speak to some of the customers of the
company. The clients who were extremely valued were pivotal in
communicating with the firm, but the process became quite repetitive, and the
information that was collected via surveys did not give substantial information
to the company. Even though the company could collect data through surveys,
they did not have efficient methods of processing and analyzing the
information. As time went on, companies begin to realize that all they really
needed was basic information. They needed to know what their customer
purchased, how much they spent, and what did they do with the products they
purchased.
ANNA UNIVERSITY 11
Notes The 1990s saw the introduction of a number of advances in this system. It was
during this time that term Customer relationship management was introduced.
Unlike previous customer relationship systems, CRM was a dual system.
Instead of merely gathering information for the purpose of using for their own
benefit, companies started giving back to the customers they served. Many
companies would begin giving their customers gifts in the form of discounts,
perks, or even money. The companies believed that doing this would allow
them to build a sense of loyalty in those who brought their products.
Customer relationship management is the system that is responsible for
introducing things such as frequent flyer gifts and credit card points. Before
CRM, this was rarely done. Customers would simply buy from the company,
and little was done to maintain their relationship. Before the introduction of
CRM, many companies, especially those that were in the Fortune 500 category,
didn't feel the need to cater to the company. In the minds of the executives,
they have tremendous resources and could replace customers whenever it
became necessary. While this may have worked prior to the 1980s, the
introduction of the Information Age allowed people to make better decisions
about which companies they would buy from, and global competition made it
easier for them to switch if they were not happy with the service they were
getting.
Today, CRM is being used to achieve the best of both worlds. Companies want
to maintain strong relationships with their clients while simultaneously
increasing their profits. The CRM systems of today could be called "true"
CRM systems. They have become the systems that were originally envisioned
by the pioneers of this paradigm. Software companies have continued to
release advanced software programs that can be customized to suit the needs of
companies that compete in a variety of different industries. Instead of being
static, the information processed within modern CRM systems is dynamic.
This is important, because we live in a world that is constantly changing, and
an organisation that wants to succeed must constantly be ready to adapt to
these changes.
1.3 NEEDS OF CRM

Customer relationship management currently, a much talked about issue is not a
fad, but is very vital for companies in the present, highly, competitive scenario.
However, across the organization the attitude towards customer service should
be inculcated and this should be driven from the top most downwards.
 Companies have to increasingly pursue a customer-centric competitive
strategy rather than a product-centric one: Two trends have brought CRM
to the forefront. First, with increased global competition and easy access to
the latest technology, products have become harder to differentiate; hence
companies are increasingly pursuing a customer-centric competitive
strategy rather than a product centric one. Second, now it is possible to put
12 ANNA UNIVERSITY
customer information from all over the enterprise into a single system Notes
rather than a no. different systems and access it from anywhere in the world
through the internet.
 E-Customers demand constant access, immediate response, and a
personalized touch: Customers in the e-business age expect constant
access to a company, through e-mails, call centers, faxes and websites.
They demand immediate response and a personalized touch meeting their
needs, placing new demands on the enterprise, which CRM alone can
satisfy.
 Focus is shifting from supply chain to demand chain effectiveness: With
the product quality at all-time highs, manufacturers find it increasingly
difficult to gain competitive advantage based solely on product attributes.
Therefore the focus now is on channel operations and customer
relationships, when there is great potential for adding value and
differentiating the offerings. Increasingly companies are applying
sophisticated information technology to identify, acquire and retain the
most profitable customers by continuously improving the highest levels of
customer experience, and creating and sustaining the highest levels of
customer satisfaction. Thus, in the era of e-business, the key source of
competitive advantage is shifting. Thinking firms are revising their strategy
to focus on demand chain effectiveness that is, continuously improving
their ability to identify, acquire and retain profitable customers.
 Better understanding and intelligent management of customer
relationships is essential for survival: The effect of increased
commoditization of products and production processes is that customers
now have more and more choices. Hence, giving them better, more
personalized product offerings and services is the only real way to make a
difference. Winning the battle for share of mind and share of wallet in this
new economy depends on understanding and intelligently managing
relationships with customers. It is no longer the privileged domain of
particularly successful companies; it has become the make-or-break
challenge for every company.
Customers in the e-business age expect constant access to a

company, through e-mails, call centers, faxes and websites. They demand
immediate response and a personalized touch meeting their needs, placing
new demands on the enterprise, which CRM alone can satisfy.
1.4 SIGNIFICANCE OF CRM

The benefits of customer relationship management are considered abound. It
allows organisations not only to retain customers, but enables more effective
ANNA UNIVERSITY 13
Notes marketing, creates intelligent opportunities for cross selling and opens up the
possibility of rapid introduction of new brands and products.
To be able to deliver these benefits, organisations must be able to customize
their product offering, optimize price, integrate products and services and
deliver the service as promised and demanded by the customer base. Keeping
the customer happy is obviously one way of ensuring that they stay with the
organisation.
However, by maintaining an overall relationship with the customer, companies
are able to unlock the potential of their customer base and maximize the
contribution to their business. Whilst the value of customer relationship
management has been identified by organisations, the full implications and
benefits are yet to be evaluated. Those responsible for delivery are perhaps the
most informed about these strategic benefits yet the transformation is a long-
drawn-out process.
The strategic benefits of customer relationship management allow companies
to reduce the cost of customer acquisition and give established players the
ability to react like a new market entrant, the very people they are battling
against. Ironically these are increased and the potential of customers can be
then capitalized through cross selling of other products and services. It is
important to understand the key benefits of CRM for most companies. These
benefits generally fall into three categories: cost savings, revenue
enhancement, and strategic impact.
1.4.1 Benefits of CRM to Organisation
The benefits of CRM to organization are:
 Increased revenue through acquisition of new customers, retaining existing
customers, and increased share of wallet through up selling, cross-selling,
etc.
 Reduced costs: The ability to differentiate between customers on the basis
of their long-term profitability helps the organisation to plan better, cost-
effective marketing strategies to derive better returns on marketing
investments. Automation of many services and ability to provide many
services as self-services further reduce the cost.
1.4.2 Cost of CRM to Organisation
Costs of CRM to organisation are:
 CRM requires the organisation to make significant investments in IT
infrastructure.
 The organisation has to incur the cost of process change arising out of
alteration in the habitual pattern of accomplishing tasks. Employees find it
far easier to carry on traditional transaction marketing. The company might
14 ANNA UNIVERSITY
need to spend significant amount of efforts to make employees adapt to Notes

CRM.
1.4.3 Benefits of CRM to Customers
The benefits of CRM to customers are:
 The continuity derived from a relationship with the same seller results in a
simplified buying process and reduction in customer's perceived risk. This,
in turn, increases the feeling of safety and comfort.
 CRM provides more avenues for customers to communicate and explain
their needs to the organisation through numerous contact points. Customers
get increased satisfaction and a feeling of being special and important
because of the increased personalization of services and customization of
goods offered to them.
1.4.4 Cost of CRM to Customers
Costs of CRM to customer are:
 Possible or inevitable loss of privacy. Many customers don't want a
company to collect and store information about them. Online companies
must disclose their privacy policies to the customers and give them the
right not to have their information stored in a database.
 Opportunity cost associated with ignoring other offers from competitive
sources – once a habit is formed most customers would refrain from
exerting the effort to assess the options and prices offered by others.
Learning Activity
Find out the significant advancements in the field of CRM.
Customer data can not only be used to integrate various internal

departments but can also be shared across the extended enterprise with
outside suppliers and partners.
1.5 CONCEPTS AND CONTEXT OF RELATIONSHIP

MANAGEMENT
No doubts about it, today’s consumers are marketing literate. Acquainted with
the tricks of the trade, they can deconstruct advertising campaigns in double-
quick time and outmaneuver even the most cunning marketing strategist.
Cognizant that consumers are cognizant of them, marketing executives have
responded to this second-guessing game in four main ways- with Irony, via
Nostalgia, through Inclusion, and by means of edibility. Taken together, these
ANNA UNIVERSITY 15
Notes responses represent an alternative to the "modern" marketing concept of

Drucker, Levitt, and Kotler, one that is more appropriate to our post-modern,
post-ironic, post-Enron epoch.
The customer, they say, is 'always right-wing-conservative, reactionary, stuck-
m-the-mud-but then, so too are companies. Forty years ago, Peter Drucker
famously announced that customer orientation was the key to marketing
success. And despite the countless social, political, economic, and
technological changes that have taken place since then, Drucker's customer-
centric marketing philosophy is still sacrosanct among scholars and executives
alike.
Customer focus, admittedly, has been denounced by numerous anti-marketing
ideologues. There is ample empirical evidence; furthermore, that customer
orientation inhibits innovation. Yet for all the attacks on, and critiques of,
customer-centricity, marketers remain as customer-led as ever. If anything,
such focus has increased through time, as the rhetoric of “satisfaction” has
been replaced by "delight," "jubilation," "excitement," and analogous
extrusions from the superlatives foundry. These days, it is not enough to
"excite" the customer; you must enchant the customer, enthrall the customer,
and enrapture the customer. Can the customer orgasmatron be far away?
While marketers' enthusiasm for customer orientation cannot be doubted, they
are faced with diminishing returns. There is only so much satisfaction the
customer can take and only so much delight the marketer can deliver without
compromising good old-fashioned objectives like profit and survival. The
vanishing point is rapidly approaching, and growing evidence suggests that a
whole new era of marketer/customer relationships is dawning. It is an era, say
Wood and Allen (2003), that involves consumers outsmarting marketers and
marketers outsmarting the outsmarters–or at least trying to.
“Customer Relationship Management (CRM) is a comprehensive approach
which provides seamless integration of every area of business that touches the
customer – namely marketing, sales, customer service and field support-
through the integration of people, process and technology, taking advantage of
the revolutionary impact of the Internet.”
According to another definition, CRM is an information industry term for
methodologies, software, and usually Internet capabilities that help an
enterprise manage customer relationships in an organized way.
Example, an enterprise might build a database about its customers that

describes relationships in sufficient detail so that management, salespeople,
people providing service, and perhaps the customer directly can access
information, match customer needs with product plans and offerings, remind
customers of service requirements, know what other products a customer had
purchased, and so forth.
16 ANNA UNIVERSITY
According to an industry view, CRM has the following utilities: Notes

Helping an enterprise to enable its marketing departments to identify and target
their best customers, manage marketing campaigns with clear goals and
objectives, and generate quality leads for the sales team.
Assisting the organization to improve telesales, account, and sales management
by optimizing information shared by multiple employees, and streamlining
existing processes
Example, taking orders using mobile devices

Allowing the formation of individualized relationships with customers, with
the aim of improving customer satisfaction and maximizing profits; identifying
the most profitable customers and providing them the highest level of service.
Providing employees with the information and processes necessary to know
their customers, understand their needs, and effectively build relationships
between the company, its customer base, and distribution partners.
CRM also refers to solutions and strategies for managing businesses’
relationships with customers. (Hence the term, customer relationship
management). With the advent of web retailing, companies have found it hard
to develop relationships with customers since the e-commerce interface is so
impersonal. After all, won’t a customer miss the firm handshake and sparkling
smile of the salesperson who just sold him the most expensive computer
system in the store? Well, whether or not he misses the personal experience of
the retail store, the goal of CRM is to give a customer that feeling when he
buys products over the Internet. When it comes to CRM, customer service is
the number one priority. Sure, all companies seem to make that claim, but
when online businesses create CRM models, it really is the case.
According to Mike Maoz, Research Director of CRM for the Gartner Group,
CRM is a strategy by which companies optimize profitability through
enhanced customer satisfaction. “CRM is a business strategy, not a
technology,” says Maoz. “It involves process, technology and people issues.
All three together really captures what CRM is.” Notice the words “customer
satisfaction.” One key component of this definition is the current trend toward
a customer-driven enterprise, in which the customer owns control of the
communication and the interaction process. This new movement will challenge
all three components of CRM - processes, technology and people – as these are
currently geared to “enable people within the organization to interact with
customers, rather than enabling customers to interact with us,” says Maoz.
What this means is that CRM urges organizations to reinvent the way they
work with their customers. It also indicates that the definition of CRM would
continue to evolve and new channels, objectives and tools would continue to
shape the future of CRM as there is an addition in the process, technology and
people issues surrounding CRM.
ANNA UNIVERSITY 17
Notes The manner in which a customer deals with an organization has changed
dramatically with time. Initially the organization was small scale, centered
locally and delivered products and services to customers that were known
personally. Customer centricity has returned! Technology has stepped into this
chasm and CRM, if implemented correctly, has allowed early adopting
organizations to serve customers to a standard previously unattainable and to
manage their relationship much more effectively.
Customer relationship management does not enable a quick win. It is a long-
term approach that has to be adopted at a strategic level. To a greater degree,
companies have understood the implications of customer relationship
management and have identified the risk to their business of not doing so,
namely loss of customers and competitive attack. They are yet to look at the
bigger picture and understand all of the associated benefits that would enable
their business strategies to be successful. The competencies required to deliver
these customer benefits are: (i) to deliver on its service promise; (ii) integrate
products and service channels effectively; (iii) customize products, services
and their respective prices; (iv) create opportunities for cross selling and
delivery mechanisms for the onward promotion of these products and services;
and (v) reduce the gestation period to market by allowing quick ad effective
introduction of new products and services.
An organization’s strategies towards developing and maintaining sustainable
relationship differ from one organisation to another depending on certain
factors. These include nature of business, its size, its market share, nature of
product type, volume of sales, geographic concentration, socio-economic status
and life style of the customers concerned, competitors strength, and so on.
However, some generic areas have to be well-studied and analyzed for
designing and implementing an effective CRM strategy. It is better for any
management thinking to focus on the basic areas of marketing mix and
incorporate the necessary preventive and remedial measures or processes to
make the areas intact without scope for any chance of loose- ends. Some of
such areas are covered under following headings:
1. Product Features: The product offered must constantly provide value
addition. The expectations of the customers may always be on the increase
due to various reasons. A customer satisfied with a given product may soon
become a dissatisfied customer in view of the changes that take place in his
expectations. Customer’s expectations go much beyond physical tangible
things like basic design, color attributes, packing and labeling, etc.; all
these areas have to be carefully crafted to meet the expectations of market.
2. Pricing: Any pricing decision has to be formulated in line with competition
and quality, depending on the firm’s pricing strategies. An organisation
may come forward to offer services or brands of different varieties with
price variations. To meet a particular need, three or four brands of varied
quality and at differing price level must be available so that, the customer
depending on his financial position may refer at least one of the varieties
18 ANNA UNIVERSITY
available. This would prevent the customers from switching over to other Notes
brands. An organisation must focus attention on the cost of the product or
services. Pricing decisions are to be governed not merely by cost related
factors. Before fixing price the paying ability of the potential customers
must also be viewed. To some extent prices are to be adjusted in tune with
the fluctuations in the paying ability of potential customers. Always, there
must be sincere attempts towards cost reduction without compromising on
quality. The organisation must perform value analysis and try to reduce
costs and retain the same good quality or improve quality of product or
service. This would help to avoid switching over of the customer to other
brands.
CRM requires the organisation to make significant investments in

IT infrastructure
3. Promotion: Promotion is an important element in providing information

for the consumer before, during and after consumption process of the
product/service. Promotion mix strategies—content, medium and timing
are to be carefully planned to meet the expectations of not only new
customers but also existing customer groups to build loyalty.
Example, introduction of relationship based differential pricing

scheme would encourage customers towards relationship building.
Under this method, the prices charged from customers would be depending
on their extent of loyalty. As customer who makes very frequent repeated
purchase would be charged fewer prices as compared to the other category
of buyers. Hotels, Air Travels, Hospitals, etc., have started practising this
method of pricing. This method would induce customers to go for
continuously buying from or making use of the service from the same
organization and thereby the relationship would emerge and continue.
However, the success of these schemes would depend on the effective
manner in which an ad-campaign is designed. The advertisements,
publicity, communication by sales persons and related communications
must also be designed in tune with the nature of customers.
Communication system that is based on customer requirements would
obviously contribute towards relationship development.
4. Placement: This is concerned with making available the product at the
right time at the right place in the desired form as preferred by the
customer, for which an effective supply chain has to in place. Performance
of each one in the chain of
5. Product/service offering is to be continuously monitored and corrective
actions are to be initiated. This must be on a continuous basis and there
ANNA UNIVERSITY 19
Notes must be a separate team of members well trained to evaluate the

performance and initiate corrective actions. Organizations must come
forward to offer state-of-the art training to all those who are connected in
the supply chain, every link in the supply chain is very important.
Unsatisfactory performance by anyone will destroy the entire process of
providing total satisfaction to the customers concerned.
6. Process: Process involves a logical sequence of activities right from
themed identification of potential customers to need fulfillment. Need
fulfillment requires manufacturing of products with desired attributes. The
process has to be derived from the costumer’s viewpoint, which paves way
for total customer satisfaction. The performance of each link must be
objectively analyzed and corrected in tune with the internal and external
customers’ expectations. Training in the areas of customer care, customer
approach, body language of service providers, customer communication,
customer need assessment, customers’ complaint management, etc., are to
be provided. Smart service providers can obviously enhance the level of
customer satisfaction.
7. People (Employees): People within the organization have the basic role in
developing and maintaining relationship with customers. Everyone in the
organization must realize the fact that their work is towards satisfying
customers. Everyone from the lowest to the highest level irrespective of
their functional specialization and responsibilities must integrate their
activities towards one of the main objectives of the organization – customer
satisfaction. The marketing department can coordinate integrated activity
towards customer satisfaction. Obviously, people within the organization
form the basis for building customer relationship. Irrespective of the
standard of a product or services offered by an organization, it is likely that
the customers would reach a level of dissonance and seek for remedial
actions. An organization must be pro-active to such a situation. All
dissatisfied customers will not come forward to show their displeasure.
They may simply make a brand switchover. This badly reflects on the
prospective customer’s attitude. To avoid this, the cases for dissatisfaction
are to be identified and have to be attended well. If a complaint is well
attended, then a dissatisfied customer becomes more loyal to the
organisation and thereby, the relationship would continue to exist.
Organisations must evolve suitable methods of empowering employees in
the service chain. Also, empowerment would help the service providers to
evolve customer specific incentive schemes, terms of sales and so on. The
organisation has to set broad guidelines and based on that the service
providers have to operate. Empowerment would boost the confidence of
both service providers and receivers. This would obviously strengthen the
relationship.
8. Physical Evidence/Service Standard: A customer not only expects quality
products but also quality services. Organisation is expected to render
20 ANNA UNIVERSITY
services in all three phases viz., presales, during sales and after sales. Notes
During presales when the customer develops expectations, the organisation
must ensure quality and availability of the product in time. During sales,
when the customer experiences the sales process, the organisation must
provide the customer an opportunity to inspect, and treat them with
courteous attentiveness, prompt reply, etc., during after sales, when the
sales are finalized, the organisation must provide supporting services such
as speedy replacements, simplified complaint procedure, efficient
maintenance and repair services and so on. Such services, which are
provided immediately and instantly, will bring total customer satisfaction.
The intangible benefits associated with the tangible product plays a major
role in creating satisfied customers. Those intangible benefits include the
courtesy shown to the customer during visits; the effective listening made
by service providers; the counseling rendered; the point of purchase
atmosphere, expertise services offered and so on. A customer, in the
context of the tangible benefits offered being almost same for competing
brands, would come forward to create a relationship in view of the
everlasting intangible benefits extended.
Weak leadership could cause problems for any CRM

implementation plan.
9. Responsive Organisation: In order to build customer relationship, an

organisation should be aware of the technology advancements and provide
quality services in tune with the customer’s expectations. It should
concentrate on total consumer satisfaction and respond to the requirements
of the customers faster than its competitors. The responsive and learning
nature of the organisation must build confidence in the mind of the
customers and that will go a long way in building the customer
relationship. Suitable incentive schemes are to be evolved by the
organisations and thereby the efforts of the service providers are to be
adequately compensated on a continuous basis. This would act as a
motivating force to take care of both satisfied and dissatisfied customers.
The incentive schemes may be linked to the factors like number of
complaints handled effectively, number of competitors, customers reached
and converted towards organisation’s own brands, volume of sales made,
and so on this attempt will encourage the service providers towards
forming relationship approach. An organisation must come forward to
identify itself with all social events with which the organisations and the
customers are concerned. It may be celebrating religious functions, national
days, organizing or sponsoring sports meets, and cultural meets ad so on in
the customer locations. Similarly, with great concern the organisation must
come forward to extend a helping hand wherever and whenever a crisis
ANNA UNIVERSITY 21
Notes arises which disturbs the normal life of the customer. This type of approach
would help to consider the organisation as part of the customer’s life and
would certainly lead towards relationship building.
10. Competitors’ Strategy: An organisation must focus constant attention on
the competitors’ performance, their strategy and style of operations and
compare it with its own performance. Customers always make this
comparison and decide their future purchase pattern. Such analysis done by
organisation would help in increasing its strengths and reducing its
competitor. As long as the customer understands and agrees with this
comparatively better performance, the relationship will continue to exist.
Factors contributing negatively towards customer relationship are to be
identified and measures are to be taken towards preventing possible
undesirable happenings. More attention should be devoted for order
processing, delivery scheduling and the related aspects. Such preventive
actions would help damage control and enable best running of the business.
11. Customer Analysis: Customers referred here include the present customers
consuming the products of an organisation also the prospective customers
who are presently consuming the products of competitors. These customers
must be periodically analysed from several perspectives such as who
constitute the customer inventory, level of customerretention, what makes
them buy, what their level of satisfaction is, where they are placed in the
loyalty ladder, what makes them disloyal, and so on. This analysis is to be
performed not only on the existing customers but also on the former
customers, so that corrective actions may be instigated to retain current
customers. Periodical customer satisfaction audit program would provide a
meaningful insight into the customer attitude and their behaviour and also
would form the basis for developing appropriate strategies to retain
relationship with the customers. For customer analysis and competitor
analysis, the organisation can depend on external agencies, so that an
unbiased report can be obtained, which in turn would enable the
organisation to further minimize its errors.
12. Consumer Behaviour Research: Organisations should have a thorough
knowledge of the purchase behaviour pattern of their customers. The
influencing factors of the purchaser decision process and the ultimate
outcome are to be analyzed in-depth. The outcome of purchase decision
may be anyone of the four viz. (1) Purchase, (2) Rejection, (3)
Postponement, (4) Search for substitutes. The organisation should have an
idea about what percentage of customers arrive at what sort of a decision
and appropriate steps are to be initiated towards making them buy the
products on a continued basis. With regard to organization’s purchasing
decisions, the key persons influencing the decisions, their characteristics
and expectation, etc. have to be understood in clear terms. The
requirements of the customers are bound to change in tune with the
changes in their lives, demographic and psychographics profiles and the
22 ANNA UNIVERSITY
related aspects. Customers up to a given point of time would concentrate on Notes

life-maintenance needs and then to life-changing needs, which will be
followed by life-enhancing needs. During these stages the customers’
requirements also undergo changes. An organisation must see that there is a
sense of matching between the customer requirements and that of the
organisation requirements in terms of: (a) Goals an organization would like
to reach and the customer would like to receive; (b) Demands of
organization and customer clash for profitability and value, which has to be
satisfied for mutual interest; (c) Limitations are constraints on the part of
the organisation and also on the part of the customers to meet the
expectations; (d) Options relate to the alternatives available to the
organisation as well as the customers; (e) Values are the convinced
standards accepted both by the organizations and the customers; and (f)
behaviour the line of actions and reactions by organizations and customers.
13. Partnership with Customers: Partnership alliance would go a long way in
building relationship with the customer. This type of a partnership
understanding may be in the form of buy-back arrangements, training
employees and extending managerial support to the customer organizations
and so on. This sort of a partnership approach would create evidence for
the care and interest on the customer’s organization. Formation of customer
clubs is another way to promote relationship. These clubs would foster a
sense of mutual belonging, understanding, and sharing of COM on
problems, and emotions. An ideal customer club can act as a bridge
between organizations and the customers. Regular meetings can be
organized on behalf of the clubs and in those meeting, representatives of
the organizations can understand the attitude of customers and react
accordingly. Customer clubs would act as a forum that enables
performance of customer related activities in a smooth manner. The club
serves as an effective platform for communicating organization’s
marketing activities. On behalf of the customer clubs, regular entertainment
meets, pleasure trips, awareness programmes, consumer education
programmes, etc., can be organized involving the family members of the
customers. An organisation must initiate research on customer satisfaction
in terms of customers’ level of satisfaction, factors contributing towards
satisfaction, extent of customer retention, influence of competitors’ brand
on customer satisfaction, customer attitude towards brand, perception of
brand image and so on. This research should be carried out on a continuous
basis and strategies towards improving customer satisfaction must be based
on the research findings. This would enable the organization to find more
appropriate approaches towards building customer relationship.
14. Complaint Monitoring Cell: An organisation should focus attention on
establishing a separate customer complaint-monitoring cell. The role of the
cell is to receive, register, and classify complaints, forward them to the
respective departments to initiate action, and follow up until the complaint
ANNA UNIVERSITY 23
Notes is attended, to the satisfaction of the customer concerned. Periodical

meetings of members of customer complaint cell and officials of various
functional areas are to be arranged, to discuss the volume and nature of
complaints received. This would help to pro-act accordingly. Such attempt
would enable better relationship with customers. Organisations must have
simple, open, efficient customer friendly communication. The customer
must feel free to contact the organisation at any point of time and get any
sort of their problem solved. Special training may be given to personnel
working in the communication channel especially in being receptive,
encouraging, positive, and optimistic and customer friendly to customers.
Each communication received should be recorded, classified and analyzed
as to their nature, and significance. The response from the organisation to
the complaints received also should be recorded.
15. Focus on Focus Group: Focus group meetings should be organized
frequently. The focus group must consist of representatives of various
customer categories. Close and continuous interaction with focus groups
would provide deep insight in to the customers’ perception, their problems,
and their expectations and so on. Organisation must consider these, while
framing policies relevant to customer care.
16. Exit Barriers: In order to retain customers, organizations must come
forward to build brand-switching barriers. In view of these barriers, exit
may be made difficult and not worthwhile. These barriers may include
incentive schemes; relationship based pricing, additional services, attractive
prize schemes, sentiments based schemes and so on. If the customer
perceives difficulty in brand switch over, he would come forward to extend
his relationship. For this reason some organizations may even go the extent
of employing unethical ways to build switching barriers, which are not
recommended in the modern business era of ethics and moral values.
CRM is a comprehensive approach which provides seamless integration of
every area of business that touches the customer – namely marketing; sales,
customer service and field support – through the integration of people, process
and technology, taking advantage of the revolutionary impact of the Internet.
CRM creates a mutually beneficial relationship with your customers. In the
rapidly expanding world of e-Commerce, there is a new generation of
empowered customers emerging who demand immediate service with the
personalized touch.
Relationship marketing is a tem often used in marketing literature. It is
sometimes used interchangeably with CRM. Relationship marketing has been
defined more popularly with a focus on individual or one-to-one relationship
with customers integrating data-base knowledge with long term customer
retention and growth strategy. Some writers have taken a strategic view and
shifted the role of marketing to genuine customer involvement (communicating
shared knowledge) rather than manipulating the customer (telling & selling).
Overall, the core of CRM and relationship marketing is the focus of co-
24 ANNA UNIVERSITY
operative and collaborative relationships between the firm and its customers Notes
and for other marketing factors. It must, however, be noted that CRM programs
now envisage a wider spectrum of efforts other than data-based one-to-one
relationship with customers, which characterizes relationship marketing.
The development of CRM as a strategy is attributable to certain emerging
factors. One is the process of disinter-mediation in many industries i.e., direct
interaction with end-consumers. This is due to the easy accessibility of
companies to the sophisticated computer and telecom technologies. Thus, in
the case of financial institutions including banks, insurance companies,
computer software, household appliances and even consumables, the process of
disinter mediation is making relationship marketing more popular. This
development is also due to the growth of service sector. In so far as services
are supplied directly to the customers, it minimizes the role of middlemen.
There is inevitably a greater emotional interaction between service provider
and user, which is found necessary to be sustained and enhanced.
Goals of CRM
The idea of CRM is that it helps businesses use technology and human
resources to gain insight into the behavior of customers and the value of those
customers. With an effective CRM strategy, a business can increase revenues
by:
 Providing services and products that are exactly what your customers want
 Offer better customer services
 Cross selling products more effectively
 Helping sales staff close deals faster Retaining existing customers and
discovering new ones
 Helping sales staff close deals faster
 Retaining existing customers and discovering new ones.
Decisions of CRM
The following factors contribute to the decision making process for the
installation of an effective CRM:
 Clearly define the management objective and strategy,
 Evolve the right process around it.
 Identify the right software solution for implementation.
 Understand the hidden costs and hurdles
 Back it up with good training and support
ANNA UNIVERSITY 25
Notes While selecting the software solution for implementation, one should ensure
the below dimensions are satisfied:
 It can manage both data and process.
 It is easy to implement and roll out.
 It is simple to use.
 Total cost of ownership.
 The risk exposure.
Major Areas of CRM Decision-making
Process of CRM decision-making involves below major areas, which are
responsible for automating business processes that are related to customers like
marketing and sales etc.
Sales Force Automation (SFA)
SFA is responsible for automating all sales related processes. Its basic purpose
is to improve the productivity of sales department that in turn improve
company’s sales process.
Customer Service and Support (CSS)
CSS is responsible for automating process related to different services like
product complaints, service requests and product returns etc.
Enterprise Marketing Automation (EMA)
EMA is responsible for automation of marketing related processes. Its key role
is to improve efficiency of marketing staff that in turns improves company’s
marketing processes.
Analytical CRM
Analytical CRM is responsible for analyzing customers’ behavior in terms of
sales, marketing or any other service provided. It utilizes database and
sometimes data warehouse to extract appropriate data regarding different
customers.
Communication/Collaborative CRM
Communication/Collaborative as the name implies, is responsible for efficient
collaboration/association with the customers through e-mails, fax, phone, SMS
or face to face communication. Organisations intending to improve their
customer relations, surely implement for their business processes. IT helps to
gain and retain customers and provide services to them efficiently.
26 ANNA UNIVERSITY
Alerts and Interfaces Notes

In order to ensure efficient Customer Relationship Management,
companies/organizations should provide various means of communication to
the subscribers. Some alerts or interfaces should be provided by
company/organisation to offer good customer care.
Customer care allows subscribers to serve themselves via various means
offered by the service providers. It reduces cost and monitoring overhead at
providers’ end, thus ensuring lower churn rate and greater customers’
satisfaction. Customer care can be provided via various means such as website,
FAQs (Frequently Asked Questions), knowledge base and forums explaining
various technical terms for the subscribers and providing an interactive
environment to seek help. Prior to all these, service providers should provide
online support to the subscribers to increase their level of satisfaction.
To enhance customer care, companies should give preference to the following:
 Allow subscribers to select any means to communicate with the support
personnel such as Telephone/E-mail/SMS etc.
 Ensure security and reliability in the service being provided to the
customers.
 Process customers’ requests with minimum period of time to decrease
churn rate of the subscribers.
Trouble Tickets
Trouble Ticket System collects and manages queries/requests from the
customers to facilitate organisation with customer management. Every time a
customer sends a support query, a ticket is assigned to him/her by the software.
This ticket has a ticket number which acts as a reference number to customers’
problem. Trouble tickets in this way facilitate tracking of customers’ problems
and help customers as well as company in monitoring of support process.
Churn Rate
Churn rate is also known as turnover rate. It is determined by the number of
customers who end/discontinue their relation with an organization (for any
reason). This term is mostly used for telecommunication services that provide
wireless communication or long distance communication facilities or any kind
of subscription
Types of CRM Programs
Till recently, most marketers focused on traditional models of marketing to
segment and acquire new customers from its target segments, using the tools
and techniques developed for mass marketing in the industrial era, as a way to
generate growth. In the present competitive era, this is proving to be highly
ineffective. Today, there is a different approach to business that involves
ANNA UNIVERSITY 27
Notes relationship marketing, customer retention and cross-selling, leading to

customer extension, which is a far cry from the traditional segmentation model.
Based on the prevailing practices and review of literature, it is possible to
distinguish between three main types of CRM programs.
The three main types of CRM programs are:
1. Continuity marketing
2. One-to-one marketing
3. Partnering or Co-marketing
Continuity Marketing
These programs are generally aimed at retaining customers and enhancing their
loyalty. The basic premise is that of offering long-term special services with
potentiality of increased mutual value. For end-users in mass markets, attempt
is made to offer rewards to consumers by way of membership and loyalty-
cards with variety of rewards, which may include privileged services, discounts
and cross-purchased items. As regards distributor customers, the basis of
continuity marketing is offer of continuous replenishment including Just-in-
Time (JIT) inventory management, efficient consumer response initiatives
through electronic order processing and Material Resource Planning (MRP). In
the case of business-to-business markets, continuity marketing may include
preferred customer programs or special sourcing arrangements, or just-in time
sourcing.
One-to-one Marketing/Individual Marketing
This type of CRM programs aim at meeting individual customers needs which
is fully satisfying and uniquely customized. In the mass markets, information
on individual customers becomes the basis of individual customer interactions
and attempt is made to fulfill the unique needs of each as well as develop
frequency marketing, interactive marketing and after sales programs for high
yielding customers. Advancement in information technology has made it
possible to use customer information at low cost. Customer business
development is the form of individual marketing vis-à-vis distributor
customers. A large manufacturer may be able to offer expert advice based on
his knowledge from across many markets and also offer resources to build the
business of distributors.
Co-marketing
As regards business-to-business marketing, individual marketing has been long
in use by way of key account management programs, which involves
appointment of separate teams by marketers to decide on the use of company
resource to be used to meet individual customer needs, and if necessary,
engage in joint planning with customers at the national as well as global levels.
28 ANNA UNIVERSITY
The relative and marked emergence of CRM as a business strategy, has Notes
radically transformed the way organizations operate. There has been a shift in
business focus from transactional to relationship marketing where the customer
is at the center of all business activity and organisations are now desperately
trying to restructure their processes around the needs of their strategically
significant customers. The critical driver of such a shift towards customer
orientation is the realization that customers are a business asset that when
mange effectively can derive continuous and sustainable economic value for an
organization over their lifetime.
CRM Marketing Initiatives
Companies simply do not purchase CRM products to automate campaign
management without a clear view of what they want to do. After all, companies
devoid of a marketing vision rarely have sufficient budget for CRM software.
Those who do, have a variety of tactics in mind for increasing customer value
and loyalty.
 Cross-selling: Cross-selling is the act of selling a product or service to a
customer as a result of another purchase. The example of a new mother
purchasing products for the newborn; at the same time buying clothes for
her is an example of cross selling. Cross selling is all the rage nowadays,
because selling more services to an existing customer increases revenue
from that customer and costs less than acquiring a new one. Cross-selling
means understanding that not every customer is a good candidate for
cross-selling. For instance, credit card customers have proven to be poor
cross-selling candidates because favorable interest rates and low fees – not
the card itself or even the issuer – are the dominant determinant of
consumer response to credit card offers. Understanding the ways by which
customers evaluate how and whether to respond to such promotions is
critical. Not surprisingly, the desire to improve cross-selling business
practices accounts for much of the popularity of CRM marketing
automation technologies.
 Up-Selling: Likewise, companies are frantically looking for opportunities
to up-sell, or motivate their existing customers to trade up to high priced
products for profitability. The art of cross-selling and up-selling is
understanding which products will increase, rather than decrease, a
customers and subsequently, companies overall profitability. Simply cross-
selling a customer an unprofitable product might actually render that
customer less profitable than he was prior to the sale.
 Behavior Prediction: Although not so much a marketing practice as a
marketing enabler, behavior prediction helps marketing departments
determine what customers are likely to do in the future. This analysis
includes several variations: (i) Propensity-to-buy analysis – Understanding
which products a particular customer is likely to purchase; (ii) Next
sequential purchase – Predicting what product or service a customer is
ANNA UNIVERSITY 29
Notes likely to buy next; (iii) Product affinity analysis – Understanding which
products will be purchased with other products. Also known as “market
basket analysis”, it can be viewed as examining products in a shopper’s
basket to understand possible product associations; and (iv) Price elasticity
modeling –Determining the optimal price for a given product, often for a
given customer or customer segment.
 Marketing Decisions: By understanding consumer behaviour, a company
can make a host of marketing decisions based on this knowledge such as:
(i) Preemptively offering discounts or fee waivers to existing customers
who are at risk of churning; (ii) Refining target marketing campaigns to
smaller customer segments or specific products; (iii) Packaging certain
products together and fixed-pricing the to sell more products and increase
their profitability; (iv) Marketing automation, the goal is to offer the right
message to the right customer at the right time. For instance, a new
customer whose use of online banking services has steadily increased
might prefer to be e-mailed a new offer along with regular statement,
whereas a retiree who enjoys visiting the neighborhood branch might be
delighted when the branch manger offers a cup of coffee and a brochure on
a new annuity product. Indeed, banking customers have range of choices
when it comes to their preferred channels; and (v) Cross-selling products
likely to be purchased with other products. The key to all this analysis, and
especially to the actions that result, is the knowledge of the companies best
customers.
 Customer Profitability and Value Modeling: For the first time companies
could quantify that price-sensitive customers – those who bring in paper-
thin margins – might never recoup their value, irrespective of their
purchase volume, yet certain low-volume customers were nevertheless
highly profitable. However, profitability is only a piece of the revenue
puzzle. A customer can be unprofitable but could have referred three high-
value customers to a firm, thereby rendering himself very valuable. Despite
not being currently profitable, a recent college graduate shows several signs
of emerging profitability and thus might be considered valuable over the
lifetime.
 Customer Value: Different companies in different industries will have
different value metrics. It refers to a Customers’ Lifetime Value (LTV),
potential value, or competitive value (also known as wallet share). Many
firms have formalized the practice of value modeling, allowing them to
score a customer based on one relative worth to the company over long-
time. The score is then used in a variety of ways to tune communications
with that customer. For instance, a brick-and-mortar retailer recognizes a
shopper with a frequent-buyer card who nevertheless visits the store only
during advertised sales. The customer has been assigned a low value score.
The retailer sends the customer a pre approved credit card to increase his
value and thus his corresponding revenue contribution. The credit card
30 ANNA UNIVERSITY
might result in raising the number of monthly shopping trips, as well as Notes
boosting the customers average purchase amount.
 Measurement of Value: Irrespective of the level of customer value being
modeled, customer value measurement is data-intensive. The challenge of
value modeling is that it is only as accurate as the customer information
data – and the analysis statistically correct. Historical customer behaviors,
product costs, support costs, customer profitability, and channel usage
should all figure into the overall value of a customer. Basing customer
value on only a single metric puts companies at risk of making erroneous
decisions about how to communicate with customers, which could
ultimately decrease customer satisfaction and increase attrition. Companies
can use the result of customer value analysis to differentiate customer
service.
 Customer Centric Decisions: Personalization is the capability to customize
customer communication based on knowledge preferences and behaviors at
the time of interaction. These technologies enable analysis of each
customer over time and across all channels, using customer profile data,
past purchases, click stream data, and web survey responses to determine,
for instance, what product the customer is most likely to purchase next or
whether the customer is at-risk and thus deserving a discount offer to lure
him back. A personalized message reflecting the results of the analysis is
then delivered in real time when the customer visits the web site.
Learning Activity
What are the factors that contribute to the decision-making process
for the installation of an effective CRM. Discuss each in detail.
Event-based Marketing: The best definition of event-based marketing is a tie-

sensitive marketing or sales communication reacting to a customer-specific
event. Event-based marketing – also called event-driven marketing – can apply
to a segment of customers or to individual customers. For instance, mailing an
application for an increase in collision damage insurance to all customers who
have recently had traffic accidents is an example of event-based marketing to a
largely undifferentiated segment of the existing customer base. The marketing
campaigns to be more reactive, real-time customer communications highly
focused on the individual customer’s profile. In our previous example, the
insurance company would suggest to each individual customer how much
collision damage insurance would be appropriate given specific factors such as
the customers current coverage, claims history, and demographic. Such event-
based marketing tactics combine personalization techniques with process
design to ensure that the right action targets the right customer at the right time.
The ideal goal of event-based marketing is to be able to react to customer
events in near real-time, soon after the actual event occurs.
ANNA UNIVERSITY 31
Notes
Example of this is the grocery store receipt featuring coupons on the
back for merchandise a customer is likely to be interested in, but might not
readily buy if unprompted.
Such real-time, event-based marketing means detecting and responding to
events quickly, often using complex data-mining capabilities and requires an
intimate understanding of possible events and their desired outcomes. Dynamic
event-based marketing means reacting to a customer event in the optimal time
frame, which could differ from one event to another.
1.6 EVOLUTION
Customer Relationship Management is a concept that became very popular
during the 1990s. It offered long-term changes and benefits to businesses that
chose to use it. The reason for this is because it allowed companies to interact
with their customers on a whole new level. While CRM is excellent in the
long-term, those who are looking for short term results may not see much
progress.
One of the reasons for this is because it was difficult to effectively track
customers and their purchases. It is also important to realize that large
companies were responsible for processing tremendous amounts of data. This
data needed to be updated on a consistent basis.
In the last few years, a number of changes have been made to customer
relationship management that has allowed it to advance. These capabilities
have allowed CRM to become the system that was once envisioned by those
who created it. However, the biggest problem with these newer systems is the
price. A number of personalized Internet tools have been introduced to the
market, and this has driven down the cost of competition. While this may be a
bane for vendors who are selling expensive systems, it is a bonanza for small
companies that would otherwise not be able to afford CRM programs. The
foundation for CRM was laid during the 1980s.
During this time, it was referred to as being database marketing. The term
"database marketing" was used to refer to the procedure of creating customer
focus groups that could be used to speak to some of the customers of the
company. The clients who were extremely valued were pivotal in
communicating with the firm, but the process became quite repetitive, and the
information that was collected via surveys did not give the company a great of
information. Even though the company could collect data through surveys,
they did not have efficient methods of processing and analyzing the
information. As time went on, companies begin to realize that all they really
needed was basic information. They needed to know what their customer
purchased, how much they spent, and what did they do with the products they
purchased.
32 ANNA UNIVERSITY
The 1990s saw the introduction of a number of advances in this system. It was Notes
during this time that term Customer relationship management was introduced.
Unlike previous customer relationship systems, CRM was a dual system.
Instead of merely gathering information for the purpose of using for their own
benefit, companies started giving back to the customers they deserved. Many
companies would begin giving their customers gifts in the form of discounts,
perks, or even money. The companies believed that doing this would allow
them to build a sense of loyalty in those who bought their products.
It is not suddenly that the business managers have realized that the customer is
supreme or the need to render personalized service. However, it was not
possible to address the preferences of a massive group of widely dispersed
individuals. Neither the tools nor the technology were available. The smart
business managers did the next best thing, which was to conduct a market
research and classify the market into broad segments with different
preferences. The product managers would (and still do) then position their
products catering broadly to these segments.
The information systems have evolved tremendously over the last three
decades and so have the communication systems, While ERP, the management
mantra of the nineties, offered the means to optimize resource planning at the
enterprise level encompassing every area of the enterprise on a real time basis,
there was still no means of connecting to the customer. The customer had just
too many locations.
The commercial penetration of Internet into the homes changed everything. It
provided the means to take the integrated enterprise information system to the
customer's living room. He could buy, sell or bank sitting there, while uniquely
identifying himself.
This has led to the evolution of CRM, which uses the Net to integrate the
customer contact points directly with the enterprise. It provides the means to
interact with every customer individually (thereby interacting with million or
even billions of customers). The interactions over a period of time create a
history that is available to the field sales/support personnel at the touch of a
button.
Customer relationship management is the system that is responsible for
introducing things such as frequent flyer gifts and credit card points. Before
CRM, this was rarely done. Customers would simply buy from the company,
and little was done to maintain their relationship. Before the introduction of
CRM, many companies, especially those that were in the Fortune 500 category,
didn't feel the need to cater to the company. In the minds of the executives,
they have tremendous resources and could replace customers whenever it
became necessary. While this may have worked prior to the 1980s, the
introduction of the Information Age allowed people to make better decisions
about which companies they would buy from, and global competition made it
ANNA UNIVERSITY 33
Notes easier for them to switch if they were not happy with the service they were
getting.
Today, CRM is being used to achieve the best of both worlds. Companies want
to maintain strong relationships with their clients while simultaneously
increasing their profits. The CRM systems of today could be called "true"
CRM systems. They have become the systems that were originally envisioned
by the pioneers of this paradigm. Software companies have continued to
release advanced software programs that can be customized to suit the needs of
companies that compete in a variety of different industries. Instead of being
static, the information processed within modern CRM systems is dynamic.
This is important, because we live in a world that is constantly changing, and
an organization that wants to succeed must constantly be ready to adapt to
these changes.
Table 1.1: Landmarks in the History of CRM: 1960-2010
1960s Mass Production/Mass Product
1970s Mass Market
1980s Total Quality Management
1990s Customer Relationship Management (CRM)
2000s Customer Relationship Management (CRM)
2010s e-Customer Relationship Management (e-CRM)
Mass Production/Mass Product: Mass Production is a system of

manufacturing based on principles such as the use of interchangeable parts,
large-scale production, and the high-volume Assembly Line. Although ideas
analogous to mass production existed in many industrialized nations dating
back to the eighteenth century, the concept was not fully utilized until refined
by Henry Ford in the early twentieth century and then developed over the next
several decades. Ford's success in producing the Model T automobile set the
early standard for what mass production could achieve. As a result, mass
production quickly became the dominant form of manufacturing around the
world, also exerting a profound impact on popular culture. Countless artists,
writers, and filmmakers used the image of the assembly line to symbolize
either the good or the evil of modern society and technological prowess.
Mass production techniques maximized the profit making ability of
corporations, but it dehumanized the lives of workers. Frederick W. Taylor
introduced Scientific Management at the beginning of the twentieth century,
which used time and motion studies (often timing them with a stopwatch) to
measure workers' output. Taylor's goal was to find the ideal process and then
duplicate it over and over. In the abstract, scientific management was a giant
leap forward, but in reality, mass production led to worker unrest, turnover,
and social conflict. Unionization efforts, particularly the struggles to organize
unskilled workers by the Congress of Industrial Organizations (CIO) in the
34 ANNA UNIVERSITY
1930s and 1940s, and battles between management and employees intensified Notes
as workers became more alienated because of the factory setting.
Mass Market: Mass Marketing is a market coverage strategy in which a firm
decides to ignore market segment differences and go after the whole market
with one offer. It is type of marketing (or attempting to sell through
persuasion) of a product to a wide audience. The idea is to broadcast a message
that will reach the largest number of people possible. Traditionally mass
marketing has focused on radio, television and newspapers as the medium used
to reach this broad audience. By reaching the largest audience possible
exposure to the product is maximized. In theory this would directly correlate
with a larger number of sales or buy in to the product. As the name says it’s
mass so you are trying to get your as many as you can.
Mass marketing or undifferentiated marketing has its origins in the 1920s with
the inception of mass radio use. This gave corporations an opportunity to
appeal to a wide variety of potential customers. Due to this, variety marketing
had to be changed in order to persuade a wide audience with different needs
into buying the same thing. It has developed over the years into a worldwide
multi-billion dollar industry. Although sagging in the Great Depression it
regained popularity and continued to expand through the 40s and 50s. It slowed
during the anti-capitalist movements of the 60's and 70's before coming back
stronger than before in the 80's, 90's and today. These trends are due to
corresponding upswings in mass media, the parent of mass marketing. For
most of the twentieth century, major consumer-products companies held fast to
mass marketing- mass producing, mass distributing and mass promoting about
the same product in about the same way to all consumers. Mass marketing
creates the largest potential market, which leads to lowered costs.
Total Quality Management: Total Quality Management (TQM), a buzzword
phrase of the 1980's, has been killed and resurrected on a number of occasions.
The concept and principles, though simple seem to be creeping back into
existence by "bits and pieces" through the evolution of the ISO9001
Management Quality System standard.
"Total Quality Control" was the key concept of Armand Feigenbaum's 1951
book, Quality Control: Principles, Practice, and Administration, in a chapter
titled "Total Quality Control" Feigenbaum grabs on to an idea that sparked
many scholars interest in the following decades, that would later be catapulted
from Total Quality Control to Total Quality Management. W. Edwards
Deming, Joseph Juran, Philip B. Crosby, and Kaoru Ishikawa, known as the
big four, also contributed to the body of knowledge now known as Total
Quality Management.
The American Society for Quality says that the term Total Quality
Management was used by the U.S. Naval Air Systems Command "to describe
its Japanese-style management approach to quality improvement." This is
consistent with the story that the United States Navy Personnel Research and
ANNA UNIVERSITY 35
Notes Development Center began researching the use of Statistical Process Control
(SPC); the work of Juran, Crosby, and Ishikawa; and the philosophy of W.
Edwards Deming to make performance improvements in 1984. This approach
was first tested at the North Island Naval Aviation Depot.
Companies who have implemented TQM include Ford Motor Company,
Phillips Semiconductor, SGL Carbon, Motorola and Toyota Motor Company.
The latest changes coming up for the ISO 9001:2000 standard’s "Process
Model" seem to complete the embodiment. TQM is the concept that quality
can be managed and that it is a process.
Total Quality Management (TQM) is a management strategy aimed at
embedding awareness of quality in all organizational processes. TQM has been
widely used in manufacturing, education, government, and service industries,
as well as NASA space and science programs.
Total Quality Management (TQM)
Total = Quality involves everyone and all activities in the company.
Quality = Conformance to Requirements (Meeting Customer Requirements).
Management = Quality can and must be managed.
TQM = A process for managing quality; it must be a continuous way of life; a
philosophy of perpetual improvement in everything we do.
Customer Relationship Management (in 1990): Customer Relationship
Management (CRM) is one of those magnificent concepts that swept the
business world in the 1990’s with the promise of forever changing the way
businesses small and large interacted with their customer bases. In the short
term, however, it proved to be an unwieldy process that was better in theory
than in practice for a variety of reasons. First among these was that it was
simply so difficult and expensive to track and keep the high volume of records
needed accurately and constantly update them.
In the last several years, however, newer software systems and advanced
tracking features have vastly improved CRM capabilities and the real promise
of CRM is becoming a reality. As the price of newer, more customizable
Internet solutions have hit the marketplace; competition has driven the prices
down so that even relatively small businesses are reaping the benefits of some
custom CRM programs.
In the beginning…
The 1980’s saw the emergence of database marketing, which was simply a
catch phrase to define the practice of setting up customer service groups to
speak individually to all of a company’s customers.
In the case of larger, key clients it was a valuable tool for keeping the lines of
communication open and tailoring service to the clients needs. In the case of
smaller clients, however, it tended to provide repetitive, survey-like
36 ANNA UNIVERSITY
information that cluttered databases and didn’t provide much insight. As Notes
companies began tracking database information, they realized that the bare
bones were all that was needed in most cases: what they buy regularly, what
they spend, what they do.
Advances in the 1990’s: In the 1990’s companies began to improve on
Customer Relationship Management by making it more of a two-way street.
Instead of simply gathering data for their own use, they began giving back to
their customers not only in terms of the obvious goal of improved customer
service, but in incentives, gifts and other perks for customer loyalty.
This was the beginning of the now familiar frequent flyer programs, bonus
points on credit cards and a host of other resources that are based on CRM
tracking of customer activity and spending patterns. CRM was now being used
as a way to increase sales passively as well as through active improvement of
customer service.
e-CRM: This is a web based Sales Force Automation tool that helps you to
focus on un-covered customer-revenue opportunities that are not possible in a
manual sales process. The architecture of the product brings your
Customers/Sales Teams/Channel partners into a single centralized structure.
This will help you overcome the stumbling block of remote accessibility of
information across your organization. Its easy to use web based interface, faster
deployment and effective implementation will streamline your sales process
quickly and in a cost effective way. It records enquiries, follow ups, complaints
and details of any other interaction with the client which helps to build and
maintain lifelong relation with the customer.
1.7 TRANSACTIONAL VS. RELATIONSHIP APPROACH

Following are the characteristics/features of the transactional as well as
relationship approach
1.7.1 Transactional Approach
1. Focuses on Single sale recruitment.
2. Emphasises on product features
3. Its short-term
4. Little or no importance given to customer service
5. Limited commitment toward the customer
6. Focused on product quality while production
7. Communicate to persuade
8. Functional, mechanistic, Production-oriented based business model
9. Goal is customer satisfaction
ANNA UNIVERSITY 37
Notes 1.7.2 Relationship Approach

1. Focuses on retention of the customer
2. Emphasises on product benefits and systematic solutions
3. It’s a long-term relationship
4. Customer service taken as the most important element
5. Higher commitment towards customers
6. Quality at all aspects
7. Communicate to make sense and meaning
8. More humanistic and relationship based business model
9. Goal is to delight the customer
1.7.3 Comparing and Contrasting
Selecting between the two styles of customer feedback survey, relationship and
transactional, is relatively straight forward for most business to consumer
organizations.
Use Transactional feedback surveys for understanding what drives day to day
customer loyalty. Use Relationship feedback surveys to benchmark yourself
against your competitors. However, it is not nearly so simple in a business to
business (B2B) or business to government (B2G) environment. Relationship
Vs Transactional: There are two key differences between the two
Timing: Transactional (or Bottom-up) surveys occur shortly after a customer
has interacted with your organisation. This could be completing a sale,
receiving an invoice, contact a service centre, etc.
On the other hand, Relationship (or top down) surveys occur on a regular
timeframe: say monthly, quarterly or annually.
Content: Transactional surveys are very short; often just 2 or 3 questions. They
rely on a high number of responses and lots of qualitative data in order to be
successful. Relationship surveys are longer (20 or more questions) and rely on
getting more information from each customer to be successful.
Neither approach is right or wrong and both have their advantages.
Relationship surveys can almost always be used in a B2B business. In fact this
is the type that is most often used. On an annual or other regular basis, the
company will contact their clients to gather their feedback. Data is collected
analysed, reported and actioned.
This fashion of survey also work well for B2B companies because it can
handles a range of influencers and decision makers within the client
organization: economic decision maker, technical influencer, etc. Using the
Relationship approach allows you to collect input from each of the perspectives
and integrate them together.
38 ANNA UNIVERSITY
Transactional surveys are not always applicable in a B2B situation. They key Notes
attribute required for this approach is, not surprisingly, a regular, high volume,
stream of transactions. You might think that all organisations have a good
stream of transaction but this is not the case.
Many B2B companies have only a relatively few, very high value transactions.
For instance, consider a company that performs mainly project based work (IT
companies, engineering companies, construction companies) or companies
with relatively large per customer sales (heavy equipment suppliers).
1.8 CRM AS A STRATEGIC MARKETING TOOL

The growth of your business depends on the products you sell and how you
answer the needs of your customers; how your business interacts with current
and potential customers will determine the profit increase over time. At the
same time, quantifying customer satisfaction cannot be achieved without first
collecting and analyzing all the data. This is where Customer Relationship
Management (CRM) comes in. By collecting, collating and analyzing all past
interactions with existing and potential customers, CRM becomes a strategy
that can help you pull in more profit. Not only that, but it can be maximized as
a marketing tool, since all your customer data is readily available.
CRM Focuses on the Need
By having a database of what your customers liked or disliked in your product,
you can now move on to developing products tailored to that feedback. After
buying a certain item, a customer might find it lacks something that could
make it a better product. A CRM system can see this and assess if that feature
is something all customers might need. If the feedback focuses in the same
areas, then the product can be developed and improved with ease.
CRM can also look into the customer trend from point of inquiry to making the
purchase. It will alert you if there is a gap or loophole letting you addresses the
problem accordingly.
Relevant Data Provides Information on What Customers Want

Following the trend of what customers want is not easy. By having a CRM
system, all your past interactions, meetings and even business presentations are
recorded automatically. There is no need to go through piles of customer data,
since all information will be stored in one place and can always be updated.
Knowing what the customers want is already one step ahead in creating the
product they would want to buy or a service they would want to avail.
Target Clients with Specific Products They Might Need
A CRM system will not just collate and analyze data, but it can also group your
customers into different segments based on their budget or preferences. By
doing this, you can make product or service suggestions to fit within their
ANNA UNIVERSITY 39
Notes specified group and send out personalized messages or advertisements. This
approach can lead to a big sales conversion rate for your business.
It will also make your customers feel affinity, since you remember what they
purchased and are now offering a better product.
Satisfied Customers Can Lead to Referrals

Satisfied customers can become loyal buyers when you provide products or
services they want with great regularity. Not only that, but they can also
encourage potential customers through their referral or just by raving about
your company. With social media as the norm nowadays, customers can post
comments about a product or service they liked and become indirect
ambassadors for the business.
CRM as a marketing tool relies on the products or services you offer, but it
also relies on actual customer feedback. By using CRM, you can come up with
the right products and target the right customers who have the highest
likelihood of needing that product. This flow of information, and the product
modifications you make based on the feedback, reinforces your claim for
quality products, and it also displays how well you know your customers.
1.9 CRM SIGNIFICANCE TO THE STAKEHOLDER

