Customer Relationship Management-Notes-Unit II
Customer Relationship Management-Notes-Unit II
Customer Relationship Management-Notes-Unit II
UNIT II
Unit II: Customer Learning Relationship – Key stages of CRM-Forces driving CRM-
Benefits of CRM- Growth of CRM market in India - Key principles of CRM.
----------------------------------------------------------------------------------------------
CRM are mainly of two different types. Reactive service is where the customer has a
problem and contacts the company. Proactive service is where the manager decides not to
wait for the customer to contact the firm, but contacts the customer himself in order to
establish a dialogue and solve problems.
“CRM – Notes”
Dwyer suggests a five-stage model where each phase represents the following:
1. Awareness: Awareness is where one party recognizes that the other party is a
‘feasible exchange partner’.
2. Exploration: Exploration refers to the ‘research and trial stage’ in the exchange. This
stage includes sub phases such as attraction, communication and bargaining, development
and exercise of power and expectation development.
3. Expansion: Expansion refers to the period where there is a continual increase in
benefits obtained by exchange partners and they become increasingly interdependent.
4. Commitment: Commitment relates to the implicit or explicit pledge of relational
continuity between the parties.
5. Dissolution: Dissolution refers to possibility of withdrawal in any relationship
Risk, Salience and Emotion are separately definable concepts but are not mutually
exclusive. There is a close association between the risk perceived in, the salience
associated with and the emotion generated by any given exchange situation. The high risk
is often associated with high salience products or service and the high emotional
outcome, although they are highly subjective and may differ from individual to
individual.
It should be noted that a particular exchange relationship will generate a perception of
high level of risk, salience and emotion with one customer yet, the same transaction in
repeated will only generate a low level with another.
Trust:
Trust is seen as an important driver to both relationships and relationship enhancement in
that it would appear to reduce risk perception more effectively than anything else.
Trust is an essential ingredient in healthy personality, a foundation for interpersonal
relationships a prerequisite for co-operation and a basis for stability in social institutions
and markets. Generating co-operative behaviour trust may-
• Reduce harmful conflict
• Decrease transactional costs(e.g. negating the need for constant checks)
• Promote adaptive organization form(e.g. Network relationships)
• Facilitate rapid formation of ad hoc network groups
• Promote effective response to crisis
Many different words are used to describe trusting situations. They are
1. Probity: Probity focuses on honesty and integrity that may mean in business
terms as professional understanding and reputation.
2. Equity: Factors such as fair-mindedness, benevolence, caring values and sincerity
are in evidence here.
3. Reliability: Reliability relates to a firm having required expertise to perform its
business effectively and reliably.
4. Satisfaction: Satisfaction represents overall evaluation, feeling or attitude about
other party in a relationship.
Commitment:
Commitment implies that both parties will be loyal, reliable and show stability in the
relationship with one another. It is therefore, a desire to maintain a relationship, often
indicated by an ongoing investment into activities, which are expected to maintain that
relationship.
“CRM – Notes”
Whatever the industry, it is important to build trust and commitment if the establishment
of a lasting relationship is the goal. There may be number of precursors to trust and
commitment, including –
• Relationship termination costs
• Relationship benefits
• Shared values
• Communication
• Opportunistic behaviour
Benefits of CRM:
CRM is the process of acquiring, retaining and growing profitable customers. CRM helps
business use technology and human resources to gain insight into the behaviour of
“CRM – Notes”
customers and the value of those customers that create loyalty. CRM has several
advantages.
1) Provides better customer service
2) Increase customer Revenue
3) Discover new customers
4) Prevents over spending on low value clients or under spending on high value ones
5) Cross Sell/ Up sell products more effectively
6) Help sales staff to close deal faster
7) Make call centre more efficient
8) Simplify marketing and sales processes
9) Reduce Advertising costs
10) Allows organization to compete for customer based service, not prices.
Growth Drivers:
Dwivedy of Microsoft says, “Today, getting new customers is a problem. Retaining them
is even more hard, which is in direct proportion to the growth factor of CRM.” For Team
“CRM – Notes”
Computers’ Chopra and Religare’s Grewal, one factor driving the growth of CRM is the
need for the companies to optimize marketing spend and deliver offerings in a more
defined manner.
“For example, in the auto industry, cross-selling has been happening between sales,
financing, and insurance, and, to some extent, after-sales. The advent of vendor/brand
agnostic service agencies will mean increased competition and obviously companies
having more customer awareness will win,” adds Grewal.
The CRM market in India is in the initial phase when there would be high demand for
consulting services in order to bring a fit between the business and CRM application and
also around deployment and implementation of the same. Organisations have started
using 'Service Quality' as a key differentiator and are using it as their USP to increase
revenues and to gain market share and that's precisely the reason why CRM has been hot
in service verticals like financial and telecom services.
According to Kapil Dev Singh, Country Manager, IDC India," Unlike ERM, which is
top-driven and therefore faces a lot of inertia, CRM initiatives in most organisations are
driven by the actual users (Customer Support Department, Sales Function, etc.). Further,
the implementation cycles for CRM are shorter and automation of CRM related processes
have a direct impact on a company's profitability. Therefore more and more Indian
enterprises are expected to invest in CRM solutions to provide improved services to the
customers and drive CRM market."
This is supported by the fact that four out of five companies are spending on modular
CRM (i.e point solutions). According to IDC's end-user survey conducted among 200
organisations, nearly 81 per cent stated that they are using modular CRM, while 19 per
cent stated that they are using complete CRM package. The CRM applications that are
primarily used are marketing automation closely followed by customer care and support
automation.
According to the survey, the key business drivers for investing in CRM solutions are
customer retention & loyalty and improving cost efficiencies. Another important reason
that emerged for CRM adoption was to make sales force management more effective.
This shows that Indian businesses are beginning to feel the heat from increasing
competition and are actively trying to retain their loyal customer base.
Principles of CRM:
“CRM – Notes”
CRM is much desired and enjoyable trip to arrive at a desired destination for the
businesses. Though there is no magic formula for effective CRM, but there are certain
guiding principles for CRM to function effectively. The following are the principles of
CRM.
5. Re-organize Metrics:
The following CRM metrics are set-
Employee participation in CRM and usage
Strategic Customer Acquisition
Customer consolidation, retention and defection rates
Brand impact
Customer satisfaction ratings and loyalty ratings
Customer knowledge
Customer Entanglement
Learning Relationships
These metrics are linked to business metrics such as revenue cost efficiency, Cross
sell/Up sell rate, Market Share, Mind Share Customer share and profitability. They help
to assemble the resources required and prepare an achievable CRM Roadmap.
Thus, the following CRM strategies and solutions have to be borne in mind for overall
CRM success
1) CRM is not software purchase, it is a strategy
2) CRM must fit the way you work-Today and Tomorrow
3) Business benefits and return on investment in CRM should be properly defined
and measured
4) Total cost of Ownership should determine carefully.
5) Right Partner should be selected for successful CRM solutions.
************