Business Essays – Successful Business CRM
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Published: Tue, 08 Mar 2016
Successful Business CRM
“The customer is always right “ might be an old age, but it is one that has been at the forefront of successful businesses for many years, and will undoubtedly remain in the future.
Uniform products, along with individualization of customers have brought pressure for change in marketing practices. In the automotive industry, that implies generating additional product benefits by means of communication and services that are designed and delivered to match the individual needs of customers. This is one of the main goals of CRM.
Forging good relationships with its clients is absolutely vital to the success of any organization, and understanding the individual requirements is often the key to ensuring customer satisfaction, securing repeat business and driving up profits.
Business relationships are getting ever-more complex and customers are demanding – and receiving – a faster and better level of service, irrespective of the industry they are operating within.
Everybody understands the importance of putting the customers first
The Genesis Of CRM
To understand the current state of CRM, we must understand its history. The story of consumer relationship management is clearly older than the term itself. Its philosophical roots can be traced in ideas from service management, relationship marketing and the total quality management movement.
Quintessentially, these are all management paradigms that make the customer the focus of any activity that the company sets out of perform. Throughout the 1990s, these philosophies were supported by numerous research findings on the importance of customer satisfaction, loyalty and retention for the long-term success of any consumer service operation. Gradually, more and more organizations gained insight into the strategic imperative of investing in what we now call CRM capabilities.
Everybody understands the importance of putting the customers first. However, few organizations do really their potential when it comes to delivering the best possible service to their customers. Responding to the results of quality reviews and offering improved membership packages do generate positive feedback, but still there is a feeling that most organizations could be doing a lot better. So why is this?
The key to answering this question is to understand that every customer is different, and has a unique set of requirements. CRM has emerged as a business philosophy which dictates that everything your organization does needs to be focused directly on the strategic objective of delivering a better customer experience. Technology can help you do this, but technology alone is not enough.
In my opinion, the Customer Relationship Management definition entails the following:
- Know your CUSTOMER, his needs, wants and motives
- Appreciate the length, width and depth of the RELATIONSHIP between the customer and your organization
- Proper MANAGEMENT of all interactions with the customer
In their zeal to grow, many companies focus almost exclusively on entering new markets, introducing new products, and acquiring new customers. However, these companies often have a “leaky bucket”- as they add new customers, old ones defect from the firm. Some studies report the average retention rate for U.S. companies is about 80%. Roughly speaking, the average company loses the equivalent of its entire customer base in about five years.
Studies also show that the cost of acquisition is generally much higher than the cost of retaining existing customers. Therefore, it seems obvious that a firm should focus on retaining its existing customers. Unfortunately, many companies don’t even know their customer retention or defection rates. Part of this problem lies in the lack of appreciation for the importance of customer retention. Therefore customer relationship plays an important role in any industry.
In simple terms you can map a relationship with a customer as a ‘journey ‘where there are key milestones are as follows
Segment a market using good analysis, planning and data
- Enquiry Management
Effective Businesses set up suitable channel to deal with any questions from prospects
A visit, phone call or welcome pack is all ways to give customers the necessary information for doing business with you.
Often companies get to know customers by collecting information in the early days (e.g. through a questionnaire). This can be administered easily through the mail, enabling new buyers to fill out the details in their own time
A retain-and-develop philosophy is now widely accepted as the preferred approach to customer relationships, in a marketplace offering consumers more product choice through more channels. Only additional sales of the right products lead to increased customer profitability, whilst firms pursuing the practice of overselling are often implementing counter-productive tactics.
The customer-centric company must give customers the tools and knowledge necessary for them to play a leading role in managing and developing the relationship. However, the customers’ motivation to be active in the relationship is directly related to the product or service they have purchased, and it is necessary to understand the level of involvement they want.
The approach taken by CRD has been shown to offer the three desirable outcomes of excellent customer experience, enhanced customer retention, and a route to realizing lifetime value potential. This is achieved by creating a dialogue with customers based on the context and content that they find most appropriate.
Context is the environment in which the customer purchases and uses the product. It embraces many factors, including channel issues and the circumstances of the customer.
Content concerns itself with communications and embraces the overall consumer proposition, with the product or services at the core.
A Consumer View
Andy Bruce (2002, 12) Consumers want more than special offers. Their expectation is
- Value their custom
- Recognize and reward their loyalty
- Listen to their needs
- Respect them
Customer Satisfaction has become the mantra for the success among companies throughout the industrialized world. Business enterprises, organizations and institutions are all focused on measuring and improving the satisfaction of external and internal customers. The logic supporting this tactic is that customer satisfaction and customer retention move hand-in-hand, leading to improved market share and profits.
