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Services Marketing and Customer Relationship Management

This book is a part of the course by Jaipur National University, Jaipur.This book contains the course content for Services Marketing and Customer Relationship Management.

JNU, JaipurFirst Edition 2013

The content in the book is copyright of JNU. All rights reserved.No part of the content may in any form or by any electronic, mechanical, photocopying, recording, or any other means be reproduced, stored in a retrieval system or be broadcast or transmitted without the prior permission of the publisher.

JNU makes reasonable endeavours to ensure content is current and accurate. JNU reserves the right to alter the content whenever the need arises, and to vary it at any time without prior notice.

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Index

ContentI. ...................................................................... II

List of FiguresII. ..........................................................VI

List of TableIII. .......................................................... VII

AbbreviationsIV. ......................................................VIII

Case StudyV. .............................................................. 136

BibliographyVI. ......................................................... 139

Self Assessment AnswersVII. ................................... 142

Book at a Glance

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Contents

Chapter I ....................................................................................................................................................... 1Service Marketing ........................................................................................................................................ 1Aim ................................................................................................................................................................ 1Objectives ...................................................................................................................................................... 1Learning outcome .......................................................................................................................................... 11.1 Introduction .............................................................................................................................................. 21.2 Consumer Choice Behaviour in Services ................................................................................................ 21.3 Job of Service Marketer ........................................................................................................................... 31.4 Steps for Building a Service Brand .......................................................................................................... 41.5 7Ps of Services Marketing ....................................................................................................................... 5 1.5.1 3Ps of Services Marketing : People ......................................................................................... 5 1.5.2 3Ps of Services Marketing : Physical Evidence ....................................................................... 6 1.5.3 3Ps of Services Marketing : Process ........................................................................................ 61.6 Problems in Service Marketing ................................................................................................................ 7Summary ....................................................................................................................................................... 9References ..................................................................................................................................................... 9Recommended Reading ............................................................................................................................. 10Self Assessment ............................................................................................................................................11

Chapter II ................................................................................................................................................... 13Customer Relationship Management ....................................................................................................... 13Aim .............................................................................................................................................................. 13Objectives ................................................................................................................................................... 13Learning outcome ........................................................................................................................................ 132.1 Introduction to Customer Relationship Management ............................................................................ 142.2 History of CRM ..................................................................................................................................... 142.3 Types of CRM ........................................................................................................................................ 152.4 CRM and Information Technology (IT) ................................................................................................. 182.5 CRM Constituencies .............................................................................................................................. 182.6 Commercial Contexts of CRM .............................................................................................................. 192.7 CRM Success Factors ............................................................................................................................ 202.8 Key Segments for CRM Applications .................................................................................................... 202.9 CRM Service Providers and Consultants ............................................................................................... 202.10 Five Key Cross-Functional CRM Processes ........................................................................................ 212.11 The Need for CRM Strategic Framework ............................................................................................ 212.12 Misunderstandings about CRM ........................................................................................................... 222.13 CRM is here to Stay ............................................................................................................................. 23Summary ..................................................................................................................................................... 24References ................................................................................................................................................... 24Recommended Reading ............................................................................................................................. 24Self Assessment ........................................................................................................................................... 25

Chapter III .................................................................................................................................................. 27The Strategy Development Process .......................................................................................................... 27Aim .............................................................................................................................................................. 27Objectives ................................................................................................................................................... 27Learning outcome ........................................................................................................................................ 273.1 Introduction to the Strategy Development Process ................................................................................ 283.2 Business Strategy ................................................................................................................................... 283.3 The Role of Business Strategy ............................................................................................................... 293.4 Business Vision ...................................................................................................................................... 293.5 Industry and Competitive Characteristics .............................................................................................. 313.6 Focusing on Business Strategy .............................................................................................................. 36