A stakeholder is any person or organization, who can be positively or
negatively impacted by, or cause an impact on the actions of a company,
government, or organization. Types of stakeholders are:
 Primary stakeholders: are those ultimately affected, either positively or
negatively by an organization's actions.
 Secondary stakeholders: are the ‘intermediaries’, that is, persons or
organizations who are indirectly affected by an organization's actions.
 Key stakeholders: (who can also belong to the first two groups) have
significant influence upon or importance within an organization.
Therefore, stakeholder analysis has the goal of developing cooperation
between the stakeholder and the project team and, ultimately, assuring
successful outcomes for the project. Stakeholder analysis is performed when
there is a need to clarify the consequences of envisaged changes, or at the start
of new projects and in connection with organizational changes generally. It is
important to identify all stakeholders for the purpose of identifying their
success criteria and turning these into quality goals.
Too many CRM initiatives suffer from an inward focus on the enterprise,
whereas the point of CRM is to achieve a balance between value to
shareholders or stakeholders and value to customers for mutually beneficial
relationships.
40 ANNA UNIVERSITY
 Vision: Successful CRM demands a clear vision so that a strategy and Notes
implementation can be developed to achieve it. The CRM vision is how the
customer-centric enterprise wants to look and feel to its customers and
prospects – the Customer Value Proposition (CVP) and the corporate brand
values are key to the CRM vision. Without a CRM vision, the enterprise
will not stand out from the competition, target customers will not know
what to expect from it and employees will not know what to deliver in
terms of external customer experience. A successful CRM vision is the
cornerstone to motivating staff, generating customer loyalty and gaining a
greater market share. "Creating a CRM Vision" defines a CRM vision,
outlines the key steps and challenges in creating it and discusses its role in
creating a successful CRM program.
 Strategy: A CRM strategy is not an implementation plan or road map. A
real CRM strategy takes the direction and financial goals of the business
strategy and sets out how the enterprise is going to build customer loyalty –
that "feel-good factor" of customer connection with an enterprise that
means customers stay longer, buy more, recommend the enterprise to
others and are more willing to pay a premium price. The objectives of a
CRM strategy are to target, acquire, develop and retain valuable customers
to achieve corporate goals.
 Valued Customer Experience: Customers' experiences when interacting
with the enterprise play a key role in shaping their perception of the
enterprise – the value it provides and the importance it places on the
customer relationship. Good customer experiences drive satisfaction, trust
and long-term loyalty. Poor customer experiences have the opposite effect
and, because bad news travels faster and further than good news, they harm
the enterprise's ability to create new relationships with prospects. No
amount of internal "second guessing" can simulate what it's really like to be
a customer.
 Organizational Collaboration: Many enterprises believe that
implementing CRM technologies makes them a customer-centric
organization. They forget, ignore or deliberately avoid the necessary
changes to the enterprise itself. True CRM means that individuals, teams
and the whole enterprise must become more focused on the needs and
wants of the customer. The term "organizational collaboration," highlights
the many facets of the customer-centric internal change needed to deliver
the required and desired external customer experience. As a critical part of
a CRM program, it will involve changing organizational structures,
incentives and compensation, skills and even the enterprise culture.
Ongoing change management will be the key.
 Processes: Past efforts to re-engineer processes were primarily driven by
the desire to improve the efficiency of an enterprise and reduce costs. The
beneficiary was the enterprise, not its customers. The rise in CRM has led
to a focus on reworking key processes that touch the customer and asking
ANNA UNIVERSITY 41
Notes customers which processes matter to them. We call this customer process
re-engineering. Enterprises frequently do not realize that their functionally
fragmented processes often mean that the customer has a poor experience
and receives less than the expected value. Successful re-engineering should
create processes that not only meet customers' expectations, but also
support the customer value proposition, provide competitive differentiation
and contribute to the desired customer experience.
 Information: Successful CRM requires a flow of customer information
around the organization and tight integration between operational and
analytical systems. Having the right information at the right time is
fundamental to successful CRM strategies, providing customer insight and
allowing effective interaction across any channel. Unfortunately, most
enterprises' CRM information capabilities are poor – the result of numerous
and fragmented departments, initiatives, databases and systems. Enterprises
that establish a business plan for sourcing, managing and leveraging their
customer information assets are more likely to achieve their CRM goals
and objectives and gain a competitive advantage.
 Technology: For most technologists, CRM is all about technology. CRM
technologies are an essential enabler for any modern CRM business
strategy, but they are just one piece of the puzzle. Gartner has a wealth of
ongoing research into CRM technology issues and "Technology Decisions
Are Key to Enabling CRM Strategies" (DF-14-8082) looks at the key
decisions that enterprises have to take in three areas: CRM applications,
architectural issues and integration. In many CRM projects, integration
issues start as a relatively low priority, and then rise in prominence (cost
and time) as enterprises realize that true CRM requires seamless customer-
centric processes, supported by integrated technology across the enterprise
and its supply chain.
 Metrics: The other seven building blocks depend on performance targets
and metrics to gauge their success, and enterprises must set measurable
CRM objectives and monitor CRM indicators to successfully turn
customers into assets. Without performance management, a CRM strategy
and associated program is destined to fail. A framework for measuring an
enterprise's success with CRM by creating a hierarchy of performance
metrics involves four levels, namely: corporate, customer strategic,
operational and process, and infrastructure input metrics. These metrics
have an internal and an external focus and link operations to strategy and
corporate financial benefits. Each enterprise will have a unique set of
metrics applicable to their situation.
To achieve the long-term value of CRM, enterprises must understand that it
is a strategy involving the whole business, and thus should be approached
at an enterprise level. CRM initiatives need a framework to ensure that
programs are approached on a strategic, balanced and integrated basis.
42 ANNA UNIVERSITY
Thus, Gartner defines Customer Relationship Management (CRM) as a Notes

business strategy that maximizes profitability, revenue and customer
satisfaction by: Organizing around customer segments; fostering behaviour
that satisfies customers; implementing customer-centric processes.
1.9.1 Rationale of CRM
All companies are facing massive challenges in today’s highly competitive
market and strive to acquire the maximum possible market share in an
overcrowded market. The following are the threats that compel a company to
design and implement CRM solutions.
 The nature of competition which is now global.
 The rate of change is accelerating out of control.
 Margins are being eroded.
 Customers are more demanding and becoming less loyal.
 Customer churn is increasing.
 Product life-cycles are shrinking.
 Industry barriers are collapsing enabling major brands to enter new
markets.
 The Internet is transforming the business landscape.
1.9.2. Critical Issues in CRM
 Internal focus: For a CRM package to be successful, the design,
implementation, and feedback should be restricted to the needs of a
particular organization. Every organization requires a unique CRM
strategy.
 Function organization design: Every department, function and operation
pertaining to a business should be studied properly and should be divided
on the basis of commonalities so as to combine together alike functions and
to achieve integration of processes.
 Command and control culture: A proper flow-chart and control
mechanism must be set-up in order to implement and plug-in the loopholes
at an appropriate time.
 Customer data: The centre of focus of any CRM solution is customers. The
customer data should be an integral part of the solution and should be
secured and reliable enough to handle the sensitive nature of the data.
ANNA UNIVERSITY 43
Notes
CRM and Customer Service
Juniper Bank
Statement of Facts: When a customer walks into the main offices of Juniper
Bank and the first thing noticed by him/her is the posters. The artwork
focuses on customers, posters in hallways and break rooms instilling such
messages as "Keeping the Customer First" and "Improving the Customer
Experience." It's a testimonial not only to the company's culture of customer
commitment but also to the very tenets on which the company was founded.
Richard Vague has always been known as an industry leader. Vague was the
former Chairman and Chief Executive Officer of First USA, the market
leader in affinity credit cards that was purchased by Bank One in 1999. In
co-founding Juniper Bank, Vague envisioned combining an online bank
with a mission to simplify consumer banking and provide the best service.
Indeed, the company's flagship product is its futuristic transparent credit
card; a product its founder declared is the best vehicle for obtaining rich
customer information. Vague has described his vision for Juniper as being
"genuinely fair to consumers, easy to access, and simple to use." All this
even before the company had opened its virtual doors.
Now that it has -Juniper Bank was launched in October 2000- - it faces the
same customer service challenges faced by most online businesses. But
building a company from scratch presents some unique opportunities, as
Regina Wallace, before joining Juniper was instrumental in constructing the
Internet bank at Wells Fargo, is responsible for Juniper's entire service
culture, from establishing the company's call center to directing the
selection of its support technology infrastructure.
After joining Juniper in June 2000, Wallace made crafting customer-focused
business processes one of her first priorities. "Not many companies can
establish the ideal business processes before they are deployed," says
Wallace, who acknowledges that such work is much more difficult to
accomplish after a bank is already in business. Wallace and her team
designed business rules and processes from the customer's viewpoint. The
organization then automated them for customer service reps – known as
relationship managers, or "RMs" - through a high touch, integrated
customer desktop.
The word "integration" was key for Wallace. After all, unlike typical
financial service call center reps, Juniper's RMs are trained on all Juniper
products, from the core credit card to electronic billing and payment to the
company's new wireless banking service. Moreover, an RM is required to
know how to communicate with a customer regardless of whether the
Contd…
44 ANNA UNIVERSITY
preferred channel was the telephone, Internet chat, or e-mail. In fact, a Notes
single RM can handle 85 percent of calls to Juniper customer support,
resulting in faster turnaround and more satisfied customers.
In addition, Juniper's preliminary customer behavior analysis indicates that
the typical customer contacts the company three to four times a year. "We
don't have branches," Wallace explains, "so we have very few opportunities
to actually leave an impression on our customers." Wallace made the
decision not to outsource Juniper's call center for the same reason. "We
definitely feel that our competitive advantage is to have our service in
house. There's a lot of customer intelligence that originates in Customer
Service."
Taking the service culture one step further, Wallace empowers RMs to
resolve issues in what they believe are the optimal way for each individual
customer, embracing the practice of one-to-one dialog. For instance, an RM
can decide to waive a service fee in an extenuating circumstance for a
valuable customer. In addition to maintaining an online database that
provides RMs with customer profiles, the company tracks service outcome
statistics to determine whether RMs are making the best decisions possible.
The Challenges: The luxury of being able to build a company's support
infrastructure from scratch is also its difficulty. True, Juniper has no
neighborhood branches with lines of impatient customers spilling out the
door. Nor is there an easy way for Juniper to provide its customers within
intimate human experience. There are no unwieldy legacy systems to
grapple with, but that means little established data to direct the best
decisions. "We were always tempted to revert to out past experience,
"Wallace reflects, "and sometimes we had to guess. But our products are
different, and so are our customers."
All things being equal, Wallace estimates Juniper is between 12 and 18
months ahead of the industry curve simply because she did not have to undo
existing business processes to establish effective ones. She plans on tackling
the organizational issues next: "We're moving towards organizing more
around the customer so that we can continue to evolve our customer focus."
The Strengths: Wallace also credits her success to the tight relationship
between customer support and meeting. The classically tense relationship
often sees service reps accusing marketing of being unrealistic about its
promotions, and marketing accusing customer service of being unresponsive
and foiling its campaigns.
Not so at Juniper, where product mangers in marketing can regularly
monitor how their campaigns affect inbound customer contacts, and RMs
can openly provide feedback to marketing about campaign improvements.
The two organizations meet regularly and maintain a weekly performance
scorecard.
Contd…
ANNA UNIVERSITY 45
Notes The organizational missions of both Juniper's Customer Support department

and its Marketing department are centered on the customer experience. As
Juniper understands more about is customers' behaviors and preferences,
RMs can influence them. For instance if a customer purchases a Juniper
credit card through a direct-mail promotion, an RM would highlight the
benefits of Internet banking in his welcome call to that customer, potentially
steering the customer towards a more profitable channel and evolving
towards online bill payment. Indeed, when Juniper communicates with a
customer on palmtop, reminding that the telephone bill is due and offering
to pay it, marketing and service becomes refreshingly enjoyable.
Since its launch, Juniper Bank has begun receiving unsolicited customer
feedback. The resulting word-of-mouth has been rewarding for both
Wallace and Juniper. The company recently received the Number 1 spot in
Gomez Advisors' Internet Credit Card Scorecard for providing "accurate
and timely responses via phone and e-mail." American Banker reported a
Speer & Associates Internet survey that rated Juniper "the best financial
Web site, beating out American Express Corp., and Citi group Inc.".
As such a company so customer focused it doesn't need a formal CRM
program. "CRM is more of an assumption," explains Regina Wallace. "We
don't really talk about it; it's a behavior we're trying to instill into our
culture. You know, 'Are we pleasing the customer from the customer's
viewpoint?" Judging from the industry praise and hearty consumer
response, the answer is an absolute Yes. Customer service is a set of
business processes aided by new technologies but fundamentally practiced
by human beings. Notwithstanding all the new CRM tools in the market that
support call centers, companies can retain their customers by simply giving
them an unforgettable service experience.
However, it is of utmost importance that an effective CRM programme
should be part of modern marketing campaign. Customer service strategies
should be receptive to emotional involvement and there should be not only
efficiency but also friendliness and empathy, two terms that play a larger
role in CRM than they're given credit for and that even the most cutting-
edge CRM technologies will never provide.
Questions
1. Make a SWOT analysis of Juniper Bank.
2. Do you agree with the present management view that a CRM
programme is not required?
3. Give your reasons for and against a proposed CRM programme.
46 ANNA UNIVERSITY
1. We have three different types of CRM – strategic, Notes

operational and analytical. Recently founded
widespread traction is ‘social CRM’. This expression
is widely used by technology firms with solutions to
sell.
2. CRM is the core business strategy that integrates
internal processes and functions, and external
networks, to create and deliver value to targeted
customers at a profit. It is grounded on high-quality
customer-related data and enabled by information
technology.
SUMMARY
 The slogans "the customer is king" or "the customer is god" or "the
customer is always right" indicate the importance of customers to
businesses – although the last expression is sometimes used ironically.
Customer satisfaction has always been a key element in the pursuit of
corporate goals and objectives. However, the current competitive
environment fostered by liberalization and globalization of the economy,
and the rising customer expectations for quality; service and value have
prompted many companies to organize their business around customers
they serve, rather than around product lines or geographic business units
 An organization’s strategies towards developing and maintaining
sustainable relationship differ from one organisation to another depending
on certain factors. These include nature of business, its size, its market
share, nature of product type, volume of sales, geographic concentration,
socio-economic status and life style of the customers concerned,
competitors strength, and so on. However, some generic areas have to be
well-studied and analyzed for designing and implementing an effective
CRM strategy. It is better for any management thinking to focus on the
basic areas of marketing mix and incorporate the necessary preventive and
remedial measures or processes to make the areas intact without scope for
any chance of loose- ends.
 Mass production techniques maximized the profit making ability of
corporations, but it dehumanized the lives of workers. Frederick W. Taylor
introduced Scientific Management at the beginning of the twentieth
century, which used time and motion studies (often timing them with a
stopwatch) to measure workers' output. Taylor's goal was to find the ideal
process and then duplicate it over and over. In the abstract, scientific
management was a giant leap forward, but in reality, mass production led
to worker unrest, turnover, and social conflict. Unionization efforts,
particularly the struggles to organize unskilled workers by the Congress of
ANNA UNIVERSITY 47
Notes Industrial Organizations (CIO) in the 1930s and 1940s, and battles between
management and employees intensified as workers became more alienated
because of the factory setting.
 To achieve the long-term value of CRM, enterprises must understand that it
is a strategy involving the whole business, and thus should be approached
at an enterprise level. CRM initiatives need a framework to ensure that
programs are approached on a strategic, balanced and integrated basis.
 CRM is a comprehensive approach which provides seamless integration of
customer service and field support – through the integration of people,
process and technology, taking advantage of the revolutionary impact of
the Internet. CRM creates a mutually beneficial relationship with your
customers. In the rapidly expanding world of e-Commerce, there is a new
generation of empowered customers emerging who demand immediate
service with the personalized touch.
KEYWORDS
CRM: It is a comprehensive approach which provides seamless integration of
every area of business that touches the customer.
Event-based Marketing: The best definition of event-based marketing is a tie-
sensitive marketing or sales communication reacting to a customer-specific
event.
Cross-selling: Cross-selling is the act of selling a product or service to a
customer as a result of another purchase.
Continuity Marketing: These programs are generally aimed at retaining
customers and enhancing their loyalty.
SELF-ASSESSMENT QUESTIONS
Short Answer Questions
1. Define CRM.
2. What is the significance of Customer Relationship Management?.
3. Explain the strategies for building effective relationship with a customer.
4. Write down the history of CRM.
5. What are the needs of CRM?
Long Answer Questions

1. Explain various approaches of customer acquisition.
2. What gaps you perceive in customer service? How do you intent to plug
these gaps?
48 ANNA UNIVERSITY
3. What is the nature of Customer Relationship Management? Notes

4. What benefits do a firm and customer derive from it?
FURTHER READINGS
B. Murali Krishna, Customer Relationship Management-An Indian

perspective, Excel Books.
Mukesh Chaturvedi and Abhinav Chaturvedi, Customer
Relationship Management-An Indian perspective, Excel Books.
H.Peeru Mohamed & A Sahadeven Customer Relation Mgt, Vikas
Publication.
Jim Catheart, The Eight Competencies of Relationship selling,
Macmillan.
Kumar, Customer Relationship Mgt, A Database Approach, Willy.
ANNA UNIVERSITY 49
Notes
50 ANNA UNIVERSITY
Lesson 2 - Customer Information Database and Data Analysis
Notes
UNIT II
LESSON 2 – CUSTOMER INFORMATION
DATABASE AND DATA ANALYSIS
CONTENTS
Learning Objectives
Learning Outcomes
Overview
2.1 Customer Information Database
2.1.1 Developing and Maintaining Customer-related Database
2.1.2 Types of Customer Data
2.1.3 Database and Hardware for CRM
2.1.4 Data Attributes
2.1.5 Data Warehousing (DW)
2.1.6 Data Marts
2.1.7 Data Access and Interrogation
2.1.8 Position of CRM with Respect to Database
2.2 Concept of Customer Profiling
2.3 Customer Profile Analysis
2.4 Customer Perception
2.4.1 Methods for Assessing Customer Perception
2.5 Expectations Analysis
2.5.1 Keeping the Pace with Customer Expectation
2.5.2 Different Precursors of Customer Expectations
2.6 Customer Behaviour in Relationship Perspective: Individual and
Group Customer’s
2.6.1 Gap Analysis
2.7 Customer Life Time Value
2.7.1 Calculating Lifetime Customer Value (LCV)
2.7.2 Managing Customer Value
2.7.3 Uses of Lifetime Value
Contd…
ANNA UNIVERSITY 51
Notes 2.8 Selection of Profitable Segments

2.8.1 Customer Profitability and Customer Retention
Summary
Keywords
Further Readings
LEARNING OBJECTIVES
 Know about the Customer Information Database
 Understand the concept of customer profiling
 How to Analysis the Customer Profile
 Explain the Customer Behaviour in Relationship Perspective: Individual
and Group Customer’s
 Understand the Customer Life Time Value
LEARNING OUTCOMES
understanding of:
 the "database", it is in usually name, address, and transaction history details
from internal sales or delivery systems, or a bought-in compiled "list" from
another organization, which has captured that information from its
customers
 that customer database system have demographic information like age,
gender, income level, marital status, presence of children, mail order
responsiveness and home ownership
 that there are two kinds of Lifetime Value measurement - absolute and
relative. The first is very difficult to calculate; the second, very easy to
calculate and in many ways more powerful than the first.
OVERVIEW
Customers play the most significant part in business. In fact the customer is the
actual boss in a deal and is responsible for the actually profit for the
organization. Customer is the one who uses the products and services and
judges the quality of those products and services. Hence it’s important for an
organization to retain customers or make new customers and flourish business.
52 ANNA UNIVERSITY
To manage customers, organizations should follow some sort of approaches Notes

like segmentation or division of customers into groups because each customer
has to be considered valuable and profitable.
In this lesson, you will learn about the concept of Customer and How to
analysis customer database.
2.1 CUSTOMER INFORMATION DATABASE

The "database" is usually name, address, and transaction history details from
internal sales or delivery systems, or a bought-in compiled "list" from another
organization, which has captured that information from its customers. Typical
sources of compiled lists are charity donation forms, application forms for any
free product or contest, product warranty cards, subscription forms, and credit
application forms.
The communications generated by database marketing may be described as
junk mail or spam, if it is unwanted by the addressee. Direct and database
marketing organizations, on the other hand, argue that a targeted letter or e-
mail to a customer, who wants to be contacted about offerings that may interest
the customer, benefits both the customer and the marketer.
What is a Customer Information Database?
A customer information database is a program of stored information that is
relevant and useful to the success of your business. Customer information
database programs can be used as standalone software, incorporated with
existing databases, such as outlook or excel, or a combination of the two. What
a customer information database may hold can vary greatly due to the type of
business, the focus of marketing, and the direction in which the business is
going. A customer information database can be used for customer information,
employee tasks, marketing plans, and a variety of other daily business
functions.
Customer Information Database: Customer Information
The most often used information in a customer information database is the
customer information. This can include personal information, such as contact
addresses and phone numbers, as well as family size, location, and other
demographic information. Many companies also use their customer
information database to record purchase information,
Service calls, customer support needs, and even warranty information.
Anything relative to customer interaction can be placed in a customer
information database.
Customer Information Database: Employee Information
The customer information database can also be a hub for managing your
employees. Vital information can be stored within the customer information
ANNA UNIVERSITY 53
Notes database, such as employee id files and commission information. Also, some
employers and managers find it useful to assign tasks, check progress, and
monitor the sales records of their employees through the customer information
database. The customer information database can be a manager’s second set of
eyes, as to the productivity and motivation level of their employees.
Customer Information Database: Other Uses
Another popular use of a customer information database is within a business’
marketing plan. Because of the detailed records kept on the customers and their
buying habits, many businesses find their customer information database to be
their best marketing tool. It is easy to create reports on buying trends and habits
and focus marketing strategies to best fit these needs using the information in
the customer information database. Other companies use the customer
information database information to track sales and create goals for their sales
team. Depending on the specific needs of an organization, there are plenty of
different uses for the customer information database to discover or design.
Companies use the customer information database to gather information and
details about their customers, including their needs and purchasing history. The
customer information database can also be used to track employee sales and
success rates, as well as task lists and completion. Many companies incorporate
their customer information database into their marketing and advertising plans.
As the information entered into a customer information database is
customizable to your own business,
Capturing data on customers is essential to capitalise on your knowledge of
their purchasing habits, and may lead to further business.
But a database is only as effective as the last time the information was checked
and updated, and good database management is essential. Everyone knows
how irritating it is to receive a wrongly addressed letter. This can imply that if
your business cannot get an address right, how good can it be at providing a
service or selling a product?
Choosing Software
Selecting the right database software is important, ideally it will give you a
flexible system which allows for growth and expansion, and will produce
reports and relevant data on a range of queries. The wrong software will tie you
up in database management for far longer than necessary and you could end up
inputting only information which your database can handle, defeating the
objective of flexible data management.
Information Selection
Deciding what you want your database to do will generally dictate the
information it should hold. Essential information will include:
 Name and address
54 ANNA UNIVERSITY
 Salutation Notes
 Use or otherwise of first name
 Job title/company name
 Contact details (home/work/mobile numbers, fax, e-mail)
 Date information was last updated
 Consumer demographic
 Industry/commercial sector
 Details of last purchase Other relevant details to your business
 Last contact made with customer (and marketing material sent)
The more you break down the information, the more flexible your database
will be. For instance, put the first and last name into two fields, with the
salutation in the third. Another field should be created for 'use or otherwise of
first name', which can be selected when you are sending a letter to all those on
your database. Some contacts will be unfamiliar to you and should be
addressed formally, while others will be offended if you didn't use their first
name.
Using Held Information
Whether you are using the database as a marketing tool, mail merging with
sales letters and producing labels, or gathering information on the purchasing
trends of your customers, you should be able to sort and view the information
in an easy format. This will enable you to produce printed reports for your staff
and sales force to work from.
Database Security
It is likely that you will want the majority of your staff to view the database
and run simple reports, however it is important to have only one or two people
managing and inputting information. This will help to maintain the integrity of
the information held within the database.
It is good practice to set up password access to the database, this way you will
prevent unwanted users from looking at your customer information - this is
particularly crucial if your staff use laptops.
Backing up your Database
Back up the database frequently and keep the backups in a safe place.
Recreating an up-to-date database is impossible and lost or damaged data could
prove a serious setback to your business.
Sources of Data
Organizations of any size can employ database marketing; it is particularly
well-suited to companies with large numbers of customers. This is because a
ANNA UNIVERSITY 55
Notes large population provides greater opportunity to find segments of customers or

prospects that can be communicated with in a customized manner. In smaller
(and more homogeneous) databases, it will be difficult to justify on economic
terms the investment required to differentiate messages. As a result, database
marketing has flourished in sectors, such as financial services,
telecommunications, and retail, all of which have the ability to generate
significant amounts of transaction data for millions of customers.
Consumer Data
In general, database marketers seek to have as much data available about
customers and prospects as possible.
For marketing to existing customers, more sophisticated marketers often build
elaborate databases of customer information. These may include a variety of
data, including name and address, history of shopping and purchases,
demographics, and the history of past communications to and from customers.
For larger companies with millions of customers, such data warehouses can
often be multiple terabytes in size.
Marketing to prospects relies extensively on third-party sources of data. In
most developed countries, there are a number of providers of such data. Such
data is usually restricted to name, address, and telephone, along with
demographics, some supplied by consumers, and others inferred by the data
compiler. Companies may also acquire prospect data directly through the use
of sweepstakes, contests, on-line registrations, and other lead generation
activities.
Business Data
For many business-to-business (B2B) company marketers, the number of
customers and prospects will be smaller than that of comparable business-to-
consumer (B2C) companies. Also, their relationships with customers will often
rely on intermediaries, such as salespeople, agents, and dealers, and the number
of transactions per customer may be small. As a result, business-to-business
marketers may not have as much data at their disposal as business-to-consumer
marketers.
One other complication is that B2B marketers in targeting teams or "accounts"
and not individuals may produce many contacts from a single organization.
Determining which contact to communicate with through direct marketing may
be difficult. On the other hand it is the database for business-to-business
marketers which often includes data on the business activity about the
respective client.
These data become critical to segment markets or define target audiences, e.g.
purchases of software license renewals by telecom companies could help
identify which technologist is in charge of software installations vs. software
procurement, etc. Customers in Business-to-Business environments often tend
56 ANNA UNIVERSITY
to be loyal since they need after-sales-service for their products and appreciate Notes
information on product upgrades and service offerings. This loyalty can be
tracked by a database.
Sources of customer data often come from the sales force employed by the
company and from the service engineers. Increasingly, online interactions with
customers are providing B2B marketers with a lower cost source of customer
information.
For prospect data, businesses can purchase data from compilers of business
data, as well as gather information from their direct sales efforts, on-line sites,
and specialty publications.
2.1.1 Developing and Maintaining Customer-Related Database
The database is a repository of collection of files (or tables). The files contain a
number of records (or rows of the table), which in turn contain various fields
(or columns of the table). Each file contains information about a topic such as
customer, sales, products, etc.
The steps given below are followed to create and maintain a customer-related
database −
The database always needs to be very accurate and up-to-date.

2.1.2 Types of Customer Data
There are mainly two types of CRM data − Primary and Secondary. The
primary data is the one which is collected for the first time. The secondary data
is the one which has been collected earlier.
ANNA UNIVERSITY 57
Notes The primary data is collected by conventional means such as conducting

surveys, holding a skill competition, inviting the customers to subscribe for the
newsletter or to register their purchase, etc.
2.1.3 Database and Hardware for CRM
The CRM software use Relational Database architecture. It is composed of
tables with rows and columns. The tables are connected to other tables by a
unique identification number stored in the ID field, named primary key.
Database Management Systems for CRM
There are many database management systems available in the market today.
Some popular ones are Microsoft’s SQL server, Oracle, DB2 from IBM, etc.
These systems help to update and administer the database.
Hardware Considerations for CRM Database
The hardware platform on which the database will reside is selected based on
the following factors −
 The database size.
 The existing technology used in the business.
 The location of CRM users. Especially in case of global use of CRM, the
multilingual users from different time zones can access the CRM for
operational and analytical purposes.
2.1.4 Data Attributes
The CRM data must have the following attributes −
 It must be sharable because many people need to access it from various
geographical locations.
 It must be relevant means pertaining to the given purpose.
 It should be most accurate. Inaccurate data wastes the marketing efforts of
the business, predicts wrong opportunities and serves the customers with
insufficient and inaccurate service. Data should be reviewed timely to
ensure removal of inaccuracy taken place while acquiring and entering the
data.
 It should be up-to-date means it should store and show the latest
information.
 It should be transportable from one location to other. It should be
available where the users need it. The technology of compiling and
handling data electronically is essential for today’s fast-paced businesses.
 It should be secured. Businesses need to keep their data safe from loss and
theft and unethical snooping as many businesses can subscribe to the same
CRM software through the same portal.
58 ANNA UNIVERSITY
2.1.5 Data Warehousing (DW) Notes

Data warehouses are huge repositories of customer related data accepted from
various databases. These repositories can be as much as a few terabytes
(240 bytes).
Numerous global businesses operating from various countries and continents
generate huge volume of data. This data needs to be converted into useful
information for further operations and analysis. Data warehouse does this task
by −
 Accepting the data from ETL system that extracts valuable data, transforms
it into a required format, and loads it into the database.
 Organizing data according to subjects of business and various time periods.
 Standardizing data coming from various sources in a single format.
Example: bringing salutations, codes (m/f or male/female), units of

measurement, etc. in the same format.
 Conducting periodic update of data, say daily or weekly, depending upon
business requirements. It is not done in real time.
 Providing updated data for the purpose of analytics, data mining, and
reporting.
2.1.6 Data Marts

It is the smaller version of a data warehouse which caters to a particular
business or a function. Data mart projects are inexpensive than data warehouse
projects as the volume of the data is smaller and the functions for which it is
used are specific. The costs, time, and efforts required to handle such data are
less.
ANNA UNIVERSITY 59
Notes 2.1.7 Data Access and Interrogation

CRM applications allow users to interact with the database.
Example: a salesperson adds customer data at the time of billing or after

the customer service call is attended. Also, the users need to interrogate the
data for analytical purpose.
Thus, data access and interrogation is essential and is carried out by the
following three ways −
Data Mining
Data mining is the process of sifting through the huge volume of data to get
most relevant information in the shortest possible time. CRM takes the help of
Artificial Intelligence to find out the solutions for the most important questions
of the business.
In the context of CRM, data mining is the application of predictive analytics to
support marketing, sales, and services. In CRM, data mining finds associations
among data, classifies the customers according to business value, and helps to
find answers of the following questions −
 Which customers the business should target?
 What is the cost of customer acquisition?
 Which customers are buying (or not buying) the products?
 Who are high/medium/low margin customers?
 What profile customers are defaulting payment repeatedly?
 How can a business segment its market?
 Can the business offer a common price for all customer segments?
Example:, an analyst of Walmart noticed that the sale of beer and

diapers is high on Fridays. Having this fact brought to the notice of Walmart,
the business kept the two products close to each other on the shelves. This
resulted in the sale rise of both the products.
Thus, data mining helps in generating sales volumes by providing most
relevant data for marketers’ analysis.
Database Queries
The queries are the tools to access and modify the database. Structured Query
Language (SQL) is used for management of Rational Databases. The queries
come in the form of statements such as SELECT, ADD, DELETE, UPDATE,
DROP, etc.
60 ANNA UNIVERSITY
Notes
Example:, look at the following query statements −
CREATE DATABASE Db_Name
DELETE * FROM EMPLOYES
SELECT Emp_Name, Emp_Salary
FROM Employees
WHERE Emp_Salary >= 25000
Reports
CRM Applications generate reports on periodic basis for analyzing the traits of
sale, performance, and many other allied activities. Reports are generally
accessed by management people of the business for performance assessment.
OLAP technology is capable of showing data at a level as lowest as a
salesperson’s and as highest as a region, which can be helpful to assess the
performance and question the underperformance.
2.1.8 Position of CRM with Respect to Database
After having known various types of CRM in earlier chapter, let us see which
CRM stands where with respect to the customer database −
Analytical CRM works most closely with the customer database and strategic
CRM works farthest from the database.
ANNA UNIVERSITY 61
Notes
Everyone knows how irritating it is to receive a wrongly addressed
letter. This can imply that if your business cannot get an address right, how
good can it be at providing a service or selling a product?
2.2 CONCEPT OF CUSTOMER PROFILING

Customer profiling looks at customer’s characteristics including demographic
(age, gender, life stage), geographic (location), and psychographic
characteristics (influencers, interests, lifestyle), as well as past buying
behaviour to understand who they are and what motivates them. Similar types
of customers, those with shared traits, goals and motivations can then be
grouped and targeted based on who they are and what they are interested in.
Benefits of Customer Profiling
Marketing is a highly competitive environment, more so now than in the past,
with consumers empowered by technological advances enabling them to
become more demanding and discerning. Brand loyalty is decreasing, whilst
customers expect timely highly personalised communications that are relevant
and an overall good customer experience. Any less and consumers will happily
take their business elsewhere. To provide a good user experience, businesses
need to understand their customers and what they are interested in to be able to
communicate with them, as and how they expect. The silver lining to this
technological age, is the wealth of data consumers now create through multiple
devices and touch points such as mobiles, tablets & computers. Profiling and
analysing this data provides the intelligence that can answer not only what
consumers are interested in but also how they prefer to be contacted and when
they might be ready to purchase. This knowledge, often referred to as customer
insight, can then be used to drive your future marketing strategy, help improve
targeting and provide a better customer experience.
Customer Profiling Advantages
Customer knowledge:– Profiling enables you to understand your customers,
who they are by age, gender, life stage, location, hobbies and past buying
behaviour.
Relevancy: Ability to tailor communications based on customer’s specific
interests which will enhance experience, engagement and ultimately sales.
Increase response rates: Communicating with the right people at the right time
drives better campaign results and sales, this insight enables a nurturing
process to lead your prospects through the buying process.
Customer Experience: If you know your customers you can make them feel
recognised and valued, increasing the customer experience and therefore
loyalty.
62 ANNA UNIVERSITY
Customer acquisition: If you understand who your best customers are you can Notes
look for prospects with the same characteristics. These prospects will have a
higher propensity to be interested in your offering and potentially purchase.
Opportunity Sizing: Understanding who your most profitable customers are
enables you to focus resource where it matters. Do a small percentage of your
customers provide a higher proportion of your profit margin?
Market Penetration: Once you know your customer profile, you can analyse
the potential opportunity available to you. What percentage of your target
market are you talking to, what’s your market penetration like?
Customer Profiling Process
The following provides a simple overview:
Data Cleanse & Validation – Your customer data needs to be cleaned and
validated to enable customer analysis and enhancement enabling profiling.
Single Customer View – If you have disparate data sources, marketing and
operational this needs to be consolidated in a single customer view so that each
customer’s information whether e-mail response, brochure download or
purchase can be analysed together.
Data Enrichment – Your data can be appended with variables such as age, life
stage, income, hobbies or consumer classifications such as Mosaic to provide
flags against individuals.
Customer Segmentation – The process of grouping customers into similar
characteristics which may be by demographics, purchasing behaviour or a
more sophisticated combination of the two.
Strategy Alignment – Once you understand who your customers are and have
segmented them into groups you can develop a strategy to drives sales and
performance based on their individual requirements. Each segment will require
a different strategy and communications based on who they are and where they
are in the sales process.
Targeted Marketing – Once you have developed your marketing strategy to
nurture both customers and prospects you are in position to implement targeted
ANNA UNIVERSITY 63
Notes marketing. This is marketing based on the interests and needs of each segment
rather than blanket marketing to all.
2.3 CUSTOMER PROFILE ANALYSIS

The information obtained from the Customer Profile analysis enables a
company to determine who their best customers are so that they can then target
their prospects more effectively and successfully.
This information is temporarily appended to the company’s database for
analysis purposes. It does not become a permanent part of their customer
database.
What are some of the Characteristics that are included in the analysis?
Demographic information includes age, gender, income level, marital status,
presence of children, mail order responsiveness and home ownership. Specific
Niche information can include the Niche category, income, demographic
profile and product interest
Example:
 Consumers in the Already Affluent category are described as having an
income level of 75,000+, white collar, few kids and high home value.
Product interests include stocks, import cars and travel.
 Lifestyles are also included in the analysis and cover interests such as
Outdoors (hunters, fishermen, campers); Athletic (tennis players, golfers,
skiers); Good Life (gourmet cooking, wine enthusiasts and foreign travel)
among others.
Why is it so important for a business to conduct a customer profile analysis?
Profiling customers is an important strategic marketing tool that can be utilized
to select the best prospects and create an appropriate marketing message and
design for your customer’s direct mail piece. For instance, if a company knows
that 85% of their customers are seniors and own their homes, they would
purchase a mailing list of homeowners age 55+, not renters in the age range of
24-35. If the data shows that a significant number of customers have a
household income level of $50,000 and play golf, that criteria can be selected
when purchasing a prospect list. A direct marketing campaign designed for a
product that is sold mostly to women would probably get better results if the
creative had a feminine look and feel rather than a football theme. Knowing
distinctive characteristics about their current customers enables a company to
target the right audience with the right message and creative, and helps them
market more intelligently and successfully.
64 ANNA UNIVERSITY
Who could benefit from analyzing their customers? Notes

Companies that mail frequently (monthly or quarterly) and want to improve
their sales and marketing R.O.I. can benefit from defining and understanding
the characteristics of their best customers. To perform the analysis, only the
Name, Address, City, State and Zip Code are required.
This information is temporarily appended to the company’s

database for analysis purposes.
2.4 CUSTOMER PERCEPTION

Customer perception is an important component of relationship with the
customers. Perception “is the act of discerning, realizing, and becoming aware
of through the senses”. The customer’s perception is what counts, not what we
think it is. Assessing customer perception is useless unless the information
leads to actionable. Assessing customer perception should be part of an overall
systematic approach aimed at improving customer satisfaction.
Box 2.1: The Customer's Perception
Customer perception is an important component of our relationship with our

customers. Given that 90% plus of our orders at some point involve the
phone, how we handle the telephone is essential to creating a perception for
our customer that aligns with the company mission of service. The
following is a great way of handling the phone.
1. The greeting is: Good Morning/Afternoon this is Joshua with (your
company name). How may I help you?
2. Always ask and receive a response from people before you put them on
hold: Would you please hold...? Then be sure they are not on hold very
long otherwise offer to call them back.
3. Remember to smile on the phone. Slow down and speak plainly and
clearly. Smiling stretches your vocal cords, and gives a more upbeat
presentation to the customer. Slowing down ensures that the customers
perception is of an organized systematic company that can handle their
project. Getting it done right and on time consistently.
4. If you transfer a call and know who is calling, tell the name of the caller
to your co-worker so they can greet the person by their name.
5. Under no circumstances should any interaction with a client be used to
express any sense of overwhelm that you may have. We are swamped,
we are so busy, etc., may be acceptable office banter in most companies
but it really should not be! If I am a customer and I am looking to get a
Contd...
ANNA UNIVERSITY 65
Notes rush project done, this type of comment tells me that I might want to
consider looking elsewhere. Customers do not care how busy we are
when they call and ask: How busy are you? What they really care about
is can we take care of another project they have for us.
We know from talking to clients that often they feel that they are
bothering us or have a concern that they might be overloading us. It is
curious to know that sometimes these are our best clients that have this
concern. Therefore, anything that might reinforce this is something we
want to avoid (you do not need to send your work to other vendors even
though you have given us a lot of work already, we can handle it). One
possible response to: Are you busy? – is to say: We are busy, but never
too busy to help you – what can I do for you? or words to that effect.
They are the customers. They do not want to hear about our situation
they want to talk about what we can do for them.
6. If we have to contact a customer with bad news of any kind realize that
your tone of voice and approach to it set the tone. We do not want to be
nonchalant as if it is not big deal. Nor do we want to act like a terrible
calamity occurred. Here are keys to contacting customers with bad
news:
 Prepare rehearse and organize what you are going to communicate to
them and how you are going to communicate it to them.
 Be sure there is no hint of blame or avoiding responsibility.
Customers do not care about the folder being broken, the copier
jamming or any other things. That is our problem. It is not their
problem and they actually do not want to hear about it. Certainly, later
in the conversation if they ask what the source of the delay or problem
is, you can share that with them, but it should not be something that
you want to volunteer early in the conversation.
 Be absolutely certain that you have options to give the customer in
these situations. This allows them to be more in control rather than a
victim. What are options? What are solutions? Do not call them with
the problem unless you are also providing solutions to them.
 Learn what you could have done to prevent this problem from
occurring and do so next time. Again, the customer is calling us to
take on their problems and to solve their problems. They really do not
want (nor do they care) to know about our problems.
7. Remember to always thank the customer. Thank them for calling. Thank
them for their business. Thank them for cooperation and understanding.
Thank them for a well prepared electronic file. Thank them for a
referral. Thank them for the professional manner in which they and their
company interact with us.
Source: http://www.fibre2fashion.com/industry-article/6/533/the-customers-perception1.asp
66 ANNA UNIVERSITY
2.4.1 Methods for Assessing Customer Perception Notes

There are many methods for assessing customer perception. The basic
categories of methods to gather customer perception information are:
1. Surveys
2. Feedback Cards
3. Focus groups
4. Face to face interviews
5. Telephone interviews
6. Customer Complaint Process
Let’s explain each of the above in detail
1. Surveys: People’s experience suggests that providing the customer with a
survey is the most frequently used method to obtain customer feedback.
These vary in length and focus with the most common categories for
questions covering, (a) quality of product, (b), timeliness of delivery, (c)
price, (d) responsiveness & flexibility, (e) service quality, (f)
cooperativeness of Customer Service Representatives and/or Sales
Representatives, (g) innovation and creativity, (h) vastness of service
offerings etc.
Potential Strengths:
 Relatively easy to coordinate the distribution.
 Relatively inexpensive.
Potential Weaknesses:
 Response rate is not usually stellar.
 You can’t control who responds and who does not. So, you may not
necessarily obtain a representative perspective of the overall customer
base.
 Poorly crafted questions may create a built-in bias by leading the
respondent to answer in a certain way.
You can’t control who responds and who does not. So, you may
not necessarily obtain a representative perspective of the overall customer
base
2. Feedback Cards: These are attached to the product, or to an invoice, and
focus on the quality of a product shipment. Areas of focus typically
include; (a) product quality, (b) condition of the product when it arrived,
(c) timeliness, and (d) packaging.
ANNA UNIVERSITY 67
Notes Potential Strengths:

 Inexpensive to execute. The cards are attached to something that is
already going to be shipped or mailed.
 Being, smaller in size and therefore less burdensome to complete, the
recipient may be more inclined to return it.
 The size of the card restricts the number of questions that can be listed.
 Although directions for distribution (who should complete it) are
included on the card, the card often does not hit its intended target.
 Sometimes the receiving department throws away the card.
 You can’t control who responds and who does not
3. Focus Groups: A focus group session is a meeting conducted with a
variety of customers to assess a product or service. Meetings can also focus
on service or process issues.
Example: an automobile industry conducts what it calls “20 Groups”

where it brings a group of twenty customers together for the purpose of
discussion. In a traditional Market Research sense, the results generated in a
focus group are not considered scientific and are used to further hone other
research instruments like a survey.
 Sometimes a customer will think of an idea with others present that
he/she otherwise would not.
 Generates a good deal of input in a short span of time.
 If not facilitated properly (focus on the outcomes and actionable items),
the meeting can turn messy. When this happens, it is worse than if
nothing was attempted.
 Sometime individuals in a group are subjected to “group think” and
support the viewpoints of others rather than voice their own.
4. Face to Face Interviews: It can be seen at shopping mall. Shoppers are
escorted into a room where a prepared survey is completed which usually
includes both open-ended questions and those that require a rating. In the
Graphics Arts world a company often relies on the sales force to obtain the
customer’s perception by sitting down and having “customer-supplier”
meetings.
68 ANNA UNIVERSITY
Potential Strengths: Notes

 The setting provides an opportunity to clarify questions and discussion
topics because communication is two- way. The interviewer can check-
in for both nonverbal and vocal cues.
 The interviewee might be more attentive and thorough in answering
questions when an interviewer is involved.
 The interviewer is constrained by geography. Either the interviewer
visits the interviewee or vice-versa. So to obtain wider coverage can be
expensive.
 The interviewer may enter bias into the activity, by either saying too
much (leading the interviewee), not listening well, or by not accurately
or comprehensively recording responses.
5. Telephone Interviews: These are not telephone solicitations. Rather these
are contacts made with existing customers for the purpose of assessing their
perception of how well a company is meeting their needs. With intelligent
crafting of both questions and sequence (the “nesting” of questions), a
tremendous amount of useful and actionable information can be gleaned.
As previously stated, it is critical to use interviewers who are completely
independent so as not to filter the information.
 The setting provides an opportunity to clarify questions and discussion
topics because communication is two-way. The interviewer can check-
in for vocal cues.
 The interviewer is not constrained by geography.
 The interviewee might be more attentive and thorough in answering
questions when an interviewer is involved.
 The interviewer may enter bias into the activity, by either saying too
much (leading the interviewee), not listening well, or by not accurately
or comprehensively recording responses.
Customer Complaint Process: Customer complaint process also means a
formal process. Generally a company implements a form or electronic
recording method for capturing a complaint. Responsibilities are assigned to
individuals to resolve the immediate issue. The log of complaints is analyzed to
determine patterns and root causes of customer perceptions for the purpose of
permanently eliminating the condition causing the complaint.
ANNA UNIVERSITY 69
Notes Potential Strengths:

 If a company genuinely listens to the complaining customer, it is
hearing an unsolicited cry for help and there is no better substitute for
that particular perception.
 Proper handling of the complaint can lead to a “save” which may
improve the relationship.
 Making this method the only source of customer perception. Often
times, customers do not complain; they just never do business with you
again.
A quick review of concepts related to perception helps attain higher degrees of
accuracy when assessing customer perception because it is wise to remember
that “beauty is in the eyes of the beholder” and in this case the beholder writes
the check.
Learning Activity
How many types of customers do you know? Discuss.
2.5 EXPECTATIONS ANALYSIS

In a unique study, the Gallop organization of USA, after interviewing a billion
customers over more than 25 years identified four major expectations of
customers.
These expectations are:
 Accuracy: The customer expects accuracy in his or her dealing with the
company.
 Availability: The company must be available to the customer where and
when he wants.
 Partnership
 Advice
Every organization tries to discover the needs and expectations of the
customers. These needs and expectations are different for different product and
services. What a customer expects from an insurance company is different
from what is expected of a health – Care Company. But, the four basic
expectations identified seem to remain more or less constant in all types of
product and service.
70 ANNA UNIVERSITY
Expectations are a key factor behind satisfaction. When customers have high Notes
expectations and the reality falls short, they will be disappointed and will likely
rate their experience as less than satisfying.
2.5.1 Keeping the Pace with Customer Expectation
Behaviour changes regularly. If a trend emerges from analysis of your data, it
is appropriate to review marketing strategy and assess the success or relevance
of the plan under way. The data and the insight they provide become an
extremely precious indicator of customer satisfaction.
By analyzing your loyalty program data, you can recognize which of your
customers visit frequently (and spend a lot) which ones visit infrequently (but
still spend a lot) and which are more erratic but still “profitable”. The loyalty
program and market research data will allow you to look at the impact of
competitors on customer behaviour. You know all the locations of your
competitors and so are able to assess visit and spend behaviour in the light of
proximity to named competitors.
As part of the customer analysis assignment, you should explore whether or not
your loyalty program has any impact on repeat purchase or loyalty. By doing
this you are hoping to see a relationship between loyalty card usage among
those customers spending and visiting stores the most. In other words, you
want to be convinced that your loyalty program is being used by, and
rewarding, your best customers. In theory this analysis should demonstrate that
your loyalty program customers tend to visit more and spend more than
average customers. You can create these as your key segments. You should
also analyse if your customers are most likely to be loyal when they are offered
on specific campaigns
With this new information, you can begin to tailor your approach to each of
these customer segments. It is clear that simply the differences in their visit
cycle have important implications for the business. If some customers only
visit once or twice a year, you need to present your offering in a clear and
attractive manner. Essentially you now have to be sure that defined groups of
customers are attracted to and persuaded by the offers and propositions your
sales and marketing team makes to them.
This requires continual development, and testing-customer profitability is the
key. However, a greater depth of understanding is needed in reviewing
seasonal trends, customer characteristics by offer type, the influence of
catchment area composition and competitive markets.
Additionally you should undertake the challenge in establishing not only the
demographic profiles of your customers, but also to achieve a precise measure
of their attitudinal and motivational approach to your product and services. As
you start developing this, the potential value of the database grows
substantially and allows a further dimension to be added in seeking to
ANNA UNIVERSITY 71
Notes understand and profitably satisfy our customer needs – and importantly your
competitors’ customer needs.
2.5.2 Different Precursors of Customer Expectations
The Customer
 Past experience of the customer;
 Word-of-mouth from other customers;
 Personal needs of the customer; and
 National culture of the customer.
The Service Provider
Communications (direct and indirect) about what the customer can expect.
Competitors
Service provided by other providers that acts as a benchmark. Every

organization tries to discover the needs and expectations of the customers.
These needs and expectations are different for different product and services
2.6 CUSTOMER BEHAVIOUR IN RELATIONSHIP

PERSPECTIVE: INDIVIDUAL AND GROUP CUSTOMER’S
The businesses and their representatives are directly responsible for the
patterns of purchases (in the long run) of each of their customers. How they
(the customers) will react within certain situations is largely due to the
education and supplying the customer with enough data and tools to
proficiently inform them of what is to be completed and within what context
and timeframe. Understanding the customer and their reactions to the
environment will prolong the life of the relationship between businesses and
their customers.
Understanding the customer can be a starting point for most businesses and a
re-evaluation point for most others. There are at times where a gap occurs
between what customers expect and what management/businesses presume
they expect. This often happens because companies overlook or do not fully
understand customer's perceptions and expectations. In spite of a strong
commitment and sincere desire to provide quality service, many companies fall
dramatically short of the mark, usually because they have an internally directed
rather than externally directed focus. An internally directed focus assumes that
the company knows what customers should want and delivers or produces that.
This orientation often leads to providing products and services that do not
match customer's expectations important features and benefits may be left out
72 ANNA UNIVERSITY
and levels of performance may be inadequate. According to Michael Wing, A Notes

few common elements that contribute to the gab between customer
expectations and the product or service offered are as follows:
 Inadequate bilateral communication between frontline personnel and
management.
 An absence of regular interaction between management and customers
 An absence of a strong marketing-research program (understanding the
customer)
 An absence of customer-service accountability. (Wing, p. 14)
Frontline employees are in constant communication with the customers and
management tends to not know the needs of those customers. Communication
must be bilateral for internal purposes, because the direction of the company is
lead by management, but is dictated by the customer. Frontline employees are
the bloodline from the customers to the management team. If the management
team does not believe that all the information is getting back to them from the
customers through the frontline employees, managers must make sure that
there is some form of interaction between them and the customer. This also
allows for the managers to keep in place some customer-service accountability.
Managers are responsible for identifying problems and resolving them,
wherever they may exist.
There are countless theories explaining customer behavior and attributes.
According to the customer Psychology in Behavioural perspective. "The most
widely-accepted and influential models of Customer behavior derive in large
part from cognitive psychology. As a result, customer choice is usually
understood as a problem-solving and decision-making sequence of activities,
the outcome of which is determined principally by the buyer's intellectual
functioning and rational, goal-directed processing of information." (Foxall, p.8)
Customers and their behaviors comprise of many attributes and differentials.
These differences are not just associated with demographics, groups or any one
particular item. There is a complex development of behaviors that exist in the
customer markets. Just by human nature, Customers can be spontaneous,
unpredictable, and selfish. By these definitions, businesses, customers and
purchasers are usually trying to find the best advantageous deal around and
always looking after number one (number one can be the business or
themselves). What makes the customer is not always a predisposition attribute,
but rather an educated or enforced protocol that has been in stowed into their
mindset. In other words, we as vendors can still influence the customer. There
are ways to enhance the products as vendors and create relationships to
influence the customers to have confidence in the products. Once the
Customer's needs are found, vendors can then create the "image" of what the
customer should expect from the products. On the other hand, getting as much
information about the customer can give the vendor more information to better
ANNA UNIVERSITY 73
Notes serve the market as a whole. The marketplace is characterized by continuous

changes in market composition, business practices and structure. To understand
what makes up the customer is unique to every business, but there are models,
that have some significance in the collaboration of several theories about
customer behavior. Exhibit #1 graphically summarizes previous efforts to
explain customer behavior (Moschis, p. 4). The solid lines and arrows show
how efforts have been explicitly directed at the examination of Customer
behavior primarily by marketing and Customer researchers. The dotted lines
show relationships reported by researchers in the customer field as well a by
researcher in other disciplines. These relationships show an indirect influence
on customer behavior through an intervening variable, that is,
they show how one factor affects another variable, which in turn might directly
or indirectly affect customer behavior. (Moschis, p. 4).
The penetration of the Web has become sufficiently pervasive, to the extent
that Web Customers now represent a wide range of demographic attributes,
such as the whole of the customer market. With the recent shift in the last 100
years of mass communications, particularly television, it has led to the success
of customers on the Internet in our culture. The web offered a benefit that TV
lacked: two-way communications. There are still many people who continue to
experience a feeling of strangeness and distrust about the Internet, but the
reality of it all, the shift has moved most businesses into the Internet market.
Businesses and vendors must realize that the potential of the Internet and
customer behavior within its means. The Internet will become a vehicle as
intrinsic to our daily existence as TV's and telephones are in today's world for
communication and Customer development. This open-ended subject has many
components to it, but the issue at hand is how the Internet impacts customer
behavior. Customer behavior on the web is yet to be figured out and the models
are in the beginning stages, but we now know it is here to stay and there is a
large market segment waiting for all businesses to join in the pursuit to easier
transactions and information on the Web. According to "The Soul of the New
Customer", we have primarily focused on what customers like and dislike
about online shopping. But how has the Internet changed the other ways that
Customers shop? The key reasons new customers say they like to shop online
are:
 It's more convenient as compared to other methods of shopping
 It saves time
 They are more empowered because of better product information and the
ability to compare offerings among many different vendors
 They find better product selection at better prices
 The primary drawbacks to online shopping are:
 Some products are simply not conducive to an online purchase
74 ANNA UNIVERSITY
 Many Customers appreciate and want to experience the "aesthetics of Notes

shopping,"
 Returning products that don't meet their requirements is a hassle.
2.6.1 Gap Analysis
Gap analysis generally refers to the activity of studying the differences
between standards and the delivery of those standards.
Example:, it would be useful for a firm to document differences

between customer expectation and actual customer experiences in the delivery
of medical care. The differences could be used to explain satisfaction and to
document areas in need of improvement.
However, in the process of identifying the gap, a before-and-after analysis
must occur. This can take several forms.
Example:, in lean management we perform a Value Stream Map of the

current process. Then we create a Value Stream Map of the desired state.
The differences between the two define the "gap". Once the gap is defined, a
game plan can be developed that will move the organization from its current
state toward its desired future state.
Another tool for identifying the gap is a step chart. With the step chart, various
"classes" of performance are identified—including world-class status. Then,
current state and desired future state are noted on the chart. Once again, the
difference between the two defines the "gap".
The issue of service quality can be used as an example to illustrate gaps. For
this example, there are several gaps that are important to measure. From a
service quality perspective, these include: (1) service quality gap; (2)
management understanding gap; (3) service design gap; (4) service delivery
gap; and (5) communication gap.
1. Service Quality Gap: Indicates the difference between the service expected
by customers and the service they actually receive.
Example:, customers may expect to wait only 20 minutes to see

their doctor but, in fact, have to wait more than thirty minutes.
2. Management Understanding Gap: Represents the difference between the
quality level expected by customers and the perception of those
expectations by management.
ANNA UNIVERSITY 75
Notes
Example:, in a fast food environment, the customers may place a
greater emphasis on order accuracy than promptness of service, but
management may perceive promptness to be more important.
3. Service Design Gap: This is the gap between management's perception of
customer expectations and the development of this perception into delivery
standards.
Example:, management might perceive that customers expect

someone to answer their telephone calls in a timely fashion. To customers,
"timely fashion" may mean within thirty seconds. However, if management
designs delivery such that telephone calls are answered within sixty
seconds, a service design gap is created.
4. Service Delivery Gap: Represents the gap between the established delivery
standards and actual service delivered. Given the above example,
management may establish a standard such that telephone calls should be
answered within thirty seconds. However, if it takes more than thirty
seconds for calls to be answered, regardless of the cause, there is a delivery
gap.
5. Communication Gap: This is the gap between what is communicated to
consumers and what is actually delivered. Advertising, for instance, may
indicate to consumers that they can have their cars's oil changed within
twenty minutes when, in reality, it takes more than thirty minutes.
Implementing Gap Analysis
Gap analysis involves internal and external analysis. Externally, the firm must
communicate with customers. Internally, it must determine service delivery
and service design. Continuing with the service quality.
Example: the steps involved in the implementation of gap analysis are:

 Identification of customer expectations
 Identification of customer experiences
 Identification of management perceptions
 Evaluation of service standards
 Evaluation of customer communications
The identification of customer expectations and experiences might begin with
focus-group interviews. Groups of customers, typically numbering seven to
twelve per group, are invited to discuss their satisfaction with services or
products. During this process, expectations and experiences are recorded. This
76 ANNA UNIVERSITY
process is usually successful in identifying those service and product attributes Notes
that are most important to customer satisfaction.
After focus-group interviews are completed, expectations and experiences are
measured with more formal, quantitative methods. Expectations could be
measured with a one to ten scale where one represents "Not At All Important"
and ten represents "Extremely Important." Experience or perceptions about
each of these attributes would be measured in a similar manner.
Gaps can be simply calculated as the arithmetic difference between the two
measurements for each of the attributes. Management perceptions are
measured much in the same manner. Groups of managers are asked to discuss
their perceptions of customer expectations and experiences. A team can then be
assigned the duty of evaluating manager perceptions, service standards, and
communications to pinpoint discrepancies. After gaps are identified,
management must take appropriate steps to fill or narrow the gaps.
The Importance of Service Quality Gap Analysis
The main reason gap analysis is important to firms is the fact that gaps between
customer expectations and customer experiences lead to customer
dissatisfaction. Consequently, measuring gaps is the first step in enhancing
customer satisfaction. Additionally, competitive advantages can be achieved by
exceeding customer expectations. Gap analysis is the technique utilized to
determine where firms exceed or fall below customer expectations.
Customer satisfaction leads to repeat purchases and repeat purchases lead to
loyal customers. In turn, customer loyalty leads to enhanced brand equity and
higher profits. Consequently, understanding customer perceptions is important
to a firm's performance. As such, gap analysis is used as a tool to narrow the
gap between perceptions and reality, thus enhancing customer satisfaction.
Product applications
It should be noted that gap analysis is applicable to any aspect of industry
where performance improvements are desired, not just in customer service.
Example: the product quality gap could be measured by (and is defined

as) the difference between the quality level of products expected by customers
and the actual quality level. The measurement of the product quality gap is
attained in the same manner as above. However, while service delivery can be
changed through employee training, changes in product design are not as easily
implemented and are more time consuming.
Gap analysis can be used to address internal gaps. For example, it is also
applicable to human resource management. There may be a gap between what
employees expect of their employer and what they actually experience. The
larger the gap, the greater the job dissatisfaction. In turn, job dissatisfaction can
decrease productivity and have a negative effect on a company's culture.
ANNA UNIVERSITY 77
Notes
Example: Ford Motor Co., utilized gap analysis while developing an
employee benefit program. While management may believe it has a handle on
employee perceptions, this is not always true. With this in mind, Ford's
management set out to understand employee desires regarding flexible
benefits. Their cross-functional team approach utilized focus groups, paper and
pencil tests, and story boards to understand employee wants and needs. Their
team, consisting of finance, human resources, line managers, benefits staff, and
consultants, identified gaps in benefit understanding, coverage, and
communications. As a result of gap analysis, Ford implemented a
communications program that gained employee acceptance.
2.7 CUSTOMER LIFE TIME VALUE

Lifetime Customer Value or Long term Customer Value is a reflection of the
possible future business a company can expect from a loyal customer. This will
include not only the repeat purchases by the customer, but also his family
purchases, referral purchases, cross sells etc., over a long period of time. It
should also consider the future product introductions of the company for which
this loyal customer is a ready prospect. This adds more dimensions to the exact
assessment of the LCV. Use of custom lifetime value as a marketing metric
tends to place greater emphasis on customer service and long-term customer
satisfaction, rather than on maximizing short-term sales.
In marketing, Customer Lifetime Value (CLV), Lifetime Customer Value
(LCV), or Lifetime Value (LTV) and a new concept of "customer life cycle
management" is the present value of the future cash flows attributed to the
customer relationship.
2.7.1 Calculating Lifetime Customer Value (LCV)
There are two kinds of Lifetime Value measurement - absolute and relative.
The first is very difficult to calculate; the second, very easy to calculate and in
many ways more powerful than the first.
The most difficult part of calculating LTV is deciding what a “lifetime” is.
Lifetime Value is the value of the customer over the Life Cycle (if you don't
know what a Lifecycle is, you really should read the article on Life Cycles
before reading this one). Lifetime Value doesn't exist without a Life Cycle. We
will get into some details on calculating Life Time Value in a moment, but
first, a clarification.
The Life Time Value concept has been horribly abused and misunderstood
over the last several years. It is not necessary to figure out an absolute Life
Time Value for a customer or wait "a lifetime" to find out the value to use the
concept in managing customer value. If you are new to this Life Time Value
stuff and have not tracked the appropriate parameters, or your company is new
and lacks meaningful operating history, you can look for "relative Lifetime
78 ANNA UNIVERSITY
Value," link it to customer behavior, and still get leverage from using Notes
LTV/LCV in your business model to manage customer value.
Example: Say I run the same ad in two different newsletters and get
response from both. When I look at these responders, maybe a week later for a
content visit or 30 days later for a purchase, I find a high percentage of repeat
visitors or buyers from one newsletter, and a low percentage from the other.
Repeat behavior indicates higher Life Time Value, and predicts future repeat
behavior, regardless of what the actual monetary Life Time Value is. I can
switch money out of the low repeat newsletter into the high repeat newsletter
and get higher ROI without having to measure anything but repeat behavior.
By the way, using customer behavior to predict the relative Lifetime Value and
loyalty of customers is a 40 year old technique still used by mail order and TV
shopping companies today. Large sites with CRM analytics are using this
technique, known as RFM, to predict customer value and response to
promotions. If you'd like to see more details on using relative Lifetime Value
to make ad or product decisions, see the tutorial: Comparing the Potential
Value of Customer Groups
Let's say you're not satisfied with using relative Lifetime value as a proxy for
absolute Lifetime Value. You're a glutton for punishment, or your boss wants a
hard number. No problem. Here are a few issues we need to put on the table
when discussing the calculation of LTV:
1. If you haven't been in business long enough to know the Lifetime of a
customer, just put a stake in the ground by looking for defected best
customers. Look at customers who have spent or visited the most with you
and then of these, look at the ones who haven't made a purchase or visit in
some time (6 - 9 months, for example). In all likelihood, the last purchase
or visit was the end of the Lifecycle when considering best customers who
have stopped buying or visiting. When best customers stop, they're usually
all done. Then look at first purchase or visit date for these customers,
calculate your Lifetime, and use this length of time as the "standard"
customer Life Time, realizing the average lifetime is probably much
shorter.
2. Frequently, a customer will defect for a few years and then come back.
This is cool, and normal. Their life changed somehow and they left, and
now they need you again. Most offline marketers would call a customer
who has had zero activity for over 2 years a defected customer. Online, it's
more like 6 months for the average customer, unless you are in a classic
seasonal business. If the customer starts up again, they would be a “new
customer”, for marketing and modeling purposes. They will more likely
behave like a new customer than a current customer. The behavior will
ramp and fall off all over again, just like it did in their previous Lifecycle
with your business. That doesn’t mean you can’t use the same customer
number, or combine the old behavior record with the new behavior record
ANNA UNIVERSITY 79
Notes in the customer service shop. In fact, knowing how long on average a
customer defects before they come back can be a useful promotional tool.
But there has been a significant break in behavior, and this customer is
more likely to behave as a new customer than a customer who has been
with you the whole time. That's just the way it works. They’re likely to be
interested in different products.
Example: You decide if it's a new lifetime or not based on your

business. In most cases, from a marketing perspective, and for the purposes
of Lifetime Value, they should be treated as a new customer. Otherwise, all
your customers will have „infinite‰ lifetimes, and you lose the relevance
of the metric.
3. Another challenge to calculating Lifetime Value: usually much of the data
you need to complete the simple calculation are not available, or can't be
agreed upon by all the players, especially if you are in a big company. If
you don't know what the average unit returned costs you in terms of
overhead, you can't do the calculation. If you don't know what the average
number of customer service calls per unit shipped is and what the calls
cost, you can't do the calculation. This is a particularly difficult problem for
offline retailers, who don't have a database that captures nearly enough
relevant data.
Here's one way approach it if the operational data you need is unclear. Try
to focus on the average unit sold, and break up all the revenue and cost
components that comprise the unit. Once you get to a profit/unit, just multiply
by units sold to a customer over the "lifetime," minus overhead and
promotional costs, and you get LTV.
Average price, cost of goods sold, gross margin... should be easy to find.
To get customer service costs, look at how many units you move annually, and
divide by annual customer service cost. Do the same thing for returns, and so
on, until you know the costs/unit sold of all the elements going into a sale.
Don't forget credit processing, after sale support, etc.
Example:
Table 2.1: Net Profit per Unit Analysis
Average Sale Price $40.00 100%
Cost of Goods Sold (36.00) (90%)
Gross Margin 4.00 10%
Credit Clearing (.80) (2%)
Revenue Ship & Handle 6.00 15%

Contd...
80 ANNA UNIVERSITY
Cost of Ship & Handle (4.00) (10%) Notes
Call Center (1 call every 5 sales) ( .80) (2%)
Returns and Processing (5% of Sales) (2.00) (5%)
Fraud / Merchandise Loss (1% of Sales) ( .40) (1%)
Promotional Costs / Discounts / Ads ( .80) (2%)
Net Profit per Unit $1.20 3%
LTV Calculation and Customer Acquisition Cost Calculations

Say the average customer buys for 2 years, then stops for at least 1 year.
Therefore, we define the Life Time of a customer as
2 years.
Over 2 years, the average customer makes 16 purchases.
16 × $1.20 Profit per Unit = $19.20 LTV of the average customer
The average customer recruits 3 other customers. The maximum acquisition
cost of a new customer should be 4 × $19.20 = $76.80 to breakeven.
By the way, I'm not a fan of including pass-a-long or referral customer value in
an individual customer Lifetime Value. If you do, what are the pass-a-long
customers worth? It's double counting. Use it to look at acquisition costs as in
the example above, but don't include it in LTV calculations. The sum of all
your customer Lifetime Values should equal your future profits; if you include
the value of pass-a-long customers in Lifetime Value, you will over estimate
profits.
Don't be surprised if you find some customer groups have negative LTV's – it’s
very common. This is the part of LTV analysis usually forgotten, because it
literally means you would be more profitable if you had fewer customers. And
explaining that to your boss (if you have one) is often a challenge, even on a
positive day.
Most models to calculate CLV apply to the contractual or customer retention
situation. These models make several simplifying assumptions and often
involve the following inputs:
 Churn rate: The percentage of customers who end their relationship with a
company in a given period. One minus the churn rate is the retention rate.
Most models can be written using either churn rate or retention rate. If the
model uses only one churn rate, the assumption is that the churn rate is
constant across the life of the customer relationship.
 Discount rate: The cost of capital used to discount future revenue from a
customer. Discounting is an advanced topic that is frequently ignored in
ANNA UNIVERSITY 81
Notes customer lifetime value calculations. The current interest rate is sometimes
used as a simple (but incorrect) proxy for discount rate.
 Retention cost: The amount of money a company has to spend in a given
period to retain an existing customer. Retention costs include customer
support, billing, promotional incentives, etc.
 Period: The unit of time into which a customer relationship is divided for
analysis. A year is the most commonly used period. Customer lifetime
value is a multi-period calculation, usually stretching 3-7 years into the
future. In practice, analysis beyond this point is viewed as too speculative
to be reliable.
 The number of periods used in the calculation is sometimes referred to as
the model horizon.
 Periodic Revenue: The amount of revenue collected from a customer in the
period.
 Profit Margin: Profit as a percentage of revenue. Depending on
circumstances this may be reflected as a percentage of gross or net profit.
For incremental marketing that does not incur any incremental overhead
that would be allocated against profit, gross profit margins are acceptable.
2.7.2 Managing Customer Value
After measuring customer value, the next step is to manage customer value - to
make money by creating very high ROI customer marketing campaigns and
site designs. The Drilling Down book describes how to easily create future
value and likelihood to respond scores for each customer, and provides detailed
instructions on how to use these scores to continuously improve the
profitability of your customers.
2.7.3 Uses of Lifetime Value
Lifetime Value is typically used to judge the appropriateness of the costs of
acquisition of a customer.
Example:, if a new customer costs $50 to acquire (CPNC, or Cost per

New Customer), and their lifetime value is $60, then the customer is judged to
be profitable, and acquisition of additional similar customers is acceptable. For
this reason, the costs involved in the first purchase are typically not included in
LTV, but rather, in the Cost per New Customer calculation.
Learning Activity
How to Calculating Lifetime Customer Value. Discuss?
82 ANNA UNIVERSITY
2.8 SELECTION OF PROFITABLE SEGMENTS Notes

Differential treatment of customers is the key to manage the customer
relationship profitably. Though customer level marketing actions are the
desired outcome of CLV computation it is also worthwhile to look at specific
segments of customers based on CLV and develop strategies for each segment.
In order to do customer segmentations, firms need to understand the exchange
variables and customer demographic variables which differentiate each group
from the other. These variables explain why certain customers are more
profitable than others.
Using a powerful metric such as CLV, firms can address marketing issues with
greater confidence. This metric will also help companies to develop important
CRM strategies that will help them develop profitable relationships with their
customers.
Businesses have become increasingly sophisticated in their efforts to capture
consumer information, but the process of exploiting consumer information
remains relatively immature. Data mining is a process that applies the
techniques of artificial intelligence to the task of discovering useful patterns in
data, and is proving particularly powerful in the identification of customers
sharing the same characteristics. This segmentation of customers into affinity
clusters presents new possibilities for customer segmentation.
Many segmentation approaches have been devised and each of these has merit.
Experience suggests that most enterprises use a combination of approaches to
deliver maximum benefit. The ability to deliver sophisticated segmentation
techniques to the business enhances the ability of the enterprise to deliver more
tailored marketing programmes, to identify segments that are more important
to the business, to identify segments that have been neglected and to become
more attentive to previously unrecognized consumer needs.
Increasingly companies realise that consumers differ in their needs,
preferences, sensitivities, opinions and behaviours. The transition from mass
marketing to target marketing that is currently in progress creates demands for
more sophisticated customer segmentation techniques. The key enabler of any
segmentation strategy is customer data. Customer data are the raw material that
must be captured, integrated and effectively analyzed in order to achieve the
goal of profiling customers. Before customer data can be integrated they must
first be assessed for quality. Inconsistencies in semantics (what the data mean)
and the occurrence of null fields are encountered as well as incorrect data.
These so-called ‘noisy’ data must be conditioned and cleansed before
proceeding to uncover meaningful patterns.
Once the data are cleansed and integrated they can be interrogated to discover
groups of customers sharing the same characteristics and needs. Market
segmentation is the process of partitioning the heterogeneous market into
separate and distinct homogeneous segments. A segment consists of a group of
ANNA UNIVERSITY 83
Notes consumers who react in a similar way to a given set of marketing stimuli.
Usually the enterprise defines a segmentation matrix and then, based on the
data, would allocate customers to segments. This a priori approach to
segmentation defines, in advance, a framework or system that describes
characteristics of customers or prospects based on information that is known
about those individuals. Some common a priori approaches to looking at
segments include loyalty, profitability, sensitivity, usage, demographics,
psychographics and attitude. Table 9.1 provides an overview of the common a
priori approaches to segmenting customers.
In addition to the a priori approach, data-mining techniques make possible a
different approach to segmentation— namely cluster segmentation. The cluster
segmentation approach, in direct contrast to the a priori method, seeks to
discover naturally occurring clusters of customers who share common
characteristics or behave in the same way.
Regardless of the segmentation technique used, the starting point is the
collection of the data that provide the variables to construct the segments.
Table 2.2: Common a Priori Customer Segmentation Categories
Segmentation Type Segment Definition
Buyer-readiness The division of prospects and customers into groups reflecting

segmentation the different stages which consumers normally pass through
during the purchase process. These usually comprise ignorance,
awareness, knowledge, preference and conviction.
Benefit segmentation Dividing the market into groups according to the different
benefits that consumers seek from the product.
Occasion segmentation The division of customers into groups which consume a product
or service at particular times, in certain situations, in response to
particular events or according to seasonal or cyclical times.
Psychographic/lifestyle The division of customers into groups based on lifestyle, social
segmentation behaviour, values, sensitivities and personality characteristics.
Demographic The division of customers into different groups based on
segmentation demographic variables such as age, gender, family size, income,
occupation, education, language, religion, race and nationality.
Life-cycle The division of customers into different groups that recognise
segmentation the different needs of consumers at different stages in their life.
Geographic The division of customers into different groups based on
segmentation countries, regions, climate and population density.
Loyalty segmentation The division of customers into different groups based on
different degrees of loyalty to supplier or brand.
Product segmentation The division of customers into different groups based on levels
and type of usage of the product or service.
Profitability The division of customers into different groups based on the
segmentation different levels of value or profitability of the customers.
Contd...
84 ANNA UNIVERSITY
Interaction The division of customers into different groups based on their Notes
segmentation preferences regarding channels, payment method, promotions
and communications.
Satisfaction The division of customers into different groups based on their
segmentation recorded satisfaction levels, complaint history, fault history and
upgrade history.
The segmentation proposed is compounded for magnitudes such as age, rent

level, potential value, and customer connection.
These magnitudes clearly define the reasons for specialized commercial
strategy.
 Age: There is no doubt that an age conditions different behavior or
attitudes in customers.
 Income level: The customer’s income level is, in banks, one of the main
parameters used to define a customer profile and what they are expecting to
receive from the entity.
 Customer value: understood that future expected fluxes of profitability,
incomes, etc., it fixes the investment for each type of customer.
 Client connection: this links the customer relationship and loyalty level
with the entity.
We are now going to show in detail the methodological process to calculate the
income level and the potential value of the parameters.
Income Level
The procedure to calculate a customer’s income level has several steps:
 Direct Income Calculation: There are a certain percentage of customers
for whom the income calculation is obtained directly from derived
transformations of other variable values.
Example:, payroll or pension, recurring incomes, etc... On average, in

the Spanish Banking Sector is able to calculate income level by this process for
40% of the population.
 Advance Income Estimation: For the other 60% of the population, the
income calculation is obtained by statistical inference. They assign to each
customer, whose rent is unknown, the same rent interval of those others
with which the distance in behavioral terms is lowest.
This is calculated with the following:
 Behavioral clustering: By vote algorithm or a distance-based algorithm
(mainly k-means), we are able to identify, through an iterative
procedure defined in five steps, customer segments with similar
behavioral. This previous step is essential in order to set a predictive
ANNA UNIVERSITY 85
Notes algorithm to assign each customer a winning probability of having a

certain income level.
 Forecasting classification: For each of the identified segments and
desired levels of income forecast (i.e. low, medium, high), a forecasting
algorithm is created (i.e. Chaid, RRNN) that will determine the
probability that a customer belongs to each of the categories.
 Distribution and transformation analysis: Once the probability of
belonging to each level of income for each customer is calculated, a
comparison of the income distribution over the population will be
performed. This income will be calculated with direct methods, whose
final value has been forecasted by data mining.
From a strategic point of view, the breakdown of the total customer value into
the present and potential value will allow the definition of differential
commercial strategies.
There are two variants in the potential value calculation: complete and derived,
understanding that derived is the value of the customer, also considering the
possible risk of attrition.
2.8.1 Customer Profitability and Customer Retention
Essentially our challenge is that we have a collection of attributes, some
discrete, some continuous, and we want to predict a continuous variable (a
number). A typical customer profitability model would use customer
demographics, channel, product requested, volume etc to predict future
profitability. Our model will use geographic location, client agent, resource etc
to predict response time.
There are thousands of ways that you could use a very similar structure to
predict a continuous number for a different real-world application. These
applications include predicting delivery time, project time, project revenue,
employee tenure, lease duration, residual value etc. Therefore, once you have
gone through this exercise, it should be very easy for you to build your own
customer profitability model or other similar model using your organization’s
real data.
We will build a data mining model using the following attributes to predict
response time:
 City
 Country
 Client operating system
 Client agent (browser and version)
 HTTP status
 HTTP operation
86 ANNA UNIVERSITY
 Referring server Notes

 Target resource
 Target resource type (e.g., .htm, .jpg, .zip)
 Bytes out
In a customer profitability prediction model, the attributes would be different,
but in both cases they are a mix of discrete variables (such as country) and
continuous variables (such as bytes out and ordered volume).
In any data mining exercise, one of the first tasks is to identify the input
variables and the output (predicted) variable(s). Note, in some data mining
tasks there is no desire to predict a variable.
Example:some clustering exercises do not make predictions, they just

cluster.
Customer profitability is certainly an attribute that you cannot get from a
customer survey. In most cases, customers will have no idea how profitable
they are to you, and would certainly use it against the firm if they knew. This
suggests the value proposition of cross-referencing customer survey data with
customer profitability segmentation. Ideally, the customer segments have their
own specific survey responses, so that behavior of the customer is assigned
directly to the cost-to-serve from the point of view of a particular company.
Once market forecasts and propensity to buy (future revenue prediction) is
linked to cost-to-serve at the segment level, detailed forecasts of customer
segment profitability are achievable, which deliver the ROI decisions for future
product and marketing initiatives.
What is unique to communications services is the large and intermingled
infrastructure of technology, networks, customer support, IT and administrative
support that are applied to a changing base of products and services. Because
these service assets are highly shared, there is a tendency to ignore the
differences in usage across the customer base. Additionally, there is little or no
marginal product cost and most costs appear to be ‘fixed’. This results in
accounting distortions that lead to inaccurate decisions, political jockeying to
control cost allocations, and inaccurate strategies for maximizing future
profitability.
Additionally, the growing installed base of operational CRM (Customer
Relationship Management) software provides the ability to utilize customer
profitability results when receiving individual service calls; whether they are
for trouble-shooting, new service requests, or billing inquiries. Customer
Profitability knowledge increases the ability of frontline staff and management
teams to put into action the primary goal of the firm: maximize profitability.
Individual frontline customer-facing decisions can now be aligned throughout
the company influencing a gamut of daily operational behaviors that
ANNA UNIVERSITY 87
Notes distinguish the value of customers, and give the ability to link customer care
actions to increased future profitability.
This is resource allocation at its finest granularity.
Example: which customers receive waiting queue priority? Which

customers are offered which premium messaging, data or voice services?
Which customers have the shortest wait for new DSL provisioning
installations? Because all customer service has cost and all customer waiting
time has loyalty risks, this prioritization is an important way to make tradeoffs
across customers and segments. It provides fine-tuning that will influence
customer loyalty, retention, acquisition, customer profitability, and thus firm
profitability.
A granular understanding of customer profitability enables resource allocation,
priority servicing or response, and specific promotional offers that mobilize
this new ‘asset’ of customer profitability knowledge. It allows these decisions
to be decentralized as required by the firm’s policy. This ‘pushdown’ of
responsibility provides a powerful way to maximize profitability at every
frontline decision. By recognizing the unprofitable customers or segments and
scripting options for product offers, and terms and conditions, companies can
take specific steps to reduce the percentage of unprofitable customers.
In banking, it is widely believed that 80-90% of the customers are unprofitable,
and the remaining minority are very profitable but barely cover the cost of all
the unprofitable customers. Since this type of analysis is so new to
communications firms, there are no rules of thumb on these percentages for
this industry. This also means that leaders in this industry can innovate in their
usage of this solution for competitive advantage.
Figure 2.1: Typical profitability distribution of customers in retail financial services.

Each of the ten blocks represents a decile of customers (10% of the total number of
customers) and shows profit contribution for each decile. The amount of profit or loss is
illustrated (here showing visually about zero profit overall). This information is a
compilation of the analysis of millions of banking relationships worldwide
88 ANNA UNIVERSITY
These profitability measures when combined with proven customer retention Notes
strategies will allow communications firms to improve profitability by focusing
retention tactics on their most profitable consumer and business customers. As
an example, within long distance carriers an annual customer churn rate of
25% or more is the typical experience with consumer households. An
unfocused CRM strategy without the benefit of precise customer profitability
data would result in retention strategies being identical for both profitable,
marginally profitable, and unprofitable customers. Conversely, armed with
profitability data a communications firm can reduce program costs and boost
profits by focusing retention only on those households or relationships revealed
to be the most profitable for the firm. Further CRM tactics such as predictive
defection modeling.
Figure 2.2: Decision Environment for using Customer Profitability
Advantage of Customer Profitability

Customer segment and individual customer profitability analysis provide
communications companies with the decision power needed for targeted
customer acquisition and retention programs. Customer profitability is a very
fundamental decision strategy that few firms have performed well.
The challenge has been the mountain of data from myriad sources, complex
calculation rules and logic, and clear understanding of the methods. Those
issues are addressed in this paper along with a discussion of tools and tactics
that can be employed to harness the power of the cost and customer behavioral
information scattered across a communications enterprise.
1. Selecting the right database software is important,
ideally it will give you a flexible system which allows
for growth and expansion, and will produce reports
and relevant data on a range of queries.
2. Lifetime Value is typically used to judge the
appropriateness of the costs of acquisition of a
customer.
ANNA UNIVERSITY 89
Notes SUMMARY
 Customers play the most significant part in business. In fact the customer is
the actual boss in a deal and is responsible for the actually profit for the
organization. Customer is the one who uses the products and services and
judges the quality of those products and services. To manage customers,
organizations should follow some sort of approaches like segmentation or
division of customers into groups because each customer has to be
considered valuable and profitable.
 A customer information database is a program of stored information that is
relevant and useful to the success of your business. Customer information
database programs can be used as standalone software, incorporated with
existing databases, such as outlook or excel, or a combination of the two.
What a customer information database may hold can vary greatly due to the
type of business, the focus of marketing, and the direction in which the
business is going. A customer information database can be used for
customer information, employee tasks, marketing plans, and a variety of
other daily business functions.
 Customer perception is an important component of relationship with the
customers. Perception “is the act of discerning, realizing, and becoming
aware of through the senses”. The customer’s perception is what counts,
not what we think it is.
 The basic categories of methods to gather customer perception information
are:
1. Surveys
2. Feedback Cards
3. Focus groups (e.g. “20 groups” derived from the auto industry)
4. Face to face interviews
5. Telephone interviews
6. Customer Complaint Process
 Expectations are a key factor behind satisfaction. When customers have
high expectations and the reality falls short, they will be disappointed and
will likely rate their experience as less than satisfying.
 Lifetime Customer Value or Long term Customer Value is a reflection of
the possible future business a company can expect from a loyal customer.
This will include not only the repeat purchases by the customer, but also
his family purchases, referral purchases, cross sells etc., over a long period
of time. Lifetime Value is typically used to judge the appropriateness of the
costs of acquisition of a customer.
90 ANNA UNIVERSITY
 Businesses have become increasingly sophisticated in their efforts to Notes

capture consumer information, but the process of exploiting consumer
information remains relatively immature. Data mining is a process that
applies the techniques of artificial intelligence to the task of discovering
useful patterns in data, and is proving particularly powerful in the
identification of customers sharing the same characteristics. This
segmentation of customers into affinity clusters presents new possibilities
for customer segmentation.
 Customer segment and individual customer profitability analysis provide
communications companies with the decision power needed for targeted
customer acquisition and retention programs. Customer profitability is a
very fundamental decision strategy that few firms have performed well.
KEYWORDS
CRM: It is a comprehensive approach which provides seamless integration of
customer service and field support – through the integration of people, process
and technology, taking advantage of the revolutionary impact of the Internet.
Customer Value Analysis (CVA): CVA compares price and quality (or value)
of a product against competitors.
Lifetime Customer Value: It is a reflection of the possible future business a
company can expect from a loyal customer.
Customer Profitability: Customer profitability is certainly an attribute that you
cannot get from a customer survey.
1. Who is a customer?
2. What is the significance of customer information database?
3. What is customer profile analysis?
4. What is customer perception?
1. What is expectation analysis?
2. Discuss customer behaviour in relationship perspective.
3. Differentiate between individual and group customers.
4. What is customer life time value?
ANNA UNIVERSITY 91
Notes 5. How will you calculate customer life time value?

6. Discuss “Selection of Profitable segments”.
FURTHER READINGS

Publication.
Macmillan.
Francis Buttle, Customer Relationship Mgt, Concepts Tools,
Elsevier.
.
92 ANNA UNIVERSITY
Lesson 3 - Customer Acquisition and Retention
Notes
UNIT III
LESSON 3 – CUSTOMER ACQUISITION AND
RETENTION
CONTENTS
Learning Objectives
Learning Outcomes
Overview
3.1 Customer Relationship Management: Components and Architecture
3.1.1 Technology and CRM Technology Components
3.2 Customer Value
3.3 Customer Retention
3.3.1 Negative and Positive Retention Strategies
3.3.2 Meet and Exceed Expectations
3.3.3 Trends in Customer Retention
3.3.4 Keys for Customer Retention
3.3.5 Strategic Customer
3.3.6 Different Types of Customers
3.4 Customer Acquisition
3.4.1 Traditional Approach to Customer Acquisition
3.4.2 Customer Acquisition Strategy
3.5 Customer Expectation
3.5.1 Zone of Tolerance
3.5.2 Expectation Management Strategies
3.6 Customer Defection
Summary
Keywords
Further Readings
ANNA UNIVERSITY 93
Notes LEARNING OBJECTIVES

 explain the Customer Relationship Management: Components and
Architecture
 To know about Customer Value
 understand the Customer Acquisition
 Discuss about Customer Expectation
 Explain the Customer Defection
LEARNING OUTCOMES
understanding of:
 analytical CRM is the capture, storage, extraction, processing,
interpretation and recording customer data to the user
 negative customer retention strategies impose high switching costs on
customers, discouraging defection
 that all information about a particular customer should be in one database
(not separate databases for marketing, sales or support), and everyone in
the organization should be looking at the same data.
OVERVIEW
The explanation below aims to discuss the concept of customer acquisition and
retention. Under the present context of competitive environment, the focus of
the organizations is more on customer retention than simply on customer
acquisition. Customer retention is the process of keeping customers in the
customer inventory for an unending period by meeting the needs and exceeding
the expectations of those customers. It is the approach of converting a casual
customer into a committed loyal customer. Acquisition is a vital stage in
building customer relationship. Certain key issues connected with customer
acquisition are dealt here.
Medical science teaches us the “life is in the blood”. When blood stops
flowing, life stops very quickly. It is the same with our businesses; customers
are the life blood of our business. When we stop having a “flow” of customers,
our business will die very soon. So it is very important to acquire and keep
customers. Our business is not about ourselves, it is about our customers. The
focus of your business shouldn’t be on yourself; rather it should focus on your
customers. They are not really interested in how long you have been in
business or how much education you have. Customers are interested in what
your business can do or provide for them. We call these “customer benefits”.
94 ANNA UNIVERSITY
The dynamics of the business ecosystem have changed the way in which Notes
companies do business both in relationship management and the streamlining
of their operations. Relationship marketing is emerging as the core marketing
activity for businesses operating in fiercely competitive environments. On an
average, businesses spend six times more to acquire new customers than to
keep them. Therefore, many firms are now paying more attention to their
relationships with existing customers to retain them and increase their share of
customer’s purchases. The practice of relationship marketing also has the
potential to improve marketing productivity through improved marketing
efficiencies and effectiveness.
Customer retention is the key to any organization’s effectiveness. Customer
centric approach to marketing programme helps retain customers and win back
lost customers. An organization needs to study the needs of the various market
segments and design the marketing programmes tailor made to suit the
segments. Customer anticipates several things from the company in addition to
the product; which the firm has to study well to bridge the gaps between
customer expectations and firm’s delivery.
3.1 CUSTOMER RELATIONSHIP MANAGEMENT:

COMPONENTS AND ARCHITECTURE
The following stages strive to determine the main components of the various
styles of Customer
Relationship Management:
(a) Functional CRM: This model of implementation is possible only with the
large scale organizations. This will be possible only with the organizations
which will not be having any departmental coordination. These modules
will work only for the particular departments. This can be called as
specialized modules. Because of this department-wise implementation the
initial amount spent will always be higher than the Return on Investment
(ROI). This method will benefit only to the specific area not to the entire
organization.
Example: we can consider the company like TATA which will be

having various types of business with variety of modules where the
commonality will be very less. In this kind of situation this type of CRM will
come into the picture.
(b) Departmental: This model is possible for all size of organizations. There
will be some departments which will be common for one or more business
modules. This intra departmental coordination can be utilized and the
modules can be implemented accordingly. This will give success from
bottom line to the middle level. That means these modules can help the
modules like call centres, SFA etc.
ANNA UNIVERSITY 95
Notes (c) Partial CRM: This module is possible only when the intra departmental
coordination is more among the departments. In this model two to three
departments will be sharing a common master database. As the modules are
shared among the various business processes the return on investment will
be always 4 to 7 times higher than the initial investment.
Example: The sales, marketing departments will always share a

common database of the products and the customers.
(d) Full CRM: This model is applicable with all levels of organizations. In this
model the entire organization will be using a same database. There will be
a greater coordination among the departments with this type of
organization. As a whole the implementation is done. Because of this
common nature, this model provides a greater ROI which is 7 to 10 times
greater than the initial investment.
As mentioned above each and every organization will have its own working
method. By identifying their level in any of the above mentioned models, the
organizations can proceed with the implementation. Customer intelligence is
another name for customer facing system. This creates the strong base of data
about the customers that the organization is having with itself. Any
organization which is having good customer intelligence can create a best
customer data repository with which the retention of customer will be easy for
the organization.
The customer intelligence is having above mentioned four steps that are to be
followed. Each and every step is interrelated with each other.
Gather data:
1. Gather Customer Data
2. Analyse Data
3. Formulate Strategy Action
4. Data collection
5. Various sources are considered.
6. Various touch points are accessed.
7. Various parameters are considered
8. Data will be accumulated in a single repository
Analyze the data:
1. Patterns are to be designed for the analysis.
2. Detailed analysis will be performed.
3. Samples will be taken into consideration.
4. Final formulation will be done.
96 ANNA UNIVERSITY
Formulation Strategy: Notes

1. Conclusions will be derived from the analysis.
2. Data segmentation will be done.
3. Models will be prepared.
Action:
1. The final step in the customer intelligence.
2. Actions will be taken based on the strategies planned.
3. Final repository will be stored with the plans.
4. Any organization which is following the above mentioned steps can create
a good customer data repository.
3.1.1 Technology and CRM Technology Components
There are following types of CRM technology:
Let us discuss the three types of CRM in detail.
Operational CRM
This is an ERP like segment of CRM.
Typical business functions involving customer service, order management,
invoice or billing or sales and marketing automation and management are the
parts of operational CRM.
It provides support to “Front Office” business processes, including sales,
marketing and service.
Each interaction with a customer is generally added to a customer’s contact
history, and staff an retrieve information on customers from the database when
necessary.
One of the main benefits of this contact history is that customers can interact
with different people or different contact channels in a company over time
without having to describe the history of their interaction each time.
It process customer data for a variety of purposes such as managing campaigns,
Enterprise Marketing Automation (EMA) and Sales Force Automation (SFA).
Till now, this is the primary use of CRM. One characteristic of operational
CRM is the possibility of integrating with the financial and human resources
functions of ERP applications.
With this integration, end-to-end functionality from lead management to order
breaking can be implemented.
ANNA UNIVERSITY 97
Notes Analytical CRM

Analytical CRM is the capture, storage, extraction, processing, interpretation
and recording customer data to the user.
Companies such as Micro Strategy have developed applications that can
capture this customer data from multiple resources and then use hundreds of
algorithms to analyze and interpret the data as needed.
The value of the application is not just in algorithm and storage, but also in
ability to individually personalize the response using the data.
It generally makes heavy use of data mining.
It analyzes customer data for the following purposes.
i. Design and execution of targeted marketing campaigns to optimize
marketing effectiveness.
ii. Design and execution of specific customer campaigns.
iii. Analysis of customer behaviour to aid product and service decision-making
such as pricing etc.
iv. Aid in taking management decisions such as financial forecasting.
v. Provide a tool in predicting the probability of customer defection.
Collaborative CRM
It is the communication centre, coordination network that provides neural paths
to customer and its suppliers.
It could mean a Partner Relationship Management [PRM] application or a
customer interaction centre.
It could mean communication channels such as web or e-mail, voice
applications and even channel strategies.
In other words, it is any CRM function that provides a point of interaction
between customer and the channel itself.
CRM Technology Components
The following are the components, which are common to different CRM
approaches.
CRM Engine: This could be the customer data repository. The data mart, the
data warehouse is the one where all the data on customer is captured and
stored. This could include basic stuff such as your name, address, telephone
number, birth date etc. It could also include more sophisticated information
like how many times you have accessed a particular web site and what you did
on the web pages you accessed. It could also include the help desk support and
the purchase history.
98 ANNA UNIVERSITY
Ultimately, the purpose is a single gathering point for all individual customer Notes
information so that a unified customer view can be created throughout the
company departments that need to know the data stored in this CRM engine
house.
Front Office Solutions: These are the unified applications that run on the top
of the customer data warehouse. They could be sales force automations,
marketing automation, or service and support customer interaction
applications. In the client server environment (and now in the internet
environment), they provide employees with the information on the basis of
which the decision of “what is to be done? or “What next is to be done with the
customer is made?” The more specific applications provide an element of self-
service for the customer.
Enterprise Application Integration: They sit between back office and front
office. They also sit between the newly installed CRM system and old systems
implemented by the enterprise. They permit CRM to CRM communication.
They are pieces of codes, connectors and bridges that as a body are called as
EAIs. EAIs provide messaging services and data mapping services that allow
one system to communicate with different other systems regardless of their
formatting.
Consumer insight helps identify hidden meanings in consumer

feedback, such as discovering latent consumer needs or value that they
themselves might not be aware of and applying this information to our
products. LG Electronics is making every effort to explore consumer insight
and to reflect it in product development and marketing, thereby increasing
consumer value.
3.2 CUSTOMER VALUE

The components of customer value are deceptively simple. Product quality,
service quality, price, and image shape a customer’s perception of value. A
firm’s strategy and performance in these areas are integrated by customers into
a perception of the value proposition. This is particularly important for first
time customers. In this highly competitive business environment, the customer
will compare the perceived value of competitive offerings. The ultimate
“winner” in the battle for the customer’s pocket book is the firm that delivers
the “best value” from the customer’s perspective. These components of
customer value can be shaped into a simple model
ANNA UNIVERSITY 99
Notes
Source: http://notablur.com/wp-content/uploads/2012/09/2_customer_questions.jpg
Figure 3.2: Components of customer value
Once a customer has made a purchase decision, a fifth component of value
emerges.
That component is the relationship between the customer and the vendor. Over
time the relationship component can develop into an extremely important
element. Unfortunately, firms often have explicit strategies to develop the other
four components of value but simply expect the relationship to happen
naturally and spontaneously. Such an expectation can be unrealistic.
Each of these components can and should be broken down into much more
detail to be managerially useful. Let’s use a full line department store as an
example, since most of us have experience with such purchases. Product
quality refers to the tangible features that a customer evaluates. For a
department store, product quality can be partitioned into two dimensions. One
dimension deals with the characteristics of the store itself. These characteristics
would probably include location, accessibility, convenient parking, store
design and layout, lighting, signs, fixtures, and furnishings. The other product
dimension would include characteristics of the products themselves. These
would probably include characteristics such as variety and assortment of
products in each area.
Other product mix characteristics might include the quality of the products,
specific brands, and merchandise displays. In total, it may be possible for
customers to identify thirty, forty, or even fifty different characteristics of the
store and products that shape perceptions of value.
In addition to the product characteristics, service factors also shape value
perceptions.
These might include the availability, knowledge, and helpfulness of cashiers
and clerks or the ease of making returns and exchanges. Service factors would
also include the customer service issues of call centres, complaint handling,
and information availability.
Since products are often fairly homogeneous across competitors, these service
factors have become increasingly important to customers in differentiating
between competitors.
100 ANNA UNIVERSITY

In fact, many managers feel that service factors are the only area to create a Notes
real competitive difference.
Price factors would include everyday prices, sales prices, acceptance of credit
cards, and promotional financing. Price might also include life cycle costs that
the customer would incur such as maintenance, repair, and operating costs.
Customers balance the product and service performance of a firm against these
price considerations in some way to form perceptions of value.
Customers will also use a store’s image in evaluating value. Very often
customers cannot easily evaluate all of these product, service, and price
characteristics. So the store image becomes a surrogate cue for product or
service quality.
Example: A customer may not be technically knowledgeable about

shoes, but if Harrods or Saks or Nordstrom carries the brand, they must be
good. Customers may use a variety of factors to evaluate image. These could
include the attire and professionalism of personnel, quality of advertising,
innovativeness, corporate citizenship, and community involvement.
Collectively, these dimensions of image help customers make decisions about
product, service, and price issues.
Based on the day to day interactions between a customer and employees, more
personal relationships may develop. Customers may prefer to deal with a
particular sales clerk.
Example: It is likely that relationships are more critical in business to

business situations than in a retail consumer situation.
While the previous example was for a department store, the same concepts will
apply to almost any business. The categories of product, service, price, image,
and relationship will shape the customers’ perceptions of value in any business.
What does change are the specific attributes within each category? The
components of service would be quite different for a department store versus
auto repair. Usually managers are also surprised at the number of different
attributes that customers use to evaluate a firm’s value proposition.
Collectively, customers may be able to identify between fifty and one hundred
different attributes that shape perceptions of value. In numerous cases, over
one hundred attributes have been identified. The challenge for managers
becomes the identification of the key drivers of value, those really important
things that the customers want or expect. If managers can identify and manage
these key drivers of value, their organizations will be far more successful, and
they will grow and prosper. If managers cannot identify what the key drivers of
value are, their organizations will be in a weaker competitive position.
So it becomes critical that managers have a clear view of the key drivers of
value, normally a subset of 20 - 30 attributes that shape the customers’ view of
ANNA UNIVERSITY 101

Notes a firm’s value proposition. Since the customer evaluates a value proposition
relative to competitive alternatives, a firm must also understand its competitive
position on each of these attributes. Few firms can clearly identify these areas
of competitive strengths or weaknesses.
Customer Value Leads to Growth
Growth is important to virtually every business, and there are only a few
generic approaches to growth. A firm can acquire new customers or rely on old
customers. A firm can expand into the sale of new products and services or rely
on the traditional product mix. The success of each approach to growth is
dependent upon one thing, delivering better value than the competition.
The growth matrix of the customer value includes four combinations:
Existing Customers - Existing Products: This growth strategy probably has
the greatest potential for growth but is often overlooked. Very few businesses
have a 100% share of a customer’s expenditures.
Normally a customer will purchase from several competitors.
Example: A grocery shopper may shop at four grocery stores during a

month. Or a lady may purchase clothes at four or five stores. Or a couple may
dine at numerous restaurants. In each case, a particular store may have only 30
- 40% of a customer’s expenditures.
If a firm could move from an average share of expenditure of 30% to an
average share of expenditure of 40%, it would have a 33.33% sales increase.
And if it went from 30% to 60%, its revenues would double. Unfortunately,
many firms assume that all customers are loyal, devoted, and make 100% of
their expenditures with a firm. However, this is seldom the case. Most firms
have no idea of what share of expenditure they are getting from their
customers. Studies have shown that the best predictor of share of spend is the
customer’s perception of value. The greater the customers’ perception of value,
the greater will be the share of pocketbook of a firm.
Existing Customers - New Products: This growth strategy occurs when a firm
tries to build upon an existing relationship with customers by offering new
products. It could be a restaurant that adds a home delivery or take-out option
to a dining operation. It could be a grocery store that adds floral, video rentals,
and film developing. It could be a telecommunications firm offering an array of
new services, such as caller identification, voice messaging, or call forwarding.
The key to success here is that the new products must be a logical extension of
the core competency of the firm and create good value for the customer. The
economic landscape is littered with the remains of firms that fiercely clung to
the “traditional mode of operation” and were passed by firms willing to
innovate with new value propositions.
102 ANNA UNIVERSITY

Unfortunately the customer’s desires are often not readily apparent. The Notes
implication is that a firm must understand how a customer perceives a value
proposition and to tie the new product to that perception.
Existing Products - New Customers: The focus of this growth strategy is on
market expansion through the acquisition of new customers. Domestically, this
means capturing more shares from traditional competitors.
In slow growth markets, this is usually quite difficult. But the key success
factor remains the same; create better value for the customer than the
competition. The most common marketing strategy is to hire a sales force and
invest them to acquire new customers. Make no mistake, acquiring customers
through internal growth or acquisition is critical for the long term growth of a
firm. But those newly acquire customers must be retained to be valuable. And
retaining new customers can be accomplished only be delivering good
customer value relative to the competition.
New Products – New Customers: This growth strategy is one of
diversification. The biggest challenge here is for managers to gain an
awareness of the new expected value proposition. Managers must learn what
the key drivers of value are for new customers. And at the same time they must
align internal processes to create value in fundamentally new product offerings.
Because the benefit of experience is lacking, this is usually the highest risk
growth strategy.
If the new products are simply an extension of traditional products, then the
benefit of experience may be at least partially transferable. But the challenge of
creating better value for new customers with new products while competing
against new competitors is daunting.
Concept of Value in Business Markets
A number of aspects need to be considered in defining the concept of value in
business markets. Christopher (1982) considers value in terms of the price a
customer is willing to pay for a product offering, and points out that
willingness to pay needs to be understood in terms of the set of perceived
benefits that the product offering provides to a customer firm. He relates this
aspect of value to the notion of a customer surplus, which he expresses as the
amount by which the monetary equivalent of the set of perceived benefits
exceeds the price paid for it. Reuter (1986) introduces the notion of “usage
value” which represents the value associated with the performance of the
product in a given customer application. As Reuter (1986, p. 79) writes,
“Especially in industrial products, the value analyst is primarily concerned with
use value—the performance and reliability of the product — rather than its
existing value (based on prestige or aesthetics, cost value, or exchange value).”
Usage value appears to be closely related to the concept of a product offering’s
value-in-use (Wind 1990). Forbis and Mehta (1981) emphasize the aspect of
competition in considering value. They introduce the concept of “economic
value to the customer (EVC),” which refers to the maximum amount a
ANNA UNIVERSITY 103

Notes customer firm would be willing to pay, given comprehensive knowledge of a

focal product offering and the other, available competitive product offerings.
This suggests that customer firms consider the value of a product offering
relative to alternative offerings.
In sum, the concept of value in business markets: is perceptual in nature and
should be expressed in monetary terms; needs to be viewed with respect to the
set of benefits that the customer receives from usage of the product offering;
and is inherently framed against a competitive backdrop.
Thus, we define value in business markets as the perceived worth in monetary
units of the set of economic, technical, service and social benefits received by a
customer firm in exchange for the price paid for a product offering, taking into
consideration the available alternative suppliers’ offerings and prices.’
Learning Activity
What do understand by customer value?
3.3 CUSTOMER RETENTION

The dynamics of the business ecosystem have changed the way in which
companies do business both in relationship management and the streamlining
of their operations. Relationship marketing is emerging as the core marketing
activity for businesses operating in fiercely competitive environments. On an
average, businesses spend six times more to acquire new customers than to
keep them. Therefore, many firms are now paying more attention to their
relationships with existing customers to retain them and increase their share of
customer’s purchases. The practice of relationship marketing also has the
potential to improve marketing productivity through improved marketing
efficiencies and effectiveness.
Customer retention is the activity that a selling organization undertakes in
order to reduce customer defections. Successful customer retention starts with
the first contact an organization has with a customer and continues throughout
the entire lifetime of a relationship. A company’s ability to attract and retain
new customers is not only related to its product or services, but strongly related
to the way it services its existing customers and the reputation it creates within
and across the marketplace.
Customer retention is more than giving the customer what they expect; it’s
about exceeding their expectations so that they become loyal advocates for
your brand. Creating customer loyalty puts ‘customer value rather than
maximizing profits and shareholder value at the centre of business strategy’.
The key differentiator in a competitive environment is more often than not the
delivery of a consistently high standard of customer service.
104 ANNA UNIVERSITY

An important distinction can be made between strategies that lock the customer Notes
in by penalizing their exit from a relationship, and strategies that reward a
customer from remaining in a relationship. The former are generally
considered negative, and the latter positive customer retention strategies.
3.3.1 Negative and Positive Retention Strategies
Negative customer retention strategies impose high switching costs on
customers, discouraging defection. In a B2C context, mortgage companies
have commonly recruited new customers with attractive discounted interest
rates. When the honeymoon period is over, these customers may want to
switch to another provider, only to discover that they will be hit with early
redemption and exit penalties. Customers wishing to switch retail banks find
that it is less simple than anticipated: direct debits and standing orders have to
be reorganized. In a B2B context, a customer may have agreed a deal to
purchase a given volume of raw material at a quoted price. Some way through
the contract a lower cost supplier makes a better offer. The customer wants to
switch but finds that there are penalty clauses in the contract. The new supplier
is unwilling to buy the customer out of the contract by paying the penalties.
Some customers find that these switching costs are so high that they remain
customers although unwillingly. The danger from CRM practitioners is that
negative customer retention strategies produced customers who feel trapped.
They are likely to agitate to be freed from their obligations, taking up much
management time. Also, they may utter negative word-of-mouth. They are
unlikely to do further business with that supplier. Companies that pursue these
strategies argue that customers need to be aware of what they are buying and
the contracts they sign. The Total Cost of Ownership (TCO) of a mortgage can
include early redemption costs.
When presented with a dissatisfied customer who is complaining about high
relationship exit costs, companies have a choice. They can either enforce the
terms and conditions, or not. The latter path is more attractive when the
customer is strategically significant particularly if the company can make an
offer that matches that of the prospective new supplier.
In the following section we look at a number of positive customer retention
strategies, including meeting and exceeding customer expectations, finding
ways to add value, creating social and structural bonds, and building
commitment.
3.3.2 Meet and Exceed Expectations
It is very difficult to build long-term relationships with customers if their needs
and expectations are not understood and well met. It is a fundamental precept
of modern customer management that companies should understand customers,
then acquire and deploy resources to ensure their satisfaction and retention.
Customers that you are not positioned to serve may be better served by your
competitors.
ANNA UNIVERSITY 105

Notes Exceeding customer expectations means going beyond what would normally
satisfy the customer. This does not necessarily mean being world-class or best-
in-class. It does mean being aware of what it usually takes to satisfy the
customer and what it might take to delight or pleasantly surprise the customer.
You cannot really strategize to delight the customer if you do not understand
the customer’s fundamental expectations. You may stumble onto attributes of
your performance that do delight the customer, but you cannot give consistent
efforts to delight customers to show your commitments to the relationship.
Commitment builds trust. Trust begets relationship longevity.
Customer delight occurs when the customer’s perception of their experience of
doing business with you exceeds their expectation. In formulaic terms:
Customer delight = P > E
Where P = perception and E = expectation.
This formula implies that customer delight can be influenced in two ways: by
managing expectations or by managing performance. In most commercial
contexts customers expectations are ahead of perceptions. In other words,
customers generally can find cause for dissatisfaction.
You might think that this would encourage companies to attempt to manage
customer expectation down to levels that can be delivered. However,
competitors may well be improving their performance in an attempt to meet
customer expectations. If your strategy is to manage expectations down, you
may well lose customers to the better performing company. This is particularly
so if you fail to meet customer expectations on important attributes.
Customers have expectations of many attributes, for example product quality,
service responsiveness, price stability, and the physical appearance of your
people and vehicles. These are unlikely to be equally important. It is important
to meet customer expectations on attributes that are important to the customer.
Online Customers, for example, look for rapid and accurate order fulfilment
good price, high levels of customer service and website functionality. Dell
Computers believes that Customer retention is the outcome of their
performance against three variables: order fulfilment on time, in full, no error,
product performance and after sales service. The comments in parentheses are
the metrics that Dell uses. Figure 4.1 identifies a number of Priorities for
Improvement (PFIs) for a restaurant company. The PFIs are the attributes
where customer satisfaction scores are low, but the attributes are important to
customers. In the example the PFIs are food quality and toilet cleanliness.
There would be no advantage in investing in speedier service or more helpful
staff.
106 ANNA UNIVERSITY

Notes
Source: http://www.google.co.in/search?hl=en&site=imghp&tbm=isch&source=hp&biw=
1366&bih=677&q-crm&oq
Figure 3.2: Using customer satisfaction and importance data to identify
Priorities for Improvement

Kano has developed a product quality model that distinguishes between three
forms of quality.
Basic qualities are those that the customer routinely expects in the product.
These expectations are often unexpressed until the product fails. For example,
a car’s engine should start first time and the sunroof should not leak. The
second form is linear quality. These are attributes of which the customer wants
more or less; for example, more comfort better fuel economy and reduced
noise levels. Marketing research can usually identify these requirements. Better
performance on these attributes generates better customer satisfaction. The
third form is attractive quality. These are attributes that surprise, delight and
excite customers. They are answers to latent, unarticulated needs and are often
difficult to identify in marketing research. As shown in Figure 4.2, Kano’s
analysis suggests that customers can be delighted in two ways: by enhancing
linear qualities beyond expectations and by creating innovative attractive
qualities.
A number of companies have adopted ‘customer delight’ as their mission,
including Cisco, American Express and Kwik-Fit, the auto service chain. Other
pays homage to the goal, but do not organize to achieve it. In the service
industries customer delight requires front-line employees to be trained,
empowered and rewarded for doing what it takes to delight customers. It is in
the interaction with customers that contact employees have the opportunity to
understand and exceed their expectations. The service quality attributes of
empathy and responsiveness are on show when employees aim to delight
customers.
ANNA UNIVERSITY 107

Notes
Exceeding expectations need not be costly. For example, a sales representative

could do a number of simple things such as:
Volunteer to collect and replace a faulty product from a customer rather than
issuing a credit note and waiting for the normal call cycle to schedule a call on
the customer.
Offer better, lower cost solutions to the customer, even though that might
reduce margin.
Provide information about the customer’s served market. A packaging
company, for example, might alert a fast-moving consumer goods
manufacturer customer to competitive initiative in the market.
Customer retention is not only a cost effective and profitable strategy, but in
today’s business world it’s necessary. This is especially true when you
remember that 80% of your sales come from 20% of your customer and clients.
Take for instance the wireless telephone companies; if you sign a new contract
you are given a large rebate or even a free cellular telephone. If you are a
current customer you have the privilege of paying full price.
Perhaps we need to rethink our marketing and sales strategies, after all many
experts will tell you that it’s five times more profitable to spend marketing and
advertising dollars to retain current customers than it is to acquire new
customers. In years past the importance of focusing on customer retention was
not as important, stickiness came naturally. We shopped in our neighbourhood
shops and our corner grocery stores. We had a personal connection with our
108 ANNA UNIVERSITY

service providers and the thought of shopping at another store would have Notes
never crossed our minds.
That has all changed now. Our stores our larger, the majority of the sales
personnel don’t know that you even exist. Not to mention that now we have the
convenience of the Internet and do a large portion of our shopping online,
where you are known by your email address. As a result, customer loyalty has
disappeared and large corporations and virtual storefronts are unable to ask the
millions of disloyal customers what caused them to stray.
However, there is a solution. Sophisticated technology and database equipment
has made it possible for specialized firms to make attempts at customer
retention through database marketing programs. Establishing a detailed client
database will allow these companies to keep track of personal information and
individual preferences of all their customers. This enables them to provide
better service and value. Just like the corner grocery store owner kept
information on 200 customers in his head, the large superstore can now keep
track of 20,000 customers through its customer database. With effective
implementation of customer databases, companies will be able to re-establish
contact with customers, and will be able to work successfully towards
increasing customer retention, repeat sales, and customer referrals.
To achieve the objectives of the database and customer retention programs, the
entire campaign should be designed and carried out with the customer in mind.
The exercise will only be effective if the customer recognizes and associates
some value with being part of your database. If they do not perceive value in
your program all of your communications, coupons, special offers, and
newsletters will be discarded. Your customers have been inundated with
meaningless “junk” mail and email spam, so embed your campaign with value.
A few values-add strategies that you can use include:
1. membership cards and programs that entitle your customers to special
offers, discounts, or preferential treatment;
2. welcome, acknowledgement, sales recognition, thank you statements;
3. after sales satisfaction and complaint inquiries and surveys;
4. event oriented communications in which the customer is genuinely
interested; and
5. enhanced and empowered customer, after sales, and technical support.
Everyone wants to retain their existing customers. Few companies, however,
are implementing positive strategies aimed at retention. Most companies are
organized for acquisition. Their advertising and sales programs are designed to
find and promote their products and services to new customers. The companies
are organized on a product or brand basis, not on a customer segment basis.
While they all have customer service departments, and most have a customer
service toll free number, they lack an integrated marketing strategy that is
ANNA UNIVERSITY 109

Notes directed at retention, and that defines retention as the measurement of success.
In this unit, we will explore the meaning of a retention strategy, showing how
it can be set up, and how lifetime value can be used to measure it.
You have often heard it said that “It is five times more profitable to spend your
marketing dollars to retain the customers that you have than to use the dollars
to beat the bushes for new customers.” Most people would agree with this
statement, even though they have no way of proving it. Indeed, the majority of
large American and Canadian firms today are experimenting with database
marketing programs aimed, in large part, at retention. Most of these companies
are not yet sure whether their experiments will be successful. A significant
number of the programs will fail and ultimately be scrapped. How do such
programs work? Let’s look at the theory.
We like to go back to the old corner grocer. Prior to 1950, most groceries in the
US and Canada were sold in small grocery stores. The proprietor would meet
them at the door. He knew them by name. He knew their preferences. He
would put things aside for them. He built his business through recognizing his
customers and doing favours for them. Customers were loyal to these stores
because of the recognition and personal attention they received. These small
stores have been virtually wiped out through the advent of supermarkets.
Supermarkets have a much wider variety of goods. The average grocery store
had 800 Stock Keeping Units (SKUs) on their shelves. Supermarkets today
have 30,000 SKUs. Mass marketing took over. Prices came down. Variety
increased. Food purchases fell from 31% of the average family budget in 1950
to about 10% today; yet the food we buy with that 10% is better in quality and
quantity then to what we bought with 31% in 1950. We have all gained.
3.3.3 Trends in Customer Retention
Retaining and developing customers has long been a critical success factor for
businesses. In that sense, Customer Relationship Management is not new,
previously falling under the guise of customer satisfaction. Worldwide, service
organizations have been pioneers in developing cause retention strategies.
1. Innovative Measures: Banks have relationship managers for select
customers, airlines have frequent flyer programs to reward loyal customers,
credit card companies offer redeemable bonus points for increased card
usage, telecom service operators provide customized services to their heavy
users, and hotels have personalized services for their regular guests. It is,
however, with the rapid rise of new entrants into the market place and
increased competition that companies in other sectors have recognized the
business potential within a captured base.
2. Improved Operating Performance: Sluggish growth rates, intensifying
competition and technological developments businesses induced to reduce
costs and improve their effectiveness. Business process reengineering,
automation and downsizing reduced the manpower costs. Financial
110 ANNA UNIVERSITY

restructuring and efficient fund management reduced the financial costs. Notes
Production and operation costs have been reduced trough Total Quality
Management (TQM), Just in Time (JIT) inventory, Flexible Manufacturing
Systems (FMS) and efficient Supply Chain Management (SCM).
3. Increased Focus: However, reduction in costs alone is no longer enough or
is necessarily an effective strategy. In facing the competitive threats, such
as new entrants, pricing pressures, technology along with the related costs
and also including the time lags in procuring, maintaining and
strengthening one’s market, more and more organizations are realizing that
the traditional marketing model is no longer effective. With a flood of new
entrants offering quality products and services at lower prices, many
sectors have been turned into commodity markets. In a market place where
loyalty has plummeted and the cost of acquiring new customers is
prohibitive, companies have turned to their current customers in an attempt
not only to retain them but also to exploit the potential within. This has
enabled them not only to respond to the threats in their market place but
also positioned them strategically to take advantage of the opportunities
available.
3.3.4 Keys for Customer Retention
1. SFA (Sales Force Automation): CRM also incorporates enhanced Sales
Force Automation (SFA) functionality. SFA puts account information
directly in the hands of field sales staff, making them responsible for
maintaining it and thus helps them to be more productive. Now, as part of
CRM, SFA is also focused on cultivating customer relationships and
improving customer satisfaction.
2. TQM (Total Quality Management): TQM has been another driving force.
TQM is aimed at improving quality and reducing costs. The TQM
philosophy has been prevalent in many companies, which find it necessary
to involve both suppliers and customers for implementing TQM at all
levels of the value chain. Companies like IBM, Motorola, General Motors,
Xerox, Ford and Toyota are consistent users of TQM and hence also of
CRM. Other programs like JIT supply and MRP (Material Resource
Planning) have also made for the use of interdependent relationship
between supplier and customer.
3. SSA (Systems Selling Approach): SSA is yet another factor which has
become more common with the advent of digital technology and complex
products. The systems selling approach involves the integration of parts,
supplies and the sale of services along with a particular capital equipment.
In the capital goods market, customers appreciate the idea of system
integration. Sellers have been able to sell augmented products and services.
This has also been extended to consumer packaged goods and services
sector.
ANNA UNIVERSITY 111