Yet, numerous studies have shown that anywhere from 60 percent to 85 percent of customers who switch firms would have been classified as satisfied according to conventional analytic procedures. We believe the anomaly stems not from basic precept that satisfying customers is a worthwhile endeavor but rather from the specific way satisfaction is measured and classified and exactly what happens as a result of that information.
Satisfaction can be measured along a continuum. The three major points on this continuum are the Zone of Pain, the Zone of Mere Satisfaction, ant the Zone of Delight. The zone of Pain is the point in which a company is not satisfying the customers’ need. The Zone of Mere Satisfaction is just past that point, in which the company is fulfilling needs but not doing much to distinguish itself from any other company within the same market.
Most companies lie within the Zone of Mere Satisfaction. Success comes from moving customers beyond the relatively flat Zone of Mere Satisfaction to the point of where customers demonstrate behaviors consistent with the goals of the firm. This is the Zone of Delight. The term DELIGHT clearly delineates that mere satisfaction in today’s market is not enough. This is what is meant by the customer delight principle.
Customer Lifetime Value
Customer Lifetime Value (CLV) is the present value of all current and future profits generated from a customer over the life of his or her business with a firm. The simple concept incorporates several aspects-the importance of not only current but also future profits, the time value of money such that $100 of profits today are worth more than $100 of profits tomorrow, and the possibility that customers may not do business with a firm forever.
Consumer Affect and Cognition
Consumer affect and cognition refer to two types of mental responses consumers have to stimuli and events in their environment. Affect refers to their feelings about stimuli and events, such as whether they like or dislike a product. Cognition refers to their beliefs about a particular product.
Affective responses can be favorable or unfavorable and vary in intensity. For instance, affect includes relatively intense emotions such as love or anger, strong feeling states such as satisfaction or frustration, moods such as boredom or relaxation and milder overall attitudes. Marketers typically develop strategies to create positive affect for their products and brands to increase the chances that customers will buy them.
Cognition refers to the mental structures and processes involved in thinking, understanding and interpreting stimuli and events. It includes the knowledge, meaning, and beliefs that consumers have developed from their experiences and have stored in their memories.
It also includes the processors associated with paying attention to and understanding stimuli and events, remembering past events, forming evaluations and making purchasing decisions and choices. Although many aspects of cognition are conscious thinking processes, others are essentially automatic. Marketers often try to increase consumers’ attention to products and their knowledge about them.
”Behavior” refers to the physical action of consumers that can be directly observed and measured by others. It is also called OVERT BEHAVIOR to distinguish it from mental activities, such as thinking, that cannot be observed directly.
Behavior is critical for marketing strategy because it is only through behavior that sales can be made and profits can be earned. Although many marketing strategies are designed to influence consumers’ affect and cognition, these strategies must ultimately result in overt consumer behavior for them to have value for the company. Thus, it is critical for marketers to analyze, understand and influence overt behavior. This can be done in many ways including offering superior quality, lower ability, greater inconvenience, easier availability and better services.
James J Lynch (1995, 4) – Loyalty clearly focuses a permanent dialogue with active customers. The aim is to build a mutually profitable long term relationship. All business needs to build customer loyalty, but small organizations- and especially those looking to establish themselves – need to pay particularly close attention to providing excellent customer service.
A loyal customer is one who:
- Makes regular repeat purchases
- Purchases across product and service lines
- Refers others
- Demonstrates immunity to the pull of the competition.
- Can tolerate an occasional lapse in the company’s support without defecting, owing to the goodwill established through regular, consistent service and provision of value.
Branding and Brand Loyalty
In the book Customer Winback (2001, 23), the authors have emphasized the importance of branding and branding loyalty. If a product is clearly positioned in the eyes of the consumer as an offer distinctively different from others, a brand has been created. Brands are intangible, yet they are often the most valuable asset a company can have.
The value of a brand arises from the positive perceptions and associations held by individuals and consist not only of ideas about functional products or services, but also of feelings and associations. The goodwill generated by a successful brand often results in a high degree of brand loyalty.