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3.7 Customer Strategy .................................................................................................................................. 373.8 The Role of Customer Strategy .............................................................................................................. 373.9 Focusing on Customer Strategy ............................................................................................................. 373.10 Aligning Business Strategy and Customer Strategy ............................................................................ 393.11 CRM Strategy Development ................................................................................................................ 39Summary ..................................................................................................................................................... 42References ................................................................................................................................................... 42Recommended Reading ............................................................................................................................. 42Self Assessment ........................................................................................................................................... 43

Chapter IV .................................................................................................................................................. 45The Value Creation Process ...................................................................................................................... 45Aim .............................................................................................................................................................. 45Objectives ................................................................................................................................................... 45Learning outcome ........................................................................................................................................ 454.1 Introduction to Value Creation Process .................................................................................................. 464.2 Core and Augmented Offer Add Value .................................................................................................. 474.3 Relationships Add Value ........................................................................................................................ 484.4 The Importance of Brand Image ............................................................................................................ 514.5 The Value Proposition ............................................................................................................................ 524.6 Customer Profitability ............................................................................................................................ 574.7 Understanding Future Profit Potential ................................................................................................... 584.8 Customer Acquisition and its Economics .............................................................................................. 58Summary ..................................................................................................................................................... 60References ................................................................................................................................................... 60Recommended Reading ............................................................................................................................. 60Self Assessment ........................................................................................................................................... 61

Chapter V .................................................................................................................................................... 63The Performance Assessment Process ..................................................................................................... 63Aim .............................................................................................................................................................. 63Objectives ................................................................................................................................................... 63Learning outcome ........................................................................................................................................ 635.1 Introduction to the Performance Assessment Process ........................................................................... 645.2 The Need for a Systematic Approach .................................................................................................... 645.3 Understanding the Key Drivers of Shareholder Results ........................................................................ 655.4 Shareholder Value, Customer Value, Employee Value and Cost Reduction .......................................... 65 5.4.1 Employee Value ..................................................................................................................... 66 5.4.2 Customer Value ...................................................................................................................... 66 5.4.3 Shareholder Value .................................................................................................................. 67 5.4.4 Cost Reduction ....................................................................................................................... 68 5.4.5 Linking Shareholder Value, Employee Value, Customer Value and Cost Reduction ............ 695.5 Developing Appropriate Standards, Metrics and KPIs .......................................................................... 69 5.5.1 Standards ................................................................................................................................ 70 5.5.1.1 The QCi Customer Management Assessment Tool (CMAT) .................................. 70 5.5.1.2 Customer Operations Performance Centre (COPC) Standard ................................ 71 5.5.2 Metrics ................................................................................................................................... 71 5.5.2.1 Customer Metrics .................................................................................................... 72 5.5.2.2 People and Process Metrics ..................................................................................... 73 5.5.2.3 Strategic Metrics ..................................................................................................... 73 5.5.2.4 Output and Comparative Metrics ............................................................................ 73 5.5.2.5 Special Metrics ........................................................................................................ 74 5.5.3 Key Performance Indicators .................................................................................................. 745.6 Establishing a CRM Performance Monitoring System .......................................................................... 745.7 Developing Strategy Maps and Success Maps ...................................................................................... 75

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5.8 Evaluating and Communicating CRM Return on Investment ............................................................... 755.9 Relating CRM Performance to Business Performance ......................................................................... 755.10 Measuring CRM Return on Investment ............................................................................................... 75Summary ..................................................................................................................................................... 77References ................................................................................................................................................... 77Recommended Reading ............................................................................................................................. 78Self Assessment ........................................................................................................................................... 79