Notes 4. KAM (Key Account Management): Another offshoot of CRM has been the
development of Key Account Management Program as some companies
insisted upon new purchasing approaches like national contracts and master
purchasing agreements to be adopted by vendors.
5. SCM (Supply Chain Management): Regarding suppliers’ loyalty, again it
has been observed that it pays more to develop closer relations with a few
suppliers than to deal with more vendors. More often marketers find it
beneficial to retain existing customers for life rather than making a one-
time sale to several new customers.
6. GAMP (Global Account Management Programs): An extension of CRM
is reflected in the emerging tend of large internationally oriented
companies to become global. For this purpose, such companies are seeking
the assistance of vendor’s co-operating and collaborating solutions for
global operations. This has made it obligatory for markets interested in the
business of global companies, to adopt CRM programs, particularly global
account management programs.
7. KM (Knowledge Management): Knowledge about customers is a pre-
requisite for CRM. Indeed, in depth knowledge of the customer’s habits,
desires, needs and the analysis of their cognitive effective behaviour and
attributes need to be applied through CRM to develop and design
marketing strategies as well as to develop ad cultivate interaction and
relationship with customers for mutual benefit.
Finally, it is recognizable that customers’ expectations have changed
significantly in recent years. With the advent of new technology and increased
availability of new and advanced product features and services, consumers are
least prepared to compromise their preferences for quality of products/services.
Cross selling and up selling are possible to a greater extent for customers, if
they are loyal and committed to the firm and its offerings.
Customer Loyalty
Building customer loyalty is the basic platform of relationship formation. In a
highly competitive and challenging business environment, organisations are
really blessed if they are fortunate to have loyal customers in their customer
inventory. With the backup of loyal customers, the organisation could enjoy a
number of advantages. In short, having loyal customers will serve as a
sustainable competitive edge to the organisation concerned in the present day
context. Therefore, organisations should keep “building customer loyalty” as
their prime agenda.
Customer loyalty is a company’s ability to retain satisfied customers.
Maintaining customer loyalty is one of the toughest challenges for any
marketing department in a business enterprise, since the wants of a customer
are modified at much faster rate than their needs. It requires a business
enterprise to follow a pro-active approach that includes formulating strategies
112 ANNA UNIVERSITY

for brand consolidation, researching and continuing with new product Notes
development, following TQM (Total Quality Management), implementing
CRM systems, and also, working out Pipeline Management tactics.
A customer loyalty program is based on a simple premise: as a company
develops stronger relationships with their best customers, those customers will
stay with the company longer and become more profitable.
Since every marketer wants customers, a logical question to ask is “what
affects customer loyalty”. The factors that affect the customer loyalty are:
Figure 3.3: Factors affect customer loyalty

1. Customer Satisfaction: People develop belief about what they expect to
happen before they make a choice. Customer satisfaction is a post-purchase
or post-choice evaluation that results from a comparison between those pre-
purchase expectations and actual performance. Fulfilment of an expectation
is confirmation. If there is a disconfirmation expectations are not met.
Dissatisfied customers may complain, choose never to purchase the
transactional experience is thus seen to result in confirmation or
disconfirmation yet for most organizations, the goal is to measure and
manage customer satisfaction with the cumulative experiences customers
have with the brand, product, organization, or location.
Effective marketers try to understand if the discrepancy between
expectations and performance is large or small. The term delightful
surprises has been use to describe situations in which customer receive
fulfilment that exceeds the satisfaction of unexpected needs or wants. A
delightful surprise may be a defining moment in which a regular customer
becomes a loyal advocate. Effective marketers likewise try to understand
the degree of discrepancy when marketers fail to meet expectations and the
causes of consumer dissatisfaction.
Satisfied customers may not be loyal customers. One explanation is that
expectations, which shape satisfaction, are complex and exist at different
levels. People may formulate expectations in terms of a desired level –
ANNA UNIVERSITY 113

Notes what should be done – and in terms of an adequate level – what will be
done. Many marketers believe customers have a zone of tolerance where
expectations range from what they hope to receive to what is minimally in
a study of satisfaction. The company ranked satisfaction on a 5-point scale
ranging from 1 for completely dissatisfied to 5 for completely satisfied. It
found that customers who rated their satisfaction as 4 were six times more
likely to switch to a competitive offering than those who marked 5 were.
So, while satisfaction is important in knowing what shapes loyalty, we have
to go deeper to fully understand loyalty.
Why do satisfied customers often switch brands or buy from other
companies? There are several explanations. The first is that a company’s
satisfied customer might also have a positive experience with and be
equally satisfied with a competitor’s offering. Thus relative satisfaction
should be considered in the role that customer satisfaction plays in shaping
customer loyalty. Another explanation has to do with familiarity and a need
for variety. People may simply opt for an experience because they get less
and less satisfaction from the old one. A third explanation is that new
information changes customer expectations about a previously untried
offering.
2. Emotional Bonding: The second component of the model shown in Figure
4.3 builds on the idea that, over time customer loyalty requires emotional
bonding. Customers have a positive brand affect, which is an affinity with
the brand, or they have a company attachment, which means they like the
company. In many circumstances, consumers may identify with and
become emotionally attached to mental images that a company or a brand
develops or acquires.
Example: many customers identify with Polo Ralph Lauren. They

identify with the brand because the brand identifies them and their friends.
From a consumer’s perspective the brand equity associated with Polo leads
to customer loyalty. Brand equity is the value of the brand name associated
with a product or service that goes beyond the functional aspect alone.
Example, many customers feel a closeness with other people who

also use the good or service.
Some companies know how to connect emotionally with their customers
while others have more difficulty in accomplishing this level of
commitment. CRM must reach beyond the idea of the rational consumer
and strive to establish feeling of closeness, affection, and trust as true
emotional bonding is often based on trust and respect.
3. Trust: Trust the third component of the model, is interrelated with
emotional bonding. Trust exist when one party has confidence that he or
114 ANNA UNIVERSITY

she can rely on the other exchange partner. Trust can be defined as the Notes
willingness of the customer to rely on the organization or brand to perform
its stated function. Trust reduces uncertainty/risk and is viewed as a
carefully thought out process, whereas brand affect may be an
instantaneous response. In many situations, trust means a customer believes
that the marketer is reliable and has integrity. In many personal selling
situations, trust means that a customer has confidence that the sale
representative is honest, fair and responsible and that his or her word can
be relied on. If a delivery date is given the buyer has confidence that the
product will be shipped on time. When there is trust in a relationship, all
partners believe that none will act opportunistically. Marketers, especially
the marketers of services, establish trust by maintaining open and honest
communication and by keeping the promises they make.
4. Choice Reduction and Habit: Contrary to traditional economic theory,
consumer research shows that people have a natural tendency to reduce
choices. In fact consumers like to reduce their choices to a manageable set,
usually not more than three. People feel comfortable with familiar brands
and well known situations that have been rewarding. Part of customer
loyalty, such as the absence of brand switching behaviour is based on an
accumulation of experiences over time. With simple repetition we become
familiar with a brand, store, company, Web site, or search engine. We
develop habits that result in continuity. For example, it has been estimated
that consumers go to the same supermarkets up to 90 percent of the time.
There can be a switching cost associated with change to the unfamiliar, the
untried or the new. There may be a cost in time, money, or personal risk. In
other words, as the adage “if it ain’t broke, don’t fix it” suggest there may
be a perceived risk in change. Perceived risk means the customer may be
uncertain about the consequences of making a purchase. There may be
perceived performance risk or social risk. The customer may think the new
brand will not perform as well as the current brand. The customer may
believe his/her friends will not like the new brand as well.
5. History with the Company: Final component of customer loyalty involves
the customer’s history with the company. One’s history with the company
influences one’s habits. But we should draw a distinction between repeat
behaviour and contact history with the company and its image. A positive
corporate image – the perception of the organization as a whole – can have
a favourable impact on customer loyalty, creating habitual responses to the
company name itself. Wal-Mart, for example is known for everyday low
prices while another department store, such as Nordstrom, may be known
for excellent customer service. Thus, perceptions of the company’s
historical image can impact customer intentions, loyalty and likelihood of
buying. The CRM system, however, is usually more focused on a
customer’s actual purchasing history.
ANNA UNIVERSITY 115

Notes 3.3.5 Strategic Customer

Customer interaction channels encapsulate all the possible ways of interacting
with customers. This comprises a mix of old legacy channels such as call
centres, mail, sales force, and new channels such as mobile, Internet, voice
automation, and interactive TV. The issues here are which of the new channels
will provide an efficient means of improving customer access and convenience,
and which of the “old” channels need to be re-engineered to improve customer
service and cost effectiveness. Internet could fall in either category for some
companies. Internet sales and service capabilities are still to be implemented,
whilst for others these are in place but failing to achieve their potential.
Create a Synchronous Customer Strategy
This should be one of the first activities in a CRM program. Initially prepared
in outline it evolves and expands as new capabilities are implemented and new
customer information becomes available. It is important to start with at least an
outline strategy, as this will help to ensure that all subsequent design and
implementation activities are totally focused on achieving specific customer
goals with quantifiable business value. A customer strategy comprises set of
strategic goals that will provide initiatives that can be applies to customers in
identifiable segments to achieve the overall objective of sustained profitable
growth.
Typical Elements of a Strategy
Obtaining high value customers to improve market-shares; rewarding the best
customers to improve loyalty ranges of sleeping customers and to reduce
agitation; stimulation of occasional customers to bring more frequent contact;
cross-selling to frequent low-value customers to improve the share of wallet
reduction of cost to market, sell, and serve to low-value customers. The ability
to create intuitively sound actionable segmentation is important. It is important
to as segment customers for a meaningful CRM. An enterprise should start by
examining what data is available or is going to be available and use common
sense to determine the level of segmentation that will be possible.
Prioritize Initiatives
The next step is to prepare the business case. This will entail assessing the
commercial impact of the customer strategy in terms of growth of customer
base, development of customer relationships, and reduction of service costs.
This should be carried out in a detailed manner such that the value of different
elements can be evaluated. This will help support the prioritization of
development of initiatives. This prioritization will also allow a phased
implementation plan to be created, which will generate an early-benefits stream
whilst moving towards the goal of a fully functional CRM capability. The plan
will typically involve three types of activity: (i) Quick wins – activities that
rollout existing best practices across the business; (ii) Short-term developments
116 ANNA UNIVERSITY

– initiatives that can exploit the existing infrastructure to create benefits Notes
quickly; and (iii) Long-term developments – detailed design and
implementation activities that will create the technical infrastructure,
processes, and an organisation that will finally support the fully functional
capability.
Measurement of the Customer
CRM will to be able to deliver significant benefits with a good data. However,
this can bring significant challenges. Effective target marketing, for example,
depends on the availability of discriminatory information on customers. To do
well, a good mix of demographic, psychograph, geographic, behaviour, and
attitudinal information maybe required. This could mean implementation of
new capabilities to strengthen the ability to measure the customer. In certain
situations where customer transactions are infrequent or non-descriptive, third
party information might be employed, acquired through affinity partnerships,
or purchase of commercially available data.
Adopt a Piloting Study
CRM business cases are often highly theoretical, and it can be unclear how
well a solution element will work in practice. The careful implementer will
adopt a piloting approach where, critical elements are tried out in the field prior
to commitment to full roll out. This will also help to refine the solution and
expose significant problems and organizational issues at an early stage. Repeat
problems will also give the opportunity to think about how to apply the
technology to improve the processes, thereby leading to an entirely new way
of working.
Customer Performance Measures
The presence of good, concise management reports describing all aspects of the
customer base can be invaluable in helping to refine the customer strategies and
shape future precut services and promotional activities. Such customer
performance measures would typically describe the size and value of key
customer segments, profile, the behaviour and attitude of the segments, and track
how the value, behaviour and attitude is changing in response to CRM initiative.
Full Range of Technology
Rapidly advancing technology means e-structuring, ways in which how
business is to be conducted. New communications technology connects remote
employees with the rest of the enterprise; the internet deepens self-service
options; telephone advances make virtual call centre operations possible; call
centres or website provide selling opportunities by marketing products that are
relevant to the individual. An effective CRM program makes technology a base
to be used in an iterative process that considers what technology can do for an
organisation and vice versa.
ANNA UNIVERSITY 117

Notes Assess Package Solutions

Given the importance of making the right CRM technology choices, sorting
through the endless applications on the market today can be intimidating and
frustrating. Applications should be sorted by the broad view of functionality
including, communication channels and IT platforms supported and size of
company they fit the best. Consideration should also be given to vendor
viability in terms of financial stability and service and support capabilities. No
single vendor currently provides all the required applications, so users typically
must patch together a set of components to fit the overall solution requirement.
Skills and Organisational Implications
In implementing CRM capabilities, attention must be paid to addressing
people, process ad organisational issues as well as technological needs. For
example, the analysis of customer information, to achieve customer
segmentation and target marketing initiatives are rarely successful without the
involvement of experienced statisticians who are trained to develop and apply
their skills whilst being driven by business requirements.
Proactive Leadership
At its best, CRM combines the information, systems, policies, processes, and
employees of an enterprise in a unified effort to identify, attract, and retain
profitable customers. Clearly, no single department can drive the cross-
functional process changes required to achieve a welldefined customer focus.
CRM must be achievement within the fabric of a company, not bolted on to it.
This means that CRM initiatives must be planned at the top and implemented
from the boardroom.
Customer Involvement in Product/ Service Development
Companies are facing highly competitive situations, only constant innovation
and development of new products/services could guarantee a competitive
advantage. However, as consumerism rises, traditional innovation models are
unable to quickly and accurately satisfy the needs of customers. In order to
reduce risks and accelerate the speed of new product/service development,
customers’ involvement has become one of the most important issues
concerning new product/ service development.
New Product/Service Development
Facing the fierce competition from domestic as well as foreign rivals,
companies can only beat their competitors through rapid introducing new
products/services which could meet the changing needs of customers.
However, developing a new product/service often takes a very long time; in
order to reduce risks, scholars start study the new product/service development
process to enhance the efficiency and effectiveness of this process.
118 ANNA UNIVERSITY

In the late 80s, as the importance of the manufacturing sector has become well Notes
recognized, scholars are focused on the development of new products. They
proposed a stage-gate model to efficiently manage different stages of the new
product development process.
As the service industry has played a crucial role in the world economy,
academics started to pay more attention on new service development however,
most of the new service development models are based on new product
development. Apart from incorporating the concept of project management, the
overlapped activities during the development process, and the information
sharing inside and outside the company, scholars and practitioners have yet not
find an easier way to facilitate the process and improve the effectiveness as
well as efficiency of new product/ service development. However, studies
approved that interacting with different kinds of customers and inviting them to
participate in the development process might significantly improve the
performance of new product/service development.
Customer involvement is defined here as those processes, deeds, and
interactions where a product or service provider collaborates with current
customers at the program, project, and/or stage level of innovation, to
anticipate customer’s latent needs and develop new product or service
accordingly.
Figure 3.4: Elements of customer involvement in product and service development

The elements of customer involvement that are illustrated in Figure 4.4, which
are the two arrows symbolize an on-going, iterative development program
where development projects build up the product and service portfolio of a
firm. Customer involvement requires making a decision about the following
factors:
1. What type of customers to involve?
2. To what extent they should be involved?
3. How it should be done?
ANNA UNIVERSITY 119

Notes The broken line illustrates the organizational context, in which a firm decides
on the strategy of the development organization.
The motives to involve customers are also important and will determine how
customer involvement is carried out and what results can be achieved. Finally,
there might be problems associated with customer involvement.
The organisations should pay attention to the profile of the target

market segment, its changing needs and make efforts for fulfilling the same,
and this would yield
3.3.6 Different Types of Customers
A traditional approach of product and service development is to obtain
information form representative customers at the centre of the intended target
market. Companies often obtain information about customer needs only, and
assign manufacturers with the task of generating ideas for solutions leading to
new products. Company employees are required to translate needs into
solutions that should fit these needs. Lead users present strong needs that will
become general in a market place months or years in the future. As there are no
products or services available on the market to fulfil their needs, lead users
often develop a solution on their own and can therefore provide design data as
well. Consequently, the lead user process takes a different approach from that
of traditional methods, collecting information about both needs and solutions
from the leading edges of the target market and from markets facing similar
problems in a more extreme form. In slow-moving industrial markets, “average
users” may provide satisfactory input to the development process. Four
customer characteristics were used including technical attractiveness, financial
attractiveness, closeness and relationship with the customer, and lead user
characteristics. They found that financially attractive customers, lead users, and
close customers have a positive impact on new product success. Technically
attractive customer, on the other hand, had a negative impact on new product
success. A possible explanation is that they have needs that are different from
those of the market in general and therefore can mislead the company.
Some companies choose to primarily work with financially attractive
customers, whereas about 30% of the companies do not make any special
selection of customers. An overview of the results from the investigated
companies is provided in Figure 4.5. For some companies the strategy is to
work with the customers who are interested in co-operation or to co-operate
with the customers who are available at a specific moment.
When comparing different types of market characteristics, that is B2B or B2C,
we found that companies on the business market are more likely than
companies on the consumer market to use customers with a special expertise
(Chi-square = 23.9, p<0.01).
120 ANNA UNIVERSITY

Notes
The organisations should pay attention to the profile of the
target market segment, its changing needs and make efforts for
fulfilling the same, and this would yield better results in customer
retention.
Figure 3.5: Overview of the type of customers taht are involved in the
development process
Needs are expressions of customers, indicating the requirement to

be fulfilled by a select product or service..
3.4 CUSTOMER ACQUISITION

One of the primary areas of growth for an organization is the acquisition of
new customers. Customer acquisition involves identification of potential
customers, understanding their strengths and weaknesses, risk assessment and
formulation of an acquisition strategy. The explosion of customer segments,
products, media vehicles, and distribution channels coupled with intense
competition bent on growth has made the acquisition of new customers more
complex, more costly, and less effective than ever.
Today’s consumer is more demanding, more informed and more able and
prepared to “vote with their wallet” if they don’t get what they want. At the
same time, business pressures and revenue accountability have led marketers to
take a more results focused approach to consumer marketing.
Today’s demanding customers and savvy competitors are causing many
companies to rethink and restructure their new customer acquisition marketing
efforts significantly.
ANNA UNIVERSITY 121

Notes Some Key Concepts

There are usually many kinds of customers, and it can often take a significant
amount of time before someone becomes a valuable customer. When the
results of an acquisition campaign are evaluated, there are often different kinds
of responses that need to be considered. The responses that come in as a result
of a marketing campaign are called “response behaviours.” The use of the word
“behaviour” is important because the way in which different people respond to
a particular marketing message can vary. How a customer behaves as a result
of the campaign needs to take into consideration this variation. A response
behaviour defines a distinct kind of customer action and categorizes the
different possibilities so that they can be further analyzed and reported on.
Binary response behaviours are the simplest kind of response. With a binary
response behaviour, the customer response is either a yes or no. If someone is
sent a catalogue, did they buy something from the catalogue or not? At the
highest level, this is often the kind of response that is talked about. Binary
response behaviours do not convey any subtle distinctions between customer
actions, and these distinctions are not always necessary for effective marketing
campaigns.
Beyond binary response behaviours are categorical response behaviours. As
you would expect, a categorical response behaviour allows for multiple
behaviours to be defined. The rules that define the behaviour are arbitrary and
are based on the kind of business you are involved in. Going back to the
example of sending out catalogues, one response behaviour might be defined to
match if the customer purchased women’s clothing from the catalogue,
whereas a different behaviour might match when the customer purchased
men’s clothing. These behaviours can be refined a far as deemed necessary, for
example, “purchased men’s red polo shirt.”
Some of the general categories of response behaviour are the following:
1. Customer inquiry: The customer asks for more information about your
products or services. This is a good start. The customer is definitely
interested in your products – it could signal the beginning of a long-term
customer relationship. You might also want to track conversions, which are
follow-ups to inquiries that result in the purchase of a product.
2. Purchase of the offered product or products: This is the usual definition
of success. You offered your products to someone, and they decided to buy
one or more of them. Within this category of response behaviour, there can
be many different kinds of responses. As mentioned earlier, both
“purchased men’s clothing” and “purchased women’s clothing” fit within
this category.
3. Purchase of a product different that the ones offered: Despite the fact that
the customer purchased one of your products, it wasn’t the one you offered.
You might have offered the deluxe product and they chose to purchase the
122 ANNA UNIVERSITY

standard model (or vice-versa). In some sense, this is very valuable Notes
response because you now have data on a customer/product combination
that you would not otherwise have collected.
There are also typically two kinds of negative responses. The first is a non-
response. This is not to be confused with a definite refusal of your offer. For
example, if you contacted the customer via direct mail, there may be any
number of reasons why there was no response (wrong address, offer misplaced,
etc.). Other customer contact channels (outbound telemarketing, email, etc.)
can also result in ambiguous non-responses. The lack of response does not
necessarily mean that the offer was rejected. As a result, the way you interpret
a non-response as part of additional data analysis will need to be thought out
(more on this later).
A rejection (also known simply as a “no”) by the prospective customer is the
other kind of negative response. Depending on the offer and the contact
channel, you can often determine exactly whether or not the customer is
interested in the offer (for example, an offer made via outbound telemarketing
might result in a definitive “no, I’m not interested” response). Although it
probably does not seem useful, the definitive “no” response is often as valuable
as the positive response when it comes to further analysis of customer interests.
3.4.1 Traditional Approach to Customer Acquisition
The traditional approach to customer acquisition involved a marketing manager
developing a combination of mass marketing (magazine advertisements,
billboards, etc.) and direct marketing (telemarketing, mail, etc.) campaigns
based on their knowledge of the particular customer base that was being
targeted. In the case of a marketing campaign trying to influence new parents
to purchase a particular brand of diapers, the mass marketing advertisements
might be focused in parenting magazines (naturally). The ads could also be
placed in more mainstream publications whose readership demographics (age,
marital status, gender, etc.) were similar to those of new parents.
In the case of traditional direct marketing, customer acquisition is relatively
similar to mass marketing. A marketing manager selects the demographics that
they are interested in (which could very well be the same characteristics used
for mass market advertising), and then works with a data vendor (sometimes
known as a service bureau) to obtain lists of customers who meet those
characteristics. The service bureaus have large databases containing millions of
prospective customers that can be segmented based on specific demographic
criteria (age, gender, interest in particular subjects, etc.). To prepare for the
“diapers” direct mail campaign, the marketing manager might request a list of
prospects from a service bureau. This list could contain people, aged 18 to 30,
who have recently purchased a baby stroller or crib (this information might be
collected from people who have returned warranty cards for strollers or cribs).
The service bureau will then provide the marketer with a computer file
ANNA UNIVERSITY 123

Notes containing the names and addresses for these customers so that the diaper
company can contact these customers with their marketing message.
New customers are the hardest and most expensive to get. You will spend more
time, money and energy attracting new customers to your business. If you are
just starting a business, listen closely, because your success here will determine
whether you are in business two years from now.
Many companies have adopted customer relationship management (CRM)
systems that can support both acquisition and retention by gathering data from
every contact with prospects and customers. Just collecting data should not be
an end unto itself, however. The real focus should be on developing a data
strategy and tuning the CRM system to help your company acquire and retain
the right types of customers.
3.4.2 Customer Acquisition Strategy
Now let us discuss the strategies that affect the acquisition of customers:
Supporting Acquisition
Most acquisition marketing campaigns begin with the prospect list. A prospect
list is simply a list of customers that have been selected because they are likely
to be interested in your products or services. There are numerous companies
around the world that will sell lists of customers, often with a particular focus
(for example, new parents, retired people, new car purchasers, etc.).
The goal for the acquisition phase of your program should be deciding which
prospects most closely match your company’s “ideal prospect” profile, but you
should also decide which prospects don’t meet your criteria for acquisition and
eliminate them up front. This simple decision helps focus your marketing and
acquisition efforts while saving costs and increasing your Return on
Investment (ROI).
Analyzing your marketing campaigns to determine which are most effective in
bringing in new customers is also important. A CRM system that is able to tag
data (assigning each contact to a specific campaign) lets you analyze the return
on the investment you are making in your marketing effort as well as its overall
effectiveness in identifying likely prospects. Another benefit of tagging is that
it lets you look at marketing programs and their related expenses by leads
generated, customers acquired, and potential and realized revenue. This will
enable your company to better tailor campaigns to individual customers and
prospects based on response or effectiveness rates.
While looking at data for individuals can help you better understand their
needs and interests, analyzing data in the aggregate can show which groupings
or classes of customers respond best to your company’s campaigns. This step
can help you develop products or services that meet the needs of specific
groups of customers or prospects.
124 ANNA UNIVERSITY

There are a number of other questions you should consider as you develop the Notes
acquisition part of the data strategy. For example,
1. What is our best source of customers?
2. Did they find us on their own initiative or were they referrals?
3. Did they come from external sources such as a direct marketing list or were
they from our own marketing campaigns?
4. When customers first contact us, what information are they interested in?
5. What was the ROI for that campaign?
6. Was it self-service or assisted interaction that eventually leads to a sale?
The absence of certain types of inquiries should also be investigated. For
instance, why are there no Web inquiries from groups of prospects that you
know are part of your regular customer base? Analyzing the use of self support
via the Web (such as searches of the knowledge base or support cases initiated)
allows you to see where customers’ interests lie and where self support can be
improved.
Keep in mind that prospects may have significantly different information and
support needs than customers and use this knowledge to tailor your acquisition
program to their needs.
Finally, consider how well the company is responding to prospects. As an
example, data may indicate that inquiries responded to within 30 minutes are
twice as likely to result in sales as those responded to the next day. This type of
analysis can reveal areas where the company’s performance can be improved.
Test Campaigns
Once you have a list of prospect customers, there is still some work that needs
to be done before you can create predictive models for customer acquisition.
Unless you have data available from previous acquisition campaigns, you will
need to send out a test campaign in order to collect data for analysis.
Besides the customers you have selected for your prospect list, it is important
to include some other customers in the campaign, so that the data is as rich as
possible for future analysis.
For example, assume that your prospect list (that you purchased from a list
broker) was composed of men over age 30 who recently purchased a new car.
If you were to market to these prospective customers and then analyze the
results, any patterns found by data mining would be limited to sub-segments of
the group of men over 30 who bought a new car. What about women or people
under age 30? By not including these people in your test campaign, it will be
difficult to expand future campaigns to include segments of the population that
are not in your initial prospect list. The solution is to include a small random
selection of customers whose demographics differ from the initial prospect list.
ANNA UNIVERSITY 125

Notes This random selection should constitute only a small percentage of the overall
marketing campaign, but it will provide valuable information for data mining.
You will need to work with your data vendor in order to add a random sample
to the prospect list.
More sophisticated techniques than random selection do exist, such as those
found in statistical experiment design and Multi-Variable Testing (MVT).
Deciding when and how to implement these approaches is beyond the scope of
this unit, but there are numerous resources in the statistical literature that can
provide more information.
Although this circular process (customer interaction, data collection, data
mining, and customer interaction) exists in almost every application of data
mining to marketing, there is more room for refinement in customer acquisition
campaigns. Not only do the customers that are included in the campaigns
change over time, but the data itself can also change. Additional overlay
information can be included in the analysis when it becomes available. Also,
the use random selection in the test campaigns allows for new segments of
people to be added to your customer pool
Evaluating Test Campaign Responses
Once you have started your test campaign, the job of collecting and
categorizing the response behaviour begins. Immediately after the campaign
offers go out, you need to track responses. The nature of the response process
is such that responses tend to trickle in over time, which means that the
campaign can go on forever. In most real-world situations, though, there is a
threshold after which you no longer look for responses. At that time, any
customers on the prospect list that have not responded are deemed “non-
responses.” Before the threshold, customers who have not responded are in a
state of limbo, somewhere between a response and a non-response.
Building Data Mining Models using Response Behaviour
With the test campaign response data in hand; the actual mining of customer
response behavior can begin. The first part of this process requires you to
choose which behaviour you are interested in predicting, and at what level of
granularity. The level at which the predictive models work should reflect the
kinds of offers that you can make, not the kinds of responses that you can
track. It might be useful (for reporting purposes) to track catalogue clothing
purchases down to the level of colour and size. If all catalogues are the same,
however, it really doesn’t matter what the specifics of a customer purchase for
the data mining analysis. In this case (all catalogues are the same), binary
response prediction is the way to go. If separate men’s and women’s catalogues
are available, analyzing response behaviour at the gender level would be
appropriate. In either case, it is a straightforward process to turn the lower-
level categorical behaviour into a set of responses at the desired level of
126 ANNA UNIVERSITY

granularity. If there is overlapping response behaviour, the duplicates should Notes

be removed prior to mining.
In some circumstances, predicting individual response behaviour might be an
appropriate course of action. With the movement toward one-to-one customer
marketing, the idea of catalogues that are custom-produced for each customer
is moving closer to reality. Existing channels such as the Internet or outbound
telemarketing also allow you to be more specific in the ways you target the
exact wants and needs of your prospective customers. A significant drawback
of the modelling of individual response behaviour is that the analytical
processing power required can grow dramatically because the data mining
process needs to be carried our multiple times, once for each response
behaviour that you are interested in.
How you handle negative responses also needs to be thought out prior to the
data analysis phase. As discussed previously, there are two kinds of negative
responses: rejections and non-responses. Rejections, by their nature,
correspond to specific records in the database that indicate the negative
customer response. Non-responses, on the other hand, typically do not
represent records in the database. Non-responses usually correspond to the
absence of a response behaviour record in the database for customers who
received the offer.
There are two ways in which to handle non-responses. The most common way
is to translate all non-responses into rejections, either explicitly (by creating
rejection records for the non-responding customers) or implicitly (usually a
function of the data mining software used). This approach will create a data set
comprised of all customers who have received offers, with each customer’s
response being positive (inquiry or purchase) or negative (rejections and non-
responses).
The second approach is to leave non-responses out of the analysis data set.
This approach is not typically used because it throws away so much data, but it
might make sense if the number of actual rejections is large (relative to the
number of non-responses); experience has shown that non-responses do not
necessarily correspond to a rejection of your product or services offering.
Once the data has been prepared, the actual data mining can be performed. The
target variable that the data mining software will predict is the response
behaviour type at the level you have chosen (binary or categorical). Because
some data mining applications cannot predict nonbinary variables, some
finessing of the data will be required if you are modelling categorical responses
using non-categorical software. The inputs to the data mining system are the
input variables and all of the demographic characteristics that you might have
available, especially any overlay data that you combined with your prospect
list.
In the end, a model (or models, if you are predicting multiple categorical
response behaviour) will be produced that will predict the response behaviour
ANNA UNIVERSITY 127

Notes that you are interested in. The models can then be used to score lists of
prospect customers in order to select only those who are likely to response to
your offer. Depending on how the data vendors you work with operate, you
might be able to provide them with the model, and have them send you only
the best prospects. In the situation in which you are purchasing overlay data in
order to aid in the selection of prospects, the output of the modelling process
should be used to determine whether all of the overlay data is necessary. If a
model does not use some of the overlay variables, you might want to save
some money and leave out these unused variables the next time you purchase a
prospect list.
When Prospects Become Customers
As the focus of your program shifts from acquisition to retention, the goals
become those of establishing loyalty, advancing the relationship and building a
sense of community, participation and affinity. As with prospecting, however,
the data strategy should also help determine whether customers do or don’t
meet the company’s criteria for retention.
Look for factors that will feed back into the acquisition cycle to reduce
marketing costs, increase success rates or both. Look for trends in the length of
customer relationships and determine if steps can be taken to avert the loss of
customers at critical points along the way. Even a small improvement in
retention can result in a significant rise in profitability and your overall ROI.
Since all organizations continually update customer data, reviewing and
analyzing the data will identify opportunities where up-selling, cross-selling
and service sales can be increased. Sales data, for instance, can indicate which
customers are due for product/service upgrades or warranty extensions.
The development of the data strategy as it relates to retention issues should
address questions such as:
(a) What characterizes our best customers, and what keeps them loyal?
(b) How do the information and service needs of new customers differ from
those of established customers?
(c) Is it necessary to keep all prospect information once a customer
relationship is established?
(d) What changes does the organization need to make as the relationship goes
along?
(e) Were any products returned and why?
(f) How many service calls did customers place?
(g) How were they resolved?
(h) What was the time to resolution on those calls?
(i) What is the potential for developing other customers such as these?
128 ANNA UNIVERSITY

(j) Why does one group or class of customer respond to opportunities when Notes
another does not?
(k) Choice of a CRM Platform
A company’s choice of a CRM solution will affect its ability to collect, analyze
and use data. A balanced CRM solution should offer the functionality the
organization needs and provide the agility to help users address changing
demands in the marketplace. The ideal CRM solution should be timely in that
it is quick to install and deploy, and it should be cost-effective from its initial
deployment through its long-term use.
All information about a particular customer should be in one database (not
separate databases for marketing, sales or support), and everyone in the
organization should be looking at the same data. Universal access to
information by all departments makes it possible to present aunified face to
each customer.
In addition, the CRM solution should be customizable to reflect the unique
business outlook and preferences of the organization using it. It should be
readily reconfigurable to record new types of information or to discontinue
collecting information that is no longer relevant or is not useful. In short, it
should be adaptable to new requirements as the needs of the organization
evolve.
Today’s Internet technology enables companies to use customized relationship
management services hosted by Application Service Providers (ASPs). An
Internet-based solution can make it easy for prospects and customers to use
self-service tools and information request forms via the Web. The CRM
solutions offered by the best ASPs include management and administrative
tools to monitor application usage and provide expected levels of service.
Developing an effective data strategy for the CRM process is a way to develop
the information you need to better run your company Ultimately, it comes
down to deciding who you want to pursue as prospects and retain as customers.
Your CRM solution should provide you with the tools and flexibility to support
that quest on an ongoing basis.
Intelligent analysis of data can indicate whether a company’s activities are in
line with its goals for customer acquisition and retention. It can be crucial to
both the speed and the quality of the company’s response, and it can influence
the future direction of your product and service offerings.
Most importantly, a well-developed data strategy and its effective use in
concert with your CRM system will allow you to be selective in the types of
customers with whom you choose to deal.
Common Mistakes in Customer Acquisition Strategies
Understanding these common mistakes is an important step toward overcoming
them and toward developing effective customer acquisition programs.
ANNA UNIVERSITY 129

Notes 1. Confusion Regarding New Customer: Marketing professionals have long

recognized the semantic confusion over the concept of “new.” The question
is what is a ‘new’ customer? The most frequent answer is that a new
customer is someone new to the community. Individuals just moving into
the community are important to the business, and most retailers would like
to capture as many of these new customers as possible. However, “new to
the community” constitutes a narrow definition that leads many retailers to
mistakenly underestimate the opportunity to attract new customers.
Demographic information about many communities suggests that the
number of new households or individuals moving into markets is small. In
some markets, the demographics may suggest that the community is losing
population. With such information, it is easy for marketers to conclude that
the opportunity a ”new customer acquisition” strategy provides is small at
best.
A substantially broader definition of new is new customer for the business.
Effective new customer acquisition programs recognize the importance of
capturing new relationships among individuals and households already in
the market who need some type of new product and are not currently
customers of the company. It is important to capture a major share of
customers, “new to the community” as well as the “new accounts of
existing residents” who are not currently customers.
2. Targeting Promotional Messages Poorly: Often, retailers that pursue an
active customer acquisition strategy tend to have a marketing strategy so
broad that it produces little success. These broad customer acquisition
programs tend to use newspapers as their primary marketing medium. In
some markets, newspaper advertising efforts are supported by television or
radio advertising.
In reality, the best opportunities to attract new customers are directly
associated with their geographic proximity. The closer the customer is to a
business establishment, the more likely it is that the marketers can turn that
non-customer into a new customer.
The best medium to deliver promotional messages to a clearly identifiable
set of customers or prospective new customers is direct mail. However,
many marketers refuse to consider direct mail seriously because they
continue to associate it with “junk mail.”
But direct mail provides a cost-effective, highly targeted way to get
promotional messages to specific groups at a desired frequency. It avoids
the substantial waste of broader promotional media, including newspapers.
3. Paying Inadequate Attention to New Customer Products: The new
customer promotional programs of many businesses tend to focus on one
product. This approach fails to recognize the variety of circumstances
individuals and households face in purchasing new products. To succeed, it
130 ANNA UNIVERSITY

is necessary to promote a number of different products that meet the Notes

customer’s specific needs.
4. Failing to Offer Price Appeals: While marketing arenas are intensely
competitive with consumers increasingly demanding discounts, coupons
and other price benefits when making decisions; many retailers’ customer
acquisition programs ignore the importance of price appeals.
5. Failing to Offer Premiums: Premiums operate at two levels within
customer acquisition programs. The first involves the prospective
customer, and the second involves the current customer. Many customer
acquisition programs do not offer an attractive, immediate incentive to
which prospective customers may respond, despite substantial evidence
that such premiums motivate prospective customers to take immediate
action. Substantial evidence also exists that premiums are cost-effective in
customer acquisition programs.
Customer Acquisition Cost
Customer acquisition cost is the cost associated with convincing a consumer to
buy your product or service, including research, marketing, and advertising
costs. An important business metric, customer acquisition cost should be
considered along with other data, especially the value of the customer to the
company and the resulting Return on Investment (ROI) of acquisition. The
calculation of customer valuation helps a company decide how much of its
resources can be profitably spent on a particular customer.
At the height of the dot.com bubble, companies frequently ignored such
calculations in their pursuit of growth. For example, according to Optimize
Magazine, at one point CDnow Online was spending about US $40 to acquire
each customer, although the average lifetime value of a customer to them was
only about US $25. The Optimize article suggests that it is not good business
sense to spend more acquiring a customer than the amount that customer will
net the company in return.
Customer acquisition cost is calculated by dividing total acquisition expenses
by total new customers. However, there are different opinions as to what
constitutes an acquisition expense. For example, rebates and special discounts
do not represent an actual cash outlay, yet they have an impact on cash (and,
presumably, on the customer).
Acquisition costs vary across industries and mediums. When acquisition data is
available, try to determine if you are comparing apples to apples, so to speak.
This is not always easy, as customer acquisition data can be scarce, and the
methodology is often sketchy.
3.4.3 Customer Acquisition Management
Customer acquisition management is a term used to describe the
methodologies and systems to manage customer prospects and inquiries,
generally generated by a variety of marketing techniques. It can be considered
ANNA UNIVERSITY 131

Notes the connectivity between advertising and customer relationship management.

This critical connectivity facilitates the acquisition of targeted customers, in the
most effective fashion.
Customer acquisition management has many similarities to lead management.
Sometimes missing from lead management definitions, but always included in
customer acquisition management, is a closed loop reporting system. Such a
reporting system typically allows the organization to quantify the effectiveness
of results of various promotional activities. This allows organizations to realize
continuous improvements in both promotional activities and customer
acquisition systems.
Customer acquisition management also often includes the original response to
a prospect immediately after their inquiry. This response could come in many
forms – a personalized fulfilment letter and brochure, an e-mail responses or a
telephone call. In each case the initial response is targeted to further the interest
of the prospect and simplify the initial sales call for the sales channel.
Like lead management, customer acquisition management creates an orderly
architecture for managing large volumes of customer inquiries, or leads. The
architecture must be able to organize numerous leads, at various stages of a
sales process, across a distributed sales force. In order to understand this
process it is helpful to examine a simplified linear lead flow process, such as
the following:
1. Advertising and CRM
2. Customer inquiry or response
3. Inquiry captured
4. Inquiry filtered
5. Lead graded and prioritized
6. Lead distribution
7. Sales contact
8. Lead nurturing or retention
9. Sales result
10. Analysis of promotions effectiveness
The lead flow process can become enormously complex as customers and sales
professionals begin to interact. These various interactions and subsequent
actions can create a variety of scenarios, both productive and
counterproductive. This exponential number of scenarios can provide for
numerous opportunities to mishandle leads in such a way as to reduce their
value. Managing these scenarios is the function of lead management.
132 ANNA UNIVERSITY

Notes
Learning Activity
What is meant by customer acquisition?
3.5 CUSTOMER EXPECTATION

Customer expectations are beliefs about service delivery that serve as standards
or reference points against which performance is judged. Because customers
compare their perceptions of performance with these reference points when
evaluating service quality, thorough knowledge about customer expectations is
critical to services marketers. Knowing what the customer expects is the first
and possibly most critical step in delivering good quality service. Being wrong
about what customers want can mean losing a customer’s business when
another company hits the target exactly. Being wrong can also mean expending
money, time and other resources on things that do not count to the customer.
Being wrong can even mean not surviving in a fiercely competitive market.
Among the aspects of expectations that need to be explored and understood for
successful services marketing are the following: what types of expectation
standards do customers hold about services? What factors most influence the
formation of these expectations? What role do these factors play in changing
expectations? How can a service company meet or exceed customer
expectations?
Meaning and Types of Service Expectations
To say that expectations are reference points against which service delivery is
compared is only a beginning. The level of expectation can vary widely
depending on the reference point the customer holds. Although most everyone
has an intuitive sense of what expectations are, service marketers need a far
more thorough and clear definition of expectations in order to comprehend,
measure and manage them.
Let us imagine that you are planning to go to a restaurant. Figure 4.6 shows a
continuum along which different possible types of service expectations can be
arrayed from low to high. On the left of the continuum are different types or
levels of expectations, ranging from high (top) to low (bottom). At each point
we give a name to the type of expectation and illustrate what it might mean in
terms of a restaurant you are considering. Note how important the expectation
you held will be to your eventual assessment of the restaurant’s performance.
Suppose you went into the restaurant for which you held the minimum
tolerable expectation, paid very little money and were served immediately with
good food. Next suppose that you went to the restaurant for which you had the
highest (ideal) expectations, paid a lot of money and were served good (but not
fantastic) food. Which restaurant experience would you judge to be best? The
answer is likely to depend a great deal on the reference point that you brought
ANNA UNIVERSITY 133

Notes to the experience. Because the idea of customer expectations is so critical to

evaluation of service, we start this unit by talking about the levels of
expectations.
Expected Service: Levels of Expectations
As we showed in Figure 4.6, customers hold different types of expectations
about service. For purposes of our discussion in the rest of this unit, we focus
on two types. The highest can be termed desired service: the level of service
the customer hopes to receive – the ‘wished for’ level of performance. Desired
service is a blend of what the customer believes ‘can be’ and ‘should be’.
For example, consumers who sign up for a computer dating service expect to
find compatible, attractive, interesting people to date and perhaps even
someone to marry. The expectation reflects the hopes and wishes of these
consumers; without these hopes and wishes and the belief that they may be
fulfilled, consumers would probably not purchase the dating service. In a
similar way, you may use an online travel-planning and flight-booking site
such as Expedia to book a short holiday to Venice at Easter. What are your
expectations of the service? In all likelihood you want Expedia to find you a
flight exactly when you want to travel and a hotel close to the key sights in
Piazza San Marco at a price you can afford – because that is what you hope
and wish for.
Figure 3.6: Possible levels of customer expectations

However, you probably also see that demand at Easter may constrain the
availability of airline seats and hotel rooms. And not all airlines or hotels you
may be interested in may have a relationship with Expedia. In this situation and
in general, customers hope to achieve their service desires but recognise that
this is not always possible. We call the threshold level of acceptable service
adequate service – the level of service the customer will accept. So the
customer may put up with a flight at a less than ideal time and stay at a hotel
134 ANNA UNIVERSITY

further away from the key Venetian sites, if he or she really wants to travel at Notes
Easter. Adequate service represents the ‘minimum tolerable expectation,’ the
bottom level of performance acceptable to the customer.
Figure 3.7: Dual customer expectation levels

Figure 3.7 shows these two expectation standards as the upper and lower
boundaries for customer expectations. This figure portrays the idea that
customers assess service performance on the basis of two standard boundaries:
what they desire and what they deem acceptable.
Among the intriguing questions about service expectations is whether
customers hold the same or different expectation levels for service firms in the
same industry. For example, are desired service expectations the same for all
restaurants? Or just for all fast-food restaurants? Do the levels of adequate
service expectations vary across restaurants? Consider the following quotation:
“Levels of expectation are why two organizations in the same business can
offer far different levels of service and still keep customers happy. That is why,
McDonald’s can extend excellent industrialized service with few employees
per customer and why an expensive restaurant with many tuxedoed waiters
may be unable to do as well from the customer’s point of view.”
Customers typically hold similar desired expectations across categories of
service, but these categories are not as broad as whole industries. Among
subcategories of restaurants are expensive restaurants, ethnic restaurants, fast-
food restaurants and airport restaurants. A customer’s desired service
expectation for fast-food restaurants is quick, convenient, tasty food in a clean
setting. The desired service expectation for an expensive restaurant, on the
other hand, usually involves elegant surroundings, gracious employees,
candlelight and fine food. In essence, desired service expectations seem to be
the same for service providers within industry categories or subcategories that
are viewed as similar by customers.
The adequate service expectation level, on the other hand, may vary for
different firms within a category or subcategory. Within fast-food restaurants, a
customer may hold a higher expectation for McDonald’s than for Burger King,
having experienced consistent service at McDonald’s over time and somewhat
ANNA UNIVERSITY 135

Notes inconsistent service at Burger King. It is possible, therefore, that a customer

can be more disappointed with service from McDonald’s than from Burger
King even though the actual level of service at McDonald’s may be higher than
the level at Burger King.
Organisations should practice total quality marketing with emphasis

on internal marketing. Effective internal marketing practiced would indicate
the quality standard of the input process, output, and other related aspects as
viewed by the organisation’s internal customers. This would enable the
organisation to initiate steps to improve the practice, procedure, process and
performance of people associated with external customers. This
3.5.1 Zone of Tolerance
Services are heterogeneous in that performance may vary across providers,
across employees from the same provider, and even with the same service
employee. The extent to which customers recognize and are willing to accept
this variation is called the zone of tolerance and is shown in Figure 4.8. If
service drops below adequate service – the minimum level considered
acceptable – customers will be frustrated and their satisfaction with the
company will be undermined. If service performance is higher than the zone of
tolerance at the top end – where performance exceeds desired service –
customers will be very pleased and probably quite surprised as well. You might
consider the zone of tolerance as the range or window in which customers do
not particularly notice service performance. When it falls outside the range
(either very low or very high), the service gets the customer’s attention in
either a positive or negative way. As an example, consider the service at a
checkout queue in a grocery store. Most customers hold a range of acceptable
times for this service encounter – probably somewhere between five and 10
minutes. If service consumes that period of time, customers probably do not
pay much attention to the wait. If a customer enters the line and finds sufficient
checkout personnel to serve him or her in the first two or three minutes, he or
she may notice the service and judge it as excellent. On the other hand, if a
customer has to wait in line for 15 minutes, he or she may begin to grumble
and look at his or her watch. The longer the wait is below the zone of
tolerance, the more frustrated the customer becomes.
Customers’ service expectations are characterized by a range of levels (like
those shown in Figure 3.7) bounded by desired and adequate service, rather
than a single level. This tolerance zone, representing the difference between
desired service and the level of service considered adequate, can expand and
contract within a customer. An airline customer’s zone of tolerance will narrow
when he or she is running late and is concerned about making it in time for his
or her plane. A minute seems much longer, and the customer’s adequate
service level increases. On the other hand, a customer who arrives at the airport
136 ANNA UNIVERSITY

early may have a larger tolerance zone, making the wait in line far less Notes
noticeable than when he or she is pressed for time.
Figure 3.8: Zone of tolerance

This example shows that the marketer must understand not just the size and
boundary levels for
the zone of tolerance but also when and how the tolerance zone fluctuates with
a given customer.
Different Customers Possess Different Zones of Tolerance
Another aspect of variability in the range of reasonable services is that
different customers possess different tolerance zones. Some customers have
narrow zones of tolerance, requiring a tighter range of service from providers,
whereas other customers allow a greater range of service.
Example: Very busy customers would likely always be pressed for

time, desire short wait times in general and hold a constrained range for the
length of acceptable wait times. When it comes to meeting plumbers or repair
personnel at their home for problems with domestic appliance, customers who
work outside the home have a more restricted window of acceptable time
duration for that appointment than do customers who work in their homes or do
not work at all.
An individual customer’s zone of tolerance increases or decreases depending
on a number of factors, like company-controlled factors such as price. When
prices increase, customers tend to be less tolerant of poor service. In this case,
the zone of tolerance decreases because the adequate service level shifts
upward. Later in this unit we will describe many different factors, some
company controlled and others customer controlled, that lead to the narrowing
or widening of the tolerance zone.
3.5.2 Expectation Management Strategies
Managing expectations explicitly may not be a daily praxis in most
organisations. Companies that tend to be past-oriented use the laissez-faire
strategy where attention is paid neither to changing conditions, needs and/or
ANNA UNIVERSITY 137

Notes wants on the customer’s side nor inside own organisation. The traditional ways
of doing things seem to be good enough for the management. However, in
today’s turbulent business context this strategy is a ‘highway to heaven’.
Companies may have a market position where they are not compelled to
compete.
Example: In a monopolistic or stabilized oligarchic situation, this may

also be the case in the public sector organisations. Therefore, intra-
organisational focus is adopted.
Intro-reactive strategy is utilised when paying attention to and reacting on
expectation issues raised by employees or business units inside an organisation.
This strategy focuses on contemporary action on a short term basis; it is a
strategy of ‘extinguishing a fire’. This situation occurs mainly when existing
expectations, whatever kind they may be, are not met in an everyday praxis.
Meeting the defeat in budget allocations, delays and mistakes in internal
deliveries, quality failures in products, disappointments in career opportunities
etc. are examples of situations where the unmet expectations may be sources of
intra-firm conflicts.
When adopting an introvert strategy, an actor ignores the customers and
concentrate on the expectations expressed within own organisation. This may
be the case in a development unit where future products are innovated and
developed in isolation from customers. Medical laboratories, top secret
innovations and their development are good example of these. Also the fashion
industry as well as many art organisations may use this strategy. In an introvert
strategy future is strongly present. History and today may serve as starting
points but change is the goal of this strategy.
In a situation when employee resources are no limitation to a company, main
attention may be directed to inter-organisational customers (buyers,
bistomers2, and other stakeholders). In an extro-reactive strategy their
expectations are handled in a parallel way to that discussed earlier in
connection with intro-reactive strategy. The extro-reactive strategy can further
be divided into extro-intrareactive and extro-interreactive strategies. In the
former, expectations within one relation are in focus while in the latter, the
network of relations is taken into account.
Co-reactive strategy refers to a situation where all relation parties in a dyad or
network act on short term basis and expectations become an issue mainly in
case of a business transaction or when parties express their dissatisfaction, i.e.
complain. Then and only then, issues are negotiated to settle the somehow
adverse situation. This is the case in many buyer-seller relations where no
commitment exists.
Intro-proactive strategists focus heavily on the future of a company or
organization and the well-being of the staff. They recognise the role of
138 ANNA UNIVERSITY

satisfied, innovative employees, and deploy their creativeness to develop the Notes
company. A genuine intercommunication exists; organizational research is a
solid part of the overall action, not an ad-hoc hobby. Knowledge acquired by
the research is implemented in existing systems and operations. Intro-proactive
strategy requires stable market conditions.
An extrovert strategy is appropriate in situations where the company
management can rely on the employees’ commitment, and need to concentrate
on gaining or defending its market share or share of customer. Market and
competitor intelligence, as well as identification and utilization of weak leads
become crucial when implementing this strategy. In the organisation,
management is preferred to leadership, and the measures used tend to be
mainly financial.
Extro-proactive strategies are dividable into extro-introproactive and extro-
interproactive depending on the number of collective actors taken into account.
Extro-introproactive parties pay a considerable attention on the future
expectations of the other party or parties in a relation while being only reactive
to the expectations of their own company and employees. Extro-interproactive
strategists deploy a wider perspective to the contextual expectations, for
instance, those of the industries and societies. Tactics in implementing this
strategy add to the earlier mentioned ones leadership to the extent that is
needed to ‘keep the engines going without ongoing maintenance’.
Co-proactive strategy in managing expectations is the one needed in committed
relationships. From the managerial point of view, both management and
leadership play crucial roles. The parties understand the importance of
intercommunication both inside their organisation as well as in other
stakeholder relations. All kinds of expectations are identified as well as their
role in the future of intra-organisational, customer and other relations. The
process of expectation development must be familiar to the organisation’s all
management levels. This is crucial because, as we have stated earlier,
otherwise we may fall into a trap of taking things for granted and not paying
enough attention to important issues. In long institutionalised relationships this
may be the fact. However, in the new competition companies have to ‘earn’
even their relationships over and over again.
3.6 CUSTOMER DEFECTION

Understanding consumer behaviour is a great topic of discussion. Now, while
we are at it, customer defection relates a lot to consumer complaint behaviour.
Let us discuss the same before taking a leap towards the main topic of
customer defection.
Consumer Complaint Behaviour
Consumer complaint behaviour is also known as consumer complaint
responses (Singh & Widing, 1991). Crie (2003: 61) defined consumer
ANNA UNIVERSITY 139

Notes complaint behaviour as a process that ‘’constitutes a subset of all possible

responses to perceived dissatisfaction around a purchase episode, during
consumption or during possession of the goods or services’’. He argued that
consumer complaint behaviour is not an instant response, but a process, which
does not directly depend on its initiating factors but on evaluation of the
situation by the consumer and of its evolution over time. Broadbridge and
Marshall (1995) explained that consumer complaint behaviour is a distinct
process, which begins when the consumer has evaluated a consumption
experience (resulting in dissatisfaction) and ends when the consumer had
completed all behavioural and non-behavioural responses.
Singh (1990) identified consumer complaint behaviour as the consumer
dissatisfaction response style. Thus, complaint is actually the response
following the consumer dissatisfaction. These responses/actions include among
others, switching patronage, telling friends and family and complaining to a
consumer agency. Mason and Himes (1973) categorized the response styles
into action group and no action group. The consumers who complain to
member(s) of distribution (e.g. retailer or seller) with intention to seek relief
are classified as action group, while others, and are classified as no action
group. In another study, Warland, Heerman, and Willits (1975) categorized the
consumer complaint behaviour into upset action and upset no action. They
argued that consumers might not complain, even though they are dissatisfied;
they regard them as the upset but no action group. Otherwise, they are in upset
action category. Other researchers have different labels for these styles, such as
complainers and non-complainers and activists and non-activists (Singh, 1990).
Action taken by consumers is not only to complain to the seller, but also
include warning families and friends, stopping patronage, diverting to mass
media, complaining to consumer council and complaining by writing a letter to
management (Heung & Lam, 2003). This buttresses the two-level hierarchical
classification (public or private action used in this study) first proposed by Day
and Landon in 1976.
Public action refers to the direct complaint actions to the seller or a third party
(e.g. consumer agency or government), which included seeking redress directly
from retailer or manufacturer, and taking legal action (Bearden, 1983; Bearden
&Oliver, 1985; Cornwell, Bligh, & Babakus, 1991). The public actions that
could be taken by consumer included verbal complain to retailer/ manufacturer,
writing comment card or complaint letters, writing to newspaper or complaint
to consumer council (Heung & Lam, 2003). Private action indicates that
complaint is privately through negative word-of-mouth communications to
family and friends or the decision not to repurchase the product or services
again or boycott store (Bearden, 1983; Broadbridge & Marshall, 1995;
Cornwell et al., 1991). Private actions generally do not get the direct attention
of the seller and thus could have a serious impact on sales and profitability
(Heung & Lam, 2003).
140 ANNA UNIVERSITY