In collectivist-oriented cultures, product and brand preferences are more likely to express attitudes arising from social norms than from internal drives or motives. Thus products or brand preferences represent expressions of what is considered socially acceptable rather than individual preferences. This ‘Brand Equity’ gives powerful branded products an edge over average brands or unbranded products and is the result of long-term heavy financial investment in building a brand image.
Review of Literature Towards Customer Perception
Everything in the Universe, throughout all its kingdoms, is CONSCIOUS: i.e., endowed with a consciousness of its own kind and on its own plane of perception – H. P. Blavatsky (1891).
Steven Wheeler (2006) defines Perception as the cognitive impression that is formed of “reality” which in turn influences the individual’s actions and behavior toward that object.
Perception is about changing the way people see things, shifting attitudes and creating recognition.
Flemming Funch (2005, 30), Perceptions vary from person to person. Different people perceive different things about the same situation. But more than that, we assign different meanings to what we perceive. And the meanings might change for a certain person. One might change one’s perspective or simply make things mean something else.
The faculty of perceiving; the faculty, or peculiar part, of man’s constitution by which he has knowledge through the medium or instrumentality of the bodily organs; the act of apprehending material objects or qualities through the senses; – distinguished from conception. – Bentley.
Peter Lindsay & Donald A. Norman (1977) – Perception, on the other hand, better describes one’s ultimate experience of the world and typically involves further processing of sensory input. In practice, sensation and perception are virtually impossible to separate, because they are part of one continuous process.
Sara R. Stumpf (1998) explains “consumer perception” as the interpretation process by which consumers make sense of their own environment. Many people believe that perception is passive or rather that we seeing and hear what is out there very objectively. However, the truth is quite the contrary. People actually actively perceive stimuli and objects in their surrounding environments.
Consumers see what they expect to see, and what they expect to see usually depends on their general beliefs and stereotypes. Since different groups (segments) of people have different general beliefs and stereotypes, they tend to perceive stimuli in the marketing environment differently.
What does all of this mean for marketers? Basically, that marketers need to be aware of this fact about perception so that they may be able to tailor their marketing stimuli (i.e. ads, packaging, pricing, etc.) differently for the different segments they are targeting. Additionally, perceptual expectations can lead to illusions and illusions can be used to great effect in packaging and advertising.
Reality Is Perception ?
“Reality is merely an illusion, albeit a very persistent one.” – Albert Einstein
Evan Hirsh, Steve Hedlund, Mark Schweizer Virtually all of the difference in how consumers perceive competing brands can be explained by their relative performance against two holistic measures: product excellence and cost.
Tony D. Clark (2006), Things aren’t always what they seem. Marketers and magicians rely on this fact to make you see things – the way they want you to see them. Artists do too.
Stephen Carman (2003), Perception is defined as the act of perceiving, which is “to become aware of directly through any of the senses, especially sight or hearing.” On the other hand, reality is defined as “the quality or state of being actual or true”. An analogy may help: the earth was “perceived” to be flat which influenced peoples understanding, beliefs, and behaviors. The “reality” turned out to be something significantly different.
Therefore, it seems to me a more accurate statement is to say “perception may be reality” or “perception is perception of reality” rather than the more common “perception is reality”.
In an online blog site, Dean’s world (2003), author Chris says “Perception is reality” is usually just a clumsy but short way of saying that people do not react to reality, they react to their perception of it.
Therefore if you control how they perceive reality, which is easier than controlling reality, you control how they will react. It also sometimes is said to point out to people that it’s not enough to make something so for people to act like it is so; you have to make them know it, too.
Evan Hirsh, Steve Hedlund, Mark Schweizer (2003) in their Strategy + Business magazine wrote that a strong car brand can create significant value in the automotive industry. Expensive advertising cannot compensate for weak brands and undifferentiated products.
This when mixed with the very fact that for a maximum number of auto manufacturers brand positioning and development play a major role on their marketing agenda.
Most of the auto manufacturers consider Consumers’ perceptions as that they are based on their accumulated direct and indirect experience with the products that makes up those brands. But most often than not the core fact those consumers’ beliefs are accurate, stable, and relatively immune to manipulation are forgotten and left for questioning. It is those industry leaders, who value the consumers’ perception of the market, what the customer demands and how much they can afford – are the successful market leaders.