Chapter VI .................................................................................................................................................. 81Organising for CRM Implementation...................................................................................................... 81Aim .............................................................................................................................................................. 81Objectives ................................................................................................................................................... 81Learning outcome ........................................................................................................................................ 816.1 Organising for CRM Implementation .................................................................................................... 826.2 CRM Readiness Assessment .................................................................................................................. 836.3 CRM Maturity Assessment .................................................................................................................... 83 6.3.1 Reviewing the Stage of CRM Maturity ................................................................................. 866.4 Identifying Barriers to CRM Success .................................................................................................... 866.5 CRM Readiness Audit............................................................................................................................ 87 6.5.1 The Overview CRM Audit ..................................................................................................... 88 6.5.2 The Comprehensive CRM Audit ........................................................................................... 88 6.5.3 Determining Key CRM Priorities .......................................................................................... 896.6 Establish a CRM Vision ......................................................................................................................... 896.7 Utilising a CRM Technology Solution ................................................................................................... 90 6.7.1 Adopting a CRM Solution ..................................................................................................... 906.8 Piloting CRM Projects ........................................................................................................................... 91 6.8.1 Planning for CRM Project Implementation ........................................................................... 92 6.8.2 Establishing Project Priorities and their Direction ................................................................ 92 6.8.3 CRM Training and Development ........................................................................................... 926.9 The CRM Budget ................................................................................................................................... 93Summary ..................................................................................................................................................... 96References ................................................................................................................................................... 96Recommended Reading ............................................................................................................................. 96Self Assessment ........................................................................................................................................... 97

Chapter VII ................................................................................................................................................ 99Business Application and Technology Issues CRM................................................................................. 99Aim .............................................................................................................................................................. 99Objectives ................................................................................................................................................... 99Learning outcome ........................................................................................................................................ 997.1 Business Application Trends ................................................................................................................ 100 7.1.1 Increased Consolidation and Mergers among CRM Vendors .............................................. 100 7.1.2 Increased CRM Focus on the Small-to Mid-Sized Business Segment ................................ 100 7.1.3 Intelligence Analytical Tools in CRM Solutions ................................................................. 101 7.1.4 Increased Number of Mobile CRM Offerings and a Move Toward Real-Time CRM ........ 101 7.1.5 Increased Implementation of CRM Software by CRM Vendors ......................................... 1027.2 The Technology Component ................................................................................................................ 1037.3 A Wireless World.................................................................................................................................. 1047.4 Using People, Process, and Technology to Differentiate ..................................................................... 105 7.4.1 People Issues ........................................................................................................................ 105 7.4.2 The Process Element ............................................................................................................ 106 7.4.3 Technology Helps ................................................................................................................ 1067.5 Ten Steps to Effective CRM Implementation ...................................................................................... 1077.6 Open Source Technology ..................................................................................................................... 1087.7 Integrated Development Environment (IDE) ....................................................................................... 109

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7.8 Software as a Service .......................................................................................................................... 1097.9 Web and Telephony Integration ........................................................................................................... 1097.10 United Messaging (UM) .................................................................................................................... 1097.11 Enterprise Service Buses (ESB) ......................................................................................................... 1097.12 Profit Optimisation Technology ......................................................................................................... 1097.13 Creating a CRM Business Case ..........................................................................................................1107.14 CRM Software Selection Tips ............................................................................................................110 7.14.1 Technical Feature Requirements .........................................................................................1127.15 Writing the CRM System Specs .........................................................................................................113Summary ....................................................................................................................................................115References ..................................................................................................................................................115Recommended Reading ............................................................................................................................115Self Assessment ..........................................................................................................................................116

Chapter VIII ..............................................................................................................................................118The Future of CRM .................................................................................................................................118Aim .............................................................................................................................................................118Objectives ..................................................................................................................................................118Learning outcome .......................................................................................................................................1188.1 Introduction ...........................................................................................................................................1198.2 CRM: The Evolving Real-Time Enterprise .........................................................................................1198.3 Government CRM ................................................................................................................................ 1208.4 RTE ...................................................................................................................................................... 120 8.4.1 Future of RTE ...................................................................................................................... 121 8.4.2 A Natural Progression .......................................................................................................... 121 8.4.3 Vision of RTE ...................................................................................................................... 121 8.4.4 An RTE Timetable ............................................................................................................... 121 8.4.5 RTE Vendors ........................................................................................................................ 1228.5 Questions to Ask CRM Software Providers......................................................................................... 1228.6 Tips for Negotiating with CRM Vendors ............................................................................................. 1258.7 CRM Software Selection Tips 181 ...................................................................................................... 1258.8 CRM ..................................................................................................................................................... 1278.9 Steps for Creating a Real-Time Enterprise .......................................................................................... 1288.10 The Future of CRM: Real Time ......................................................................................................... 1308.11 Trade Shows/Conferences .................................................................................................................. 131Summary ................................................................................................................................................... 133References ................................................................................................................................................. 133Recommended Reading ........................................................................................................................... 133Self Assessment ......................................................................................................................................... 134