Bearden and Oliver (1985: 228) pointed out that ‘’private complaint has no Notes
effect on the firm’s responses, but may reinforce negative attitudes through the
process of consensual validation whereby individuals seek confirmation of
their feelings by selectively exposing themselves to agreeable others’’. It is
important to know that a consumer may only either involve in one action (the
public or private complaint) or will involve in both public and private
complaint (Kolodinsky, 1995).
Defection
Customer defection is also termed as ‘’customer exit’’ or ‘’switching
behaviour’’. In Colgate and Hedge (2001), the terms switching, defection and
exit were used interchangeably, which showed that the terms have similar
definition. Defection can be defined as customers forsaking one product or
service for another (Garland, 2002). The customer decides not to purchase a
product or service again.
Crie (2003) defined defection as an active and destructive response to
dissatisfaction, exhibited by a break of the relationship with the object (brand,
product, retailer, supplier, etc.). According to Colgate and Hedge (2001),
defection is the customer’s decision to stop purchasing a articular service or
patronising the service firm completely, which is a gradual dissolution of
relationships due to problem(s) encountered over time. They explained that
defection is a complex process following customers faced with problem(s).
Stewart (1998) in studying the customer defection in the banking industry tried
to define defection as the ending of the relationship between customer and
bank. He explained further that the relationship is marked by a customer ‘’run
down’’ the account to a negligible balance and have no future transaction or
formally close the account.
Previous research has shown that complaint has impact on the defection
intention by the customer. Arnould (2004) pointed out that dissatisfied
customers who do not complain are more likely to discontinue purchase, which
means, they are more likely to defect than those who complain.
In other words, majority of customers who complained will continue to buy the
product or service, compared to those who are dissatisfied but do not bother to
complain (Sheth, Mittal, & Bruce, 1999). Buttle and Burton (2002) also stated
that non-complainers were found to be the least loyal customers, even more
disloyal than complaining dissatisfied customers whose problems were not
resolved. For complaint customer, defection is often the last resort after
complaint has failed (Kim et al., 2003; Colgate & Hedge, 2001). So they will
likely choose to stay after the complaint is resolved. In other occasions,
customer defection will increase in accordance with complaint. According to
Colgate and Hedge’s (2001) study, up to 80% of customers do make an effort
to complain to the bank prior to defect.
ANNA UNIVERSITY 141

Notes In relation to the Malaysians context, complaint style may likely be influenced
by the people’s lifestyle. Abdullah (1996) claimed that Malaysians are less
forthright in expressing views and opinions and giving negative feedback can
be awkward and difficult as indirectness is the more acceptable norm than
directness in day to day behaviour. One of the consequences of this norm is
that it is more difficult for organizations to understand why customers are
unhappy (Ndubisi& Tam, 2005). As the choice of complaint style might differ
across cultures, it is expected to find some differences in the Malaysian
consumer complaint behaviour.
Example: One would expect private complaint to be more strongly

associated with defection than public complaint, and defection to be higher
among private complainants compared to public complainants (Ndubisi &
Tam, 2005). It is also logical to believe that Malaysian customer might be more
willing to engage in private complaint rather than public complaint because a
customer who chooses public complaint will have to confront the service
provider directly, which may not be deemed normative (Ndubisi& Tam, 2004).
Customer complaint behaviour can explain defection. Although both public
and private complaints have significant impact on defection, the strength of the
impact produced by private complaint is greater than that produced by public
complaint. This indicates that among customers who defect, many are unlikely
to complain to the bank before leaving.
Those who will complain before leaving are in the minority. In other words,
the likelihood of customers complaining privately rather than publicly before
defecting is higher. This result is not moderated by the gender of the customer;
instead it is a generic view of male and female customers of Malaysian banks.
Irrespective of their sex type, they are generally less likely to complain to the
bank before defection. Ndubisi (2003a) had earlier shown that dissatisfied
customers blame the company when served poorly, and rather than complain
directly to the company, they typically patronize one another.
There are few implications of this study on customer management by banks in
Malaysia. Managers should recognize that zero complaint is not tantamount to
customer satisfaction because not all unsatisfied customers are likely to
complain directly to the bank. They may choose to complain to friends and
family members instead. The fact that private complaint explained defection
better than public complaint shows that management may not know that
customers are dissatisfied until they defect from the bank. Moreover, the
generic nature of this result (without significant difference between men and
women) indicates a strong consensus and demands genuine efforts that are not
gender discriminatory to forestall customers from abandoning the organization
without a word of caution
142 ANNA UNIVERSITY

1. LG Electronics opened a global marketing portal site Notes

as an in-house marketing centre in July 2008 so that
marketing personnel around the world could share and
learn from important best practices as well as
marketing strategies and activities. LGE will continue
to expand the portal and strengthen its function as a
Global Insight Hub.
2. Customer defection is also termed as ‘’customer exit’’
or ‘’switching behaviour’’
SUMMARY
 Customer value creation is a central marketing concept that has been under
investigated (Hunt 1999). The customer value creation strategy framework
developed in this paper offers a useful tool for specifying and illustrating
value creation strategies, illustrating brand and organization positioning,
identifying opportunities for new value creation propositions, and
suggesting enhancements to the value propositions of existing products.
  In addition to these contributions, the framework also suggests directions
for future research. For example, it leads to the following questions: Under
what conditions are some types of customer value creation more or less
appropriate than others? Under what conditions are some value migration
strategies (patterns and progressions of value creation) more or less
appropriate than others? Are some sources of value more or less
strategically important than others?
 Relationship marketing is emerging as the core marketing activity for
businesses operating in fiercely competitive environments.
 On an average, businesses spend six times more to acquire new customers
than to keep them. Therefore, many firms are now paying more attention to
their relationships with existing customers to retain them and increase their
share of customer’s purchases.
 Most acquisition marketing campaigns begin with the prospect list. A
prospect list is simply a list of customers that have been selected because
they are likely to be interested in your products or services.
 As the focus of your program shifts from acquisition to retention, the goals
become those of establishing loyalty, advancing the relationship and
building a sense of community, participation and affinity. As with
prospecting, however, the data strategy should also help determine whether
customers do or don’t meet the company’s criteria for retention.
 Berry and Parasuraman, two early advocates of relationship marketing have
developed a framework for understanding the type of relationship
strategies.
ANNA UNIVERSITY 143

Notes  The framework suggests that retention marketing can occur at different
levels and that each successive level of strategy results in ties that bind the
customer a little closer to the firm.
KEYWORDS
Customer Acquisition Cost: It is the cost associated with convincing a
consumer to buy your product or service, including research, marketing, and
advertising costs.
Customer Delight: Customer delight occurs when the customer’s perception of
their experience of doing business with you exceeds their expectation.
Customer Retention: It is the activity that the selling organization undertakes
to reduce customer account defections.
Fear, Uncertainty and Doubts (FUD): Fear, Uncertainty and Doubts, is a
marketing strategy. FUD is generally a strategic attempt to influence
perception by disseminating negative and dubious or false information. An
individual firm, for example, might use FUD to invite unfavourable opinions
and speculation about a competitor’s product; to increase the general
estimation of switching costs among current customers; or to maintain leverage
over a current business partner who could potentially become a rival. The term
originated to describe disinformation tactics in the computer hardware industry
but has since been used more broadly. FUD is a manifestation of the appeal to
fear.
GAMP: Global Account Management Programs
Prospect List: A prospect list is simply a list of customers that have been
selected because they are likely to be interested in your products or services.
Response Behaviour: The responses that come in as a result of a marketing
campaign are called response behaviour.
1. What do you mean by customer retention strategy?
2. Write short note on customer value.
3. How customer value is important to business?
4. Describe the keys of customer retention.
5. Write short note on emotional bonding.
6. Explain the benefits of customer involvement in product/service
development?
144 ANNA UNIVERSITY

Long Answer Questions Notes

1. Define customer acquisition. Discuss the reason for customer acquisition.
6. Describe, in detail, various strategies for customer acquisition.
7. Describe the methodologies and systems to manage customer prospects and
inquiries, generally generated by a variety of marketing techniques.
8. What do you understand by the term customer retention? Discuss its
importance.
9. Discuss the strategies of customer retention.
10. What are the costs and difficulties of customer retention programs? How
will you overcome these hurdles?
FURTHER READINGS

Macmillan.
ANNA UNIVERSITY 145

Notes
LESSON 4 – STRUCTURE OF CRM
CONTENTS
Learning Objectives
Learning Outcomes
Overview
4.1 Elements of CRM
4.2 CRM Process
4.2.1 Benefits of a CRM Process
4.2.2 A Closed-loop CRM Process
4.2.3 Process Selection Procedure
4.2.4 CRM Business Transformations
4.2.5 CRM Process for Marketing Structure
4.3 CRM Business Strategy
4.3.1 Creating a CRM Business Strategy
4.3.2 Build a Customer Growth Strategy
4.3.3 Avoid the Whipsaw Effect
4.3.4 Don’t Buy into the Technology
4.3.5 Measure Satisfaction with CRM
4.4 Models of CRM
4.4.1 The Client/Server CRM Model
4.4.2 When Prospects become Customers
4.4.3 Choice of a CRM Platform
4.4.4 Common Mistakes in Customer Acquisition Strategies
4.5 CRM Road Map for Business Applications
4.5.1 The Road Ahead
4.5.2 Computer Telephony Integration (CTI)
4.5.3 CRM_ERP integration
Summary
Keywords
Further Readings
146 ANNA UNIVERSITY

Lesson 4 - Structure of CRM
LEARNING OBJECTIVES Notes

 Explain the Elements of CRM
 Understand the process of CRM
 Discuss about the CRM Business Strategy
 Explain the Models of CRM
 Know about CRM Road Map for Business Applications
LEARNING OUTCOMES
understanding of:
 The role of Marketing Director is to coordinate the entire process measured
on customer holding, purchase and profitability
 CRM strategies are based on the premise that quick, accurate knowledge
about customers empowers organizations to increase the value of current
customers, keep them longer and more effectively acquire new customers
 The CRM client software’s task is to request data from the server, present it
to the user for viewing or editing, and then return the record; opening and
adding or editing information on a form; and then clicking the “OK” button
to save the information
OVERVIEW
CRM cannot be executed by one part of the company in isolation because the
customer does not see it that way and most projects cannot be executed that
way. The complexity of projects demands the potential involvement of a lot
of staff, all working together with common purpose and vision. The degree of
cultural change required means CRM projects need a lot corporate drive to
see them through to success. Any initiative will need key project champions
throughout the organization, and ownership and drive at Board level. The
basic structure of the CRM organization should align around the key
communication process. In order to recognize the right customer relate the
right offer, and schedule the interaction or communication of the offer at the
right time, with the connection across the right channel. People will have to
share a process and activate their skills to complete the activities and tasks
required for success.
ANNA UNIVERSITY 147

Notes 4.1 ELEMENTS OF CRM

The appropriate approach for the CRM process involves the following four
CÊs:
Correlate: A series of transaction and interaction that make up a dialogue
between customer/channel/end user and an organization. This is the data that is
collected from all contact points and communications, with outside points of
contact.
Combine: The mapping and management of interaction points between a
customer/channel/end user and an organization.
Cognize: The insight gained through capture and analysis of detailed
information is to crate continuous learning (about customer, products,
channels, markets, and competitors) form the data warehouse and knowledge
base that is created, interrogated and analyzed.
Connect: The application of insight to create relevant interaction or
communication with consumers, customers, channels, suppliers, and partners
that build value relationships. These four activities will help one to achieve the
extended CRM process.
4.2 CRM PROCESS

CRM process is defined as any group of action that is instrumental in the
achievement of the output of an operation system, in accordance with a
specified measure of effectiveness.
The final objective of the CRM process is to originate a powerful

new tool for customer retention. The focus of any process is to achieve
something always wanted, but do not have the proper resources, it is only as
the inter-operability of systems allow us to break down the barriers between
functions, it becomes something that one can even hope to achieve.
The CRM implementation and success rate purely depend upon the process,
which includes the future, revenue, customer value, customer retention,
customer acquisition and profitability.
4.2.1 Benefits of a CRM Process
 Ability to retain loyal ad profitable customers and channels for rapid
growth of the business project.
 Acquiring the right customers, based on known characteristics, which
drives growth and increased profit margins.
 Increasing individual customer margins, which offering the right products
at the right time.
148 ANNA UNIVERSITY

4.2.2 A Closed-loop CRM Process Notes

Gathering information: Initially, gather information about customers.
Customer data comes from sources both internal and external to organization.
Perform data aggregation: It is here that the data is merged and compressed
into a complete view of the customer. A large customer data repository is
produced.
Create”exploration warehouses”: These are extracts of the customer data need
to support specific analyses, such as customer profitability and predictive
modeling. Exploration warehouses are the engines for analytical applications
that support identification of opportunities and developing strategies.
Execution of strategies: Execute these strategies by developing and launching
marketing campaigns across targeted segments of customers. Campaign
execution inevitably results in an interaction with customers.
Finally, once as customer interaction takes place and the customer responds,
capture that response and „recycle‰ it to use in the on-going learning,
analysis, and refinement process. Each time the process loop is completed.
More is learned about the needs and wants of customers. Marketing improves
as understanding of customers is enhanced and the ability to anticipate their
needs increases.
Marketing organizations are significantly behind their organisational
counterparts in providing bottom-line business benefits that are proficient
practice of repeat processes. CRM process is the systematic determination of
the methods by which a project is to be implemented. To do this effectively, an
organization must:
Creatively translate business innovation, structural transformation, and value
measures into CRM investment priorities, and continually refine interaction
approach based on the following five major areas:
 Customer
 Competition
 Market
 Growth
 Technology Innovation
In the high-stakes game of business, understanding the impact of marketing
investments can have a dramatic impact on a company’s performance.
4.2.3 Process Selection Procedure
This determines how the service will be produced. It involves:
(a) Major technological changes
(b) Minor technological changes
ANNA UNIVERSITY 149

Notes (c) Specific component choice and

(d) Process flow choice
1. Major Technological Changes: This includes the following questions to be
answered:
(a) Does technology exist or not?
(b) Are there competing technologies between which one should chose?
(c) Should the technology be developed in the country itself?
(d) Whether innovations be licensed from foreign countries?
2. Minor Technological Changes: Once the major technological choice is
made, there may be a number of minor technological process alternatives
available. The director should be involved in evaluating alternatives for
costs and for consistency of the desired product. Deciding on the best
combination of processes in terms of costs and the operations process could
be a difficult job.
3. Specific Component Choice: This needs answer for: (a) what type of
hardware is to be used? and (b) how effectively should one use the
technology?
4. Process Flow Choice: The final process selection step determines how the
CRM product will move thought the system.
4.2.4 CRM Business Transformations
Repeat or Interactive Process: All organizations have been following a set of
their own procedures to market their products, services and or promotional
activities. Some activities are common at all. To achieve this organisation, has
to definitely go through two levels of iterations.
CRM process has got its own set of rules and regulations to
change an organisation into a full-fledged Customer Relationship
Management based organisation.
The trouble is that different organizations have different sales strategies and
processes, and therefore different technology is needed for each company.
Iterative cycle is as follows:
 CRM modification
 Determine the boundaries of patterns
 Fixes the limits of channel models
 Define/refine POI models
 Arrange pattern with technology
150 ANNA UNIVERSITY

 Define/refine organizational impact Notes

 Preference and corrective gaps
 Provision technology ecosystem
 Make as “go-to-Market” blueprint
 Plan, deliver, and manage implementation
 Assess customer lifetime value
 Measure and access program value
 Repeat the iteration
A common cause of poor CRM implementation is the classic mistake of falling
in love with the technology itself rather than looking critically at how it can
help execute go-to-market strategies and processes. One service provider
purchased a particular CRM package solely because it was the one used by its
leading competitor. The thinking was if it is good enough for them it is good
enough for us. First, understand the customer’s needs, sales channel references
(example, directly sales, telesales), and profitability. Second, define the
coverage strategies-how to plan to increase target customer acquisition,
retention, and penetration. Third, use this information to carefully evaluate and
select technology and vendors.
Make go-to-market strategy: Based on the outcome of the first two steps,
revise the go-to-market strategy, that is, the plan for acquiring and increasing
customers as well as the design of customer contact channels (such as sales,
marketing, and customer service), jobs, and processes. One should also define
the metrics for measuring organization performance.
Clarify the Role of CRM: Decide how CRM technology should support go-to-
market strategy. One way it can do this is by increasing efficiency through the
automation of time-consuming steps and elimination of redundant steps.
Another way is by sharing customer information across all channels. This
enables all the sales, customer service, and marketing resources interacting
with an account to have the same information such as product purchases, order
status, and other facts.
Prepare for Action: A key step in identifying the right technology enablers is
to evaluate existing technology capabilities, map out the desired functionality,
and identify the technology requirements needed to close the gaps between
what already exists and what is desired. Once the potential requirements have
been identified, they can be prioritized based on their impact.
The final step is to develop a business case that clarifies the estimated return
from investing in new CRM technologies to derive specific go-to-market
objectives.
ANNA UNIVERSITY 151

Notes 4.2.5 CRM Process for Marketing Structure

The CRM process and the key for effective organizational structure of a
marketing organisation would assume the following style:
 Director Marketing: The role of Marketing Director is to coordinate the
entire process measured on customer holding, purchase and profitability.
The Director’s role is an important one in the inherent success of CRM.
Skills Requirement:
 Marketing experience
 IT outsourcing
 IT knowledge
 Warehousing
 Internet technology concepts
 Data mining technique
 Customer linking trend
 E-channels
 Statistics
 Marketing Analyst: To identify the right customers, one need to have
expertise services of the marketing analyst(s). The analyst is expected to
have a sound business knowledge, industry knowledge and market
knowledge that would help in the development relating to customers
identification and segmentation. The marketing analyst would take care of
analysis, reporting and predictive modeling.
Skill Requirement
 Statistical Modeling: QA statistics, Mathematics
 Data mining: Use of SAS, Clementine, Teraminer, or other detailed
knowledge discovery tools.
 CRM Technical Consultant: As the CRM subject matter expert the CRM
technical consultant, works with sales staff, internal and partners,
professional services, and delivery staff to both plan and implement eCRM
projects from mid-tier clients. Using proprietary opportunity assessment
tools, he analyses client’s current CRM business process areas and
recommends custom-made, high value eCRM systems and services
configuration from partner’s list of established products and service
providers. Documents and manages best practices of eCRM process. Works
with marketing staff to build and maintain CRM body of knowledge on
leading technology products and service providers. Works with project
management team to develop, document, and mentor project
implementations best practices. He also works with technical consultants to
152 ANNA UNIVERSITY

determine technology platform options, implementation methodologies and Notes

shared vendor project teams.
Any business firm has the objective of making profit. However, the crux of all
business activity centers on the satisfaction parameters of its customers. A firm
enjoys sustained growth and profits in the long-run provided its customers are
loyal and hence should adopt strategies tailor made to suit the various segments
of its market. The modern concept of marketing and the experts of marketing
insist that retaining a customer is cheaper than gaining a new customer. A
retained customer is treated asan asset to the business firm and enjoys huge
dividends from the existing customers in the form of a positive word of mouth
and in tomes of recession a loyal customer base helps survive the business.
Managing relationships with customers and making them satisfied and
committed has become a necessity in the wake of globalization, where
customer delight is the only key to success and to the very existence of the
company. Scary as the situation may seem, it is a ground reality that many
companies in the world over have realized that customers need to be given
more care seriously than ever before.
The perception of a company is based on the customers varied experiences
with people within the organisation. It is a proven fact that it costs ten times as
much to bring in a new customer than it is to retain the existing one.
Furthermore, the choices open to the customers today are so much. Here,
information is the key to success. The only entity seen by the company is its
customer. This requires a better understanding of the customers and what they
expect from the organisation.
It needs to be understood that not all customers contribute equally

to profits.
The key herein lies in identifying the customers who pay the organization more
for the kind of services that it offer, and focusing valuable efforts into taking
special care of those customers. This not only helps to improve organisation,
bottom line, but also helps to focus organization’s efforts where it is required
the most.
4.3 CRM BUSINESS STRATEGY

Driving a business initiative without strategy behind it is like trying to drive a
car without a steering wheel. The car may be fitted with the most advanced
engine and a plush interior, but does not serve the purpose of taking you from
point A to point B because it cannot be directed to move along the chosen path.
An enterprise-wide CRM strategy is a comprehensive and detailed definition of
the scope of the CRM programme towards organizational goals. “
ANNA UNIVERSITY 153

Notes
The strategy is needed to keep businesses customer-centric and to

help the company constantly evolve internal processes and technology to
acquire and retain customers.”.
A CRM strategy is especially useful for large organisations spread across
different locations.
“Instead of duplicating CRM in different business units, the organization
centralizes a CRM strategy practice which will ensure standardized fulfillment
of customers’ needs irrespective of the location,” adds Bhat.
Customer Relationship Management (CRM) strategies and the technologies
that enable them make it possible to figure out what customers want and the
most profitable ways to give it to them – important in an age when acquiring
new customers – is about five to 10 times the cost of retaining current ones.
CRM strategies are based on the premise that quick, accurate knowledge about
customers empowers organizations to increase the value of current customers,
keep them longer and more effectively acquire new customers.
A CRM strategy takes direction and financial goals from the business strategy,
and revisits the marketing strategy to customize it. It provides an overview of
how the enterprise will build valuable customer relationships and customer
loyalty. The first stage in developing the CRM strategy is to segment
customers into categories, and to set objectives and metrics for each segment.
The second stage is to assess the state of the customer base when viewed as an
asset. That can be achieved by plotting the strength and value of customer
relationships along two perspectives: How much does the customer value the
enterprise? How much does the enterprise value the customer?
The result is a customer asset matrix which combines the supplier's view of
customer value segments with an estimate of the strength of the customer
relationship. The third stage is to define the objectives to be met and the tactics
to be used. The customer strategy customizes the traditional marketing strategy
for different target customer segments, and thus supersedes it.
4.3.1 Creating a CRM Business Strategy
Know your objectives: The idea is to keep and acquire customers with the
greatest value potential. By establishing objectives, one can determine specific,
quantifiable customer acquisition, development and retention targets that meet
corporate financial goals.
How this is best accomplished depends on the kind of organization and its
priorities. Of course, customer retention is important to just about all
organizations. Business-to-business enterprises aiming to become a preferred
supplier often give high priority to customer development. Business-to-
consumer enterprises with an eye to boosting market share concentrate on
154 ANNA UNIVERSITY

customer acquisition. Government and non-profit organizations tend to care Notes

most about customer satisfaction.
Know thyself: Start by answering these questions:
 What are your enterprise's goals and imperatives?
 What should be achieved with a CRM initiative?
 What business units will be affected?
 What's the condition of the IT infrastructure?
 What needs to be upgraded, integrated?
Transform your customer base into an asset: Be customer-centric. Focus
objectives on your customer life-cycle, which then mirror your product/service
life-cycle. This means:
 Analyze your customers: Look for ways that customer value is lost or
unexploited. When you've spotted where action is required, you can set
metrics and monitor them.
 Jibe CRM and corporate strategies: CRM strategy cannot stand alone;
it must be derived from corporate goals and
 imperatives, and it must be linked to other operational strategies.
 Keep it flexible: In a challenging, competitive environment
unpredictably impacted by discontinuous change, CRM strategy needs
to be dynamic and timely, adapting operational efforts and corporate
direction to market conditions. Thus, successful CRM strategy evolves
in an iterative process that takes advantage of customer and operational
feedback to refine objectives, tactics and processes.
 Build a repeatable, continuously improving process: The goal is to
efficiently utilize all your organization's resources to present one
friendly, consistent face to customers. Customers should get the same
information about your company from any channel – from website to
call centre to sales force to marketing brochure. Companies that want to
lock in customer loyalty and maximize profitability need to employ
four CRM tactics: (1) build a customer growth strategy upon a CRM
foundation of strategic intent and cost management; (2) avoid the CRM
whipsaw effect; (3) don't buy into the technology silver bullet; and (4)
measure satisfaction with CRM. These tactics will ensure that CRM
programs can successfully adapt to the pending changes in the
economy.
4.3.2 Build a Customer Growth Strategy
Businesses must build top-line growth strategies upon the foundation of their
CRM programs by ensuring that strategic intent and cost management
measures are institutionalized. Many companies have not determined strategic
ANNA UNIVERSITY 155

Notes intent or have not focused on developing clear metrics to measure

performance. Yet many have done some cost cutting within customer-facing
functions and lowered their cost-to-serve just to reduce the overall cost of
sales. These cost-structure changes should be modified to invest in these fields
of CRM so that growth strategies gain some early wins, no matter what state
the economy is in. As the economy turns into recovery, the winners are likely
to be those who have not only stabilized their customer service and sales costs,
but those who are improving the effectiveness of customer retention and
loyalty programs. Improved customer segmentation, customer satisfaction, and
service strategies should be tailored in downturns and expanded in upswings,
but need to remain long-term goals of any successful CRM program.
4.3.3 Avoid the Whipsaw Effect
Senior management commitment is critical to the success of any major
corporate initiative. CRM is certainly no exception. In fact according to CRM
magazine/the A.T. Kearney survey results, IT decision-makers ranked
executive sponsorship as the most important factor for maximizing the return
on their CRM investments. If CRM initiatives are not in the CEO's agenda,
then investments in these initiatives have a much lower probability of success.
Additionally, because CRM is a fundamental shift in the way a company does
business with its customers, rather than just a one-time e-business initiative, it
requires continuous leadership support over multiple years.
This type of long-term senior management support can only be achieved and
maintained if a long-term strategic plan is developed. The time frame also
requires the strategic plan to have built-in contingencies for the ups and downs
of the business cycle. Without this type of flexible strategy, companies get
caught in a CRM whipsaw: over investing in one year and then cutting to the
bone in the next. The result is unrealized investments, squandered
opportunities, and a loss of employment for the CRM champion. The whipsaw
may affect users as well. Employees whose new customer-centric behaviours
enable CRM success can get caught in the whipsaw if communications about
customer strategy and CRM processes are not clear or consistent throughout
changes in the business cycle.
4.3.4 Don’t Buy into the Technology
The CRM vendor landscape is changing rapidly. Placing all bets on a single
vendor or technology can prove disastrous. The unstable economy has caused a
vendor shakeout. It has reduced the number of CRM vendors, but also has
enabled the strongest companies to survive with the best-integrated offerings.
Strong vendors, after acquiring or merging with smaller niche vendors, still
have to refine the resulting integrated offerings. Even so, research indicates
software functionality is not the prime factor in selecting a CRM vendor.
Financial viability and ROI remain the most important factors in selecting a
vendor, and reflect the fact that the best-of-breed approach in recent years has
156 ANNA UNIVERSITY

left a number of companies holding the bag of unsupported applications. The Notes
focus on vertical expertise has also been increasing.
Companies stung by the challenges and high costs of customizing standard
applications are demanding that the major vendors of the CRM world ensure
that vertical customizations are rebuilt into the application they install.
Customers are focusing on implementing the best vertical application
available. This shift has also been pressuring vendors that have not caught up
with the verticalised wave or have poorly packaged and standardized their
industry experience within applications.
4.3.5 Measure Satisfaction with CRM
Measuring CRM success has often been elusive, but it is possible to measure
satisfaction with CRM. Companies have often measured success either by ROI
or by changes in customer satisfaction to justify CRM benefits. Although
capturing ROI and preventing CRM budget expansion is important, the CRM
magazine/A.T. Kearney research indicates that 60 percent of companies claim
their CRM initiatives met or exceeded expectations. Of the rest, 25 percent did
not set expectations. So for the moment, there appears to be more satisfaction
with CRM projects than not. However, ROI generally measures the internal
return of a technology/process or organization improvement project.
4.4 MODELS OF CRM

4.4.1 The Client/Server CRM Model
The CRM system centralizes data by implementing client/server architecture.
This means that a single, large computer is given the role of “server”. It is
responsible for storing and acting on the entire set of enterprise data as well as
“servicing” fulfilling requests for information-from “clients”. The clients are
the individual computers on the desks of staff. A small program is installed on
each computer to act as the CRM client. The CRM client software’s task is to
request data from the server, present it to the user for viewing or editing, and
then return the record; opening and adding or editing information on a form;
and then clicking the “OK” button to save the information.
The CRM client software can also transfer data between programs run on the
computer where it is installed.
Example:, A customer’s e-mail details that have been retrieved from the
CRM server maybe transferred (along with notes typed by the user) and
automatically composed into an outgoing e-mail message.
Some client/server systems utilise the server as nothing more than a
“warehouse” to store the accumulated data. In these systems, any rules or logic
applied to data entry and any tracing of events related to the data must take
place individually on each client computer. This approach is limited because
ANNA UNIVERSITY 157

Notes any change to these rules must be applied separately to each user’s computer.
Also, pro-active tracking of events can only happen while the user’s computer
is running, and may require large amounts of additional data to be retrieved
from the server.
To solve these problems CRM uses the power of the server computer, which
already has all the relevant data all the time, to enforce the rules of the
organisation and to pro-actively monitor and react to events as they occur.
Below are some examples of “server-side” events and processes in CRM:
Customer Records
When creating a new customer record, one may choose to select the check box
called “This customer is a person not a company”. After clicking “OK”, the
customer record is sent back to the CRM server for storage. When the server
receives a customer record with this check box selected, it attempts to break
down the customer name into the components of Salutation/First Name/Last
Name. From the components of the CRM server, customer name automatically
creates a new contact person record using the details from the customer record.
Likewise, for convenience, one may choose to complete the input boxes on the
“As New Location” tab on the customer form. When the record is saved, the
server understands that it should take this new location data and automatically
creates a new location record for the customer.
Locations
When there is a change in the credit terms, credit limit or account manger for a
location, the server logs this change in the “notes for this location” input box
and, wherever necessary, sends an e-mail to the relevant sales manager or
credit officer. Since the e-mail addresses of sales managers and credit officers
are also stored on the server, only a new sales manger’s e-mail address needs to
be entered once, and any relevant notices are instantly directed to him or her.
In this scenario, no changes to individual computers or even advice to staff is
needed for the information to be redirected to the new person.
An input box called “move these locations to customer ID”. On the location
form is monitored by the server when a record returns from a client. If the user
has entered customer ID # in this input box, the server transfers the location
record so that it now belongs to the nominated customer.
Contact People
When creating a new contact person record, you may choose to leave the
telephone and/or fax input boxes blank and only specify a location. After
clicking “OK” to send the new record to the server, the server will notice that
the telephone and/or fax input boxes are blank and will complete them for by
using the telephone and fax values for the specified location. Similarly, if later
changes were made to the telephone or Fax for a location, the server will
158 ANNA UNIVERSITY

instantly check for any contact people records associated with that location and Notes
update the accordingly.
As might be expected, CRM provides for recording a customer’s details in
Customers, a list of their addresses in Locations, and a list of relevant people in
Contact people, but CRM’s real power lies in its ability to track and process the
information, which relates to the company’s interaction with customers.
Opportunity Files
CRM uses ‘Opportunity Files’ to track, process and report on the life cycle of
business opportunities that a sales representative might normally pursue. When
a sales representative finds a lead or a non-profit organisation worker proposes
a sponsorship, or a recruitment agent learns of a job vacancy, the event defines
the start of a “unit of work”. There is a possibility consisting of many tasks, for
that person. In many industries, this is refereed to as the start of the “sales
cycle”. As this initial event involves interacting with an external entity (the
customer), it is prudent to record the event for recollection as well as to advice
others who may interact with this customer in the future. Using CRM one
should create new opportunity file to record this event and immediately the
company benefit in several ways.
Data Mining Models using Response Behaviours
With the test campaign response data in hand, the actual mining of customer
response behaviors can begin. The first part of this process requires you to
choose which behaviors you are interested in predicting, and at what level of
granularity. The level at which the predictive models work should reflect the
kinds of offers that you can make, not the kinds of responses that you can
track. It might be useful (for reporting purposes) to track catalog clothing
purchases down to the level of color and size. If all catalogs are the same,
however, it really doesn't matter what the specifics of a customer purchase for
the data mining analysis. In this case (all catalogs are the same), binary
response prediction is the way to go. If separate men's and women's catalogs
are available, analyzing response behaviors at the gender level would be
appropriate. In either case, it is a straightforward process to turn the lower-
level categorical behaviors into a set of responses at the desired level of
granularity. If there are overlapping response behaviors, the duplicates should
be removed prior to mining.
In some circumstances, predicting individual response behaviors might be an
appropriate course of action. With the movement towards one-to-one customer
marketing, the idea of catalogs that are custom-produced for each customer is
moving closer to reality. Existing channels such as the Internet or outbound
telemarketing also allow you to be more specific in
the ways you target the exact wants and needs of your prospective customers.
A significant drawback of the modeling of individual response behaviors is that
the analytical processing power required can grow dramatically because the
ANNA UNIVERSITY 159

Notes data mining process needs to be carried our multiple times, once for each
response behavior that you are interested in. How you handle negative
responses also needs to be thought out prior to the data analysis phase. As
discussed previously, there are two kinds of negative responses: rejections and
non-responses. Rejections, by their nature, correspond to specific records in the
database that indicate the negative customer response. Non-responses, on the
other hand, typically do not represent records in the database. Non-responses
usually correspond to the absence of a response behavior record in the database
for customers who received the offer. There are two ways in which to handle
non-responses. The most common way is to translate all nonresponses into
rejections, either explicitly (by creating rejection records for the non-
responding customers) or implicitly (usually a function of the data mining
software used). This approach will create a data set comprised of all customers
who have received offers, with each customer's response being positive
(inquiry or purchase) or negative (rejections and nonresponses). The second
approach is to leave non-responses out of the analysis data set. This approach
is not typically used because it throws away so much data, but it might make
sense if the number of actual rejections is large (relative to the number of non-
responses); experience has shown that non-responses do not necessarily
correspond to a rejection of your product or services offering.
Once the data has been prepared, the actual data mining can be performed. The
target variable that the data mining software will predict is the response
behavior type at the level you have chosen (binary or categorical). Because
some data mining applications cannot predict non-binary variables, some
finessing of the data will be required if you are modeling categorical responses
using non-categorical software. The inputs to the data mining system are the
input variables and all of the demographic characteristics that you might have
available, especially any overlay data that you combined with your prospect
list. In the end, a model (or models, if you are predicting multiple categorical
response behaviors) will be produced that will predict the response behaviors
that you are interested in. The models can then be used to score lists of
prospect customers in order to select only those who are likely to response to
your offer. Depending on how the data vendors you work with operate, you
might be able to provide them with the model, and have them send you only
the best prospects. In the situation in which you are purchasing overlay data in
order to aid in the selection of prospects, the output of the modeling process
should be used to determine whether all of the overlay data is necessary. If a
model does not use some of the overlay variables, you might want to save
some money and leave out these unused variables the next time you purchase a
prospect list.
4.4.2 When Prospects become Customers
160 ANNA UNIVERSITY

the data strategy should also help determine whether customers do or don’t Notes
meet the company’s criteria for retention. Look for factors that will feed back
into the acquisition cycle to reduce marketing costs, increase success rates or
both. Look for trends in the length of customer relationships and determine if
steps can be taken to avert the loss of customers at critical points along the
way. Even a small improvement in retention can result in a significant rise in
profitability and your overall ROI.
Since all organizations continually update customer data, reviewing and
analyzing the data will identify opportunities where up-selling, cross- selling
and service sales can be increased. Sales data, for instance, can indicate which
customers are due for product/service upgrades or warranty extensions.
The development of the data strategy as it relates to retention issues should
address questions such as:
 What characterizes our best customers, and what keeps them loyal?
 How do the information and service needs of new customers differ from
those of established customers?
 Is it necessary to keep all prospect information once a customer
relationship is established?
 What changes does the organization need to make as the relationship goes
along?
 Were any products returned and why?
 How many service calls did customers place?
 How were they resolved?
 What was the time to resolution on those calls?
 What is the potential for developing other customers such as these?
 Why does one group or class of customer respond to opportunities when
another does not?
4.4.3 Choice of a CRM Platform
A company’s choice of a CRM solution will affect its ability to collect, analyze
and use data. A balanced CRM solution should offer the functionality the
organization needs and provide the agility to help users address changing
demands in the marketplace. The ideal CRM solution should be timely in that
it is quick to install and deploy, and it should be cost-effective from its initial
deployment through its long- term use. All information about a particular
customer should be in one database (not separate databases for marketing, sales
or support), and everyone in the organization should be looking at the same
data. Universal access to information by all departments makes it possible to
present a unified face to each customer.
ANNA UNIVERSITY 161

Notes In addition, the CRM solution should be customizable to reflect the unique
business outlook and preferences of the organization using it. It should be
readily reconfigurable to record new types of information or to discontinue
collecting information that is no longer relevant or is not useful. In short, it
should be adaptable to new requirements as the needs of the organization
evolve. Today’s Internet technology enables companies to use customized
relationship management services ted by Application Service Providers
(ASPs). An Internet-based solution can make it easy for prospects and
customers to use selfservice tools and information request forms via the Web.
The CRM solutions offered by the best ASPs include management and
administrative tools to monitor application usage and provide expected levels
of service. Developing an effective data strategy for the CRM process is a way
to develop the information you need to better run your company. Ultimately, it
comes down to deciding who you want to pursue as prospects and retain as
customers. Your CRM solution should provide you with the tools and
flexibility to support that quest on an ongoing basis. Intelligent analysis of data
can indicate whether a company’s activities are in line with its goals for
customer acquisition and retention. It can be crucial to both the speed and the
quality of the company’s response, and it can influence the future direction of
your product and service offerings.
Most importantly, a well-developed data strategy and its effective use in
concert with your CRM system will allow you to be selective in the types of
customers with whom you choose to deal.
4.4.4 Common Mistakes in Customer Acquisition Strategies
Understanding these common mistakes is an important step towards
overcoming them and towards developing effective customer acquisition
programs. Confusion Regarding New Customer: Marketing professionals have
long recognized the semantic confusion over the concept of "new." The
question is, What is a 'new' customer? The most frequent answer is that he is
someone new to the community. Individuals just moving into the community
are important to the business, and most retailers would like to capture as many
of these new customers as possible. However, "new to the community"
constitutes a narrow definition that leads many retailers to mistakenly
underestimate the opportunity to attract new customers. Demographic
information about many communities suggests that the number of new
households or individuals moving into markets is small. In some markets, the
demographics may suggest that the community is losing population. With such
information, it is easy for marketers to conclude that the opportunities a “new
customer acquisition" strategy provides is small at best. A substantially broader
definition of new is new customer for the business. Effective new customer
acquisition programs recognize the importance of capturing new relationships
among individuals and households already in the market who need some type
of new product and are not currently customers of the company. It is important
162 ANNA UNIVERSITY

to capture a major share of both customers, "new to the community" as well as Notes
the "new accounts of existing residents" who are not currently customers.
Targeting Promotional Messages Poorly: Often, retailers that pursue an active
customer acquisition strategy tend to have a marketing strategy so broad that it
produces little success. These broad customer acquisition programs tend to use
newspapers as their primary marketing medium. In some markets, newspaper
advertising efforts are supported by television or radio. In reality, the best
opportunities to attract new customers are directly associated with their
geographic proximity. The closer the customer is to a business establishment,
the more likely it is that the marketers can turn that non-customer into a new
customer. The best medium to deliver promotional messages to a clearly
identifiable set of customers or prospective new customers is direct mail.
However, many marketers refuse to consider direct mail seriously because they
continue to associate it with "junk mail."
But direct mail provides a cost-effective, highly targeted way to get
promotional messages to specific groups at a desired frequency. It avoids the
substantial waste of broader promotional media, including newspapers.
Paying Inadequate Attention to New Customer Products: The new customer
promotional programs of many businesses tend to focus on one product. This
approach fails to recognize the variety of circumstances individuals and
households face in purchasing new products. To succeed, it is necessary to
promote a number of different products that meet the customer's specific needs.
Failing to Offer Price Appeals: While marketing arenas are intensely
competitive, with consumers increasingly demanding discounts, coupons and
other price benefits when making decisions, many retailers' customer
acquisition programs ignore the importance of price appeals.
Failing to Offer Premiums: Premiums operate at two levels within customer
acquisition programs. The first involves the prospective customer, and the
second involves the current customer. Many customer acquisition programs do
not offer an attractive, immediate incentive to which prospective customers
may respond, despite substantial evidence that such premiums motivate
prospective customers to take immediate action. Substantial evidence also
exists that premiums are cost effective in customer acquisition programs.
4.5 CRM ROAD MAP FOR BUSINESS APPLICATIONS

CRM, at lCICI, is viewed as a discipline as well as a set of discrete software
technologies, which will focus on automating and improving the business
processes associated with managing customer relationships in the areas of
sales, marketing, customer service and support. The organization aims to
achieve the end goal of one-to-one marketing.
The CRM software applications will not only facilitate the coordination of
multiple business functions but also coordinate multiple channels of
ANNA UNIVERSITY 163

Notes communication with the customer – face to face, call centre, ATM, web,
telephone, kiosk, bank, branch, sales associates, etc.– so as to enable ICICI to
carry out cradle-to-grave customer management more efficiently. It should
allow ICICI to engage in one-to-one marketing by tracking complete customer
life-cycle history. To begin with, it will automate process-flow tracking in the
product sales process, and be able to generate customized reports and promote
cross selling. It will also enable efficient campaign management by providing a
software interface for definition, tracking, execution and analysis of
campaigns.
CRM will essentially focus on providing optimal value to customers-through
the way we communicate with them, how we sell to them, and how we service
them-as well as through the traditional means of product, price, and promotion
and place of distribution. ICICI recognizes that customers make buying
decisions based on more than just price... more than just product. Customers
make buying decisions based on their overarching experience that includes
product and price and sales, service, recognition and support. If ICICI can get
all of those factors right–consistently–we will be rewarded with ongoing
customer loyalty and value.
3.5.1 The Road Ahead
Technology has been a major driving factor for CRM and is bringing about
radical changes. The developments in several technological areas are likely to
have a major impact on CRM. Some of the areas are listed below:
Biometric sensing: passwords continue to be the least user friendly and the
most un-secure link in the CRM chain.
However, advancement in biometrics will soon make it possible to make a
foolproof recognition through voice, live fingerprint or image. The system
would automatically identify (and not just verify) the user. PeopleSoft has
already announced that it is working on voice recognition.
M-commerce: There has been an enormous advancement in this area. Rapid
developments in the mobile computing and data access devices are likely to be
a major growth area for CRM. The global marketplace is all set to shrink to a
palmtop, digital signatures and secured identification technologies.
Integration with B2B marketplaces: Many argue that online market-places
will drive sales in the coming decades and branding will no longer be
important. Even if such a postulation is far-fetched, there can be little doubt
that enterprises will integrate the CRM solutions with B2B market places.
4.5.2 Computer Telephony Integration (CTI)
With global competition growing, outstanding customer service is becoming an
increasingly important basis of competitive advantage for many organisations.
Quite simply, organisations in a variety of industries now live or die by the
quality of service they provide for their customers.
164 ANNA UNIVERSITY

Call Centers (CCs), or Customer Contact Centers (CCCs), have long played a Notes
critical role on the customer interaction front. Compared with other form of
customer interaction, call centers provide a highly efficient and effective
medium for serving customers. Like other parts of the modern organisations,
however, call centers are coming under increasing pressure to become more
effective, and provide a competitive advantage for the entire organisation.
Computer Telephony Integration Technology (CTI) can play critical role in
helping call centers achieve their competitive and effectiveness goals. While
traditional CTI technology has been on the market for a number of years and
has been adopted in some form or the other by a sizeable number of large call
centers, the mainstream customer contact center is only now starting to adopt
the technology to significant extent. Fuelling the move to CTI is the need for
companies in commodity markets to differentiate themselves from their
competitors by providing increasingly competent and cost effective customer
service, as well as the need to integrate the disparate communications
technologies of the telephone system and the Internet into one cohesive form of
business communication.
CTI can be defined as the application of computer-based intelligence to
telecommunications devices. CTI can also be defined as the process of
blending the functionality of computers and computer networks with the
features and capabilities of sophisticated telephone systems over an intelligent
data link to gain increases in agent productivity, customer satisfaction and
enterprise cost savings. CTI is the solution that combines the functionality of
programmable computing devices with the telephony network through the
exchange of signaling and messaging data between the switching systems and a
computer. Computer telephony is considered a part of the overall call center
hardware/software market, which includes systems and applications such as
IVR, message boards, desktop telephones, automated attendants and predictive
dialing. The primary task of CTI is to integrate various call center systems and
platforms, including PBXs, LANs, IVR/VRU systems, predictive dialers, the
desktop PC an Internet-based applications.
4.5.3 CRM_ERP integration
There are two distinct chains in the corporate eco-system: (i) the supply chains,
which cover the back office to external suppliers and distributors; and (ii) the
demand chain, which extends from the front-office to the customers and the
channel.
The back office includes departments and processes associated with finance,
human resources, and, often, manufacturing to accounts receivables to shipping
and logistics. The front-office includes sales, marketing, and channel
management and all customer service functions. Its reach is directly to the
customer or partner, not through the supplier or vendor.
ANNA UNIVERSITY 165

Notes However, there is a lot going on between the back-office and the front-office.
For example, a closed product sale to a customer generates a bill or invoice and
creates an account receivable that has to be taken into the ERP or financial
package being used by the company. This product has to be physically created
and moved from inventory to shipping and distribution. All this is accounted
for in the back office, though the transaction is originated in the front-office. If
the front-office and back-offices are integrated, this works well enough so that
there is not duplicated data or repetitive data gets entered into the system.
As modular and flexible as it has tried to become, ERP’s foundation (which
evolved from earlier manufacturing-based manufacturing resource planning
(MRP) applications and its later incarnation, MRPII applications), it is based
on creating internally stable business functions and predictable process control.
The concept of ERP was the integration of all back-office functions so that the
basic problems responsible for interruptions and breaks in the processes were
smoothed out and the incompatibilities of the best of processes were settled,
and the incompatibilities of the best-of-breed applications were eliminated or
reduced. This does not work with CRM, which is external. Conceptually, one
important reason for CRM is real time response to the constantly liquid-
shifting of customer demands, which is not controlled internally at all. It also
means the psychology of the front-office is quite different from the psychology
of the back-office. Despite all the efforts to create a uniform, employee-
friendly corporate culture, firm has two different sub-culture functionalities
within.
CRM and ERP
There were two other major problems with ERP vendors’ incursion into CRM
and, particularly, eCRM. Before they could enter this active market, they had
to re-invent themselves as business-to-business enablers. To get e-business
crest and to actually become e-commerce-focused enterprises, they had to
revamp their entire applications since none of them had Web-integrated
applications of any note.
Example:, in order for Oracle to deliver Oracle CRM effectively, they

had to convert their Oracle 8.0 database so that it would work with the Web
and then covert a series of other products to make them Internet-ready.
ERP vendors are behind the curve. This arch is becoming more pre-eminently
populated with eCRM vendors who provide fully web-integrated applications
that are increasingly being created in Java and are ready, ERP is rushing to
catch up.
The simplest option is to hire a systems integrator to come in and integrate the
systems. However, the obvious hazard here is that they are not only dealing
with ERP and CRM applications they may not know much about, they are also
dealing with the existing legacy systems, which they know nothing about. But
166 ANNA UNIVERSITY

integrating all of that is the job and purpose of the ERP vendor who Notes
implements the ERP vendor’s CRM solution. But many of the solutions remain
vaporware or poorly integrated.
Benefits of CRM with the Help of Types of CRM
Highlighting a few benefits whereby different types of CRM helps enterprises:
 Retain existing customers. CRM helps increase customer loyalty by
tracking and coordinating all customer interactions. It also gives the
customer a single, consistent and uniform experience irrespective of the
channel used to interact with the company
 Attract, acquire, and grow new customers. CRM helps companies in
refining strategies and take timely action by providing real-time feedback
on marketing initiatives and sales leads through analysis and reports.
 Recognize and take advantage of new competitive opportunities. Because
all interactions with a customer (or potential customer) are tracked,
opportunities for up selling and cross selling are more easily recognized.
 Improved Response Time to Customer Requests for Information. With
24-hour access to information and faster tools for communication such as
email, web chat, etc., the customer can contact anytime and from
anywhere.
 Product meets customer requirements. Based on the customer likes and
dislikes and with the capability of online configuration, companies or
customers can create products suiting their needs.
 Improved customer satisfaction. By analyzing the customer behaviour and
providing a single view of the customer across the departments, line-of-
business or the interaction channels, CRM helps in better servicing of the
customer.
 Improved revenue and reduced cost. Becoming customer centric increases
revenue, profitability and employee productivity, as well as improve
overall shareholder value.
Learning Activity
“It is of paramount importance to integrate the ERP and CRM
system for effective performance of the total system”. Discuss and
analyse.
ANNA UNIVERSITY 167

Notes
1. CRM system is one of the most effective tools that you
can use in your company, also it can help in the
development and strengthening the customer base.
2. Customer relationship management or CRM has the
capability to transform your business model to offer
exceptional customer experience.
SUMMARY
CRM strategies offer companies a complete view of their customers across the
entire organization. When implemented properly, a CRM strategy integrates all
customer-facing and back office applications with the same data. Companies
reap large gains from these efficiencies by offering better service and
developing deeper relationships with customers.
In order to achieve those gains, the implementation of the CRM strategy has to
create a 360-degree view of the customer. This means merging the information
silos maintained by each department into a single data repository accessible by
all departments.
Selection of technology is vital to a successful CRM implementation. Selecting
package approach, rather than tying together existing individual components,
enables each department to tie into the same database with systems that speak
the same "language."
Implementation of a CRM strategy is by no means a project for the IT
department alone. Marketers must be directly involved in the process because
they will ultimately win or lose based on the quality of the outcome. If
implemented properly, a CRM strategy enables marketers to interact with
customers armed with useful information. Additionally, by analyzing existing
customer data, marketers have better tools to build future marketing
campaigns, increase sales and drive ROI.
The focus of any process is to achieve something always wanted, but do not
have the proper resources, it is only as the interoperability of systems allow us
to break down the barriers between functions, it becomes something that one
can even hope to achieve. The CRM implementation and success rate purely
depend upon the process, which includes the future, revenue, customer value,
customer retention, customer acquisition and profitability.
Relationship marketing is emerging as the core marketing activity for
businesses operating in fiercely competitive environments. On an average,
businesses spend six times more to acquire new customers than to keep them.
Therefore, many firms are now paying more attention to their relationships
with existing customers to retain them and increase their share customer’s
purchases. Most acquisition marketing campaigns begin with the prospect list.
168 ANNA UNIVERSITY

A prospect list is simply a list of customers that have been selected because Notes
they are likely to be interested in your products or services.
the data strategy should also help determine whether customers do or don’t
meet the company’s criteria for retention.
Berry and Parasuraman, two early advocates of relationship marketing have
developed a framework for understanding the type of relationship strategies.
The framework suggests that retention marketing can occur at different levels
and that each successive level of strategy results in ties that bind the customer a
little closer to the firm. At each successive level, the potential for sustained
competitive advantage is also increased.
KEYWORDS
CRM Strategy: It takes direction and financial goals from the business
strategy, and revisits the marketing strategy to customize it.
CRM Process: It is defined as any group of action that is instrumental in the
achievement of the output of an operation system, in accordance with a
specified measure of effectiveness.
CRM: It can be described as Web-enabled sales and marketing tool that
synergistically combines the functionalities of database marketing, one-to-one
marketing and Sales Force Automation (SFA).
Map the CRM Process: For ease of understanding and to map the CRM
process, the marketing organisation may follow along the lines of know, relate
and connect.
Response Behaviour: The responses that come in as a result of a marketing
campaign are called response behaviors.
Prospect List: A prospect list is simply a list of customers that have been
selected because they are likely to be interested in your products or services.
1. Discuss the procedure of iterative cycle.
2. Write a note on the Four C concept in CRM process.
3. Discuss the style of different CRM structures. Also discuss their
advantages and disadvantages.
4. What do you understand by CRM strategy? Discuss its elements.
ANNA UNIVERSITY 169

Notes Long Answer Questions

1. How do you create a CRM business strategy?
2. What is CRM planning? Discuss the main elements of CRM planning.
3. Define CRM process. What are the objectives of CRM process?
4. Discuss the steps involved in the selection of CRM process.
FURTHER READINGS

Publication.
Macmillan.
Assel Henry, Consumer Behaviour, Cengage.
Elsevier.
170 ANNA UNIVERSITY

Lesson 5 - CRM Planning and Implementation
Notes
UNIT IV
LESSON 5 – CRM PLANNING AND
IMPLEMENTATION
CONTENTS
Learning Objectives
Learning Outcomes
Overview
5.1 Strategic CRM Planning Process
5.1.1 CRM Planning
5.2 Implementation Issues
5.2.1 Implementation
5.2.2 CRM Implementation Steps
5.3 CRM Tools
5.4 Role of CRM Managers
Summary
Keywords
Further Readings
LEARNING OBJECTIVES
 Explain the Strategic CRM Planning Process
 Discuss about the Implementation Issues
 Describe the CRM Tools
 Understand the Role of CRM Managers
LEARNING OUTCOMES
understanding of:
 the project manager is responsible for all aspects of the implementation,
including cost control, quality and testing, and customer satisfaction
ANNA UNIVERSITY 171

Notes  CRM requires a cultural change that aligns a company, its employees and
its systems towards customers and away from traditional product or process
centric models
 the CRM project manager will lead and mentor the project team in delivery
of SDLC (Software Development Life Cycle), system interaction and/or
packaged software configuration projects for CRM and e-CRM business
applications
OVERVIEW
Achieving the long-term value of Customer Relationship Management (CRM)
requires a strategy involving the whole business and should be approached at
an enterprise level. Only a small, but growing, number of enterprises are
tackling CRM at this level, with most CRM initiatives consisting of
departmental projects or attempts to integrate the work of multiple projects.
Executing enterprise-level CRM is not easy. It requires board-level vision and
leadership to drive a "relentless focus on the customer." It involves learning
new customer management skills, potentially difficult changes to processes,
culture and organization, and grappling with the technology challenges of
multichannel alignment, systems integration and data quality. Even if the board
accepts the need for enterprise-level CRM, the quarterly demands of revenue
and profit targets, especially in delicate economic conditions, often mean that,
although CRM is the most important challenge facing an enterprise, it is not
seen as the most urgent. This typically results in a focus on isolated tactical
"quick wins" until conditions are better. Through 2005, enterprises that use a
strategic CRM framework to estimate, plan and promote their CRM initiatives
while building up their capabilities in small piloted steps are twice as likely to
achieve planned business benefits as enterprises that pursue projects without a
framework (0.7 probability).
The framework emphasizes the need to create a balance between the
requirements of the enterprise and the customer. The two central building
blocks in the Figure (valued customer experience and organizational
collaboration) are joined by a yin and yang motif to emphasize that this is
where people meet, build relationships and provide value to each other.
Through 2005, 90 percent of successful CRM initiatives will have balanced the
needs of improved customer experience with improved organizational
collaboration (0.8 probability).
5.1 STRATEGIC CRM PLANNING PROCESS

5.1.1 CRM Planning
Thinking about the potential ROI of your Customer Relationship Management
(CRM) project should start during the selection process. Before you write an
RFP or start talking to vendors, you need to do some homework to ensure that
you're on the right track to maximize ROI.
172 ANNA UNIVERSITY

Identify the Problem and the Solution Notes

Before you start thinking about vendors, you should define your problem in
clear business terms. Do you need to improve management visibility into the
sales pipeline? Reduce customer support costs or improve customer support?
Reduce customer related administrative overhead? Making your CRM
challenges specific will help you determine which technologies or components
are most likely to deliver ROI and how you can prioritize your development
and deployment plans. Most companies' CRM goals fall into a couple of main
categories: Improved sales performance Improved management visibility
Improved customer support Improved marketing Reduced costs If your CRM
goals fall into more than two of these categories, you'll likely want to prioritize
one over the other and plan a phased deployment. Depending on how
interlinked the people impacted are, you may want to consider two different
projects altogether.
Regardless, now is the time to start thinking about the executive sponsor or
project champion who can help you keep things on track if politics or budget
issues get in the way. Getting feedback and support early in the process will
save you time and energy down the road.
It's also a good idea to know at this point what your likely budget is, how
flexible it is, and what your procurement officer or CFO will be looking for in
terms of business justification. If you know walking into the project that you'll
need to show a six month payback period, for example, you can plan
accordingly.
Short List Potential Vendor
Short listing should be easy to define based on these factors: CRM goals: The
vendors whose functionality meets your needs will depend on whether you're
looking for improved sales, improved reporting and forecasting, improved
support, improved marketing, or a combination of different customer-related
technology. The vendor profiles section of this report provides profiles of
many of the leading vendors. Your existing environment and IT philosophy:
Do you have existing databases, order systems, or contact lists that will need to
be integrated or migrated into your CRM solution? Do you expect to do your
own development or use consultants or systems integrators? Are you
comfortable outsourcing your sales and marketing data in its entirety or in
part? Answering these questions will help you determine whether a large-scale
CRM infrastructure, a hosted solution, a point solution, or a broad solution is
likely to deliver maximized ROI. Your user dynamics: Are the employees you
expect to use the solution technology savvy and open to change, or are they the
ones still using pencils and paper to track leads? The greater the magnitude of
the change you expect them to make, the greater the risk that adoption will
slow the ROI of your project. You'll want to explore usability of the different
solutions based on your users' level of experience and comfort with
technology, the potential cost of customizing them to better align with you
ANNA UNIVERSITY 173