In a competitive industry, when one company successfully markets its newest idea, it is so very common for all the competing forces to follow suit. As opposed to other industries where equity is created largely via advertising, in the automotive industry brand perceptions change first and foremost by regular and unrelenting changes in the principal product assortment
Jill Griffin & Michael Lowenstein (2001, 140) have explored much regarding the Customer Interaction Model. The customer perception cum interaction model to produce the BEST result has four steps:
B: Begin the customer interaction
- Gauge mood
- Build rapport
E: Establish the customer’s agenda
- Ask open-ended and closed questions
- Be quiet
- Listen actively
- Probe for specifics
S: Satisfy the customer’s needs
- Generate more than one option
- Consider the customer’s perspective
T: Thank the customer and verify the next step
- Thank the customer
- Verify who will do what by when.
The author has given simple but effective steps to understand the customer behavior and promote customer interaction model.
Jossey Bass (2001, 152) outline the Proven process for searching out customer value (PACE)
Prepare for the Research Process
Before anything can be done to encourage customer loyalty, a business must first know what makes a customer loyal and what factors exist in the company that discourages loyalty. Start by interviewing management and staff as well as reviewing existing information, including prior research, sales report, complaint data, and so on. Determine (1) what the company knows about its customers and competitors and (2) what insights are missing.
Assemble Customer Needs and Wants
Use qualitative research methods to uncover customer-defined needs, expectations, problems, and complaints. With this information, you can design your quantitative customer questionnaire.
Comprehend Customer Priorities
Use your questionnaire to survey randomly selected customers and identify customer loyalty drivers. Analyze the survey data, employing user-friendly graphics and models that prioritize your firm’s performance areas according to improvement needs and opportunities.
Employ Your Findings
You will now have a clear understanding of what is driving customer value and loyalty. Based on your research findings, develop action plans, programs, and processes for improving customer loyalty.
Review of Literature Pertaining To CRM
History of CRM
Meeting the customer demands and managing the customer relationship is becoming ever more complex as the number of channels through which interactions take place has grown to encompass the telephone, the World Wide Web, e-mail and interactive digital TV as well as traditional high street outlets and direct mail.
Companies will only succeed if they adopt a management approach that puts the customer at the core of the company’s processes and practices. Moreover, companies need to view CRM as a cyclical process which doesn’t treat customer contacts as one-off events but as interactions in a long-term relationship which develops and deepens over time.
According to one of the earliest Relationship Marketing (RM) is a “….strategy to attract, retain and enhance customer relationships”. The term CRM is a later version of RM, having similar meaning, but used differently in literature.
CRM is the broad category of concepts, tools and processes that allows an organization to understand and serve everyone with it comes into contact.CRM is about gathering information that is used to serve customers – basic information such as name, address, meeting and purchase history, and service and support contacts. In a supplier relationship it might be procurement history, terms and conditions, or contact information .This information is then used to better serve the clients.
CRM is concerned with creating improved shareholder value through the use of customer-centric business processes and the development of appropriate relationship with consumers
Jonathan Sellwood (2007) thinks CRM is a common business term, which has been around for a lot longer than may imagine, and can be thought of as a “soft issue”, but is quite a basic concept and is of prime importance to all to understand and implement
The Gartner Group (2000) defines CRM is a management discipline – a philosophy even – that require businesses to recognize and nurture their relationships with customers. With CRM an individual customer’s needs and preferences are available to anyone in the business working at the customer interface regardless of channel. Each customer is treated as an individual in a relationship that feels one to one.
Wendy Gersten believes that CRM is a strategy to acquire new customers, to retain them and to recover them if they are defected. The corresponding CRM goals can only be achieved if the right data sources are combined.
Darryl Coulthard, Olaf Boon &Brain Corbitt focused their attention to the types of CRM – Analytical & Operational CRM.
Operational CRM includes all activities concerning the direct customer contact, such as campaigns, hotlines or customer clubs. Every oCRM activity is generally implemented in one of the three enterprise processes: sales, marketing or service, since these are the processes concerned with the direct customer contact.
Analytical CRM (aCRM) provides all the components to analyze customer characteristics (behavior) in order to accomplish oCRM activities, with respect to the customers’ needs and expectations. There, the idealistic goal is to provide all information necessary to create a tailored cross-channel dialogue with each single customer on the basis of his or her actual relations.
To reach this goal and aiming to show only one company image to the customer, it is necessary to look at CRM (oCRM and aCRM) as a cross enterprise process. Marketing, sales and service departments have to coordinate their responsibilities, activities, information systems and data
Jill Dyche in his CRM Handbook has characterizes CRM. CRM is a business philosophy which provides a vision for the way your company wants to deal with your customers. To deliver that vision, you need a CRM strategy which shape to your sales, marketing and customer service and data analysis activities. For most companies, the aim of a CRM strategy is to maximize profitable relationships with customers by increasing the value of the relationship for both the vendor and the customer.