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List of Figures

Fig. 2.1 Types of CRM ................................................................................................................................. 15Fig. 3.1 Seven best practices in making vision and values work ................................................................. 30Fig. 3.2 Alternative strategies based on differentiation and cost ................................................................. 35Fig. 3.3 The three broad business strategies ................................................................................................ 35Fig. 3.4 Review of product/service and market/customer segment options ................................................ 38Fig. 3.5 The CRM strategy matrix ............................................................................................................... 39Fig. 4.1 The value creation process.............................................................................................................. 46Fig. 4.2 The total value offer ........................................................................................................................ 47Fig. 5.1 The linkage model .......................................................................................................................... 65Fig. 5.2 Categories of CRM metrics ............................................................................................................ 72Fig. 6.1 Key elements in organising for CRM implementation ................................................................... 82Fig. 6.2 Levels of maturity in the development of CRM ............................................................................ 84

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List of Table

Table 2.1 Major applications within operational CRM ............................................................................... 16

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Abbreviations

ASPs - Application Service ProvidersBT - British TelecommunicationsCDMA - Code Division Multiple AccessCDPD - Cellular Digital Packet DataCFROI - Cash Flow Return on InvestmentCICS - Customer Information Control SystemCLI - CallerLineIdentificationCMAT - Customer Management Assessment ToolCMR - Customer Managed RelationshipsCOPC - Customer Outsourcing Performance CentreCRM - Customer Relationship ManagementCTI - Computer Telephony IntegrationDTC - Direct-To-CustomerEAI - Enterprise Application IntegrationEDI - Electronic Data InterchangeEPOS - Electronic Point of SaleERP - Enterprise Resource PlanningESB - Enterprise Service BusesEVA - Economic Value AddedFEA - Federal Enterprise ArchitectureGE - General ElectricGSM - Global System for Multiple CommunicationsIDE - Integrated Development EnvironmentKPIs - Key Performance IndicatorsMA - Marketing AutomationMVA - Market Value AddedODS - Operational Data StoreOOP - Object Oriented ProgrammingPDAs - Personal Digital AssistantsPMA - President’s Management AgendaR&D - Research and DevelopmentRTE - Real-Time EnterpriseSaaS - Software as a ServiceSCM - Supply Chain ManagementSFA - Sales-Force AutomationSMB - Small-and Mid-Sized BusinessesSMEI - Sales and Marketing Executives InternationalSMS - Short Messaging ServicesSVA - Shareholder Value AddedTDMA - Time Division Multiple AccessUM - United MessagingVARs - Value Added ResellersVC - Venture CapitalVoIP - Voice Over Internet ProtocolWAP - Wireless Application Protocol

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Chapter I

Service Marketing

Aim

The aim of this chapter is to:

introduce the service marketing•

elucidate the consumer choice behaviour in services•

explain the service complexity•

Objectives

The objectives of this chapter are to:

explain the job of a service marketer•

describe the importance of branding in services•

elucidate the steps for building a service brand•

Learning outcome

At the end of this chapter, you will be able to:

explain the 7P’s of service marketing•

identify 3P’s services marketing•

understand problems in service marketing•


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1.1 IntroductionMost physical goods tend to be relatively high in search qualities, these are attributes, which a customer can determinepriortopurchasingaproduct,suchascolour,style,shape,price,fit,feel,hardness,andsmell.Othergoodsand some services, by contrast may emphasize experience qualities, which can only be discerned after purchase or during consumption, as with taste, wear ability, ease of handling, quietness and personal treatment. Finally, there arecredencequalitiescharacteristicsthatcustomersfindhardtoevaluateevenafterconsumption.Examplesincludesurgery, legal services, and so on. Services on the other hand emphasize experience qualities, which can only be discerned during consumption, and credence qualities, which customers have to take on faith, since they involve characteristics that are hard to evaluate even after consumption. In addition, more complex services, such as some professionalservicesorfinancialservicesmaybe“mentallyintangible”inthatanaveragecustomer’sunderstandingoffeaturesandbenefitsmaybeextremelylimited.Asaresult,itisrelativelyhardertodefinethenatureofaserviceproductpriorto,purchaseandevaluateitagainstcompetingalternatives.Thisproblemismostacuteforfirst-timeusers without prior experience of the service in question.

1.2 Consumer Choice Behaviour in ServicesThe drivers of consumer choice in services can be broadly categorised as brand name and functional quality.

Brand nameTheabsenceofatangiblephysicalgoodonwhichabrandnamecanbeaffixedoftennecessitatesassigninggreaterprominence to the corporate brand name on the various physical products and facilities used to deliver the service (example, displaying an airlines logo, and names on airplanes, ground transportation vehicle. baggage handling vehicle, ticketing counter, and so on). Thus in the context of marketing of services, the brand equity could reside inthenameofthefirmitself.

Functional qualityTheperceivedservicequalityconceptsuggeststhattheservicequalityperceptionisformedbythedisconfirmationbetween expected and experienced service. The consumer expects a service based on marketing communication, word of mouth and image. The actual service experience is based on the actual service process and the outcome of the service. These two dimensions are known as functional quality (how the service process functions?) and technical or the outcome quality (what the service process leads to?) dimensions.

The process consumption of services, that is the involvement of the consumer during the production of the service, implies that even though the outcome might be positive, a poorly perceived process might cause the whole experience to be tainted. In such a scenario the functional quality is much more critical than the technical quality. This functional qualityshouldbeseparatedfromthecoreserviceprovidedwhichisinfluencedbytheknowledgeandskilloftheemployees. Since services are very competitive and there is very high level of replication of products, the consumer does not perceive a drastic fall in quality with falling price. For highly intangible service offerings in particular, organisation, wide factors, such as the level of functional service quality, may be emphasised when adding value.In addition, it is suggested that extrinsic cues such as image and reputation may be particularly important in adding value in cases where consumer understanding of service offerings is limited. This is likely to be the case, in particular, whereserviceofferingsarecomplexand,asaresult,highly“mentallyintangible”totheaverageconsumer.

The following section considers the implications of service complexity for the process of differentiation:

Service complexityThe factors that consumers use to evaluate service offerings that is those, which can be used in differentiating a service may be contingent on the complexity of the service offering in question. For certain more complex or sophisticated financialservicesofferingsinparticular,theirhighintangibilitymakesitpotentiallydifficulttoenvisagetheuseofspecificservicesfeaturesasthebasisfordifferentiation.Customersaremorelikelytopurchaseanewproductifthey understand the product. Customer understanding of a new product is helped by previous experience with the product class and by the relative simplicity of the products developed. This is more likely for existing customers of the company who are already familiar with the type of products that the company offers.

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A major problem for the consumer is identifying cues, which provide an insight into the nature of the service experience. In this respect, a lack of consumer understanding may result in increased reliance on experience and credence qualities of the service offerings. However, this may be less of a problem in the case of more simple serviceswithfeaturesandbenefitswhichconsumersfindrelativelyeasytounderstandandevaluate.Intrinsiccuesareusuallyproductspecificattributes,oftentangibleinnature.Extrinsiccuesareexternaltotheproduct,withtheexamplesofbrandnameandadvertisingbeingusedbytheauthor.Animportantextrinsiccueisqualityasdefinedbyabstract dimensions that can be generalised across offerings, also called higher-level abstraction. When customers are purchasing offerings where search qualities arc important in the customers perception of value and, hence, intrinsic attributes have a high predictive value, then customers w ill tend to rely on those intrinsic attributes.