Notes current profile, and your ability to easily and quickly customize them as your
needs change. Your budget: CRM solutions such as Siebel and SAP can cost
millions of dollars to deploy and require a team for ongoing support and
maintenance. On the other end of the spectrum, Microsoft CRM and Front
Range (for example) can cost considerably less. You can expect a hosted
solution to have a minimal upfront investment and from $500 to $1500 per user
per year. Clearly defining your requirements and characteristics in each of
these key areas will prepare you for the next step · evaluating each individual
solution's ability to deliver returns based on the costs and benefits associated
with a deployment.
Check Resumes
Once you've identified the likely vendors to deliver the best solution for you,
you'll want to check their references · and this doesn't mean just reading case
studies on their Web sites. Look to independently developed case studies and
your own interviews with references to learn about their decision process,
project successes and challenges, and whether or not their spending · and
benefits "met expectations. Any vendor that won't give you names and
numbers of references to call is sending up a red flag; it either doesn't have
many customers or is not sure its customers are as happy as its marketing says.
Find a Partner
In the CRM world, few companies will deploy a solution without some help
from external consultants or systems integrators. Selecting and planning how
you work with consultants is just as important to your project's success as the
technology you hoose.
It is not enough to take the solution vendor's word for the ability of
a partner or consulting firm.
You'll want to vet the service provider just as you evaluate the vendor: by
checking references and carefully planning how you'll interact with both the
vendor and the service provider and agreeing in advance who takes the lead in
taking responsibility for a successful deployment.
Justify your Investment
Once you've identified your goals and selected a short list of vendors, you can
use a structured evaluation of costs and benefits to determine the best solution
in terms of ROI and build the business case for moving forward. On the costs
side, you'll want to consider the initial and ongoing software, hardware,
consulting, internal personnel, and training costs associated with the project.
Here are a few guidelines to keep the ROI from your CRM project on track:
174 ANNA UNIVERSITY

 You should spend less on software and consulting than 70 percent of Notes
expected annual direct benefits.
 You should be able to deploy and achieve some returns in fewer than six
months (even if it's only a pilot).
 For a hosted solution, you should see benefits in fewer than 60 days.
 Consulting costs should not be more than twice your initial software
investment.
 Training users should take fewer than four hours.
5.2 IMPLEMENTATION ISSUES

Once the stakeholders are convinced, the budget is set, the software is chosen,
and the integrator/implementation partner is hired, and then comes the work.
The software must be implemented.
This is not a simple matter. Implementation does not just mean

installing the software and hoping that it runs well.
It means understanding how the software must conform to the business model
and the style of the company. Implementation is always required, regardless of
how much or little it is. Very rarely does a CRM work right out of the box.
5.2.1 Implementation
When a firm attempts to implement a CRM package without knowing how
implementations work, it is likely that it will face problems throughout the
project. The statement of work and the change management processes have to
be cleared prior to starting the installation. The industry thumb rule is that the
implementation services will cost at least double to triple the price of the
software itself.
Implementations on a larger scale are not covered here; they are more complex
in scope and methodology. They have a different set of problems and often a
larger team. It is definitely necessary to have a formal steering committee that
consists of the stakeholders, program managers, project managers, and so on
who would review the project as it moves through the implementation stages. It
is far more complex and beyond the scope to look at a Fortune 1000 CRM
implementation.
5.2.2 CRM Implementation Steps
Pre-implementation
The timeframe on this one varies from several weeks to several months,
according to the depth of preliminary work a company needs to do. For
example, in this timeframe, the decision is made to go with eCRM
ANNA UNIVERSITY 175

Notes implementation. The criteria for this are those questions the CRM software
functionality needs to answer and those corporate weaknesses the software and
processes need to address. Additionally, this is the phase where the
stakeholders at the executive level are identified and engaged. This also is the
phase where software selection occurs. The market is witnessing new CRM
choices every day. The selection criteria must be sharp and also have some
reference to help identify the established vendors and new vendors. Identifying
the cutting-edge vendors would considerably ease the process of selection.
Some of the criteria for the selection are:
 Scalability of software
 Toolset flexibility for customization
 Stability of the existing CRM application with legacy systems and internet
systems
 Level of technical support available during and after the implementation
upgrades support.
Meeting the Vendor
This is where the implementation partner—be it the vendor, a large or small
consulting services firm, or a systems integrator who is doing more than just
the implementation—meets with the customer to figure out the customer’s
needs. This meeting, which should take two or three days, is where the
customer and the partner decide which responsibilities are assigned to whom.
The team members meet each other and the chemistry for the implementations
established.
Project Manager (PM)
The project manager is responsible for all aspects of the implementation,
including cost control, quality and testing, and customer satisfaction. Since the
PM maybe managing several projects simultaneously he usually may not be
available to spare the required time. The project manager represents a
consulting services partner or a systems integrator. If there are changes in the
statement of work (SOW), it is the project manager that must work out the
details with the customer. There should be a change management process in
place that is approved by both the customer and the implementation services
company.
Implementation Leader
This person is also titled the technical leader. He is responsible for technical
aspects, directs the system engineers, and is usually dedicated to only one
project at a time. He tends to be onsite full time until the end of the project. His
strength is a combination of personnel skills and technical knowledge. Often he
is a CRM architect who takes a hands-on role in the project. He assists the PM
176 ANNA UNIVERSITY

in preparing the statement of work. However, he does not resolve the problems Notes
of the project. The project manager’s team does that.
System Engineers
Their primary role is to do the coding and they can be Java developers or
analyst programmers or any developers. They are onsite all times, unless
otherwise, there is work to do at home. In many implementations, one has to
have the technical and functional expertise necessary do the work. CRM
implementations are complex. For example, it’s important for the systems
engineer to how corporate sales processes tend to function. It’s now time for
introductions and assignments for the customer’s team. First and foremost, the
team is the one with the knowledge of how the company works and is expected
to impart that knowledge. Second, the team needs to know how a CRM works.
When the implementation is done, the partner will probably not want to stay
back and maintain, unless a separate company is engaged to do so. Therefore,
someone has to learn how CRM works at the technical level. That would be the
responsibility of in-house team.
In-house Project Manager
The project manager owns the project from the customer’s point of view. That
means the PM is in relationship with the partner’s PM, and is also the one who
sees to it that the statement of work developed by the partner PM is adhered to.
This project manager filters any suggested changes in the SOW, prior to a
discussion with the partner PM on changes. This PM is also the one who
approves the pricing of the changes.
Systems or Business Analysts
These employees are the functional experts. They provide input on business
processes and flow that are enterprise specific. In the ideal world, they will be
assigned full time to the project and not leave it until it is complete. That
happens sometimes. The rest of the time, they are onsite when can be, which
doesn’t necessarily dovetail with when they should be. That can create serious
headaches, if not major problems for the implementation’s completion in a
timely fashion. Here is where some variance might also be the case.
There may be some differences in the way the project is staffed. For example,
there would also be functional expertise on the implementation partner’s team
in the disguise of “business analysts”. This would not mitigate the need for the
enterprise process specialists. It is just that the larger CRM packages have
enormous specialized functionality best understood by a functional specialist,
who has background in the area and who also knows the product being
implemented.
ANNA UNIVERSITY 177

Notes Networking Staff

People who are maintaining and setting up the network and its software, should
ensure that there is no significant downtime or problems during the
implementation period. Actually, they have to do this all the time. Because a
good deal of an implementation process involves working the bugs out of it,
the stress on the system can be high. The administrators, who have enough
stress in their lives as it is, are under greater pressure during this critical period.
Integration Professional
This expert is in charge of integration of CRM with other information systems.
This person has to have specialized skills to interact with the other information
systems. For example, someone who is integrating mid-market SAP with
Vantive is going to be someone who knows how to make the hooks, find the
APIs, write the scripts, and do whatever is necessary to make this work.
Heads of Non-Technical Departments
These heads provide input and approval on issues affecting their departments.
They can make the implementation succeed if the implementation partner
understands that they are non-technical, which means patience and
explanations are necessary. They can make it fail if either they think that they
have the technical knowledge and try to tell the technical group how to do their
jobs or if they have insufficient explanation of what is going on. This usually
leads to misunderstandings and wrong decisions. This is a very important
group of team members who have to do their job well.
It’s important for both teams to come to an understanding as to the

expectations and the outcomes of the solution as to what the system is
functionally and technically going to do.
For example both teams must agree that it will allow forecasting in the sales
pipeline that can be managed against the steps of the sales process. It also
means agreeing that it will run under updated versions of Windows when the
company upgrades. As long as the agreement is there, things run smoothly for
both parties.
There also has to be an understanding of what the software can and cannot do.
During implementation process several doubts haunt the minds of both the
buyer and seller of the software solution; the buyer because what he expects
must be met, the seller because he has to reorganize the package after trying to
tailor-make the solution to the needs of the buyer.
The final objective of a commencement meeting is to create the initial timeline,
so that each deliverable is scheduled for some date. If the meeting was
successful, there will be sign-offs on what the system can and can not do and
what the expectations are from each person. These can be formal or informal,
178 ANNA UNIVERSITY

depending on the relationship between the vendor and the organisation. It Notes
should conclude on a positive note and everyone should be ready and raring to
go.
Information Gathering
Gathering the requirements for a CRM implementation should take about three
to four days. The length of the requirements gathering can change remarkably,
if the scope of the project is significantly bigger. That can be a quantitative
reason; there are a lot more people to interview. It can be qualitative, if the
project meets the requirement meeting, which happens with the stakeholders,
users, other corporate decision makers, and the IT staff. In other words, all
those who are going to use the system could be a small team, or a big team.
The in-between number tends to be the implementation team group. This
requires that departments cooperate, since the CRM implementation is going to
affect the interactions of every appropriate department in the company.
Marketing, sales, finance, and so on and are having a direct need to provide
input to the teams during the requirements in gathering phase.
There are a number of actions during this procedure; legacy systems need to be
analysed. This is both technical and a functional issue. This is where the
analysis of the enterprise’s sales methodology and the business rules that
define the company are assessed. This is also the time for some corporate soul-
searching. To check the methodology of various policies and procedures like
sales methodology, advertisement, etc. A good requirement analysis will bring
out these issues and some of the answers, though certainly not all of them.
Ultimately, whatever the customer wants to carry forward will be incorporated
into the CRM system. Most CRM packages are fairly flexible in their toolsets,
allowing for wholesale or small changes to the business rules that govern the
customer’s corporate life. One of the major complaints about earlier ERP
packages was the inflexibility of the embedded business rules. When the ERP
packages were built using object-oriented methodologies and languages, for
instance, the ability to alter the excellent practices and business rules implanted
into the application became a simpler matter. CRM packages have all learned
from the mistakes of the ERP in the past.
Once the requirements for the front-office practices are gathered, the next step
is to identify the inputs and outputs. This is the way users will interact with the
system. Some of the questions to be answered in this phase include:
 Which screens will be needed to input data?
 Which screen will be need to output data?
 How will information be retrieved from the system?
 How does the customer want to work with the system?
ANNA UNIVERSITY 179

Notes  How many users must the system accommodate and how will they connect
to it, that is via WAN, LAN, individual, remote users, remote offices, Web
etc.
First, the users, unacquainted with what the system can technically do and not
do, often ask for functionality that is impossible. CRM application prior to the
requirements gathering is often useful in narrowing the field of dreams. As the
project proceeds, the functionality list narrows significantly. Obviously, the
plan is to include as much as possible to keep the customer happy, but the
technical boundaries and the interactions of the proposed functionality have a
lot to do with the ultimate restrictions on what gets implemented.
There is a lot more to be done with the identification of what data must be
imported to the system and what must be exported. That refers to both the one-
time effort that must occur, and the ones that will be recurring throughout the
life of the system, such as financial data gathered from invoiced sales and the
like. To ensure that the requirements gathering moves smoothly, it is important
to obtain all information possible about the existing system and thus provide a
foundation to see how the legacy system and the CRM implementation will fit.
This means taking a look at the legacy system’s functionality and seeing how
that will communicate with the CRM functionality of the system.
To get this information, non-disclosure agreements and all other necessary
paperwork need to be signed during this phase. The non-disclosure agreement
states that neither the implementation partner nor the customer will disclose
each other’s information, gained during the course of this project. This
agreement is binding for the life of the project and usually a term of one year
after that and, on occasion, longer than that. That way both the partner and the
customer can get the data and confidential information necessary to start the
project work, including the system detail from the customer.
Detailed Proposal Generation
This is where the actual hands-on work begins with prototype. The purpose of
this prototype is to develop some of the key functionality for the customer to
examine before the rollout. By doing it with a prototype, the various
difficulties that crop up in the achievement of the functionality and the issues it
brings up are all on the table before a complete implementation for all users is
done. This confirms whether it can be done or not. The same goes for the
creation of fake screens. With the creation of the screens, the workflow can be
demonstrated. This allows the user to participate in each step of the workflow
and prototype development. In most circles, the methodology that gives the
users the maximum participation and input on deliverables as they are
delivered is called the repeat method. The idea is that the users are involved in
all interactions of the application. The result is happy customers because they
not only verified the workflow, the look and feel of the screens, but they are
also giving input to the team at all times, hopefully with a clear understanding
of the scope of the statements of work.
180 ANNA UNIVERSITY

The prototype can clarify the customer needs by visualization. This means Notes
when the customer sees the process work or the workflow and agrees to what
he or she sees, the development team and the customer team are of like mind.
Making the project work more much more smoothly. The prototype can be
demonstrated to various departments, each with their own agendas and way of
viewing data, and can be worked upon by the development team. Even if the
data presentation from department to department is conflicting this process
generally takes about two weeks.
Not all customization requires prototyping, though that happens rarely. On
occasion, the requirements are clear and the processes already work well or are
embedded in the out-of-box version of the software. Once the prototype is
complete and demonstrated, and the proposed changes to the workflow and
functions are acceptable to the customer and the development team, a formal
project proposal that states the deliverables, timelines, and final cost is written
for the client. This document can run as small as perhaps ten pages, or as large
as fifty pages. In the larger PeopleSoft/ Vantive world, these proposals can
have one hundred pages or more.
When one choose the right Customer Relationship Management (CRM)
solution one can immediately increase the effectiveness of sales, marketing,
and support organizations and understand where marketing campaigns are most
effective, where the most profitable customers come from, how effective sales
cycle is, what types of customs support problems are faced, and how quickly
they can be resolved.
In case a company picks a wrong solution, it will land up in spending resources
for an overly complex system that goes unused, wasting precious IT/IS
resources on an unproductive project, and compromising organization’s ability
to succeed in an ever-competitive marketplace.
A Framework for Successful CRM Implementation
A CRM framework maximizes the possibility of CRM implementation success
that will be among the 32 per cent of projects that succeed (as opposed to the
68 per cent that don’t). Companies that have successfully implemented CRM
solutions are reporting excellent results and the interest surrounding the topic is
greater than ever.
A recent study indicated that only 31 per cent of CRM initiatives lead to
significant improvements is sales performance. Of the rest, 37 per cent
recorded only minor improvements and 32 per cent stated that there was no
noticeable improvement at all. While these results represent a significant
improvement from the 60 per cent to 80 per cent failure rates reported a few
years ago, there is still clearly cause for concern.
ANNA UNIVERSITY 181

Notes Lack of Business Focus

A recurring theme in many of the failures is a lack of business focus. Instead of
being driven by a clear strategy that dictates how CRM will address marketing,
sales, and services issues, many initiatives are launched by organizations’
jumping without thought onto the technology bandwagon. Companies that first
select a solution and then go in search of problems that might be solved by it
are heading for disappointment.
New Solutions
As further complication is the persisting excited activity in the CRM solution
marketplace. New solutions are arriving almost weekly, bringing with them
fantastic claims of technological breakthroughs. In this environment, it is
extremely difficult to determine what will work in a particular business
situation.
Employee Involvement
CRM involves much more than instilling any one application, embracing a new
technology, or even committing to one vendor’s CRM suite. It provides better
insight into customer behaviour and enables new ways of doing business. Good
implementation gives employees a complete view of the organisation’s
relationship with its customers, and opens up internal systems to customers so
they can have access to sales and service themselves.
Cultural Change
CRM requires a cultural change that aligns a company, its employees and its
systems towards customers and away from traditional product or process
centric models. Companies that are unresponsive to the shift will soon find
themselves scrambling for scraps left behind by those that are.
Adopt a Suitable Framework
A simple framework will help to understand the full scope of a CRM solution
and also help to focus on areas that need attention. A useful framework will
encompass the following elements:
 Customer strategy: This will ensure that the company is focused on
achieving specific customer goals, and will provide direction to the
selection and deployment of CRM applications.
 Customer insight: This encapsulates customer data acquisition and storage
capabilities, insight generation (data mining) capabilities and insight
exploitation capabilities and is used both to support customer strategy
development and to drive ”intelligent” customer interaction in marketing,
selling and service activities.
182 ANNA UNIVERSITY

Keys to Successful CRM Implementation Notes

 Develop your customer-focused strategy first before considering what kind
of technology you need.
 Break your CRM project down into manageable pieces by setting up pilot
programs and short-term milestones. Start with a pilot project that
incorporates all the necessary departments but is small enough and flexible
enough to allow tinkering along the way.
Make sure your CRM plans include a scalable architecture framework. Think
carefully about what is best for your enterprise: a solution that ties together
“best of breed.”
In reality, a significant amount of CRM programs fail – not because of the
software, but because leaders fail to effectively implement CRM into the
business. Software is only one aspect of a successful CRM program. To be
effective, knowledgeable users must operate it in an environment that has made
CRM an integral part of its culture. The odds of CRM success increase
dramatically when there is a comprehensive implementation strategy
addressing six key areas – embracing change, planning for implementation,
resolving current problems, gaining user support, phasing implementation and
training end-users.
1. Embracing Change: Many people loathe change, but CRM inevitably
requires change to achieve maximum results. The challenge for
management is helping the system's users understand the scope of the
changes and embrace them as a means to advance the company's goals.
The change process must begin well in advance of system implementation.
Leaders should start by considering how to remold the business itself to
leverage the benefits of CRM. Keeping in mind that the first word in CRM
is "customer," the most obvious change is the transition toward a more
customer-focused approach. This change alone may require a complete
overhaul of the company's culture, but it's worth the effort if it helps
management and end-users perceive the benefit of CRM before it appears
on their computer screens.
Some businesses find it helpful to enlist the services of an outside
professional to jumpstart the change process. Outsiders bring the advantage
of a fresh perspective, and are often taken more seriously because they
speak with an objective voice.
2. Planning for Implementation: If it's worth doing, it's worth planning.
Managers begin an efficient implementation plan by deciding what they
hope to accomplish through CRM, including critical program objectives.
From there, managers should communicate objectives to others in the
business, particularly end-users. If they understand where the
implementation process is going, end-users will be more willing to stay
onboard throughout the process.
ANNA UNIVERSITY 183

Notes Once leaders have communicated the plan throughout the business, it could
be helpful to establish a steering committee to track the implementation
process. Comprised of representatives from every department, this team is
responsible for solidifying the plan, keeping the process in line with new
corporate culture and ensuring CRM's proper implementation.
The broad representation of the team creates a convenient avenue for
feedback and reinforces the idea that CRM implementation will have a
comprehensive impact throughout the business.
3. Resolving Current Problems: CRM does not provide a solution for current
processes that don’t function properly. The implementation process will
only highlight dysfunctional areas and make problems worse. If customers
currently experience long wait times to speak with a customer service
representative, the problem will continue after CRM has been
implemented.
Before implementing CRM, it is critical to examine the company's current
practices and processes to root out dysfunctional areas that the new
technology can't – and won't – fix. This includes purging the company's
database of bad data that will only bog down the new system and frustrate
end-users.
A company-wide departmental canvas should reveal problem areas that
need to be remedied prior to automation. Leaders should advise
stakeholders to emphasize flawed practices that could potentially derail the
process.
4. Gaining User Support: You can’t force-feed CRM to end-users. If the
people who will use the system on a daily basis don’t see its advantages, no
amount of pressure from above will be effective in making the system a
success. The key to gaining user support is to invest end-users in the
process. Executive leadership needs to consistently convey excitement and
vision, but leaders must generate the same level of enthusiasm in users.
Managers should look for cheerleaders, or project champions who will take
the CRM gospel and communicate it throughout the business. Once
champions have been identified, they should become involved in every step
of the process. They should understand how CRM can benefit the company
and feel free to offer feedback about how the system can be improved to fit
specific needs of the business.
5. Phasing Implementation: Support for CRM will wane if the
implementation process drags on without noticeable results. An
incremental rollout solves this problem by delivering a tangible solution
sooner rather than later. A phased implementation also gives users time to
adapt to the system's basic functions before they have to deal with more
advanced features, which is a big plus if users have trouble seeing the
benefits early in the implementation process. As the phases progress, the
184 ANNA UNIVERSITY

system begins to take on greater complexity, including the ability for users Notes
to customize features for their specific tasks and functions. However,
leaders must carefully plan and execute the rollout process. If later phases
require users to redo work they have already done, their commitment to the
system will waver.
6. Training End-Users: The effectiveness of CRM depends on the ability of
the people who use it. Unfortunately, many business leaders slash training
budgets when project resources are in short supply. A successful launch
requires unshakable commitment to training users to adequately navigate
the system and integrate it into everyday business practices.
Handing a user a training manual is not enough. Scheduling training days
and workshops will yield much better results and create a smoother
transition for those who will use CRM on the front lines.
Drawbacks of CRM Implementation
Selecting the right CRM solution is not an easy task. Before one make final
decision, one need to have a clear sense of how much it is going to cost and
how long it is going to take to implement. That means that one has to be
assertive enough to ask tough questions. After all, to make assure the vendors
in consideration are responsive to the needs. Look at the customer list to see if
they have a good track record of serving companies; competitors to the
organisation. The good news is that there are some very good products and
services out there to help maximize an organization’s potential. All a company
has to do is find the right ones.
There is no such thing as an easy implementation. Even installing Microsoft
Word or Excel can be problematic on network for multiple users. CRM and
eCRM are very complex implementations involving multiple elements and
frequently, back-office integration. It could involve coming with multiple
software packages that already installed in the corporate system. Issues such as
scalability-it can help the software handle the amount of use and number of
users it is going to get-are paramount even prior to the selection of the
software. Some CRM applications are focused on the smaller and mid-size
companies, others on the Fortune 1000-sized enterprises. Large companies
with multiple locations have a different set of problems than small companies
with a single location and multiple users. Because each company has a
different process and culture, each company will have a unique set of issues to
solve with the implementation-technical, functional, and cultural. Even a
perfect technical installation and carefree customization can fail if one has
employees who do not take care of the system.
5.3 CRM TOOLS

1. Strategic CRM: A comprehensive implementation that provides seamless
coordination between all customer-facing functions by integrating people,
ANNA UNIVERSITY 185

Notes process and technology to maximize relationships with all customers. Here,
we discuss a few terms related to strategic CRM:
 Business Case: Borrowed from business school terminology to
document the strategy, goals, metrics, and resources needed for CRM
implementations.
 Customer Knowledge: Companies should strive to develop a complete
picture of the customer by actively gathering, organizing, and analyzing
customer data.
 Customer Loyalty: Companies strive to create brand-loyalty between
their customers and a particular company or brand.
 Customer Retention: The value derived from a particular market
segment. CRM strives to increase sales by retaining valuable
consumers and by retaining a secure customer base to counteract
competitor activity.
 Customer Satisfaction: Are the customers happy? Measurement
systems should be put in place to measure customer satisfaction.
 Direction: What companies hope to accomplish by implementing CRM
and which components will be needed at each level to achieve the
implementation.
 Leadership: A champion in senior management who will advocate for
the CRM implementation in its various stages over a number of years.
 Master Plan: The overall guiding methodology and metrics for a CRM
implementation from start to finish.
 Metrics or Measurement: Benchmarks set by a company to measure the
success or failure of a project or a web site.
 People: The most difficult component of CRM to get right. Users who
do not understand the CRM implementation, or have not been properly
trained can substantially harm a CRM implementation. People will be
the ultimate judges of the success of the CRM implementation.
 Process: An automated system. It is important to review all customer
management systems prior to automating their processes, as
inappropriate processing will only speed up a flawed system.
 Return on Investment (ROI): A calculation of how much money will be
saved or earned as the result of an investment in a CRM solution. ROI
calculations should be used in developing a business case for a given
proposal; factors in investments of both time and capital should be
included while calculating ROI.
 Strategy: Investigating, implementing, measuring, and maintaining the
CRM solution should all be factored into the company’s overall
business strategy.
186 ANNA UNIVERSITY

 Success: How can one measure the ROI of a CRM implementation? Notes
Pre-determined metrics for a CRM project must include measurements
of increased profit, decreased spending, and increased market share etc.
 Technology: Web-based applications, portal offerings, agent
technology, n-tiered architectures, and other emerging technologies
impact new business functionality.
 Top Management: Business intelligence includes extensive reporting to
senior managers on the success and internal adoption of the CRM
implementation. It is essential to keep senior managers informed and
involved in the fight to sustain the CRM implementation across the
enterprise.
 Trends: New and noteworthy directions affecting employees, process,
and technology issues.
 Vision: A broad and comprehensive game plan for a company’s future
that takes into account both the business goals of a company and the
technology projects needed to support a company’s long range
planning.
2. Technology and Implementation: One knows that the company needs a
CRM software package, but how does one implement it and what
technology will you need? When properly implemented, CRM breaks
through the traditional boundaries separating sales, marketing, service, IT
and other functional areas. An overall, flexible enterprise architecture plan
is required to enable seamless integration of CRM systems, as well as the
alignment of “e’’ and traditional channels into hybrid technology systems.
Enterprise Architecture and Applications: The plans, methods, and tools
aimed at consolidating and coordinating computer applications across an
enterprise. An enterprise (or company) typically has existing legacy
applications and databases that stay in use while adding or migrating new
applications using Internet, e-commerce, intranet, and other new
technologies.
 CRM-induced culture change: After companies implement a Customer
Relationship Management system, they often feel the effects of what is
called CRM-induced culture change resulting from the influence of
CRM on behavior patterns across an organization.
 Migration management: Successfully migrating the use of one
operating environment to another operating environment.
 Knowledge-based utilization: An expert knowledge management
system containing a collection of facts and rules needed for problem
solving.
 Application Service Providers: (ASPs) are outsourcing specialists for
software applications that offer enterprises access to applications and
ANNA UNIVERSITY 187

Notes related services over the Internet. This is an alternative model to

loading software in personal computers or on enterprise servers.
Designed to minimize the headache of buying, installing, managing,
and maintaining the software.
 Connectivity: Internet Service Providers (ISPs) that offer businesses
connections to the Internet.
 Application Servers: Three-tier integration application tying together
graphical user interface (GUI) servers, application (business logic)
servers, and the database.
 System Integrators: Integrates an organization’s old “legacy” systems,
or connects them to new net markets. Also known as EAI (Enterprise
Application Integration) providers, integration architects, and data
integrators.
 Back-end Integration: Application integration with IT back-end chains
- inventory management, accounting, shipping, etc.
 Planning and Investigating: Just getting started? The first stage
involves research, business case writing, metrics setting, etc. This
section contains articles and research papers regarding vendor’s
solutions and the methodology.
 Implementing and Deployment: After choosing an appropriate
solution(s), this information helps in planning the implementation and
deployment strategies.
 Change Management: Implementing and deploying a solution does not
automatically ensure ROI. This stage of project management is very
critical to the success of overall CRM game plan.
 Maintaining and Upgrading: The Internet has enabled maintaining and
upgrading CRM applications much easier. But one shouldn’t upgrade
every point release – basically it is here where one learns to identify
things worth doing.
3. Mobile Business for the Enterprise: Mobile technology and Field Force
Automation (FFA) are integral components of any new CRM
implementation. Mobile technology allows field sales, support and service
personnel to access critical customer and company information, send and
retrieve data, and interact with colleagues and customers. New applications
will give birth to innovative customer-facing sales and service channels.
Mobile wireless devices connecting CRM and FFA applications ensure that
information is always up-to-date and available to mobile workers.
 Delivery Technology: Transmission technologies that enable the
sending of data to and from mobile phones, fax machines and/or IP
addresses. Examples of data delivery technologies include Edge
188 ANNA UNIVERSITY

(Enhanced Data GSM Environment), GPRS (General Packet Radio Notes

Services), and SMS (Short Message Service).
 Display Technology: Enables your wireless device to show text,
graphics, and images. Currently, most display technologies hold less
than 100 characters total.
 Field Force Automation (FFA): Automating tasks and delivering
content to employees who are in the field visiting customers.
 Input Technology and Devices: Operations, programs, and devices that
transfer data to or from mobile devices including voice recognition,
touch screen, handwriting recognition, traditional keyboard, and a
mouse.
 Mobile Commerce: The buying or selling from a mobile device i.e.
buying and selling stocks from your mobile phone.
 Mobile Enterprise: Making the Intranet, CRM solution, etc. available to
mobile employees.
 Mobile Operating System: An operating system specifically for mobile
devices.
 Standards: Specifications for a set of communication protocol.
 Wide Area Network (WAN): A network of connected devices that are
geographically dispersed.
 WAP and WML: Wireless application protocol and wireless markup
language, these are syntax used to program content for wireless phones
using languages that allow the text portions of Web pages to be
presented.
 Wireless Application Service Provider: ASP’s specifically designed for
wireless devices. WASP’s allow customer access to the service from a
variety of wireless devices.
 Wireless Devices: Devices that use electromagnetic waves (rather than
wires) to carry a signal.
 XML and Voice XML: otherwise known as Extensible Markup
Language. Syntax to deliver all types of voice content to devices.
4. Sales & Marketing: Sales is a multi-channel selling system that relies on a
combination of field sales, retail, partners, call centres and electronic
channels. The goal is to make the customer the focus of sales efforts by
integrating customer needs into channel and product strategies via
forecasting, push support, up-selling, personalization; and by embedding
service into products using networked sensors, microprocessor intelligence
and wireless communication. The five skills of Relationship Management
are: positioning, hunting, coaching, leading, and farming.
ANNA UNIVERSITY 189

Notes  Enterprise Relationship Management (ERM): Often used

interchangeably with CRM, this term is often used by Enterprise
Resource Planning or “ERP” software vendors such as SAP, Baan,
Oracle and PeopleSoft.
 E-Sales: Revenue generating functions of an Internet strategy.
 Lead Qualification: Automation that pre-qualifies leads according to
pre-established business rules before they are entered into a system.
 Operational CRM: The “Operational” components of a CRM Strategy
include Sales Automation, Call Center Automation, Channel
Automation, and Proposal Generation.
 Partner Relationship Management (PRM): Third party sales channel
automation capabilities such as Lead Distribution, Web based
wholesale merchandising (catalogs, product configuration, and order
management), promotions and discounts, collaboration and planning,
measurement, billing, product returns, etc.
 Repeat Business: The ongoing and recurring revenue stream generated
by an existing customer base over time.
 Sales Force Automation (SFA): Basic Sales Automation capabilities
including Contact, Account, Opportunity, Activity Management,
Proposal Generators, etc.
 Marketing consists of corporate branding, customer acquisition,
customer retention and customer loyalty programs. Marketing now
involves blending online and off-line media channels, and leveraging
Internet-acquired customer information with marketing automation to
drive the B2C and B2B selling processes. This is the age of the
“eCustomer,” going beyond traditional sales campaigns to identify,
profile, and engage in an ongoing interactive dialogue with customers
through your web assets.
 Analytical CRM: The analytical components of a CRM strategy include
data marts, decision support tools and customer behaviour modeling,
and analytical tools. The customer data that is captured within the
“operational” components of a CRM system is stored, retrieved and
analyzed for performance management and results measurement.
 Customer profiling and Segmentation: Used to describe all activities
and system capabilities that capture large amounts of customers’
information in order to do a more effective job of “segmenting”, or
dividing, the customer base. The customer base is first segmented by
the value they represent to an organization, and then by the needs they
may have for specified products/ services.
190 ANNA UNIVERSITY

 E-Marketing Automation: An umbrella term including campaign Notes

management, customer analytics and “closed loop marketing” that track
the effectiveness of various marketing programs and campaigns.
 Lead Qualification: A term used to describe certain marketing and sales
automation capabilities that pre-qualify sales leads as they are entered
into a system governed by pre-established business rules defined by the
organization.
 Personalization: Personalization and Content Management enable you
to target and tailor communications. Personalization includes all aspects
of making the customer interaction a unique and beneficial experience,
wherever the interaction takes place.
5. Business Intelligence: (BI) is the intersection of the needs of the business
and the available information necessary to make the best business
decisions. BI information sources include the internet, the extranet, the
intranet, On-Line Transaction Processing systems (OLTP), Operational
Data Stores (ODS), Data Warehouses (DW), Data Marts (DM), Analytical
Applications (AA), data mining applications, statistical analysis
applications, predictive modeling applications, reporting systems, and data
islands (isolated sets of data such as spread sheets, desktop databases, etc.).
 Analytical processing and Analytics: Using data to produce a research
and analysis of a business case. Analytics are frequently used to support
or disapprove management decisions.
 Customer Intelligence Systems: Provides companies with information
about the purchasing preferences of their customers. These systems are
used to identify potential customers and retain existing customers; as
well as to determine which products and services should be promoted to
various segments of the customer population.
 Customer scoring: Tools used for the continuous monitoring of account
data and customer behaviour.
 Data Cleansing: The process by which “dirty” or corrupt data is
removed or corrected.
 Data Marts: A specialized smaller version of a data warehouse. A data
mart is typically created by a department to
 address a business function.
 Data Mining: A technique using software tools geared for users who
typically do not know exactly what to search for; but are looking for
particular patterns or trends. Data mining is the analysis of data for
relationships that have not previously been discovered.
 Data Warehouse: A central repository for all or significant parts of the
data that have been collected by an enterprise’s various business
systems. Data warehouses can be used as repositories for consistent
ANNA UNIVERSITY 191

Notes historical data that can be easily accessed and manipulated for decision
support.
 Dimension: A table used in a star scheme to store descriptive,
hierarchical and metric information about an aspect of the business.
Examples include product, customer, geography, and time.
 DTEAMM (Design, Transformation, Extract, Access, Monitoring and
Management): A transformation engine based, client server computer
application that provides for most aspects of data warehouse and data
mart system design, construction, utilization, monitoring and
management.
 Filtering and House Holding: The process of eliminating data based on
selection criteria and a methodology of consolidating names and
addresses.
 Information Database: A database containing corporate information for
analysis purposes such as customer phone numbers, credit info, etc.
 Legamart: A non-architected repository of data gathered from
operational data and other sources (data mart) that business users rely
upon.
 Meta Data: Simply put they are data dictionaries and repositories. Meta
data names and describes data that is modeled, migrated from source
data, captured and stored in the data warehouse and accessed by users.
 ODS (Operational Data Store): A database designed for queries on
transactional data. ODS’s are also commonly used to populate data
warehouses and data marts. Common sources of the data include legacy
systems that contain current or near term data.
 OLAP (On-Line Analytical Processing): Processing that supports the
analysis of business trends and projections.
 OLTP (On-Line Transaction Processing): Daily business operations
such as order entry.
 OODBs (Object Oriented Data Bases): A database that allows the
storage and retrieval of multiple data types.
 Operational Data: Supports the modeling and creation of data as
objects.
 Operational System or Database: A term used interchangeably with
legacy systems; Operational Systems are an information or transaction
processing system used to store data that is important to a business on a
day-to-day basis, including administrative, employee, financial and
other data.
6. Customer Contact Center: The customer contact centre integrates
customer touch-points and provides service through one multi-channel
192 ANNA UNIVERSITY

gateway. The customer contact centre, whether it is a help desk, a call Notes
centre, or on-line support via email or chat, is how your customers
experience your organization. Customers leave the customer contact centre
experience with either positive or negative feelings towards your company.
 Call Center and Help Desk: The department that handles customer
inquiries typically via telephone, fax, or e-mail.
 Customer Interactive Center (CIC): Help desks and support
environments that are highly interactive. CIC leverages technology,
human resources and methodologies to create raving fans while
utilizing eService and eSupport for outstanding customer satisfaction.
 Customer Retention: Processes that identify, prioritize, and improve
areas of performance that have the greatest impact on customer loyalty.
Keep as many customers as possible, keep them satisfied, keep them
loyal, and keep them for
 life. Measuring their performance over time and against competitors,
how they drive customer feedback through the organization to build
lasting customer relationships.
 Customer Support: Provides timely, expert support to resolve customer
problems and queries sent by e-mail, phone, fax, or in person.
 eService system: A sophisticated scripted online help system and/or a
knowledge base of technical notes and previously offered customer
solutions. eService is a Customer Service Center management system
that allows customers to find solutions on their own.
 Live Support/Service: Customer service representatives who answer
customer questions via the telephone in real time.
 On-line Support/Service: On line support from an internal help desk,
allows businesses of any size to dramatically improve customer service
by providing employees access to problem resolution information
through Intranets. An external help desk allows customers to access
customer service information through the Web. Both systems enable
companies to resolve problems faster, leading to improved service and
greater overall customer satisfaction.
 State-of-the-service technology: An eService plan.
7. eCRM: eCRM is not simply electronic CRM. eCRM is customer
management for e-Businesses that must confront the complexity of
managing sophisticated customers and business partners in a variety of
media including: online and offline media, personal contact, and more
automated and electronic forms of communication.
 E-commerce: Sales and services via the Internet. Sometimes confused
with e-business that is an umbrella term for a total presence on the Web
including the e-commerce (shopping) component.
ANNA UNIVERSITY 193

Notes  Channel Automation Software: Modules or platforms that empower the

channel, by enabling the channel to engage in Web-based commerce.
These solutions enable manufacturers to coordinate and manage the
sale of products and solutions across multi-channel sales and
distribution channels. As a result, customers are able to transparently
navigate a multi-tiered selling process, gaining the value-add of both
manufacturers and channel partners.
 Collaborative Commerce Software: Software that aggregates
fragmented buyers and/or sellers to increase a market’s efficiencies
beyond the exchange of goods. C-commerce moves beyond that level
of support to enable multiple enterprises to work together online within
a dynamic trading community.
 On-line Storefront: Websites on which companies sell products or
services via the Internet.
 Multichannel Customer Management: The integration of electronic
interactions including e-mail, chat, self-service, collaboration, Voice-
over-IP (VoIP) with voice interactions in a seamless manner delivering
a universal queue for all interactions, and fronting the interaction
engine with a desktop CRM application.
 E-Service: An umbrella term for services delivered over the Internet.
Includes e-commerce transaction services for handling online orders,
application hosting by application service providers (ASPs) as well as
any processing capability that is obtainable on the Web.
 E-mail Response Management: An application that uses agents to read
and respond to e-mail messages. Includes an email response library
containing a series of standard texts to deal with common issues.
 Guided Selling and Buying: Leveraging traditional applications for
configuring and cataloging — with layers of dynamic, customer-
friendly capabilities—to guide customers through the process of
selecting a product. Organizations use guided selection functionality to
accomplish multiple objectives, which vary depending on the nature of
the company, customer, and product.
 Product Configuration: The ability to self-configure a product or
service over the Internet. Complex configuration solutions typically
allow product managers to create business-based rules such as “If
package A is chosen, then it should include components 1, 2, or 3.” A
salesperson or channel partner would use this consistent interface to
begin a sale but customize it with specific products and pricing
preferences.
 Order Management: Online order management is much more than
simply a solution for automating the online order taking process;
vendors are extending order management functionality and tightly
194 ANNA UNIVERSITY

integrating with other sell-side functional areas. The online order Notes
management system must not only simplify the process of taking orders
on a Web site and feeding the back-end systems, but also must track the
entire order life cycle. Information housed in the order management
system is incredibly valuable to supply chain partners, customers, and
resellers. As a result, integration—both external and internal—is
essential to fully realizing the benefits of an online order management
system.
 Electronic Agents: Agent programs search the Internet gathering
information you’re interested in and bring (or push it) to your desktop.
Also known as “bots” or “push technology”.
 Catalog Management: Software applications that normalize product
data from multiple vendors for easy comparison. Includes information
about data sets, files, databases and the devices on which each data set
or file is stored.
 Content Management: Refers to the printed word online, including
documentation, information pages and data that describe items offered
in online catalogs or marketplaces.
 E-Customer: Business or consumer customers who goes through the
online customer transaction process. An E-Customer implementation
can be direct to the end-customer or incorporate distribution channels
such as resellers or distributors.
 Fulfillment software: Executes tasks such as bill of materials, order
management, shipping management, returns and status tracking.
 Self-Service: Customer facing applications that allow customers and
partners to access information, track shipments and solve problems by
themselves.
Learning Activity
Explain the comparison between the CRM and CMM level.
5.4 ROLE OF CRM MANAGERS

Following are different kinds of CRM managers:
1. Manager Segments: The segment managers are the glue of the team and
form the kingpin for the CRM process. He handles all customers, having
ultimate say in campaigns and the customer.
2. Campaign Manager: Having identified the opportunities, the campaign
manager then creates the right offer that will ultimately be made to the right
customer. The right offers include offers, strategy, timing, printed matter,
ANNA UNIVERSITY 195

Notes product management, advertising, public relations messaging, interactions,

plans and measurements.
Key Responsibilities of Campaign Manager:
 Connecting with product managers, advertising managers, relationship
managers and public relation departments and outside firms.
 Scheme designing
 Determining campaign strategy
 Trial marketing
 Relationship with telemarketing firms
Technical Skills Requirement:
 Marketing automation tools
 Marketing experience
 Knowledge of campaign management tools and databases
 Work with IT to ensure flow is accurate
 Vendor management
Channel Manager: The CRM process, which is a point where, the right
customer is identified, the right offers have been created, the right time has
come, and the critical transition from single view of customer to a single
company image is reached. The channel manager coordinates the customer,
offer and timing into the channel decision, and ensures that the same offer is
communicated and then reinforced across all of the enterprises’ many “touch
points”.
The channel manager must interact with the call center, the Internet, the Web
and the direct or indirect sales force (other internal customers who are affected
by the process). It must be known and planned who are the external channels of
resellers, distributors, franchisees, and advertising and public relations team, to
make sure the process hits the all lines in parallel. This means having the script
aligned, the Web pages, the print ads purchased and scheduled, and the TV
slots confirmed (in the case of a large campaign). It may also (in the case of
incremental campaign) not be required to have such a high degree of
coordination in which case, these interest groups may not be required each and
every time.
Key Responsibilities:
 Coordinates communications across all the contact channels.
 Presents “Single – company image” to customers.
 Manages liaison with call center, Internet team sales force, customer
services, and resellers to ”coordinate” touchpoints, treatment, and total
customer communication
196 ANNA UNIVERSITY

Skills Requirement: Notes

 Web implementation
 Integration of channels
 Operational call center
 Internet experience
 Language/prose skills
 Analysis and research
 Negotiating skills
4. Relationship Manager: Most of the Indian companies do not have
Relationship Manger, who is as most important player in the CRM process.
This person handles the business problems or the business opportunities
such as customer retention, customer purchase (acquisition) and customer
profitability. Determines the communications plan, touches treatments, and
frames rules for engagements. He is also responsible for the maintenance of
privacy within the organisation. Interacts with others to align execution
(correlates, combines, cognizes, and connects).
Skill Requirements:
 Relationship techniques (Data mining, hypothesis development and
communication techniques)
5. CRM Project Manager: The CRM project manager will lead and mentor
the project team in delivery of SDLC (Software Development Life Cycle),
system interaction and/or packaged software configuration projects for
CRM and e-CRM business applications.
Responsibilities include managing client relationships at all levels

of the organisation, managing project deliveries within a specified time and
budget, and recruiting and managing vendor resources to augment internal
project resources.
Responsibilities also include continuous development and leadership of best
practices for both traditional and emerging rapid implementation,
methodologies. The manager will be responsible for directing large projects
and also supervisory responsibility of short-term project engagements.
Skills Requirements:
 Project management experience in new software development and/or
packaged software configuration and implementation projects.
 Experience in managing shared vendor project teams of 10 to 30-core
member over an extended engagement.
ANNA UNIVERSITY 197

Notes  Successfully managed multiple releases across an expended time

period.
 Built strong cross-function project teams.
 Retained core team members throughout project management.
The candidate must have project Management certification or any equivalent
certification, background in technical delivery of business applications
software, background in management consulting, and IT consulting and
business solutions sales or presales support experience.
1. A marketing director is often necessary for tracking the

cost, schedule, performance, and risk factors involved
in the CRM project..
2. Relationship Manager manages the dialogue between
the organisation and the customer.
SUMMARY
In the CRM world, few companies will deploy a solution without some help
from external consultants or systems integrators. Selecting and planning how
you work with consultants is just as important to your project's success as the
technology you choose. It is not enough to take the solution vendor's word for
the ability of a partner or consulting firm, you'll want to vet the service
provider just as you evaluate the vendor: by checking references and carefully
planning how you'll interact with both the vendor and the service provider and
agreeing in advance who takes the lead in taking responsibility for a successful
deployment.
The project manager is responsible for all aspects of the implementation,
including cost control, quality and testing, and customer satisfaction. Since the
PM maybe managing several projects simultaneously he usually may not be
available to spare the required time. The project manager represents a
consulting services partner or a systems integrator. If there are changes in the
Statement of Work (SOW), it is the project manager that must work out the
details with the customer. There should be a change management process in
place that is approved by both the customer and the implementation services
company.
Gathering the requirements for a CRM implementation should take about three
to four days. The length of the requirements gathering can change remarkably,
if the scope of the project is significantly bigger. That can be a quantitative
reason; there are a lot more people to interview. It can be qualitative, if the
project meets the requirement meeting, which happens with the stakeholders,
users, other corporate decision makers, and the IT staff. In other words, all
those who are going to use the system could be a small team, or a big team.
198 ANNA UNIVERSITY

The in-between number tends to be the implementation team group. This Notes
requires that departments cooperate, since the CRM implementation is going to
affect the interactions of every appropriate department in the company.
Marketing, sales, finance, and so on and are having a direct need to provide
input to the teams during the requirements in gathering phase.
A CRM framework maximizes the possibility of CRM implementation success
that will be among the 32 per cent of projects that succeed (as opposed to the
68 per cent that don’t). Companies that have successfully implemented CRM
solutions are reporting excellent results and the interest surrounding the topic is
greater than ever.
Selecting the right CRM solution is not an easy task. Before one make final
decision, one need to have a clear sense of how much it is going to cost and
how long it is going to take to implement. That means that one has to be
assertive enough to ask tough questions. After all, to make assure the vendors
in consideration are responsive to the needs. Look at the customer list to see if
they have a good track record of serving companies; competitors to the
organisation. The good news is that there are some very good products and
services out there to help maximize an organization’s potential. All a company
has to do is find the right ones.
India’s value proposition is already leading IT enabled services hubs such as
Ireland and Singapore to back-end their operations in India, since skilled labor
is becoming an increasingly scarce resource in these countries. To take
maximum advantage of these conducive factors, the Government of India has
initiated drastic improvements in the telecommunications infrastructure of the
country ensuring India offers a-hard-to-beat proposition to emerge as a
“Preferred Global Hub”. Seizing the opportunity, several companies in the
financial services sector, for example, have saved at least 50-60 percent of their
process costs after relocating their contact centre facilities in India. The process
redesign that comes with out-location also provides additional cost savings and
consolidation of operations.
KEYWORDS
Cultural Change: CRM requires a cultural change that aligns a company, its
employees and its systems towards customers and away from traditional
product or process centric models.
CRM Framework: It maximizes the possibility of CRM implementation.
Segment Managers: The segment managers are the glue of the team and form
the kingpin for the CRM process.
Relationship Manger: He is an most important player in the CRM process
who handles the business problems or the business opportunities such as
customer retention, customer purchase (acquisition) and customer profitability.
ANNA UNIVERSITY 199

Notes SELF-ASSESSMENT QUESTIONS

1. Write a note on the frameworks for successful implementation of CRM.
2. Who is responsible for the implementation of services to the customer?
3. Difference between Relationship Manger and Segment Managers
4. Explain the Role of CRM Manager
1. What are the drawbacks of CRM implementation?
2. A CRM framework maximizes the possibility of CRM implementation.
Discuss.
3. Examine different steps involved in implementation of a CRM model.
4. What are the five phases of CRM implementation?.
FURTHER READINGS

Relationship Management-An Indian perspective ,Excel Books.
H.Peeru Mohamed & A Sahadeven Customer Relation Mgt , Vikas
Publication.
Macmillan.
Elsevier.
200 ANNA UNIVERSITY

Lesson 6 - Analytical Customer Relationship Management
Notes
LESSON 6 – ANALYTICAL CUSTOMER
RELATIONSHIP MANAGEMENT
CONTENTS
Learning Objectives
Learning Outcomes
Overview
6.1 OPERATIONAL CRM
6.2 CRM AS A PHILOSOPHY
6.2.1 An Additional Dimension to CRM Philosophy
6.3 CALL CENTRE BASED CRM
6.3.1 History of the Industry
6.4 Contact Centre
6.4.1 Customer Relationship Management
6.5 Classification of Call Centres
6.6 India: Opportunities and Challenges
6.7 Operational Challenges
6.8 Call Centre Technology
Summary
Keywords
Further Readings
LEARNING OBJECTIVES
 Understand the Operational CRM
 Explain the CRM as a Philosophy
 Describe the Call Centre Based CRM
 Understand the Contact Centre
 Explain the how to Classification of Call Centres
 Know about India: Opportunities and Challenges
ANNA UNIVERSITY 201

Notes  Understand the Operational Challenges

 Discuss about the Call Centre Technology
LEARNING OUTCOMES
understanding of:
 operational CRM it provides support for various business processes, which
can include sales, marketing and service.
 contact centres offer a variety of avenues for interaction including voice, e-
mail, voice-mail, fax, web interactivity. New ideas in technology, resource
management, and process design will alter how companies do business.
 a call centre, its purpose of installing these gadgets ranges from
maximizing number of calls handled, reducing stress on agents, distributing
call load evenly, route calls to specific agent group etc
OVERVIEW
Analytical customer relationship management may be defined as a decision
support system that is targeted to helping senior executives, marketing, sales
and customer support personnel to better understand and capitalize upon their
customer needs, the company’s interactions with the customer, and the
customer buying cycle. Like the term Business Intelligence, this is a fairly new
term with a myriad of definitions and a variety of products that support some
of those defining aspects.
For many companies the first step in managing their sales operations is to
introduce a Customer Relationship Management application (CRM) to
optimize their customer relationships and effectively monitor their sales
operations. However, for a CRM strategy to work it is first necessary to
thoroughly analyze and understand customer behaviour. This is precisely the
kind of task for which analytical CRM solutions are designed. Using data
mining techniques, analytical CRM solutions analyze customer relationships
and allow marketers to classify groups of customers according to their
characteristics and buying behaviour (segmentation). They also help to
improve the effectiveness of marketing campaigns and attract new customers,
as well as maximizing the value of sales to existing customers (cross-selling
and up-selling) and minimizing customer loss (churn). Data mining techniques
are also used to analyze and monitor levels of customer satisfaction and loyalty
and diagnose the causes of changes in these levels.
6.1 OPERATIONAL CRM

Operational CRM generally refers to services that allow an organization to take
care of their customers. It provides support for various business processes,
202 ANNA UNIVERSITY

which can include sales, marketing and service. Contact and call centers, data Notes
aggregation systems and web sites are a few examples of operational CRM. If
your company has a high customer turnover, or perhaps high service costs,
Operational CRM Solutions is a tool that can help you solve your problems.
The high tech expertise of CRM gives you access to information about your
customer as well as giving you a clear view of your customers needs.
To ensure that your customers receive the most personal attention possible, we
at Straight Marketing make the process and implementation of Operational
CRM easy and professional. By way of example, let’s suppose you were
overwhelmed with telephone calls each and every day. In your desire to know
the status and progress of the services you are providing, you might want to
speak with your customers, but there just isn’t time. Instead of spending time
making telephone calls on a daily basis, Straight Marketing implements an
operational CRM system that allows your customers to log into an account via
the web and view all the details of the service being provided. Try to imagine
the time you can save without having to respond to unnecessary phone calls.
As a result of Operational CRM, it’s a win/win situation for everyone. You are
responsive to the customer, your customer is happy with your service and
everyone is getting what he or she wants and needs. This is just one area of
CRM that creates greater efficiency for your company.
The results of an operational CRM strategy are far reaching and can
either be implemented in basic software or in a more complex software
installation depending on the company’s requirements.
Generally, competent customer relationship management involves providing
customer assistance on a variety of levels. These levels are usually classified
into three main categories, usually referred to as operational, collaborative, and
analytical. Companies of just about every size will incorporate elements of
each classification into the business strategy, helping to ensure an ongoing
rapport with the customer base.
The operational aspects of customer relationship management involve
processes that provide for direct interaction between the client and a customer
care specialist. Many of these processes are time honored methods, such as on
site visits with the customer, contacts by telephone, and letters and other
printed matter that is exchanged between the client and the customer support
staff. Today, such vital means of communication as email, audio and video
conferencing, and instant messaging also provide this direct link between
customer and support specialist.
Collaborative methods of customer relationship management allow for direct
contact between the client and the company, but do not include the presence of
customer support staff. These methods may include automated online access of
the customer to his or her account information, the ability to order new
ANNA UNIVERSITY 203

Notes products of services on-line, and to submit changes to account information

using automated tools provided by the vendor. Generally, these tools are
available for use around the clock, making it possible for a customer to manage
the relationship in his or her own time.
He analytical aspect of customer relationship management has to do with the
systematic analysis of customer data. This is an internal process, and does not
initially involve interaction with the customer. Instead, historical data on the
purchasing patterns of the customer, including which goods or services are
purchased and at what intervals, is used to determine if there is some sort of
new product or service that the vendor can develop and offer to the customer.
Analyzing past usage of the client base in general can also help the company
develop new strategies to educate existing customers about other products that
may be of interest, which can translate into additional ties of loyalty between
supplier and customer.
In today’s marketplace, attracting and keeping customers is critical to the
continued existence of any business. Many companies look to customer
relationship management, or CRM, a business strategy focusing on acquiring,
cultivating, managing and retaining customers, to help them manage all aspects
of customer relations. CRM emerged in the early 1990s when software
companies began developing applications to automate the sales process
through contact management tools. CRM has evolved into a strategy that uses
technology to achieve its goals.
Operational CRM is the aspect of CRM dealing with the automation of
customer-facing, or “front office,” processes. These processes include sales,
marketing and customer service. Since operational CRM involves the
automation of customer-facing processes, it relies heavily on the use of
computer technology to achieve its goals.
Sales Force Automation: Sales force automation uses software applications to
automate sales activities. The activities automated include: lead management,
sales forecasting, contact management, and quotation and proposal generation.
Lead management software allows businesses to qualify and assign sales leads,
or opportunities. Sales forecasting software uses historical sales data to forecast
future sales. Contact management software enables companies to manage
customer communications from many sources, including websites, emails and
faxes. Quotation generation software generates sales quotes from input data,
and proposal generation software automates the process of producing sales
proposals.
Marketing Automation: Marketing automation refers to the use of software
applications to automate marketing campaign management and event-based
marketing. Campaign management applications enable targeted
communications and offers through the use of customer-related data. Event-
based marketing uses events, such as a purchase, to trigger communications
and offers to customers.
204 ANNA UNIVERSITY

Service Automation: Service automation enables companies to manage Notes

customer service interactions through the use of technology. Customer service
automation includes: issue management; inbound call management; queuing
and routing; and service level management.
Issue management software enables companies to manage customers’
problems by storing information about a problem, routing it to the appropriate
personnel for resolution and tracking its progress during resolution. Inbound
call management software identifies incoming calls and retrieves historical
information related to the call. Queuing and routing software manages
customer service calls by ensuring that they are routed to appropriate personnel
in the order received. Service level management software enables a company
to monitor and manage the quality of service of its key performance indicators.
Plan for Success: Operational CRM is the aspect of CRM most prone to
failure. The reasons for failure include underestimating costs, time and
commitment; organizational politics; technology-driven strategies instead of
those driven by customer or service considerations; and no measures of success
or accountability. To ensure success, executives are advised to steer clear of
CRM if their company is not prepared for the effort required for a successful
implementation; get the visible support of senior management; and
communicate the implementation strategy to gain acceptance throughout the
organization.
6.2 CRM AS A PHILOSOPHY

Everywhere you look there is somebody trying to turn day-to-day business
operations into some form of CRM pain so that they can sell you a solution.
The result is that anybody trying to define the boundaries of CRM soon finds
that there are none. Perhaps it’s time to step back from all the excitement of the
bleeding edge of technology and take a more pragmatic look at the whole CRM
problem.
The problem with CRM, of course, is that everything we do is done with
customers in mind. If there is a business process that is not related in some way
to a customer sale then its very existence demands an explanation. Therefore, it
can be said that all business processes need to be incorporated into a CRM
solution. At a slightly less pervasive level, perhaps it is better to say that a
CRM solution needs to extend its reach to all of the customer touch points so
that the business understands everything that a customer does and is able to
provide a consistent and - hopefully - personalised response. In order to
achieve this we set about constructing a customer management infrastructure.
We start out by building a database that holds every detail of every customer
interaction. It has to be a real-time database just in case the customer phones
the call center immediately after sending an e-mail and it needs to be scalable
to deal with the millions of customers we will attract and retain by having such
a powerful IT solution.
ANNA UNIVERSITY 205