Software solutions and new technologies may facilitate the new ways of working required by a CRM strategy but simply implementing a CRM product will not, in itself, deliver increased customer satisfaction. Instead, companies need to introduce new cross-departmental processes which allow them to complete the four steps in the CRM cycle: plan, interact, process, leverage – and then plan anew
Many CRM applications tackle only one or two elements of the CRM cycle. As a result, a high proportion of CRM projects – which are based around implementing a particular package or suite of applications – fail to increase customer satisfaction, improve customer loyalty or deliver a return on investment for the supplier in the form of increased revenues or profits.
Any CRM imitative should therefore start with a vision and strategy which lays out the company’s aims and objectives. You must then adjust your processes and organizational structures so that they will allow you to execute that strategy effectively. These processes need to be underpinned by a CRM architecture which connects interaction channels with CRM applications and customer data repositories
Aspects of a Customer Relationship Management
1. Know your Customer
Any definition of CRM would be fundamentally wrong if it didn’t start with the customer in mind. As with customer service, to truly engage the customer with your organization and products, you’ll have to exceed the expectations of the customer. How can you do that if you don’t know the customer?
2. Appreciate the relationship
When talking about the length, width and depth of your customer’s relationships, it comes to mind that they are not one-dimensional. The relationship with your client can exist on many levels, not just through the customer service reps, or the web site.
3. Manage the interactions
The final part of my customer relationship management definition is on the management of the interactions. As you now know the relationship with the customer doesn’t only exist on the level of customer support or through order entry
To manage all interactions with the customer, CRM can only be successful if the complete organization is mobilized. In fact, you could say that everyone is part of the customer service department. Often, this means a great paradigm shift for the business, towards true customer centric thinking and acting.
ATOS ORIGIN in their white paper on CRM has briefed on the CRM cycle vision which emphasis on the following: Plan, Interact, Process and Leverage. The CRM cycle vision is given in a nutshell in the above diagram.
CRM & the Auto Industry
According to Automobile industry view, CRM consists of:
- Helping an enterprise to enable its marketing departments to identify and target their best customers, manage marketing campaigns and generate quality leads for the sales team.
- Assisting the organization to improve sales, account, and sales management by optimizing information shared by multiple employees, and streamlining existing processes (for example, taking orders using mobile devices and internet)
- 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 and identify customer needs and effectively build relationships between the company, its customer base, and distribution partners.
Many organizations turn to CRM software to help them manage their customer relationships. CRM technology is offered on-premise, on-demand or through Software as a Service (SaaS) CRM, depending on the vendor. Recently, mobile CRM and the open source CRM software model have also become more popular.
Eric Williams (2008) defines CRM as an information industry term for methodologies, software, and usually Internet capabilities that help an enterprise manage customer relationships in an organized way. For example, an enterprise might build a database about its customers that described relationships in sufficient detail so that management, salespeople, people providing service, and perhaps the customer directly could 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.
Steven Wheeler (2002) mentions in his article on “How the Auto Industry Should Embrace CRM” that Information technology is a costly enabler of customer relationship management (CRM). But CRM programs coupled with smart technology and strategy may soon mean the end of the road for mass marketing in the auto industry.
As is mentioned by Evan Hirsh, Steve Hedlund, Mark Schweizer (2003), Consumers are not only elegantly simple in their view of automotive brands, they are acutely rational as well. In addition to their own firsthand experience, they consult a number of sources, from the anecdotal evidence of friends and family, to independent reviews by magazines, industry groups, and government agencies, to the manufacturers’ marketing communications, including brochures, measured media, and owner events. Every car manufacturer need to be aware of the customers wants and perceptions in order to better serve their needs and hence improve their market rating and business value amongst their competitors.
CRM as another valuable in the hands of the auto manufacturers enables them to integrate processes, people, operations and marketing capabilities to maximize retention, acquisition and productivity. Knowing your customer is just not enough to do business, but to study them constantly and understand their perceptions of the service you offer is more becoming increasingly valuable than ever before.
Businesses that understand this and operate in accordance with these basic rules of consumers requirements are there to stay. Different cultures and economic market needs determine the business capabilities and those who stay ahead with their game plan by utilizing the CRM and hence evaluate
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