Notes The database has to be populated from information gathered at each of the
customer ‘touch points’. This means a massive middleware project where the
required data is gathered from call centres, e-mail servers, web forms, e-
commerce applications, web servers, supply chains, faxes, paper documents,
WAP phones and just about any other electrical item you can think of. Having
gathered all of this data from the customer touch points, it is also necessary to
be able to service the associated demands i.e. process an order, respond to an e-
mail, send out a brochure. This is where links into those business processes are
required and the good old workflow engine comes into its own once again.
It all sounds good doesn’t it? A clever architecture that brings together the
customers and the business and, as long as you can cope with the volumes, a
solution that allows large parts of your business to be automated. But do you
think that your customers actually want to deal with robots? You can
personalise the solution all that you want and you can develop sophisticated
decision support mechanisms that can deal intelligently with customer
requirements but this can never be as flexible and responsive as a well trained
human being with the authority to make decisions that will result in a sale or a
more contented customer.
A central goal of every business is to serve its customers. For as long as there
have been merchants, success or failure has hinged on this simple rule.
Customer Relationship Management (CRM) is a way of using technology to do
just that.
There are many pieces of software available that offer customer relationship
management features, but in reality, CRM goes beyond software
implementation. It’s a business strategy that often involves using multiple
pieces of software, as well as implementing policies that promote (1) the
collection of customer information, and (2) the use of that information by
individuals throughout the company in order to maximize customer service and
increase sales.
The customer relationship management system is an enterprise system, which
means that it spans multiple departments. Virtually all departments within a
corporation have at least some indirect access to customers, or customer
information; the goal of CRM is to collect that information in a central
repository, analyze it, and make it available to all departments. For example, a
company’s call center may have a “screen pop,” a small application that is
connected to the phone system. This application, which is a type of CRM,
automatically senses who is calling, and by the time the agent answers the
phone, produces a screen on the computer that lists important information
about the caller, such as what they have purchased in the past, what they are
likely to buy in the future, and what products the company may have available
that would go well with what the customer has already bought. This “screen
pop” is made up of several bits of information from different databases; it may
draw on information from the accounting department to show the agent what
their current balance may be; it may draw on information from the sales
206 ANNA UNIVERSITY

department to show what has been purchased recently, and it may draw on Notes
information from the credit department to show the agent what terms can be
offered.
Because a customer relationship management system is so complex, often
involving multiple silos of information and multiple pieces of software, all tied
together in a single interface, it’s often hard to set up. Some larger companies
use an integrator to put the CRM system together. Because of the complexity
of CRM, smaller companies often see it as too expensive. However, even the
smallest company can implement a CRM strategy. While a Fortune 500
company may spend hundreds of thousands of dollars annually on customer
relationship management, a small one-man shop may even handle CRM with a
box of index cards and a ball point pen. Midsize companies may use simple,
off-the-shelf software such as contact managers and spreadsheets, and still
have a very effective CRM system that can help them to serve customers in the
best possible way, and to make the most advantageous use of information that
has been collected.
CRM is a philosophy that needs to be prevalent all through an

organisation. You cannot create it with an IT system - you can only
automate bits of it. So, before you go out and spend millions putting in a
CRM infrastructure, take a look at your business and the people in it first.
6.2.1 An Additional Dimension to CRM Philosophy
Many companies have embraced Customer Relationship Management (CRM)
as a way to manage better their relationships not only with current customers
but also with potential customers, resulting in increased sales performance.
Today, we can conclude that many companies have made progress to evolve
from a product focused to a customer centric organization.
However, companies still have a long way to go to fully understand their
customers’ profitability as well as their customers’ perception of value.
Nevertheless, both insights will help a company to withstand today’s highly
competitive market environment in which customers have become more
demanding and shareholders push for short-term results.
Also as an answer to this market evolution, an increased focus on pricing has
emerged as the most effective and efficient way to sustain and improve a
company’s revenue and profitability. We believe that CRM and pricing are
complementary initiatives that will help a company to excel in a challenging
business environment. As this article will clearly illustrate, considering both
initiatives together will represent more value than the sum of the isolated
initiatives.
ANNA UNIVERSITY 207

Notes Profitability and Pricing Defined

Profit = Price X Volume – Cost
Looking at the profit equation above, one has different ways to improve
profitability.
1. Increasing volume has been tried by CRM via cross selling and up-selling
without much success. It is very hard to do without a thorough
understanding of customer’s perception of value and customer Profitability.
2. The cost side has been fully exploited by most of the companies during the
economic downturn. Additional efforts in this domain will not have a
similar contribution to profitability as in the past.
3. Pricing is considered today as the most important of these profit levers with
still a lot of room for improvement. Research proves that 1% improvement
in price increases operating profit by more than 12,3% while a similar
improvement in variable cost has only an impact of 8,7%. A good mastery
of pricing will allow a company to realize a sufficient margin on its
products and to get a better understanding of customer profitability. As the
picture below illustrates, these insights will have a positive impact on
profitability and can be leveraged in the long run to increase volume.
CRM and pricing: a mutual beneficial relationship one of the key objectives of
CRM is to provide an integrated customer view. Although many data around a
customer have been gathered, profitability and pricing insights are still
missing. Mainly because it requires cross process analysis and adequate
technology, but also time to create the history and success stories to prove the
added value. The illustration below depicts the value added contribution of
pricing to the CRM data and processes. Today, companies that embraced CRM
challenges some years ago are requesting this new evolution to outperform
direct competition.
In the past, the complementarities between pricing and CRM did not have a
good track record. CRM had a lot of success in the services and technology
based industries while pricing expertise was originally developed with
manufacturing actors. In a more global and complex world, the convergence of
CRM to pricing, or vice versa, is a major opportunity to share experiences
among industries.
6.3 CALL CENTRE BASED CRM

To begin with, let’s start with the process of defining a call centre, according to
the industry definition:
“A call centre is a place wherefrom calls are made or received in high volume
for the purpose of sales, marketing, customer service, telemarketing, technical
support, or any other specialized business activity.”
208 ANNA UNIVERSITY

Some more Definitions Include Notes

1. Technology based customer service operation, which is highly dependent
on telephony information, systems, high-tech technology skilled and
trained manpower to enable customer service with the ability to take
immediate action on customer requests.
2. The contact center is changing beyond all recognition and is being
repositioned as a Centre of Excellence.
3. It is redesigned to become one of the highest incoming learning group and
outgoing contact with customers to derive as much customer information as
possible, and to act as the core multimedia engine in sales and marketing.
If we analyze the above definition and as we proceed in the program, we
will realize there is much more than calling in call centres. It has emerged
as a full-fledged industry in itself which provided employment to over 3%
of working population of US in 1995 in more than 200,000 call centres
operating throughout the length and breadth of the country. For India this is
just the beginning and we have a long way to go and better still, India is
poised to have call centres not only serving her own territories but also
catering to the needs of other developed countries.
Call centres are generally set up as large rooms, with workstations that
include a computer, telephone set hooked into a large switch and one or
more supervisor stations. It may be integrated or connected with other
centres or to corporate data network, including mainframes,
microcomputers and LANs. Call centres gained popularity in service
oriented industries where keeping in touch with the customer is not only
required but is a necessity in the fiercely competitive business environment
prevailing today.
6.3.1 History of the Industry
The history of call centres dates back to the inception of its enabling channel,
the telephone. It begins in USA when in 1874, Alexander Graham Bell
discovered a process for sending voice over wires. Two years later, the first
telephone patent was issued and by May 1877, six telephones were in use. By
November 1877, over 3,000 phones were being utilized as wires were strung
between homes and businesses across the city of Boston in Massachusetts.
That same year, the first call centre was created as individuals rang operators
or the first call centre agents who manually connected their calls through a
switchboard with the required party. By 1880, the number of phones in use had
climbed to 133,000 and thus began the dawn of a new age in communication.
As the use of phones grew, public began to depend upon and expect quality.
Increasingly, it became more difficult for new or temporary operators to have
the knowledge of how and where all the phone lines were connected. It became
a specialized job where prior training was required before hitting the floor.
ANNA UNIVERSITY 209

Notes The first call centre managers must have found themselves in hot waters with
the introduction of telephone exchanges but in order to survive, they shifted
their focus to other industries. Little did they know that they were laying
foundations of an industry then.
One of the first-ever 24-hour call centres was an inbound customer service and
sales centre set up by Pan American World Airlines in 1956. Shortly
afterwards, AT&T introduced the first high-volume discounts for outbound
long-distance calling that led to the development of regional and national
telemarketing call centres (although the term telemarketing was not introduced
for another 10 years). This was followed in 1967 by the introduction of toll-
free numbers (800 numbers) that gave customers a way of contacting
businesses at no cost to themselves.
Call centres, from that point onwards, started evolving into a separate industry
and its relation with the telecom industry became parallel rather than dependent
on it. In fact, many innovations in the telecom field were based on the feedback
from call centre operations.
A major thrust to this industry was provided in the post-war era when
management gurus advised companies to focus on customers and lately when
every company is religiously observing management concepts like customer
centricity and core competency.
In more recent times, call centres have flourished because industries such as
travel, hospitality, banking and catalog shopping have found value in the
concept. Call centres have transitioned into a strategic tool with both inbound
customer service and outbound telemarketing and collections. They are utilized
to provide superior customer service and increase sales to maximize market
share.
While a call centre’s success depends on three factors: speed, quality and
efficiency, its objectives remain:
1. Customer satisfaction
2. Business Process Analysis
3. Employee development and welfare
4. Increase in revenue
5. Analyzing future trends
6. Cost reduction
However, the challenges faced by call centre managers and agents are also
numerous. It is a mix of issues ranging from recruiting, training, forecasting,
technology, strategy design, process implementation, and performance
monitoring while striving to increase speed, quality and efficiency.
210 ANNA UNIVERSITY

Evolution Notes
Customers need the comfort of a central point of contact.
1. Growth in the industry, because the customer can contact by any means,
from any place, at any time.
2. The customers can easily obtain information.
Advantages:
(i) Economical
(ii) Ease of contact and Time Saving
(iii)Availability of standardized product/customer information
(iv) Service availability 24 hours a day, 7 days a week, 365 days a year.
6.4 CONTACT CENTRE

While the telephone was responsible for giving birth to the first call centre, the
advent of internet has attributed to a phenomenal change in a call centre’s role
and modus operandi. New contact centres offer a variety of avenues for
interaction including voice, e-mail, voice-mail, fax, web interactivity. New
ideas in technology, resource management, and process design will alter how
companies do business. A contact centre can, thus be defined as:
“A place that has adequate telecom facilities, trained personnel, access to wide
databases, Internet and other on-line support infrastructure to provide
information and support to the customers and business on real time basis.”
These new-generation call centres, better known as ‘contact centres’ are a mix
of low-tech telephony and the latest in online collaborative technology. Their
capabilities range from simultaneous interactive voice and data access over the
Internet to the use of a web page as the simple but time-saving first step in the
service process. Web users who need extensive help click a call-back button to
have an agent call them. Customers with less complex questions use an instant
text-chat feature to get answers from agents almost immediately.
The evolution of call centres into contact centres is all about responding to
customers in whatever form of communication they prefer saving on their as
well company’s time, cost and effort. It might be through e-mail, interactive
chats, web callbacks, VoIP (Voice over Internet Protocol), fax, voice mail, or
phone calls. As individuals become more comfortable with these types of
communication media, the demand for companies to support them becomes
increasingly important in enhancing customer service and ensuring customer
retention.
ANNA UNIVERSITY 211

Notes
Figure 6.1: Contact Centers of Today use Many Media to Interact with the
Customer
6.4.1 Customer Relationship Management

1. CRM is putting the customer at the center and re-orienting and aligning all
facets of the organization to deliver sustained customer satisfaction every
time. It means not just a software solution as an outcome of convergence,
but a means of realigning technology, process, policies and people.
2. CRM provides ways of handling customers.
3. CRM provides ways for optimising customer satisfaction.
4. The goal of CRM is to maximize the interaction and gain maximum
information and provide maximum satisfaction to customers.
Interactive Voice Response/Voice Response Unit
1. Call handling time is decreased
2. Allows callers to streamline their questions to get accurate information by
providing access to database information
3. Enhanced call routing based on questions
4. Automation of FAQ enquiries
5. Improved customer service satisfaction
6. Faster response
7. 24 × 7 × 365
8. Reduced queuing time
Automatic Call Distributor (ACD)
The ACD portion of the system ensures that incoming calls are distributed
evenly, so agent productivity is maintained at a high level, and inbound callers
are handled efficiently. The routing of calls is achieved by the following
criteria:
1. Agent vacant to take the call
212 ANNA UNIVERSITY

2. ANI (Automatic Number Identification) Notes

3. Skills based routing
4. Call routing to skilled agents
5. Number of call accumulative in a queue
Computer Telephone Integration (CTI)
CTI is the technology that links telephone systems and computers within a call
center. Applications using CTI technology help automate inbound and
outbound call handling, eliminate many of the repetitive tasks performed by
agents and improve call center management with better reporting capabilities.
Elements of CTI
1. Telephone switches (ACDs and PBXs) route the calls.
2. Computers contain the databases of relevant customer information, such as
name, address, account number, telephone number, purchasing history, etc.
3. CTI software (known as middleware) provides the instructions and
interfaces for carrying out the CTI tasks.
4. CTI Features in an Inbound Call Center
5. List Management Addresses uncompleted calls, such as busy, no-answer,
or answering machines, by redialing numbers according to specified time
intervals.
6. Screen Pop- Presents customer data, product, and service information
simultaneously with the incoming telephone call.
7. CLI- Matches the incoming caller’s phone number to the customer profile.
8. Inbound call Routing - Routes calls, based on data and the customer’s
profile to the agent best equipped to help that particular customer.
9. ACD Connectivity - Provides the ability to connect one or more ACDs to a
CTI server, regardless of the manufacturer, in standalone or networked
configurations.
10. CTI Features in an Outbound Call Center
11. “do-not-call”- Some people have enrolled themselves for not calling them.
12. Time zone restrictions - Difference in time for countries.
13. Call Results Upload -Updates the host computer with campaign results for
scheduled batch processing.
14. Predictive Dialing - Maximizes agent occupancy as well as connects per
agent while minimizing abandoned calls.
15. Campaign Build- Allows segmentation of outbound campaigns based on
customer profiles.
ANNA UNIVERSITY 213

Notes 16. Call List Download - Transfers call list records in real time or batch mode
from any standard medium.
17. Transaction Disposition Reporting - Logs call results, such as sale or no
sale, along with transaction values to campaign histories by transaction,
agent, or application.
18. Speed Dialing -Features allow for speed dialing, preview dialing, and
manual dialing from a host or workstation application.
19. Preview Dialing - Allows the agent to become familiar with a customer
profile before initiating a call.
20. CTI Features in a Blended Call Center
21. Call Blending: Blends of inbound and outbound calling to maximize
productivity and increase the variety of tasks offered to agents.
22. Scheduled Calling – Calls customers back at a previously specified date
and time.
23. ACD Connectivity
24. Preview Dialing
25. Enhance Dialing
26. IVI/VRU Connectivity—Provides the ability to connect to one or more
VRUs regardless of the manufacturer, in standalone or networked
configurations.
27. Workstation connectivity—Allows call centers to drive character-based
(dumb terminals) or graphical user interfaces in a client/server or cluster-
controlled architecture.
Predictive Dialing
1. Dialogic Card is used for outbound calls.
2. The automation of outbound dialing allows agents productivity by
automating the services.
3. Numbers are dialed automatically in advance by an agent available to take
the call as per the skill and availability.
Building Customer Relationship through Call Centers in Banking and
Financial Services
Contribution: Vinod Dumblekar
The contribution of Dumblekar has led to CRM being embedded into every
call centre. A call centre is an arrangement where the division of an
organization or intermediary acts as a link with their customers. CC is an area
where several specially trained employees known as customer service
representatives handle queries on products/services. The CSR of the contact
214 ANNA UNIVERSITY

centre is an active salesman, using a telephone line supplemented by terminals Notes

and CRM software. This software would link telecom hardware to IT databases
at the back end and communicate automated information to the callers in the
form of (IVR) Interactive Voice Response and screen pop-up layers. Through
CSR, CRM softwares incorporate Internet technologies to be web-enabled,
allowing more interactivity for their callers, while keeping the basic model for
customer interaction unchanged (Haines, 2000). According to Shapiro (2000)
an organization has three major channels of interaction with the customer,
phone, web and face-to-face contact.
The e-CRM call centre incorporates e-mail, chat, computer telephone
integration to cover customers over layer territory.
Figure 6.2: Flow Chart of CRM Activities in the Call Centre Serving a Bank
In the Indian perspective, GE Capital International Services (GECIS) is the
largest at Gurgaon and Hyderabad, offering many other IT-enabled services.
Another is the joint venture between HDFC and Tata Consultancy Services
(TCS). The third example is HDFC Bank, which incorporates both CIT and
IVR Technology.
6.5 CLASSIFICATION OF CALL CENTRES

Call centres can be broadly classified into three different categories according
to the nature, area, and ownership of the call that they make into the three
categories respectively:
1. Inbound/Outbound: When a call centre specializes in receiving calls from
customers/third parties, it’s known as an inbound call centre. It is basically
used in customer care and ideally should have one or more tollfree
numbers. Outbound call centre can, thus, be easily defined as one
wherefrom calls are made to third parties. The main utility of outbound call
centres is for collections, telemarketing and catalog retailing. Outbound
ANNA UNIVERSITY 215

Notes calling can be further broken down into two components: B2C (business to
consumer) and B2B (business to business) which depends on whether the
called party is a business or an individual consumer.
2. International/Domestic: Signifies the geographic area of customers a call
centre is catering to. A call centre making/taking calls to/from customers
situated outside the political boundaries of the country the call centre is
located in would be termed as an international call centre. Some of the
characteristics of such a call centre is the difference of time zones, laws of
the land, area of dominant influence, and cultural and language differences
between the customer and the agent. Domestic call centres would obviously
cater to customer requirements within the same geographical and political
boundaries.
3. In-house/Outsourced: An in-house call centre is run by the company,
which owns the product/service regarding which the call is made or
received. Whereas in outsourcing, the company simply enters into a service
contract with a company willing to undertake the responsibility of call
handling for the customers of the former. Though it is difficult to judge
which option is better, it often depends on the priorities assigned to various
factors viz. customer confidentiality, capital resources, total customer base,
time available etc. Companies may outsource because they do not want to
risk capital on a new enterprise, or they don’t have expertise to undertake
the assignment as compared to a third party which is quoting a lower price
to provide the same service with more stringent quality standards supported
by a better technology.
The drawbacks to outsourcing are similar to the drawbacks to renting as
compared to buying. With outsourcing a company never gains expertise in
the function. One is always dependent on the claimed expertise of the
vendor and the associated assets never become tangible.
Some other classifications can be arrived at after taking number of seats,
continuity of operation and agent availability (24/7), as a yardstick.
Learning Activity
Discuss building customer relationship through call centers in
banking and financial services Building Customer Relationship
through Call Centers in Banking and Financial Services.
6.6 INDIA: OPPORTUNITIES AND CHALLENGES

Contact centres offer excellent opportunity for career growth. If one is keeping
track of newspapers and various business publications, it would be quite clear
that the quantum of activity and growth happening in this fledgling industry is
enormous. Basically this industry in India owes its existence to Internet and
telecommunication revolution because of which the cost of transferring voice
216 ANNA UNIVERSITY

data has become negligible. Companies utilize artificial satellites and leased Notes
lines to integrate their businesses and services over the globe.
It is widely acknowledged that this industry needs over 10,000 agents to man
the Contact Center operations in India every year and it is going to be the
single largest employer of young graduates in the urban sector within two
years.
India is slowly but steadily becoming the preferred global destination for
companies to outsource their back office/contact centre operations because of
the following apparent advantages:
1. Availability of well-educated, English-speaking manpower.
2. Low infrastructure and labor costs.
3. Stable political environment, which makes the business investments safe.
4. Availability of high-bandwidth for data transfer via internet/satellite
telephony.
5. Thrust of government on service industries.
6. Favorable time difference with the developed economies.
By outsourcing IT enabled services requirements to India, large overseas
companies including an increasing number of Fortune 500 companies and
existing overseas service providers are not only achieving significant benefits
in cost, quality and time but are also providers are not only achieving
significant benefits in cost, quality and time but are also creating platforms for
building new businesses. Overall, these benefits are due to the advantages
offered by relevant skill-surplus economies. India offers the case of best value
proposition for all IT enabled services.
India’s value proposition is already leading IT enabled services hubs such as
Ireland and Singapore to back-end their operations in India, since skilled labor
is becoming an increasingly scarce resource in these countries. To take
maximum advantage of these conducive factors, the Government of India has
initiated drastic improvements in the telecommunications infrastructure of the
country ensuring India offers a-hard-to-beat proposition to emerge as a
“Preferred Global Hub”. Seizing the opportunity, several companies in the
financial services sector, for example, have saved at least 50-60 percent of their
process costs after relocating their contact centre facilities in India. The process
redesign that comes with out-location also provides additional cost savings and
consolidation of operations.
Customer interaction services including call centres and customer support
centres, were prime areas of growth during 2000-01 in India among the entire
segment of IT-Enabled Services portfolio. In fact, customer interaction services
continued to be the highest growing segment within this sector with a growth
of 112 percent over 1999-2000 and revenues touching Rs. 850 crore in 2000-01
from Rs. 400 crore during 1999-2000. Back office operations revenues grew an
ANNA UNIVERSITY 217

Notes impressive 42.1 percent, from Rs. 950 crore in 1999-2000 to Rs. 1,350 crore in
2000-2001.
Table 6.1
Services Year Revenue % Growth
Customer Interaction 1999-2000 400 crore 35%
Services
2000-2001 850 crore 112%
Back office Operations 1999-2000 950 crore 12%
2000-2001 1350 crore 42%
As per NASSCOM (National Association for Software and Service

Companies) projections, IT Enabled Services – of which call centres are a
part, can generate revenues of US$ 17 billion and provide employment for
1.1 million people in the next eight years.
Because of the need to coordinate traditional voice-based customer service
with fax, e-mail, and Internet-based modes of contact such as text chat and
collaborative browsing, call centres are being pushed to move fast towards
multichannel IP contact solutions.
6.7 OPERATIONAL CHALLENGES

The lucrative opportunities discussed above lured many a companies in setting
their facilities but those which were not committed to meeting the client and
customer expectations regarding the following crucial factors lost out on the
gold rush and were run over by more competitive players. Besides, the below
mentioned factors also represent the challenges faced by this industry in India.
Trained manpower: Quality human resource is a vital area which has to be
addressed on a priority basis.
There are simply not enough people to provide the required

impetus to the industry.
Since most of the operations become viable only when the scale is high, most
companies have postponed their business decisions rather than starting on a
lower scale. When we speak of manpower, obviously the context is individuals
who are not alien to the idea of contact centres and possess basic computer
skills, typing skills, team spirit and interpersonal communication skills. This
familiarity and skill set reduces the strain an individual comes across and also
increases the learning curve when one is further exposed to specific business
training.
Government regulations: While the government is trying its best to promote
this industry, there still remain some operational hurdles which the
218 ANNA UNIVERSITY

multinational companies perceive as adverse to their smooth running of this Notes

business.
Commitment to quality: Contact centres deal with customers and serve as the
first line of contact for the business they are representing. Any mistake,
misrepresentation by the agent can cause a damage in customer-client
relationship. To prevent any such situation, normally the client issues some
CTQ (Critical To Quality) factors, MAT (Must Adhere To) factors, and metrics
analysis on a random basis, which are complied with on the floor. The clients
are very specific about maintaining this quality standard.
6.8 CALL CENTRE TECHNOLOGY

A call centre is an integration of human and technical resources. Usually apart
from having general all-purpose gadgets like computer, printers, faxes and
telephone lines a call centre needs to have some sophisticated equipment in
order to maximize productivity. The purpose of installing these gadgets ranges
from maximizing number of calls handled, reducing stress on agents,
distributing call load evenly, route calls to specific agent group etc. To attain
this objective of maximizing call centre productivity some of the following
gadgets/technologies are used:
Computer-Telephony Integration (CTI): This refers to the integration of
computers with telephone switches and let’s a computer issue the switch
commands to move calls around. It applies computer intelligence to
telecommunications devices like switches and telephone instruments. It covers
many technologies such as local area network, interactive voice processing,
voice mail, automated attendant, voice recognition, predictive dialing,
collaborative computing, simultaneous voice data and text-to-speech.
Automatic Call Distributor (ACD): An ACD answers a call and puts the call in
a pre-specified order in a line of waiting calls. On the simplest level, it makes
sure the first call to arrive is the first call answered. It delivers calls to agents in
a pre-specified order. It delivers the call to the agent who has been free (or
idle) the longest or to the next agent that becomes available in a call centre. It
also provides the means to specify the many possible variations in the order of
calls and agents. In a nutshell, it assures that human resources in a call centre
are used as effectively as possible since it has the ability of handling calls at a
rate and volume far beyond human capabilities.
It also provides detailed reports on every aspect of the call transaction with
reference to the following statistics:
1. The number of calls connected to the system.
2. The total number of calls reaching agents.
3. How long the longest call waited for an agent.
4. Average length of each call and the wrap-up time.
ANNA UNIVERSITY 219

Notes 5. Time for which the agent was logged-in.

6. Total number of abandoned calls.
In fact, there is no end to the kind of statistics the ACD can be programmed to
report and the interpretations, which can be drawn thereof.
ACD can be of two types, switch based and server based. Earlier the term ACD
meant a very specific type of telephone switch which had specialized features
and particularly robust call processing capabilities which served at least 100
extensions.
Server based ACD is built on an open platform. Usually, although not
necessarily, this platform is a PC. Server based ACD have many advantages,
the biggest one being its ability to integrate closely with data processing
systems, including the IVR system, CTI applications, and multimedia interface
such as fax, e-mail, Internet and video applications.
For example, a server based ACD can route e-mail, fax and a video call with
the same ease as it does a voice call. Moreover, it can mix information from the
database with the incoming call and pass in on to the agent attending that
particular call.
However, the server based ACD have two major disadvantages. Firstly, the
size of the platform and the required processing power needed for an ACD.
Secondly, the relative incompatibility or unreliability of PCs with the
telecommunications standards resulting in weird outcomes.
A lot of changes, modifications have been undertaken since Rockwell
introduced this technology. Today, we have key systems with ACD functions,
key systems that integrate with a computer and software to create a full-
featured ACD, PBXs with ACD functions etc.
Figure 6.3: Advantages of Using an ACD

Now, let’s follow a call to explore the features one may expect to find these
days. First, the call will be greeted by an announcement of some kind. The
announcement may simply tell the caller that all agents are busy, please wait
(remember that ubiquitous 197 or 131 reply in Indian context!). Through
integration with a reporting system, it might tell the caller the duration of wait
in advance. A separate queue can be assigned for valued customers to
220 ANNA UNIVERSITY

minimize inconvenience. It might ask the caller to enter his/her telephone Notes
number, account number or ID. The ACD will use this to do a database lookup
and present information about the caller to the agent as he gets the call in the
form of a screen pop. This screen pop might provide an agent with the
information about the number that the caller dialed, the selections that the
caller made in the early part of the call, or even the phone number of the caller.
From this information the computer might also be able to bring up the whole
computer record of the caller and a history of their recent contacts. The ACD
might also offer the caller to get his/her query resolved through an IVR if the
case is so.
Figure 6.4: An ACD can integrate Many Resources to Maximize Productivity

in a Call Centre
Some ACDs have built-in ANI (Automatic Number Identification) which
identify the number dialed in case a call centre handles helpdesks for many
clients simultaneously. Intelligent skill based call routing can be done in the
above mentioned way.
Some variables on which call routing can be programmed in an ACD are time
of day, day of week, volume of calls in the organization, number of agents
available etc.
While the call is being processed, the ACD can provide a supervisor with real-
time information about calls in the centre, a group or the status of a single
agent, and even the gap time between two calls. It also enables a supervisor to
listen in on calls to evaluate agents or to handle escalated calls.
After the call, the ACD can automatically give the agent a certain amount of
time to wrap-up the transaction, make notes, decide follow-up date etc. before
throwing the next call. Statistics for the finished call are added to the reporting
system.
Thus, the ACD is at the centre of a call centre’s activity.
Interactive Voice Response (IVR): An IVR can be best described as a
telephone interface to a computer system i.e. a system acting on the front end
of a computer system that let’s a caller enter information from that system
either through a telephone keypad or the spoken word.
ANNA UNIVERSITY 221

Notes However, input via numeric digits is much more simple and accurate than any
word or letter because of the ease of using the numeric keys on the telephone
keypad. Voice recognition, which would entail that caller speaks the
information is making great strides but of course is error prone due to the
nature and diversity of human speech. A very good example of a successful
IVR implementation would be the KBC (Kaun Banega Crorepati) hotline
which uses a combination of both voice and data input during the call, the data
input is for record-keeping and the voice of the caller is archived for
verification.
Installing an IVR system has resulted in tremendous cost and time savings for
call centres as it cuts down on the need for agents-especially when repetitive
queries are involved. A typical IVR application takes an existing database and
makes it available by phone. IVR gives access to and takes in information and
performs record-keeping as well.
An IVR can also help in intelligent skill-based call routing to appropriate
agents. For example, it may ask the caller for a choice and route a call
accordingly – “for sales – press 1, for accounting – press 2 etc”.
However, some essential points to consider while implementing or deploying
an IVR system is to ask for customer acceptance level. Many customer profiles
do not want to interact with a machine. For example, a customer of Mercedes
Benz would not like to wait for the unending message which dictates his option
as the last one.
Nowadays, callers can use the keys of their telephone, spoken words, or any
noise at all (there is a wonderful technology called “grunt detect”) to choose
menu items, enter credit card details, bill numbers, meter readings, or other
information, or to help in the routing of a call to an appropriate person. Some
of these applications completely replace the use of people, however many
callers are unhappy with too much use of this technology. Talking to a robot is
rather boring! Given below is a diagrammatic representation of an IVR.
Figure 6.5: IVR can Route Calls According to the Specifications Provided
222 ANNA UNIVERSITY

Also known as Voice Response Unit Notes
Figure 6.6: An IVR Flowchart

Predictive Dialing: Predictive dialing is an automated outbound calling process
which uses advanced software to select, dial and connect the agent on to the
telephone number called. It also estimates the correct number of calls to place,
and the number of agents that will be required to handle those calls.
Predictive dialing is very important in outbound calling and enhances
productivity the most. A simple example in support of its effectiveness can be
linked to an observation which concluded that average talk time in a manual
dialing process ranges from 23-27 minutes an hour. Most of the rest of that
time is unproductive involved in activities such as: looking up the next number
to be called, dialing the number, listening to the rings, dealing with nonhuman
contacts such as answering machine, fax, busy signal etc. Predictive dialing
increases the average talk-time to about 45-50 minutes an hour by taking off
these distractions off from agent’s workload. It recognizes and distinguishes
the human voice from answer-phones, engaged tones, telecom intercepts, and
many other things that can happen when a call is made and passes the call onto
a human agent only in case of a human contact.
It uses complex mathematical algorithms which analyze a number of variables
such as agent & line availability, probability of not reaching the intended party,
ANNA UNIVERSITY 223

Notes the time required between calls for maximizing agent efficiency, the length of
an average conversation and the average wrap-up time required by the agents.
Some advanced predictive dialers adjust the dialing rate by monitoring and
sensing changes in these factors on a periodic basis, as these are highly
dynamic in nature.
Furthermore, it can be programmed to dial as per instructions ignoring it’s own
decision-making and relying onto human intelligence when the Nth factor
comes in.
1. Analytical CRM is a behind-the-scenes process; the

customer is not aware that his or her actions and
interactions with the company are being captured and
analyzed.
2. As online companies continue to add new and often
faster ways of interacting with customers, the
opportunity and the need to turn data about customers
into useful information has become a necessity. As a
result, there are a number of software tools that have
been created to analyze customer data.
SUMMARY
Analytical customer relationship management may be defined as a decision
support system that is targeted to helping senior executives, marketing, sales
and customer support personnel to better understand and capitalize upon their
customer needs, the company’s interactions with the customer, and the
customer buying cycle. Like the term Business Intelligence, this is a fairly new
term with a myriad of definitions and a variety of products that support some
of those defining aspects.
Operational CRM generally refers to services that allow an organization to take
care of their customers. It provides support for various business processes,
which can include sales, marketing and service. Contact and call centers, data
aggregation systems and web sites are a few examples of operational CRM. If
your company has a high customer turnover, or perhaps high service costs,
Operational CRM Solutions is a tool that can help you solve your problems.
The high tech expertise of CRM gives you access to information about your
customer as well as giving you a clear view of your customers needs.
Sales force automation uses software applications to automate sales activities.
The activities automated include: lead management, sales forecasting, contact
management, and quotation and proposal generation.
Lead management software allows businesses to qualify and assign sales leads,
or opportunities. Sales forecasting software uses historical sales data to forecast
future sales. Contact management software enables companies to manage
224 ANNA UNIVERSITY

customer communications from many sources, including websites, emails and Notes
faxes. Quotation generation software generates sales quotes from input data,
and proposal generation software automates the process of producing sales
proposals.
Marketing automation refers to the use of software applications to automate
marketing campaign management and event-based marketing. Campaign
management applications enable targeted communications and offers through
the use of customer-related data. Event-based marketing uses events, such as a
purchase, to trigger communications and offers to customers.
Service automation enables companies to manage customer service interactions
through the use of technology. Customer service automation includes: issue
management; inbound call management; queuing and routing; and service level
management.
Issue management software enables companies to manage customers’
problems by storing information about a problem, routing it to the appropriate
personnel for resolution and tracking its progress during resolution. Inbound
call management software identifies incoming calls and retrieves historical
information related to the call. Queuing and routing software manages
customer service calls by ensuring that they are routed to appropriate personnel
in the order received. Service level management software enables a company
to monitor and manage the quality of service of its key performance indicators.
A call centre is a place wherefrom calls are made or received in high volume
for the purpose of sales, marketing, customer service, telemarketing, technical
support, or any other specialized business activity.”
Call centres are generally set up as large rooms, with workstations that include
a computer, telephone set hooked into a large switch and one or more
supervisor stations. It may be integrated or connected with other centres or to
corporate data network, including mainframes, microcomputers and LANs.
Call centres gained popularity in service oriented industries where keeping in
touch with the customer is not only required but is a necessity in the fiercely
competitive business environment prevailing today. Call center’s success
depends on three factors: speed, quality and efficiency, its objectives remain:
1. Customer satisfaction
2. Business Process Analysis
3. Employee development and welfare
4. Increase in revenue
5. Analyzing future trends
6. Cost reduction
However, the challenges faced by call centre managers and agents are also
numerous. It is a mix of issues ranging from recruiting, training, forecasting,
ANNA UNIVERSITY 225

Notes technology, strategy design, process implementation and performance

monitoring while striving to increase speed, quality and efficiency. To attain
this objective of maximizing call centre productivity some of the following
gadgets/technologies are used:
Computer-Telephony Integration (CTI): This refers to the integration of
computers with telephone switches and let’s a computer issue the switch
commands to move calls around. It applies computer intelligence to
telecommunications devices like switches and telephone instruments. It covers
many technologies such as local area network, interactive voice processing,
voice mail, automated attendant, voice recognition, predictive dialing,
collaborative computing, simultaneous voice data and text-to-speech.
Automatic Call Distributor (ACD): An ACD answers a call and puts the call in
a pre-specified order in a line of waiting calls. On the simplest level, it makes
sure the first call to arrive is the first call answered. It delivers calls to agents in
a pre-specified order. It delivers the call to the agent who has been free (or
idle) the longest or to the next agent that becomes available in a call centre. It
also provides the means to specify the many possible variations in the order of
calls and agents. In a nutshell, it assures that human resources in a call centre
are used as effectively as possible since it has the ability of handling calls at a
rate and volume far beyond human capabilities.
It also provides detailed reports on every aspect of the call transaction with
reference to the following statistics:
1. The number of calls connected to the system.
2. The total number of calls reaching agents.
3. How long the longest call waited for an agent.
4. Average length of each call and the wrap-up time.
5. Time for which the agent was logged-in.
6. Total number of abandoned calls.
In fact, there is no end to the kind of statistics the ACD can be programmed to
report and the interpretations which can be drawn thereof.
KEYWORDS
 Customer satisfaction: is a critical concept for customer success
professionals to understand and live by, and it's actually about more than a
money-back guarantee.
 Business Process Analysis: BPA collects data and makes
recommendations based only on the core processes of an organization
 Employee development: Employee development is defined as a process
where the employee with the support of his/her employer undergoes
226 ANNA UNIVERSITY

various training programs to enhance his/her skills and acquire new Notes
knowledge and skills.
 Welfare: Welfare services are provided to help with people's living
conditions and financial problems.
 Revenue: Revenue is money earned by a business, or income received by
the government from taxes.
1. What are call centers?
2. What are contact centre meant for?
3. What is ACD?
4. What is CTI?
5. What are the advantages of using an ACD?
1. Define Analytical customer relationship management.
2. Define operational customer relationship management.
3. Discuss CRM as a philosophy
4. What are the factors on which success of a call centre depends
5. What is call centre technology?
6. Discuss the various types of call centers.
FURTHER READINGS

Publication.
Macmillan.
Elsevier.
ANNA UNIVERSITY 227

Notes
228 ANNA UNIVERSITY

Lesson 7 - E-CRM
Notes
UNIT V
LESSON 7 – E-CRM
CONTENTS
Learning Objectives
Learning Outcomes
Overview
7.1 Concept of e-CRM
7.1.1 Need for e-CRM in a Liberalized Economy
7.2 Managing e-CRM
7.2.1 Scope of Internet in e-CRM
7.3 Online Brand and CRM
7.4 CRM and Brand Loyalty
7.5 Banks
7.5.1 Internet Banking
7.6 CRM and its Presence in the Indian Economy
7.7 A Few Experiences and Projections
7.8 CRM software
Summary
Keywords
Further Readings
LEARNING OBJECTIVES
 Understand the Concept of e-CRM
 Know about Managing e-CRM
 Explain the Online Brand and CRM
 Describe the term CRM and Brand Loyalty
 To know about the CRM and its Presence in the Indian Economy
 Understand the CRM software
ANNA UNIVERSITY 229

Notes LEARNING OUTCOMES

understanding of:
 the e-CRM utilizes a complete view of the customer to make decisions
about messaging offers and channel delivery.
 a net banking makes it easy to transfer money from one branch in a
particular city to another branch in another city
 the CRM software is to provide all the essential tools for businesses to
retain customers and, through it, achieve sustained sales growth
OVERVIEW
Most of today’s on-line customers exhibits a clear proclivity towards loyalty,
and Web technologies, used correctly, reinforces that inherent loyalty. If the
executives don’t quickly gain the loyalty of their most profitable customer and
acquire. the right new customers and acquire the right new customers, they will
face a dismal future catering to the whims of only the most price sensitive
buyers.
Loyalty is about earning the trust of the right kinds of customers for whom you
can deliver such a consistently superior experience that they will want to do all
their business with you. Moreover, although e-commerce brings benefits to
both vendors and customers, it also has limitations, such as the physical
separation between buyers and sellers, and between buyers and merchandise.
In order to reduce the barriers, vendors must develop a trustworthy relationship
to foster customer loyalty.
The concept of relationship marketing has been broadening beyond merely
dealing with one’s customers. Hunt & Morgan (1994), Parvatiyar and Sheath
(1994), for example, view relationship marketing as an orientation “that seeks
to develop close interactions with selected customers, suppliers and
competitors for value creation through co-operative and collaborative efforts.”
There is a need to ensure that all the dimension of both external and internal
markets are addressed in an integrated and cohesive manner and to achieve a
sharper focus on the goal of building long-term customer relationships.
7.1 CONCEPT OF E-CRM

e-CRM provides companies with a means to conduct interactive, personalized
and relevant communications with customers across both electronic and
traditional channels.
e-CRM utilizes a complete view of the customer to make decisions about
messaging offers and channel delivery. It synchronizes communications across
otherwise disjointed customer facing systems. It adheres to permission-based
practices respecting individual’s preferences for how and whether they wish to
230 ANNA UNIVERSITY

Lesson 7 - E-CRM
communicate with you. And it focuses on understanding how the economic Notes
relationships influence the business. Advocates of e-CRM recognize that a
comprehensive understanding of customer activities, personalization,
relevance, permission, timeliness and metrics are all a means to an end—its
customers. e-CRM therefore, however we choose to define it, must be the
means to serve the three areas of:
1. Sales
2. Customer Service
3. Support
Frawley (2000) explains the various interpretations of the term ‘e’ in e-CRM
as:
Electronic Channel: New e-channels such as the web and personalized e-
messaging have become the medium for fast interactive and economic
customer communications, dialoguing companies to keep pace with the
increased velocity.
Enterprise: Through e-CRM, a company gains the means to touch and shape a
customer’s experience across the entire organization, reaching beyond just the
bounds of marketing to sales, service and corner offices whose companies need
to understand and access customer behaviour. An e-CRM strategy relies on the
construction and maintenance of a data warehouse that provides consolidated
detailed views of individual customers, cross channel customer behaviour and
communication history.
Empowerment: In this new age e-CRM strategies must be structured to
accommodate customers, who have the power to decide when and how to
communicate with the company and through which channel. With the ability to
opt out, customers decide which firm earns the privilege to talk to them in the
light of this new customer empowerment. An e-CRM solution must be
structured to deliver timely, pertinent valuable information that a customer
accepts in exchange for his or her attention.
Cost Control Measures: Too many customers execute customer
communication strategies with little effort or ability to understand the
economics of customer relationships and channel delivery choices. Yet
customer economics drives small asset allocation decisions, directing money
and efforts at individuals likely to provide the greatest return on customer
communication initiatives.
Evaluation: Evaluation of result allows companies to continuously refine and
improve efforts to optimize relationships with customers.
External Information: The use of customer sanctioned external information
can be employed to further understand customer’s needs this information can
be gained from such sources as third party information network and web page
ANNA UNIVERSITY 231

Notes profiler applications under the condition the companies adhere to strict
consumer option rules and privacy concerns.
7.1.1 Need for e-CRM in a Liberalized Economy
The first and foremost rule of implementing e-CRM is the search for the right
software package that embodies what e-CRM is for the firm, SAP, as a
package, comes last in a set of sequential steps for ERP; for e-CRM, it is
Siebel. These vendors have many strengths as (KEEN) 2000 says: “software
does not substitute for clarity of business model, quality of business process,
base IT infrastructure, design and operations, integration cost or effective use
of software tools and data.”
Regardless of the company’s objectives, an e-CRM solution must possess
certain key characteristics. It must be:
1. Driven by data warehouse.
2. Focused on multi-channel view of customer behaviour.
3. Based on consistent metrics to assess customer actions across channels.
4. Built to accommodate the new market dynamics that place the customer in
control.
5. Structured to identify customer’s profitability or profit potential and to
determine effective investment allocation decisions accordingly.
6. Scalable to meet growth and performance needs.
In an e-CRM solution, the data warehouse or customer data mart contains a
consolidated and comprehensive view of the customer. The warehouse
provides the broadest possible profile of the customer needed to determine an
appropriate course of action, the most effective offer to make and the best
channel to deliver your pertinent message.
Organisations today have different methods for interacting with their
customers. An e-CRM solution must have applications that coordinates or
synchronizes customer communication across channels and do so in real time.
These applications must be able to capture customer transactions across
disparate touch points and store that information in temporary data storage to
broaden the customer profile obtained from back-end transactional system and
external sources.
Today many companies spend a lot of capital communicating with customers,
but spend little time and effort determining the effectiveness of those
campaigns. e-CRM provides the means to customers competitiveness and
communication efforts. E-CRM is a continuous, interactive process. It employs
customer analytical tools to project outcomes of customer communication
initiatives, capture results, attribute changes in consumer behaviour to a
particular communication and assess those results to improve subsequent
customer interactions and return on investment. While a company can
232 ANNA UNIVERSITY

Lesson 7 - E-CRM
encourage customers to communicate through particular channels, it is the Notes

consumer who ultimately decides how and when he or she will contact the
company and grants explicit permission, about how the company can
communicate with him or her.
Thus, an e-CRM strategy must deliver timely pertinent messaging that
customer or prospect will gladly accept.
By adhering to opt in, permission marketing an e-CRM solution makes
marketers sensitive to when and how to communicate i.e. e-mail, wireless
phones, etc.
A customer may decide to opt in or opt out of dialogue across a particular
channel, particularly e-mail.
Source: Journal of National Productivity Council on CRM
7.2 MANAGING E-CRM

CRM on the Internet – The Relationship between Customer Satisfaction and
Brand Loyalty
—Contribution: Horng, Der Leu, Hong-Jea Hsuan Jung Chung
Competition by Internet companies can no longer be overlooked. The
bookstore revolution raised by Amazon.com is an example; so too are the
Internet securities. A big enterprise no longer has advantage in customer
service after the entry of worldwide Internet, which has brought about a great
impact on traditional markets (Lynn Maltz, Jurkat & Hammer, 1999). The
merger between time Warner and AOL (America on Line), the alliance
between K-Mart, the retail giant and Yahoo! are a few instances. According to
the E-com book report there is a new user on the Internet every seven seconds.
The research of the web server Net Craft Corp. in the U.S. shows an amazing
growth 50.8% of global www (websites) that broke through 10 million sites in
February, 2000.
Many business move part of their service to the Internet because of a large
online population, which keeps increasing. In the process, a mighty Internet
marketing effort has been springing up. Conceptually, the internet represents
an extremely efficient medium for accessing, organizing and communicating
information (Kaynama & Keesling 2000). New customer acquiring costs are
five times higher than customer retention (Heskett, Sasser & Hart 1989). A
five-point improvement in customer retention can lead to profit swings of 25%-
85% Reichheld & Saner (1990) and Peppers & Rogeres (1997) believe an
enterprise must learn how to treat the unique needs of each customer in today’s
interactive era. Web-enabled customer relationship management is the need of
the hour.
Kotler (1991), defines customer satisfaction as a customer’s pre-purchasing
experience expectation and afterward evaluation. Companies have to collect
ANNA UNIVERSITY 233

Notes customer preference in advance, based on individual needs, and apply database
information and analysis and expand it into long-term individual database and
create an inseparable long-term bond between the company and customers
(Blattberg & Deighton, 1999). Focus on customer retention, long-term
relationship building and increased customer loyalty should be the main target
for the company, putting relationship marketing into practices (Berry &
Paravraman). As Reichheld (1996) points out, it can be cost saving and profit
creating for a company, elevating customer loyalty, getting free
recommendation, word-of-mouth reputation too, building the advantage of
price as well. In the virtual world, creating satisfied customers through CRM
and building loyalty is one of the important topics that brook no delay.
The real CRM prize is no longer competitive advantage.
7.2.1 Scope of Internet in e-CRM
To face the increasing international trade and competition, e-commerce is
essential, especially in information and communication technology (Nath,
Akmanligil, Hjelm, Sakaguchi & Schultz, 1998). Underlying electronic
business are the phenomenon of digitalization and connectivity (Kotler, 2000).
Internet could provide lower searching cost for consumer (Strader and Shaw,
1997) as its easier for consumers to compare the price while shopping through
the internet. Hence some believe that internet shops well cause price war and
reduce profit from the marketer (Bloch, Pigneur & Segev, 1999). Therefore, we
would like to discuss the meaning, types and products of Internet shops.
“Internet shops” are also referred to in literature as electronic store, electronic
marketplace, Internet marketplace or virtual store (Yesill, 1997). They sell
products through the Internet. Websites are also increasingly being used for
product development and improvement as are internal marketing customer
service and opinion polling (Arnold & Aslai Gail, 1996). The ease of ordering
via the Internet and the associated reduction in cost of purchase and improved
customer relationships are the benefits achieved and it can help a company
determine where to implement similar solutions that contribute to revenue
growth. Internet shops could build new customer groups and contacts
(O’Connor & Keefe, 1997; Bloch, Pigneur & Segev 1999; Senn, 1996).
For this reason, relationship marketing is regarded as a new marketing
paradigm (Kotler, 1992; Gronroos, 1994), especially when combined with the
Internet technology.
The success stories of the biggest book store chain in states, Barnes & Nobles
and the retail giant Kmart, which established Internet shops successively have
given a fillip to the new industry of Internet shops. The future of virtual market
may be good as Internet shops get established one after another around the
world, even though most of them don’t have much profit at present. The
Internet has the advantages of low cost and high speed. Moreover, it can work
across time and space and mounts a strong attack on traditional industries.
234 ANNA UNIVERSITY

Lesson 7 - E-CRM
Research reports reveal that there is no consistent classification of Internet Notes

shops. Hoffman, Novac & Chatterjee (1995) have classified e-business into six
types according to its marketing function:
1. Online Storefront
2. Internet Presence
3. Content Mail
4. Incentive Site
5. Search Agents
6. Internet Shops
Till now, scholars differ in their views with no consistent classification of
Internet shops. Kotler (2000) groups sites into two basic forms:
Corporate Website
In this type of site a company offers basic information about its history,
mission and philosophy, products, services and locations. It might also offer
current events, financial performance data and job opportunities. The basic
requirement for markets are: pay attention to the basics, such as providing
names, phone numbers and dates and make it easy for customers to purchase
products online.
Marketing Website
This kind of a website is designed to bring prospective customers closer to
purchase or other marketing outcome the site might include a catalog, shopping
tips and promotional features such as coupons, sales events on contests.
Other scholars have different views on Internet shop classification. Taiwan
researcher Lin (1995) classifies Internet shop’s service into three types:
1. Communication-oriented services
2. Information-oriented services
3. Product-oriented services
Xu (1996) defines it as an online storefront, mall and information

service, information oriented service.
There are four types:
1. Domestic Service
2. Global Service
ANNA UNIVERSITY 235

Notes 3. Domestic Transactions

4. Global Transactions
According to Oueilch and Klein, (1996), there are three types:
1. Informational Web
2. Transactional Web
3. Operational Web
According to Koh & Bathazard (1997), there are five types, incorporating the
above-mentioned:
1. Institutional Site
2. Product Catalogue Site
3. Online Ordering Site
4. Online Payment Site
5. Delivery Web defined by Jolly (1997).
An investigation into Internet users made by Cyber Dialogue in December
1999 showed that the most popular products in sequence are books, computer
software, gifts, flowers, trips, CD, tapes, computer hardware, electronic
consumer products and clothes. In Taiwan, the most popular products online
are books (36.8%), information service (23.5%) and communication products
(22.6%), etc. Online products are of three basic types:
1. Hard goods: Computer books/CD.
2. Soft goods: Information services, online newspapers, online software
downloads, database searching.
3. Online service: Law, medical consultation, room reservation, ticket
ordering.
A better classification structural frame includes two dimensions:
1. Outlay and Frequency of Purchase
2. Value Proposition and Differentiation Potential
Exhibit 7.1: Classification of Internet Shops
Purpose of Internet shop
Business Shopping Informatio
Classification of Internet Representati online n
Scholar on and providing
Shop
Product Manageme
Information nt and
Delivery Collection
Hoffman Internet presence 
Novak & Online storefront 
Contd...
236 ANNA UNIVERSITY

Lesson 7 - E-CRM
Chatterjee Mail Notes

(1995) Content 
Incentive Site 
Search Agent 
Communication-oriented 
service
Lin (1995) Information-oriented service 
Product-oriented service 
Domestic service 
Ouelch & Klein Global service  
(1995) Domestic transactions 
Global transactions 
Online storefront Mail 
Xu (1996)
Information service 
Retail store  
Store
Departmental store  
SPECIALITY SHOP
Connection Mall 
Taiwan
Electronics
Small Mall 
Department Specialty Mall 
MALL Large Integrated 
Mall
Regional Mall 
Multinational Mall 
Informational 
Webs 
Koh & Transactional Webs 
Balthazard Operational Webs 
(1997)
Institutional site 
Product catalogue Site 
Jolly (1997) On Line ordering site 
On line payment site 
Delivery Web 
7.3 ONLINE BRAND AND CRM

Relationship principles have been considered a paradigm shift in the marketing
field (Deighton, 1996). Empirical research concerning relationships formed at
the level of brand is especially scant (Fournier 1998). CRM relies on a huge
range of applications and resources but one of its key strengths is web-enabled
integration. There are several stages of building a relationship with consumers
(Chiagouns, 2000).
ANNA UNIVERSITY 237

Notes 1. Consumer becomes aware of the company or its brands.

2. Taking the relationship to a deeper level.
3. A transaction occurs that consummates the relationship.
Exhibit 7.2: Relationship Building Stages
Dimension 1: Dimension 2: Dimension 3: Examples of
Outlay and Value Differentiation Products and
Frequency of Preposition Potential Services
Purchase
Tangible or High Wines, soft drinks cigarettes
Low quality,
Frequently Physical Low Milk, eggs
purchased Intangible or High Online newspapers and magazines
goods Informational Low Stock market quotes
Tangible or High Stereo market quotes
High quality,
Infrequently Physical Low Precious metals
purchased Intangible or High Software packages
goods Informational Low Automobile financing insurance
Product and Service Classification Grid Source (Peterson et al, 1997)

Brand-building is important in customer relationship. However, we have no
idea if it works in the virtual environment. There is a controversial issue of
whether brand loyalty exists on the Internet. There are two kinds of academic
thoughts.
One believes brand loyalty will be important than ever, but another is the
opposite. However, there’s no unanimous answer for the time being. According
to scholars who support the concept of online brand loyalty, the Internet can
now play a pivotal role in enhancing brand relationship and corporate
reputations (Chiagouris, 2000). Plus, there is no difference between building an
Internet brand and a traditional brand (Chiagouris, 2000). Building brand
awareness creates a strong relationship with customers, which is imperative for
any business to be successful (Britt, 1997).
On the contrary, those scholars who hold the view that brand loyalty does not
count online, advise against excessive focus on building your brands anymore.
Instead, they advocate focusing on learning how you can bring more value to
your market and then delivering it. The brand building will take care of itself
(Sisber, 2000). In addition, branding on the web will be built through
experience, a long-term relationship and guaranteed customer loyalty is now
practically out of the window (Hacker, 2000). However, only a few reports
support this view. Most scholars still agree that brand names can help business
grow and catch customer attention in order to build long-term loyalty.
Fournier (1998) developed a preliminary model of brand relationship quality
and effect on relationship stability, conceptualizing loyalty as a long-term,
238 ANNA UNIVERSITY

Lesson 7 - E-CRM
committed and affection-laden partnership. This model has also constrained Notes
relationship-inspired insight by implicitly encouraging ignorance of the many
other potentially valuable relationship forms that may characterize consumer
brand bonds.
One of the most interesting relationship-building uses of branding on the
Internet are those companies like Barnes & Noble, Toys-R-Us and the Gap,
who are seeking to link the traditional brick and mortar brand experiences they
provide with their e-branding experience (Chiagouris, 2000). By building the
brand, the institution can sell additional products and services to customers.
Studies show that the more products and services a customer has with an
institution, the less likely he is to leave (Britt, 1997). Schultz and Bailey (2000)
worked on customer/brand loyalty in an interactive marketplace and found the
interactive marketplace changes traditional marketing theory. An argument is
made for the development of shared values and reciprocity as a theory base on
which to build customer relationship.
By giving the consumers something they want, you are helping them and
promoting brand message at the same time. This improves brand position in a
way an online brochure cannot (Chiagouns, 2000). Webster Jr. (2000) focuses
on the relationship of brands among brands, consumer retailers and
summarizes the value of manufacturer’s brands to channel members.
From the above researches, it is obvious that it is helpful for companies to
combine their business with brand, Internet and CRM. Reichheld found that
companies that retained just 5% more of their customer were 150% more
profitable. Good customer relationships positively impact the bottom line (Mc
Laughlin, 2000). Using the advantage of Internet and combining it with CRM
will increase customer retention rate.
7.4 CRM AND BRAND LOYALTY

Exhibit 7.3: Brand Loyalty
Conducted by Time Focus on
Chicago Tribune Late 1940s- 1950s Consumer daily panel data that recorded
consumer household purchases
Most of the early work in customer/brand loyalty was focused primarily on how customers
purchased or behaved in the marketplace.
Farley's (1964) Mid 1960s Economics of information i.e. the cost

and ability of consumers to search for
information about alternatives and to
understand brand choices.
Joccby and Kyner (1973) Early 1970's Repeat purchasing behaviour
Much of the theory base for brand loyalty stems from attempts to model basic consumer
behaviour, that is, how consumers evaluate alternatives and make purchase decisions.
Contd...
ANNA UNIVERSITY 239

Notes
Jones and Sasser's (1995) 1980's Scanner data, Consumer choice and
behaviour modelling (using primarily
observable consumer purchase
behaviour).
Reichheld's (1996) 1990 The economic value of customer loyalty.
Much of the brand or customer loyalty concepts have been developed from the marketers' view
(the economic)
Source: Schultz and Bailey (2000)
Figure 7.1: A Preliminary Model of Brand Relationship Quality and

Effects on Relationship Stability
Customer Satisfaction
There are many researches on customer satisfaction and loyalty. Oliver (1980)
defines customer satisfaction as the disconfirmation expectancy and
conception. Kotler (1991) identifies customer satisfaction as pre-purchase
expectancy together with post-purchase evaluation of products’ quality. Good
customer relationship management can satisfy customers immediately, raise
customer satisfaction, build long-term relationship and increase business
profits. Therefore, relationship marketing could provide a potential power for
business to acquire big profits (Berry, 1995). A business needs to learn to treat
the unique needs of each customer (Pepper & Rogers, 1997). Retaining old
customers, building long-term relationship and increasing customer loyalty are
the main aims of putting CRM into practice (Berry, 1995).
240 ANNA UNIVERSITY

Lesson 7 - E-CRM
Some scholars found satisfaction as the leading factor for loyalty (Anderson & Notes
Fornell, 1994; Oliver & Linda, 1981; Pritchard, 1991). Others proposed that it
is not possible to create a loyal customer by merely satisfying a customer
(Cronin and Taylor, 1992; Fornell, 1992; Oliva et al, 1992). Thus, increasing
customer satisfaction does not necessarily lead to increased customer loyalty to
a product, service or organization (Abdullah et al, 2000). 40% of them will
leave and start doing business with the competition (Michand, 2000). Systems
for measuring satisfaction must match the speed with which customers change
their views towards brands.
The relevance of traditional models should not be overlooked

(Chiagouris, 2000)
In online product marketing, it is the customer, not the marketer, who gives
permission and controls the interaction. Schultz and Bailey (2000) showed that
power had shifted from product-driven marketplace to distribution-driven and
finally to customer-driven, which is shown in the Figure 10.3.
The arrival of an e-business has shifted market power from the supplier to the
customer or end user, fostering expectations of faster cheaper and more
effective service (Krueger, 2000).
Customer satisfaction is an important index both in traditional and Internet
marketing, as proved from researches. Many companies still try their best to
satisfy customers in order to build a long-term relationship even though they
can’t make sure if satisfied customers will become loyal customers. However,
there is no literature suggesting neglect of customer satisfaction. Moving to
online marketplaces, we need some empirical articles to prove if satisfied
customer can become loyal customers, yielding the same results as in the
traditional model.
ANNA UNIVERSITY 241

Notes Loyal Today – Gone Tomorrow

Loyal customers stick with their supplier or service providers over the long
run. They also express their loyalty by giving, a greater share of their wallet to
their high value brands or service providers and by generating word-of-mouth
referrals (Abdullah, Al Naseer & Husain, 2000). Now that e-commerce is a big
business the battle is on for customer retention, especially among sites like
Yahoo and America on line (Kotler, 2000). World-class companies understand
the shift and are investing in e-business tools and transforming their enterprises
by better interacting processes, organization and technology to satisfy their
promises and build customer loyalty, the ultimate competitive advantage
(Krueger, 2000).
10 or 11 hours is a lifetime in the Internet world (Wilde, 2000) loyalty becomes
more complex given the impact of the Internet, World Wide Web and e-
commerce (Schultz & Bailey, 2000). A satisfied customer tends to remain
more loyal to the brand of the product than an unsatisfied customer (Schultz
and Bailey), and the branding power of site relies on the ability to bring
customer back for repeated interactions, the degree of the permission granted
by the customer for ongoing dialogue and the extent this access is being
leveraged. Once permission is granted this elicits more trust, satisfaction and
loyalty from each customer. Companies that grasp the power of the Internet
and its relationship-building capability will discover an accelerated path to
prosperity (Chiagouris, 2000). In order to build customer relationship with
brands on the Internet, loyalty plays a key role to make customers stay longer
with well-intentioned attempts to consider loyalty as more than repeat purchase
(Jacoby and Chestnut, 1978). In the normal situation, loyalty in the customer
should lead to good relationship. If so, maintaining loyalty will be the vital
thing for online companies since customers can get information quickly online
and changing one’s mind requires only a click of the mouse.
Hence it is not an easy thing to maintain customer loyalty online.

How to Build Online Loyalty?
Kotler (2000), states that online marketing has at least five great advantages.
Both small and large firms can afford it. There is no real limit on advertising
space, in contrast to print and broadcast media, Information access and
retrieval are fast, compared to overnight mail and even fax. The site can be
visited by anyone, anyplace in the world at any time, shopping can be done
privately and swiftly. Besides, both buyers and marketers can receive the
benefit of online service.
242 ANNA UNIVERSITY

Lesson 7 - E-CRM
Notes
Figure 7.3: Benefits through E-Crm for Online Buyers and Marketers
Loyalty Creation
There are five steps for loyalty creation (Mc. Laughlin, 2000)
1. Determine what your customer relationship strategy is.
2. Look in close and differentiated way at your customers.
3. Decide what steps should be taken when customer interaction happen.
4. Use “True multi-channel marketing” which includes the Internet, email,
fax, call centre and direct mail.
5. Measure the above steps to determine whether they are truly promoting
customer loyalty.
Figure 7.4: 5 Steps to Create a Loyalty Solution
Measurement
Besides, Michaud (2000) suggests five tips to move beyond customer
satisfaction to customer loyalty.
1. Establish a common ground
2. Listen and show concern
3. Use humour
4. Keep a positive attitude
5. Treat customers like family.
Online buyers increasingly create product information and do not just consume
it. “World of Web” is an important buying influence (Kotler, 2000). In this
new world of e-tailing, the role of pack is to build loyalty to the brand and to
attract new customers through benefits it can demonstrate (Bois, 2000).
ANNA UNIVERSITY 243

Notes Exclusive research from the Carlson Marketing group reveals four elements for
the relationship-builder to gauge drivers of loyalty, characteristics, core
driver’s commitment and emotional closeness to the brand. The most important
influences on customer loyalty as per the Carlson Marketing Group’s Research,
across supermarkets, departmental stores and banks are good staff prices,
accessibility and loyalty schemes or rewards.
The following are a few ways to create loyalty online:
Define your Business: Strategy number cannot be successful if one doesn’t
know what one wants to do. With special mission and strategy a business can
plan, organize and execute its ideas in the real world. In the virtual world, it
can expand its business without borders with advantage of speed and low cost.
Use Database: One of the advantages of Internet marketing is database utility.
Business can analyze customer need and wants and predict future trends by
collecting customer information since database can give quick and correct
information.
Tracking Customer Needs: The only thing that will never change online is
change itself. Tracking customer needs will be the most important with quickly
changing environment, thoughts, information and interests in the virtual could
amazon.com provide a fabulous example for building customer relationship on
the internet. When a customer buys a book from them amazon.com starts
collecting information and makes a recommendation test especially for this
unique person. Keeping track of customer needs in essential.
Give Surprise Gifts: People will seldom say no, if you can really touch their
heart. Giving a pleasant surprise at the right time, such as sending flowers or a
birthday card, baby card, baby-care tips for new parents, etc. combined with
business and service provided, would induce customers to come and share their
wallet repeatedly.
Source: Journal of National Productivity Council on CRM
7.5 BANKS
Banks in present days are not just for savings account and working capital
loans. They now provide all the financial services under one roof, popularly
known as universal banks. Universal banks are those banks which provide
commercial bank services and also services normally provided by financial
institutions, like long-term funding and investment opportunities, insurance
investment portfolio management, advisory services, etc.
Just as shopping malls provide all shopping facilities under one roof and are
such a success at it, banks too can provide all types of financial services under
one roof for the convenience of the customers.
244 ANNA UNIVERSITY

Lesson 7 - E-CRM
Banks are also concentrating more on earning fee-based incomes to be able to Notes
compete with globalization and recessionary conditions. This they do by
handling all financial activities of their customers in return for a fee. They are
providing advisory services, investment options, special services like wireless
and private banking, debit cards, credit cards and of course, Internet banking.
Banking innovation is the buzzword.
In a service-oriented setup, delivering high quality products quickly, error-free
is very important and it revolves all the time around the customer. Interactions
with the clients are many and frequent and they are usually in the nature of
discussion and paperwork transactions. The use of e-CRM and Internet
banking would make these transactions both cost-effective and speedy.
7.5.1 Internet Banking
Net banking makes it easy to transfer money from one branch in a particular
city to another branch in another city. One can open a FD account via the Net.
One needs to provide data regarding the amount and term of deposit and also
the branch in which the account is to be opened. One can order for an issue of a
demand draft or a banker’s cheque. However, the draft can be delivered only to
the customers address and not to any other third party. One can inquire on the
balance in one’s saving current and FD account and also on the tax deducted at
source on one FD account for the current and previous financial year. One can
give instructions over the Net for stopping payment on a cheque. One can
request for a chequebook via the Net, which will take three days to come. One
can view all the transactions completed on an account for a special period and
get a copy via mail.
Areas of Difficulties with Respect to Services Provided by Internet Banking
For an e-CRM solution to be effective, data and information has to be freely
available across departments and organizations and access available for them for
communication at least. Hence having a centralized system for Internet
operations without providing access to local authorities causes a lot of difficulty.
Unless the Internet banking operates on real time basis, it cannot be helpful to
the customers, as there would be a time lag of 12 to 15 hours.
“Confidentiality, security, the level of confidence that people have with using
PIN numbers on the Internet to transact is very low”—Milind Barve, Managing
Director, HDFC AMC. It has to be made sure that the security system is tight.
Existing e-CRM systems most performing the function of data

warehousing only. This is because they are not able to motivate customers
to use more of the Internet facility effectively. This can be noticed by the
fact that in banking activities, though about 40% customers possess the PIN
numbers to operate through the Internet, only 2%-5% actually use it.
ANNA UNIVERSITY 245

Notes In the age of globalization, e-commerce and the 24-hour economy, e-CRM
solutions should aim to give organizations the ability to deliver the same
attention, care and service to their customers that the representative, or a
teacher or a storekeeper did in previous times.
Therefore, to have an effective e-CRM system, it has to be built strategically.
e-CRM and Collaborative Tools
Patricia B Seybold of customers.com says: “Let customers choose the medium,
they want to use; Internet, phone, mail or in person and give them the same
level of information access on all media. Whenever possible, integrate those
media. If customers order by mail, for example, allow them, to verify and
check the status of their order on the Web.”
When all the services have to be provided at one place, integration is the vital
requirement because whatever the customer requires should be provided. There
is a need to move the focus from transactions to one where customer is at the
centre of everything. If a potential customer enquires about life-insurance
policies, for example, the request should go to the campaign management
system, which should immediately deliver the requested information via e-mail
or postal mail.
As far as customers are concerned, the technical solution is unimportant. It
doesn’t matter how proud you are of the Web infrastructure, it should always
remain transparent and user friendly to your customers.
e-CRM in Government Sector
1. Provides equal, easy access to information across society, ensuring the
whole process is socially inclusive, building consumer trust and
strengthening social cohesion.
2. A catalyst in the development of e-Europe, providing both public and
private sectors with the ability to really understand citizen needs from their
websites.
3. Highly cost-effective as a means of managing and improving the quality of
contact strategy.
Following are the areas where government has to concentrate to implement
electronic customer relationship management.
1. The government wants to stimulate the use of the electronic highway in
general as a means of driving growth and creating jobs. In order to do so, it
is crucial that they are at the forefront of effective use of digital
technologies.
2. Public sector authorities should try to become much more customer-
oriented. Increased use of electronic communication is critical to support a
dramatic growth in the level of customer interaction and citizen self-service
is crucial in the management of this.
246 ANNA UNIVERSITY

Lesson 7 - E-CRM
3. The distance between the government and the citizen has grown wider and Notes
wider. People are less interested in politics. Government services are seen
as unfriendly and inaccessible. The Internet can provide a solution to this
challenge, if effective communications software tools are used to support e-
Government initiatives.
4. The public sector, as a whole (departments, organizations) is complex and
obscure, Citizens have no idea how to find their way through this spaghetti
of departments. e-CRM has to provide an ideal tool to assist citizens in
navigating the vast quantities of information being provided online.
It is said before and is better to say it again. The only road to success is to be
innovative. But innovativeness is not about creativity and originally of — it is
about stealing. We must steal or more realistically, learn from the practices of
other. So learn to know more about customers (to form a relationship). In this
context, CRM is very vital for companies in the present highly competitive
scenario. However, across the organization, attitude towards customer, service
should be inculcated and this should be driven from the top management to
downward. Recent researches (by Icicle Consultancy) proved that most the
Indian companies are aware of CRM but are unconvinced.
Figure 10.5: Results of Researches done by the Icicle Consultancy

The market is expected to each on with the increasing use of Internet (by
Netizens). The overall sentiment is ‘wait and watch’.
Learning Activity
What are the barriers other than the above mentioned barriers
which are admissible in the internet adoption?.
ANNA UNIVERSITY 247

Notes 7.6 CRM AND ITS PRESENCE IN THE INDIAN ECONOMY

Consequent to 1991, the new economic policy, leading to more of economic
liberalization, privatization, the floodgates of the Indian economy were opened
for the participation of multinational corporations. Since then, several MNCs
have started playing directly or indirectly in the Indian market, which was
already bubbling with severe competition. The advent of MNCs has added to
the severity of the market competitiveness. The environment, thus, has become
“Vibrant”, “Volatile”, and “Vociferous”. Vibrant means too many players in
the defined market that it can bear, volatile means the rate of obsolescence of
brands being very high and vociferous means the customers becoming more
knowledgeable and therefore, demanding in nature. In such an environment,
business enterprises need to be highly market-oriented to infuse confidence in
the customers through consistent performance and making the exchange
process more convenient. Here is where e-commerce and Internet marketing
are quite useful. This demands the marketers to be more intelligent, innovative
and adapting to initiative postures. The markets need to be proactive in
understanding the future needs of the customers in advance and provide the
same before the customers express their need. Marketers also need to be
creative in finding ways and means of being closer to the customers which in
turn, leads to better understanding of the customer requirements and therefore,
better service to the customers. These are today’s need of the market for
retention of the customers. In the above context, a large number of Indian
business enterprises are adopting Customer Relationship Management
strategies for customer retention and market sustenance in their own way. Two
Indian examples may be sighted.
1. Offer Additional Benefits: Maruti Way—Maruti Udyog Limited (MUL)
launched its new business of “pre-owned” cars under the brand name
“Maruti True Value “Termed as “one-shop-shop” for second hand (pre-
owned) cars, Maruti True Value offers customers the facility of exchanging
one old car for a new one or another old one, with finance options too.
MUL will buy less than four year-old Maruti cars, or which have done less
than 60,000 km and not more than two previous ownerships. These cars are
refurbished and sold with one year or 15,000 km warranty.
2. Owing Success to the Customers: V-Guard Way—V-Guard was
established in 1977 with its first product V-Guard stabilizer. Over the 25
years, the company has come a long way and today it is a Rs 120 crores
turnover company. The range of products include stabilizers, UPS, digital
stabilizer, rosewood clocks, pumps, motor starters, Aquatron, water
purifier, cables, PVC pipes, etc. All these products, innovated and
developed, were aimed at providing greater convenience and comfort to
their customers with quality as the main concern. Today, the company is
serving 25 million customers. The V-Guard company goes on record that
their customers’ trust and goodwill has spurred them on, helping them
achieve a turnover of Rs 125 crores. V-Guard states that they value their
248 ANNA UNIVERSITY

Lesson 7 - E-CRM
customers’ trust as their biggest asset and humbly realize how greatly owe Notes
their success to the customers. In view of the above, if companies desire to
succeed, they have to “exceed customer expectations, not merely meet
them”. To perform in this manner, companies must strive to perform to
implement customization, differentiation, and communication.
Customization would provide the latitude that the customer would enjoy and
therefore, feel empowered to choose and customize its options. It could be
advocated that such a strategy would have a larger bearing on services operated
at an arm’s length are usually an add-on to the convenience aspect. The value
added is the operational ease between the organization and its customer.
Differentiation is the ability to provide unique and superior value to the
consumer in terms of service quality, special features, or after-sales services.
Differentiation allows a firm to command a premium price or premium market
position, which leads to higher profit ability.
An important factor in CRM is Communication with the customers. The most
important point in CRM is that the customer should be made to know that you
care for him. All customers, however big or small, must be treated equally. For
example, Ponds Institute has a Customer Response Centre to answer to each
and every letter and phone call received. Calls are answered with empathy and
responsibility.
Recently, HLL-Surf received ‘open customer feedback’ on product defects and
suggestions. Their new product Surf Excel was launched on the basis of
suggestions given by the customers. Customer surveys are increasingly being
considered essential tools for growth, conducted by both the organization and
independent agencies on a periodic basis.
Baron International (AKAI) has set up 42 Factor Service Centre and 18
substations. It employees 536 service technicians and operates 150 vans, which
are equipped with cellular phones. Complaints from the customers are
redressed within two hours.
In the above context, the challenge for the 21st century is not just serving
customer’s needs, but something more to the customers. To achieve and
implement CRM, companies need to follow the “Nine commandments”:
1. Understand customers,
2. Prepare to serve customers,
3. Listen to customers,
4. Provide responsive actions when customers call,
5. Live up to commitments,
6. Make transactions more memorable,
7. Surprise customers,
ANNA UNIVERSITY 249

Notes 8. Strive to keep customers for life,

9. Get unsolicited referrals from customers.
7.7 A FEW EXPERIENCES AND PROJECTIONS

According to NASSCOM, the CRM market in India was earlier estimated
around $2 million and was slated to grow to $17 million by 2006.
By 2004, only 35 per cent of enterprise would adequately define the cost and
benefits metrics desired from their e-CRM strategies before implementing
tactical projects. These enterprises will able to quantify of leveraging
technology to enable their e-CRM strategy.
By 2004, 55 per cent of CRM and e-CRM initiatives would fail to meet
measurable benefit objectives and will fail to positively affect ROI due to lack
of business processes for conducting ongoing measurements.
Gurbaxani of 24/7 customers.com opines that “Now SCM and CRM are
complementary applications and need to work in tandem to get a job done.
Knowledge management (KM) is a part of CRM and is used for analysis and to
cross-sell and up sell. Thus, CRM along with SCM and KM are going to be
important aspects for companies to be successful in the future.”
A Gartner study says that companies in the future are going to commit 16 per
cent of their investments in CRM, 5 per cent in ERP and 13 per cent in SCM.
According to Gartner group, at least 80% of the enterprises underestimate the
time and resources required, with many exceeding their budgets for this effort
by two or three times.
According to a report from IDC, CRM software sales were slated to grow from
US $6.2 billion in 2000 to $14 billion in 2005 demonstrating a five-year
Compounded Annual Growth Rate (CAGR) of 25.2%. This growth rate would
be well above that of overall IT services market, which showed a CAGR of 12
per cent during 2000-2005.
Giga Information Group says that CRM is the least likely category of software
that companies will cut. The prediction of Giga indicates a growth rate of 5%
or more for CRM.
Worldwide, the CRM applications sector clocked over 84% growth in 2000-01
and despite the slowdown, the CAGR for 2001-02 was expected to be in the
55-60% range.
e-CRM in Down Turns
Keeping in view the growing demand in CRM, by making use of IT efficiently,
organizations achieve a lot of benefits even during downturns. During
downturns, companies often fail to take any initiative or programme which is
not certain to offer instant success. Many of them do not take risks, and lay off
their workforce or auction their meager physical assets to pay creditors instead.
250 ANNA UNIVERSITY

Lesson 7 - E-CRM
The willingness to reorganize the significant process from the company is very Notes
important. During downtimes, the companies must identify the failure parts of
their customer service and try to resolve them.
7.8 CRM SOFTWARE

CRM—Customer Relationship Management—software refers to applications
that implement those technologies, strategies, and practices that companies use
to:
 establish strong relationship with their customers
 facilitate easy customer and company interaction through company
communication lines or through social media
 generate critical databases to facilitate business intelligence and insights
 generate promotional and loyalty programs based on those collected
insights
The expectation is that all these components work together to keep clients
happy and continuously patronizing the company’s service and product
offerings ahead of what is oftentimes a very competitive environment.
The purpose of CRM software in a business
CRM software is to provide all the essential tools for businesses to retain
customers and, through it, achieve sustained sales growth. You may think of
CRM software platforms as your main clearinghouse for every information that
would matter when dealing with your company’s clients, from complaints or
purchase history and patterns, how your sales and marketing have performed
against the latest company marketing and loyalty drives, or as-of-yet
unexploited areas that offer great potential for upselling and cross-selling
among others.
Benefits of CRM software
It could hardly be imagined how businesses—or the world, really—would
manage as it does without the elaborate CRM systems churning along as
businesses deliver their products and services to their customers, most of these
offerings carrying those features gleaned from the consumers and end-users
themselves, spirited somewhere in some vast data storage complexes.
More specifically, CRM software delivers the following benefits:
 Vastly improved customer information
 Fast, efficient client communication
 Much improved, more intelligent customer service
 Tasks like filling of forms, sending of reports are easily automated
 Sales, marketing, and customer service teams enhance their efficiency
ANNA UNIVERSITY 251

Notes  Analytical data and reporting are greatly improved

 Businesses are better placed to deliver top-notch products and services
 Maximized upselling and cross-selling
 Create—and keep—loyal customers
 Enhanced sales, increased revenues
What are the latest trends in CRM software?
 AI for CRM of the future. Ever-improving AI technology will soon glean
lessons from human interactions with data and spot areas humans could
hardly imagine exist. When applied to other teams and lead or customer
databases, companies gain access to previously unseen and untapped
patterns, uncover insights to enable them to tweak their systems for
significant benefits.
 Social media becomes social CRM. We mentioned Zoho CRM and Nimble
already has strong social media features and we foresee the trends getting
more widespread in the future. Expect bots and virtual communities to be
hot staging fields for CRM companies and their user clients.
 Deeper integration with other processes. Integrating multiple systems and
other applications with native CRM software does pay off. Big time. As
more and more of their objectives and processes actually overlap or
complement each other, why not proceed to the next obvious stage, full
integration.
 Bots providing gateways for fast messaging with snackable content,
content that is designed to be easy for readers to consume and to share as
Facebook Messenger currently implements it.
1. Electronic customer relationship management (E-

CRM) is the application of Internet-based technologies
such as emails, websites, chat rooms, forums and other
channels to achieve CRM objectives.
2. You activate your net banking facility, you pretty
much do away with the need to visit a bank branch or
an automated teller machine (ATM), to request for
certain services.
SUMMARY
e-CRM utilizes a complete view of the customer to make decisions about
messaging offers and channel delivery. It synchronizes communications across
otherwise disjointed customer facing systems. It adheres to permission-based
practices respecting individual’s preferences for how and whether they wish to
252 ANNA UNIVERSITY

Lesson 7 - E-CRM
communicate with you. And it focuses on understanding how the economic Notes
relationships influence the business. Advocates of e-CRM recognize that a
comprehensive understanding of customer activities, personalization,
relevance, permission, timeliness and metrics are all a means to an end—its
customers.
e-CRM therefore, however we choose to define it, must be the means to serve
the three areas of:
1. Sales
2. Customer Service
3. Support
Following are the areas where government has to concentrate to implement
electronic customer relationship management.
1. The government wants to stimulate the use of the electronic highway in
general as a means of driving growth and creating jobs. In order to do so, it
is crucial that they are at the forefront of effective use of digital
technologies.
2. Public sector authorities should try to become much more customer-
oriented. Increased use of electronic communication is critical to support a
dramatic growth in the level of customer interaction and citizen self-service
is crucial in the management of this.
3. The distance between the government and the citizen has grown wider and
wider. People are less interested in politics. Government services are seen
as unfriendly and inaccessible. The Internet can provide a solution to this
challenge, if effective communications software tools are used to support e-
Government initiatives.
4. The public sector, as a whole (departments, organizations) is complex and
obscure, Citizens have no idea how to find their way through this spaghetti
of departments. e-CRM has to provide an ideal tool to assist citizens in
navigating the vast quantities of information being provided online.
To achieve and implement CRM, companies need to follow the “Nine
commandments”:
1. Understand customers,
2. Prepare to serve customers,
3. Listen to customers,
4. Provide responsive actions when customers call,
5. Live up to commitments,
6. Make transactions more memorable,
7. Surprise customers,
ANNA UNIVERSITY 253

Notes 8. Strive to keep customers for life,

9. Get unsolicited referrals from customers.
There are many researches on customer satisfaction and loyalty. Oliver (1980)
defines customer satisfaction as the disconfirmation expectancy and
conception. Kotler (1991) identifies customer satisfaction as pre-purchase
expectancy together with post-purchase evaluation of products’ quality. Good
customer relationship management can satisfy customers immediately, raise
customer satisfaction, build long-term relationship and increase business
profits. Therefore, relationship marketing could provide a potential power for
business to acquire big profits (Berry, 1995). A business needs to learn to treat
the unique needs of each customer (Pepper & Rogers, 1997). Retaining old
customers, building long-term relationship and increasing customer loyalty are
the main aims of putting CRM into practice
During the last few years, globalization in the field of e-commerce has
challenged the companies to make customer communication truly interactive.
e-CRM is drifting away from a one-to-many mass-communication philosophy
to more individualized, one-to-one communications. Real-time, automated
marketing communication in relation to the effective, personalized sales and
services will make the firm’s communications to the consumer relevant and
timely. In future, there will be nothing like e-business since all businesses will
have an e-layer. In a similar way, the difference between CRM and e-CRM
will disappear.
The rapidly growing Internet-based technologies are making a major impact on
managing customer’s relationships, where companies are establishing one-to-
one customer relationship online. The Internet is increasingly serving
customers, either directly or in combination with traditional channel-
intermediaries.
KEYWORDS
Understand customer’s: Understanding customers is the key to giving them
good service. To give good customer care you must deliver what you promise.
Globalization: globalization means the increase of links and the
intercommunication which are extended beyond of governments and make the
global new system .
e-CRM: The eCRM or electronic customer relationship management
encompasses all the CRM functions with the use of the net environment i.e.,
intranet, extranet and internet
Sales: Sales are activities related to selling or the number of goods or services
sold in a given time period.
Customer Service: Customer service is the process of ensuring customer
satisfaction with a product or service
254 ANNA UNIVERSITY

Lesson 7 - E-CRM
SELF-ASSESSMENT QUESTIONS Notes

1. Define the term e-CRM?
2. Discuss the concept of e-CRM?
3. Describe the areas of e-CRM?
4. Describe the need for e-CRM in a liberalized economy?
5. Discuss the scope of Internet in e-CRM
6. Discuss CRM and its presence in the Indian economy.
7. Discuss the future of e-CRM.
8. Explain managing e-CRM.
9. Mention few ways to create loyalty online:
10. What is Internet banking
FURTHER READINGS

Publication.
Macmillan.
Elsevier.
ANNA UNIVERSITY 255

Notes
LESSON 8 – CUSTOMER DATA ANALYSIS
CONTENTS
Learning Objectives
Learning Outcomes
Overview
8.1 Data Warehousing
8.1.1 Different Types of Data Warehousing Tools
8.2 Data Warehouse Architecture
8.2.1 Differences between Data Warehousing and
Business Intelligence
8.3 Data Mining
8.3.1 Data Mining for CRM: Some Relevant Issues
8.4 Data Mining Applications
8.5 Difference Between Data Mining and Data Warehousing
8.6 Firefly Technology Versus Broad Vision based Technology
Summary
Keywords
Further Readings
LEARNING OBJECTIVES
 Explain the Data Warehousing
 Describe the Data Warehouse Architecture
 Understand the Data Mining
 Explain the Applications of Data Mining
 Differentiate Between Data Mining and Data Warehousing
 Discuss about the Firefly Technology Versus Broad Vision based
Technology
256 ANNA UNIVERSITY

Lesson 8 – Customer Data Analysis
LEARNING OUTCOMES Notes

understanding of:
 the data in the warehouse varies widely, depending on the discipline and
the focus of the organization.
 data mining uses a relatively large amount of computing power operating
on a large set of data to determine regularities and connections between
data points
 firefly technology represents hi-tech semiconductor manufactures who
have or want of more customers.
OVERVIEW
The significance of CRM solution lies in its ability to store and retrieve data. The
processes that are followed, the systems that are designed and the methods and
equipment used all have to be synchronized to deliver the best output to the
executives of CRM for realizing the fruits of effective e-CRM. Data mining and
knowledge discovery are receiving increasing attention in the business and
technological press, among industry analysis and among corporate management.
8.1 DATA WAREHOUSING

Data warehousing is combining data from multiple and usually varied sources
into one comprehensive and easily manipulated database. Common accessing
systems of data warehousing include queries, analysis and reporting. Because
data warehousing creates one database in the end, the number of sources can be
anything you want it to be, provided that the system can handle the volume, of
course. The final result, however, is homogeneous data, which can be more
easily manipulated.
Data warehousing is commonly used by companies to analyze trends over time.
In other words, companies may very well use data warehousing to view day-to-
day operations, but its primary function is facilitating strategic planning resulting
from long-term data overviews. From such overviews, business models,
forecasts, and other reports and projections can be made. Routinely, because the
data stored in data warehouses is intended to provide more overview-like
reporting, the data is read-only. If you want to update the data stored via data
warehousing, you’ll need to build a new query when you’re done.
This is not to say that data warehousing involves data that is never
updated. On the contrary, the data stored in data warehouses is updated all
the time. It’s the reporting and the analysis that take more of a long-term
view.
ANNA UNIVERSITY 257

Notes Data warehousing is not the be-all and end-all for storing all of a company’s
data. Rather, data warehousing is used to house the necessary data for specific
analysis. More comprehensive data storage requires different capacities that are
more static and less easily manipulated than those used for data warehousing.
Data warehousing is typically used by larger companies analyzing larger sets
of data for enterprise purposes. Smaller companies wishing to analyze just one
subject, for example, usually access data marts, which are much more specific
and targeted in their storage and reporting. Data warehousing often includes
smaller amounts of data grouped into data marts. In this way, a larger company
might have at its disposal both data warehousing and data marts, allowing users
to choose the source and functionality depending on current needs.
8.1.1 Different Types of Data Warehousing Tools
Data warehousing tools included in a standard software package can be divided
into four primary categories: data extraction, table management, query
management, and data integrity. A data warehouse is a repository for large sets
of transactional data. The data in the warehouse varies widely, depending on
the discipline and the focus of the organization. For example, many scientific
research projects collect huge amounts of data for analysis and review. A data
warehouse may be the best technology to manage and store this information.
It is important to note that specific skill sets are required for all staff
who work with
Many people in this field began their careers in statistics or computer science.
The concepts used to create and manage the data flow are quite complex and
require significant time and effort to master.
A data warehouse requires a method of adding data to the warehouse. An
extraction, transform, and load (ETL) tool is typically used for this purpose.
The tool itself is a software program used to correctly identify the appropriate
information from another computer system, based on the user’s criteria. This
data may need to be normalized or modified for consistency or to match the
warehouse database structure. Loading the data is critical, as all the
relationships and connections to other databases must be maintained to ensure
the integrity of the database, so it can be used with other data warehousing
tools.
Every data warehouse contains a vast number of database tables. These tables
are organized to work with each other in a logical, systematic way. The
maintenance of these tables is essential to the continuing operation and
accuracy of the data warehouse. Using the concept of relational databases,
these tables must be maintained and validated on a regular basis. Any faults or
failures will result in inaccurate reporting.
258 ANNA UNIVERSITY

A query is simply a programmed question or report request. There is an entire Notes

business process surrounding the creation of a data warehouse query. This
process requires in-depth knowledge and understanding of the business needs,
as well as the data structures within the data warehouse. Business intelligence
specialists are trained professionals who have the combination of skills and
training necessary to create and manage multiple, customized queries.
A data integrity function is standard in most data warehousing tools. These
modules are often extremely complex to use, with multiple options and
functions available. This tool is absolutely essential to the creation and
maintenance of a functioning, useful data warehouse. Data integrity tools
check for consistency within the data, accurate connections between databases,
and clean programming logic. Poor data integrity will result in a data
warehouse that provides inaccurate reports, resulting is poor business
decisions.
Learning Activity
Make differences between data warehousing and business
intelligence.
8.2 DATA WAREHOUSE ARCHITECTURE

Data warehouse architecture is a design that encapsulates all the facets of data
warehousing for an enterprise environment. Data warehousing is the creation
of a central domain to store complex, decentralized enterprise data in a logical
unit that enables data mining, business intelligence, and overall access to all
relevant data within an organization. Data warehouse architecture is inclusive
of all reporting requirements, data management, security requirements,
bandwidth requirements, and storage requirements.
When creating a data warehouse architecture, it is important to break the
architecture into specific domains that are joined into a holistic final design.
This design should be considered the blue print for the enterprise data
architecture. In particular, several primary areas should be developed when
considering data warehouse architecture. These areas are source system access,
staging area process, data enrichment process, data architecture, business
intelligence process, and storage requirements.
Data warehousing requires source data to be transferred from a transactional or
database of record into the data warehouse. This process is simplified into the
term Extract Transform and Load (ETL), which basically encapsulates the
areas of source system access, data enrichment, and data architecture. For the
sake of clarity, it is better to design these architectural areas in detail, which
outlines how the ETL process will be achieved. While some data is required
from the source systems, all data is not desirable as it would overburden the
enterprise warehouse. The primary areas of concern when addressing the
ANNA UNIVERSITY 259

Notes source system layer are data access methodologies, data required from the
source system, and refresh requirements.
The next data warehousing architectural layer to consider is the staging area
process. As most data from source systems will require validation and data
cleansing, it is important to create a landing zone for source data to reside prior
to loading into the business rules layer of the data warehouse. The staging area
maintains raw data feeds from source systems that are typically time stamped
to ensure the recentness of data.
The data enrichment or business rules process is where data is cleaned to meet
the desired outcome of the data warehouse. A good example of this cleansing
approach is using address cleansing tools; in the event the source system has
incorrect data, the data enrichment process will run the address from the raw
data set into a business rule system that would correct invalid addresses. This is
also the time where inaccurate data is deleted or modified to ensure
completeness within the data warehouse.
The next layer to consider is the data architecture layer. This area is where the
true design or schema of the enterprise data warehouse is completed.
Data warehousing in not a combination of all the data sets within

an enterprise, but instead it is a newly defined database built to enable an
overview of all business entities within the enterprise his requires the data
architecture to answer the questions that will be posed by the business in the
area of business intelligence and data mining.
By creating the data architecture in this manner, the raw data sets will be
transformed into fact tables that will allow the users to perform ad-hoc
reporting on the entire enterprise view rather then a specific database. This is
also the area that will maintain metadata about the data from the raw system,
which could include the source system name or primary keys.
The next area to consider is the business intelligence and reporting
requirements. This layer can be thought of as the user-facing requirement for
the data warehousing. Typically, this area contains canned reports, ad-hoc
reporting capability, and enterprise dashboards or alerts. The business
intelligence layers normally get the most consideration, as it is the only
outward-facing component within the data warehouse.
The final layer for consideration is overall data storage requirements and
maintenance. As a data warehouse continues to grow and expand, user base
data storage must be strictly managed and maintained. Additionally, while
creating the data warehouse architecture, the design should make realistic
estimates as to what will be required form a data storage capacity as well as a
band with data access capacity. These requirements will be critical as the data
warehouse become widely used throughout the enterprise
260 ANNA UNIVERSITY

8.2.1 Differences between Data Warehousing and Business Intelligence Notes

Data warehousing and business intelligence are two terms that are a common
source of confusion, both inside and outside of the information technology (IT)
industry. Usually, data warehousing refers to the technology used to actually
create a repository of data. Business intelligence refers to the tools and
applications used in the analysis and interpretation of data. Data warehousing
and business intelligence have grown substantially and are forecast to
experience continued growth into the future.
Data warehousing is comprised of two primary tools: databases and hardware.
In a data warehouse, there are multiple databases and data tables used to store
information. These tables are related to each other through the use of common
information or keys. The size of a data warehouse is limited by the storage
capacity of the hardware.
He hardware required for a data warehouse includes a server, hard drives, and
processors. In most organizations, the data warehouse is accessible via the
shared network or Intranet. A data architect usually is responsible for setting up
the database structure and managing the process for the updating of data from
the original sources.
Business intelligence is a term used to describe analytical software. Data
warehousing and business intelligence solutions can work together to provide
and support a user dashboard that offers customized information to the user.
The software provided in a business intelligence solution usually includes the
ability to manage large data sets, create queries, and generate reports. An
important aspect of any business intelligence solution is the usability.
The primary distinction between data warehousing and business intelligence
solutions is the purpose. A data warehouse is designed to hold and support the
transactional data, while the business intelligence solution is used to access and
review the data. These terms often are used interchangeably, but mean very
different things.
Staff members who work with data warehousing and business intelligence
tools typically must have a combination of information technology skills. He or
she must be able to manage and support the technology, from both a hardware
and software perspective. Additional skills for data warehousing staff usually
include relational database management and creation of database structures.
Business intelligence staff usually must have training in statistics and
mathematics, as well as programming logic.
The growth in data warehousing and business intelligence is due to the
maturity of business technology solutions. As organizations accumulated more
transactional data, they needed a way to access that data in a meaningful way.
These tools are used to create reports that can identify trends and help to
inform sound business decisions.
ANNA UNIVERSITY 261

Notes 8.3 DATA MINING

It is the exploration and analysis by automatic or semiautomatic means, of
large quantities of data in order to discover meaningful patterns and rules.
Data mining uses a relatively large amount of computing power operating on a
large set of data to determine regularities and connections between data points.
Algorithms that employ techniques from statistics, machine learning and
pattern recognition are used to search large databases automatically. Data
mining is also known as Knowledge-Discovery in Databases (KDD).
Like the term artificial intelligence, data mining is an umbrella term that can be
applied to a number of varying activities. In the corporate world, data mining is
used most frequently to determine the direction of trends and predict the future.
It is employed to build models and decision support systems that give people
information they can use. Data mining takes a front-line role in the battle
against terrorism. It was supposedly used to determine the leader of the 9/11
attacks.
Data miners are statisticians who use techniques with names like near-neighbor
models, k-means clustering, holdout method, k-fold cross validation, the leave-
one-out method, and so on. Regression techniques are used to subtract
irrelevant patterns, leaving only useful information. The term Bayesian is seen
frequently in the field, referring to a class of inference techniques that predict
the likelihood of future events by combining prior probabilities and
probabilities based on conditional events. Spam filtering is arguably a form of
data mining, which automatically brings relevant messages to the surface from
a chaotic sea of phishing attempts and Viagra pitches.
Decision trees are used to filter mountains of data. In a decision tree, all data
passes through an entrance node, where it faces a filter that separates the data
into streams depending on its characteristics. For example, data about
consumer behavior is likely to be filtered based on demographic factors. Data
mining is not primarily about fancy graphs and visualization techniques, but it
does employ them to show what it has found. It is known that we can absorb
more statistical information visually than verbally and this format for
presentation can be very persuasive and powerful if used in the right context.
As our civilization becomes increasingly data-saturated and sensors are
distributed en masse into our local environments, we will inadvertently
discover things that might be missed on the first pass over. Data mining will let
us correct these mistakes and discover new insights based on past data, giving
us more bang for our data storage buck.
Data Mining Concepts
1. The process is known as Knowledge Discovery in Databases and was
developed by Gregory Piatetsky-Shapiro in 1989. Four different classes of
data mining concepts allow the process to take place. Clustering uses the
262 ANNA UNIVERSITY

algorithm created from the data mining process to assemble items into Notes
similar groups.
2. Successful students arrange their commitments to ensure there is sufficient
time allocated to learning data mining concepts. It is worth noting that a
strong fundamental base is absolutely essential to making any progress in
this field.
Data Mining Tools
1. The most prevalent tool used in data mining is the process called
Knowledge Discovery in Databases (KDD). KDD was developed in 1989
by Gregory Piatetsky-Shapiro. Using this data mining tool, users are able to
process raw data, mine the data for information and interpret the various
results in the form of information management.
2. This can include information like financials, client lists, policy and
procedure documents, shareholder registers, and even electronic copies of
contractual agreements with customers and vendors. With a data mining
tool, it is possible to conduct a focused search for data that is needed, rather
than having to pore through all the stored data manually.
Data Mining Techniques
1. Market Basket Analysis
2. Memory Based Reasoning
3. Cluster Detection
4. Link Analysis
5. Decision Trees and Rule Induction
6. Neural Networks
7. Genetic Algorithms
8. OLAP
8.3.1 Data Mining for CRM: Some Relevant Issues
Data mining is an important enabler for CRM. Advances in data storage and
processing technologies have made it possible today to store very large
amounts of data in what recalled data warehouses and then use data mining
tools to extract relevant information. Data mining helps in the process of
understanding a customer by providing the necessary information and
facilitates informed decision-making. Operational CRM solutions involve
integration of business processes involving customer touch points.
Collaborative CRM involves the facilitation of collaborative services (such as
e-mail) to facilitate interactions between customer and employees. All this
effort produces rich data that feeds the Analytical CRM technologies
ANNA UNIVERSITY 263

Notes 8.4 DATA MINING APPLICATIONS

Data mining applications are computer software programs or packages that
enable the extraction and identification of patterns from stored data. A data
mining application, or data mining tool, is typically a software interface which
interacts with a large database containing customer or other important data.
Data mining is widely used by companies and public bodies for such uses as
marketing, detection of fraudulent activity, and scientific research.
There are a wide variety of data mining applications available, particularly for
business uses, such as Customer Relationship Management (CRM). These
applications enable marketing managers to understand the behaviors of their
customers and also to predict the potential behavior of prospective clients. An
example of the kind of task that a data mining technique may assist with is the
prediction of future client retention. For example, a company may decide to
increase prices, and could use data mining to predict how many customers
might be lost for a particular percentage increase in product price.
Data mining applications are often structured around the specific needs of an
industry sector or even tailored and built for a single organization. This is
because the patterns within data may be very specific. Banking data mining
applications may, for example, need to track client spending habits in order to
detect unusual transactions that might be fraudulent. In another example, a data
mining application might be used by a government body to detect associations
between individuals who may be involved in terrorist activities.
Pattern mining is a term sometimes used to refer to the detection of industry
specific patterns in particular types of data. Using this technique, data mining
association rules may be detected which can give a likelihood of one
characteristic or behavior being associated with another. An example of a data
mining association rule detected by a data mining application analyzing data
for a supermarket might be, for example, the knowledge that pasta and sauce
are purchased together 90% of the time.
The value of data mining applications in business is often estimated to be
extremely high. Some businesses have stored large amounts of data over years
of operation, yet without an appropriate data mining application are missing
out on the very valuable information that may be contained within their
existing data. The installation and use of data mining applications can
sometimes be an investment that returns dividends quickly by enabling a
business to leverage its existing information into more clients, more sales, or
greater profits.
Integrating Mining and CRM
Step 1:
Analytic user creates model using mining system
Model is then exported into campaign management system
264 ANNA UNIVERSITY

Step 2: Notes
Marketing user creates campaign that includes predictive models
When campaign executes, data mining engine scores customers dynamically
8.5 DIFFERENCE BETWEEN DATA MINING AND DATA

WAREHOUSING
The terms data mining and data warehousing are often confused by both
business and technical staff. The entire field of data management has
experienced a phenomenal growth with the implementation of data collection
software programs and the decreased cost of computer memory. The primary
purpose behind both these functions is to provide the tools and methodologies
to explore the patterns and meaning in large amount of data.
The primary differences between data mining and data warehousing are the
system designs, methodology used, and the purpose. Data mining is the use of
pattern recognition logic to identity trends within a sample data set and
extrapolate this information against the larger data pool. Data warehousing is
the process of extracting and storing data to allow easier reporting.
Data mining is a general term used to describe a range of business processes
that derive patterns from data. Typically, a statistical analysis software package
is used to identify specific patterns, based on the data set and queries generated
by the end user. A typical use of data mining is to create targeted marketing
programs, identify financial fraud, and to flag unusual patterns in behavior as
part of a security review.
An excellent example of data mining is the process used by telephone
companies to market products to existing customers. The telephone company
uses data mining software to access its database of customer information. A
query is written to identify customers who have subscribed to the basic phone
package and the Internet service over a specific time frame. Once this data set
is selected, another query is written to determine how many of these customers
took advantage of free additional phone features during a trial promotion. The
results of this data mining exercise reveal patterns of behavior that can drive or
help refine a marketing plan to increase the use of additional telephone
services.
It is important to note that the primary purpose of data mining is to

spot patterns in the data. The specifications used to define the sample set has
a huge impact on the relevance of the output and the accuracy of the
analysis.
Returning to the example above, if the data set is limited to customers within a
specific geographical area, the results and patterns will differ from a broader
ANNA UNIVERSITY 265

Notes data set. Although both data mining and data warehousing work with large
volumes of information, the processes used are quite different.
A data warehouse is a software product that is used to store large volumes of
data and run specifically designed queries and reports. Business intelligence is
a growing field of study that focuses on data warehousing and related
functionality. These tools are designed to extract data and store it in a method
designed to provide enhanced system performance. Much of the terminology in
data mining and data warehousing are the same, leading to more confusion.
8.6 FIREFLY TECHNOLOGY VERSUS BROAD VISION

BASED TECHNOLOGY
Firefly technology represents hi-tech semiconductor manufactures who have or
want of more customers. Firefly CRM is a Web-based customer relationship
management system to keep track of customers and their companies. Each
entry can have a list of actions to be done and items that have been done. It can
also be used to send emails to your customers.
Broad Vision: One-to-One application allows businesses to develop and
manage personalized web sites interactively profile each visitor and
dynamically match info based on their profile and business rules specified by
providers of site & services users do not go through hoops finding relevant
data.
Firefly Phone
A Firefly phone is a mobile phone specially designed for younger kids. The
Firefly phone features only five buttons on the faceplate, which are picture-
coded and designed to be pre-programmed by parents. The Firefly phone is
kid-friendly in design and has a clip for attaching to backpacks.
The five buttons on a Firefly phone consist of green and red call buttons to
begin and end a call, and mom and dad buttons with symbols similar to those
used on public restroom doors to indicate gender. There is also a directory
button that will hold up to 20 numbers programmed by mom or dad. On the
side of a Firefly phone is a 911-assistance button. The Firefly phone is
designed to be simple enough for a child to use and durable enough to
withstand normal use by a child.
Many parents find value in being constantly connected to their kids, especially
when children start preschool or kindergarten and spend part of their day at
school and part of their day at daycare. With a Firefly phone, parents can
provide a simple way for kids to reach them at work without needing to
remember numbers. It also prevents older children from calling friends
unnecessarily and racking up expensive bills.
266 ANNA UNIVERSITY

Electronic Perception Technology (EPT) Notes

Electronic Perception Technology (EPT) is a low-cost, single-chip imagining
technology that enables electronic components to form a 3-D map of their
surroundings and see what their users are doing. One of the first applications is
a “virtual keyboard”, a system that projects a laser keyboard onto a table and
detects which keys the user is pressing by watching their hands and sensing
which spots on the table their fingers are touching. Current EPT keyboards can
sense up to 400 characters per minute.
By sending out pulses of light and timing how long it takes for the reflection to
return to the sensor, EPT systems can determine depth. This is quite different
than the way in which the human brain determines depth, but still effective.
EPT systems can accurately determine brightness and distinguish objects from
one another.
1. To design an effective and efficient data warehouse,

we need to understand and analyze the business needs
and construct a business analysis framework.
2. Data Mining enables Corporations and Government
Agencies to analyze data extensively and relatively
inexpensively.
SUMMARY
Data warehousing is combining data from multiple and usually varied sources
into one comprehensive and easily manipulated database. Common accessing
systems of data warehousing include queries, analysis and reporting. Because
data warehousing creates one database in the end, the number of sources can be
anything you want it to be, provided that the system can handle the volume, of
course. The final result, however, is homogeneous data, which can be more
easily manipulated.
Data warehousing is commonly used by companies to analyze trends over
time. In other words, companies may very well use data warehousing to view
day-to-day operations, but its primary function is facilitating strategic planning
resulting from long-term data overviews. From such overviews, business
models, forecasts, and other reports and projections can be made. Routinely,
because the data stored in data warehouses is intended to provide more
overview-like reporting, the data is read-only. If you want to update the data
stored via data warehousing, you’ll need to build a new query when you’re
done.
Data warehouse architecture is a design that encapsulates all the facets of data
warehousing for an enterprise environment. Data warehousing is the creation
of a central domain to store complex, decentralized enterprise data in a logical
unit that enables data mining, business intelligence, and overall access to all
ANNA UNIVERSITY 267

Notes relevant data within an organization. Data warehouse architecture is inclusive

of all reporting requirements, data management, security requirements,
bandwidth requirements, and storage requirements.
When creating a data warehouse architecture, it is important to break the
architecture into specific domains that are joined into a holistic final design.
This design should be considered the blue print for the enterprise data
architecture. In particular, several primary areas should be developed when
considering data warehouse architecture. These areas are source system access,
staging area process, data enrichment process, data architecture, business
intelligence process, and storage requirements.
Data warehousing requires source data to be transferred from a transactional or
database of record into the data warehouse. This process is simplified into the
term Extract Transform and Load (ETL), which basically encapsulates the
areas of source system access, data enrichment, and data architecture. For the
sake of clarity, it is better to design these architectural areas in detail, which
outlines how the ETL process will be achieved.
While some data is required from the source systems, all data is not desirable
as it would overburden the enterprise warehouse.The primary areas of concern
when addressing the source system layer are data access methodologies, data
required from the source system, and refresh requirements.
Data mining is an important enabler for CRM. Advances in data storage and
processing technologies have made it possible today to store very large
amounts of data in what are called data warehouses and then use data mining
tools to extract relevant information. Data mining helps in the process of
understanding a customer by providing the necessary information and
facilitates informed decision-making. Operational CRM solutions involve
integration of business processes involving customer touch points.
Collaborative CRM involves the facilitation of collaborative services (such as
e-mail) to facilitate interactions between customer and employees. All this
effort produces rich data that feeds the Analytical CRM technologies
Data mining uses a relatively large amount of computing power operating on a
large set of data to determine regularities and connections between data points.
Algorithms that employ techniques from statistics, machine learning and
pattern recognition are used to search large databases automatically. Data
mining is also known as Knowledge-Discovery in Databases (KDD).
Data mining applications are computer software programs or packages that
enable the extraction and identification of patterns from stored data. A data
mining application, or data mining tool, is typically a software interface which
interacts with a large database containing customer or other important data.
Data mining is widely used by companies and public bodies for such uses as
marketing, detection of fraudulent activity, and scientific research.
268 ANNA UNIVERSITY

There are a wide variety of data mining applications available, particularly for Notes
business uses, such as Customer Relationship Management (CRM). These
applications enable marketing managers to understand the behaviors of their
customers and also to predict the potential behavior of prospective clients. An
example of the kind of task that a data mining technique may assist with is the
prediction of future client retention. For example, a company may decide to
increase prices, and could use data mining to predict how many customers
might be lost for a particular percentage increase in product price.
Data mining applications are often structured around the specific needs of an
industry sector or even tailored and built for a single organization. This is
because the patterns within data may be very specific. Banking data mining
applications may, for example, need to track client spending habits in order to
detect unusual transactions that might be fraudulent. In another example, a data
mining application might be used by a government body to detect associations
between individuals who may be involved in terrorist activities.
The terms data mining and data warehousing are often confused by both
business and technical staff. The entire field of data management has
experienced a phenomenal growth with the implementation of data collection
software programs and the decreased cost of computer memory. The primary
purpose behind both these functions is to provide the tools and methodologies
to explore the patterns and meaning in large amount of data.
The primary differences between data mining and data warehousing are the
system designs, methodology used, and the purpose. Data mining is the use of
pattern recognition logic to identity trends within a sample data set and
extrapolate this information against the larger data pool. Data warehousing is
the process of extracting and storing data to allow easier reporting.
Data mining is a general term used to describe a range of business processes
that derive patterns from data. Typically, a statistical analysis software package
is used to identify specific patterns, based on the data set and queries generated
by the end user. A typical use of data mining is to create targeted marketing
programs, identify financial fraud, and to flag unusual patterns in behavior as
part of a security review.
An excellent example of data mining is the process used by telephone
companies to market products to existing customers. The telephone company
uses data mining software to access its database of customer information. A
query is written to identify customers who have subscribed to the basic phone
package and the Internet service over a specific time frame. Once this data set
is selected, another query is written to determine how many of these customers
took advantage of free additional phone features during a trial promotion. The
results of this data mining exercise reveal patterns of behavior that can drive or
help refine a marketing plan to increase the use of additional telephone
services.
ANNA UNIVERSITY 269

Notes Firefly technology represents hi-tech semiconductor manufactures who have or

want of more customers. Firefly CRM is a Web-based customer relationship
management system to keep track of customers and their companies. Each
entry can have a list of actions to be done and items that have been done. It can
also be used to send emails to your customers.
Broad Vision: One-to-One application allows businesses to develop and
manage personalized web sites interactively profile each visitor and
dynamically match info based on their profile and business rules specified by
providers of site & services users do not go through hoops finding relevant
data.
A Firefly phone is a mobile phone specially designed for younger kids. The
Firefly phone features only five buttons on the faceplate, which are picture-
coded and designed to be pre-programmed by parents. The Firefly phone is
kid-friendly in design and has a clip for attaching to backpacks.
The five buttons on a Firefly phone consist of green and red call buttons to
begin and end a call, and mom and dad buttons with symbols similar to those
used on public restroom doors to indicate gender. There is also a directory
button that will hold up to 20 numbers programmed by mom or dad. On the
side of a Firefly phone is a 911-assistance button. The Firefly phone is
designed to be simple enough for a child to use and durable enough to
withstand normal use by a child.
KEYWORDS
Database: a structured set of data held in a computer, especially one that is
accessible in various ways.
Queries: ask a question about something, especially in order to express one's
doubts about it or to check its validity or accuracy
Analysis: Analysis is the process of breaking a complex topic or substance into
smaller parts in order to gain a better understanding of it
Reporting: give a spoken or written account of something that one has
observed, heard, done, or investigated.
Storage: the action or method of storing something for future use.
1. What is meant by data warehousing?
2. What is meant by data mining?
3. What are the different types of data warehousing tools?
4. What is data warehouse architecture?
270 ANNA UNIVERSITY

Long Answer Questions Notes

6. What is data mining concept?
7. What are data mining tools?
8. What are firefly phones?
9. What is Electronic Perception Technology?
10. Differentiate between data mining and data warehousing
FURTHER READINGS

Publication.
Macmillan.
Elsevier.
ANNA UNIVERSITY 271

Notes
272 ANNA UNIVERSITY

Model Question Paper
Model Question Paper

Reg. No.:
M.B.A. DEGREE EXAMINATION

Fourth Semester – Marketing Management
DBA 5065 – CUSTOMER RELATIONSHIP MANAGEMENT
Time: Three hours Maximum: 100 marks
Answer ALL questions.
PART A – (10 × 2 = 20 marks)

1. Define CRM.
2. Why is the concept of CRM important for an organization?
3. Define customer perception.
4. What do you mean by customer behaviour?
5. How can customer defection be reduced?
6. What are the key elements of CRM?
7. What is operational CRM?
8. Define strategic CRM.
9. Give an example of using the internet in increasing CRM.
10. How do softwares used in customer relationship management?
PART B – (5 × 13 = 65 MARKS)
11. (a) Explain the types of CRM.
Or
(b) Discuss the concepts and context of CRM.
12. (a) “Companies want relationship with customer, but do customer want relationship with
companies”- discuss.
Or
(b) Explain the importance of customer database in CRM.
13. (a) Explain the models of CRM.
Or
(b) Discuss the various strategies used by organization for customer retention and acquisitions.
ANNA UNIVERSITY 273

14. (a) Explain CRM implementation issues.

Or
(b) How would you define and measure customer value? Should it define value on the individual
level or on the segment level?
15. (a) Discuss in detail about the need for data mining for CRM.
Or
(b) Explain the roles and importance of data warehousing.
PART C — (1 × 15 = 15 MARKS)
16. (a) ‘Practising CRM without technology is not possible and it is a roadmap for business application’-
Discuss.
Or
(b) Elucidate the merits and limitations of customer profile analysis.
274 ANNA UNIVERSITY

Easy Anna Univ Customer - Relationship - Management Book

Uploaded by

Copyright:

Available Formats

Easy Anna Univ Customer - Relationship - Management Book

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Easy Anna Univ Customer - Relationship - Management Book

Uploaded by

Copyright:

Available Formats

CUSTOMER RELATIONSHIP MANAGEMENT

Notes LEARNING OBJECTIVES

1.1 MEANING AND DEFINITIONS OF CRM

Notes CRM can be defined as an alignment of strategy, processes and technology to

1.2 HISTORY OF CRM

1.3 NEEDS OF CRM

Customers in the e-business age expect constant access to a

1.4 SIGNIFICANCE OF CRM

need to spend significant amount of efforts to make employees adapt to Notes

Customer data can not only be used to integrate various internal

1.5 CONCEPTS AND CONTEXT OF RELATIONSHIP

Notes responses represent an alternative to the "modern" marketing concept of

Example, an enterprise might build a database about its customers that

According to an industry view, CRM has the following utilities: Notes

Example, taking orders using mobile devices

CRM requires the organisation to make significant investments in

3. Promotion: Promotion is an important element in providing information

Example, introduction of relationship based differential pricing

Notes must be a separate team of members well trained to evaluate the

Weak leadership could cause problems for any CRM

9. Responsive Organisation: In order to build customer relationship, an

related aspects. Customers up to a given point of time would concentrate on Notes

Notes is attended, to the satisfaction of the customer concerned. Periodical

Alerts and Interfaces Notes

Notes relationship marketing, customer retention and cross-selling, leading to

Event-based Marketing: The best definition of event-based marketing is a tie-

Mass Production/Mass Product: Mass Production is a system of

1.7 TRANSACTIONAL VS. RELATIONSHIP APPROACH

Notes 1.7.2 Relationship Approach

1.8 CRM AS A STRATEGIC MARKETING TOOL

Relevant Data Provides Information on What Customers Want

Satisfied Customers Can Lead to Referrals

1.9 CRM SIGNIFICANCE TO THE STAKEHOLDER

Thus, Gartner defines Customer Relationship Management (CRM) as a Notes

CRM and Customer Service

Notes The organizational missions of both Juniper's Customer Support department

1. We have three different types of CRM – strategic, Notes

Long Answer Questions

3. What is the nature of Customer Relationship Management? Notes

B. Murali Krishna, Customer Relationship Management-An Indian

Notes 2.8 Selection of Profitable Segments

To manage customers, organizations should follow some sort of approaches Notes

2.1 CUSTOMER INFORMATION DATABASE

Notes large population provides greater opportunity to find segments of customers or

The database always needs to be very accurate and up-to-date.

Notes The primary data is collected by conventional means such as conducting

2.1.5 Data Warehousing (DW) Notes

Example: bringing salutations, codes (m/f or male/female), units of

2.1.6 Data Marts

Notes 2.1.7 Data Access and Interrogation

Example: a salesperson adds customer data at the time of billing or after

Example:, an analyst of Walmart noticed that the sale of beer and

2.2 CONCEPT OF CUSTOMER PROFILING

2.3 CUSTOMER PROFILE ANALYSIS

Who could benefit from analyzing their customers? Notes

This information is temporarily appended to the company’s

2.4 CUSTOMER PERCEPTION

Customer perception is an important component of our relationship with our

2.4.1 Methods for Assessing Customer Perception Notes