Further when intrinsic cues are scarce (as is arguably the case for more complex services offerings), when it is costly in terms of time and effort to evaluate intrinsic cues, and when the offering is high in experience and credence qualities, then extrinsic attributes will be far more important in the customer’s assessment of value.

Extrinsicattributescanserveasvaluesignalsandcansubstituteforactiveweighingofbenefitsandcostandthisislikely to be the case, particularly when the incidence of search and credence qualities is high. Relating the above propositions to complex services, it can be argued, therefore, that the extrinsic factors and brand image/reputation elements mentioned above may well be particularly important to the mix of factors which adds value to a complex services offering.

1.3 Job of Service MarketerBy identifying the drivers of consumer choice, a service marketer can identify the factors, which can be leveraged in different service conditions to add value to the consumer and thus differentiate the offering. Issues relating to which elements of the offering to emphasize when adding value may be particularly important in the case of services, as the characteristics of the typical services offering may have major implications. An organisation’s ability to compete effectively in a particular market is increasingly seen as being dependent on its capacity to deliver offerings that compriseacompetitivebundleofbenefits,orvalue,totheconsumer.Theprocessofaddingvalueisinessencedifferentiating one’s offerings effectively in the eyes of the consumer. One of the means to achieve this is through “branding”.

Branding: Delivering a value propositionAchievingdistinctionfromcompetitorsisnolessimportantforfirmsmarketingservicesthanforfirmsmarketinggoods.Abrandcanprovide informationandcommunicateefficiently,qualifyaproductorservice,orestablishdifferentiation. A truly powerful brand can do all three if necessary. The essential purpose of a brand is to distinguish one company’s offerings from that of other companies. Consisting of names and other distinguishing elements such asslogansandsymbols,brandsprovidecustomersanefficientmechanismforidentifyingaparticularfirmoritsproducts.

Branding in servicesIn services marketing the company brand is the primary brand; in packaged goods marketing the product brand is the primary brand. The locus of brand impact is different for packaged goods and services because services lack the inherent physical presence that facilitates individual product, packaging, labelling, and display. Thus, in services, the company brand becomes paramount. A service company presents its brand to consumer, customer prospects, employees, and other stake holders through a variety of potential media, including facilities, signs, print and television advertising, delivery trucks, employee uniforms, and more. The core of the presented brand is the company’s name, but the accompanying words and symbols, and the visual presentation of these stimuli, play key roles also. The service the company provides, how well it performs the service, and the service’s value combine toinfluencecustomers’interpretationsofthepresentedbrand.Customer’sexperience-basedbeliefsarepowerful,diminishing the effects of company-controlled communications that contradict actual experience. This is why the service concept, quality, and value are more important than the presented brand for experienced customers.


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Customer focusServices marketing has a very sensitive aspect where the strategy revolves around the customer. The need for customerorientedmarketingisthatfirmshavebeguntorealizethatcustomers’needsareunique.Buildingastrategicrelationship with the customer starts with a simple premise-, marketing to individuals rather than accounts, focusing on the process of marketing to individuals. This process driven approach represents a major change in the way companies handle marketing. This approach emphasizes a market segment size of n = I or the individual. In other words concentrating on the individuals is the path to increased sales. However, embracing this n = I marketing and sales concept means a fundamental shifts in attitudes. It involves moving from a ‘Get the order, no matter what it takes’ culture to one that emphasizes providing the best solution to the individual customer.

1.4 Steps for Building a Service BrandSix component of building a brand is as follows:With appropriate senior management commitment, building a relevant and powerful brand for any consumer-focused company including a bank is a reasonable goal. According to the consultants Booz-Allen, there are six components to successfully branding a company. These steps blueprint the process of developing a concise message or promise that an institution wants to communicate to its customers and for executing a strategy that delivers on that promise. Thefollowingfigureillustratestheprocessofbuildingbrands.

Thefirst step inbuildingabrandedbusiness is tounderstand the roleof thebrand in thatparticularbusiness,including the leverage it can provide across markets and product categories. A brand can provide information and communicateefficiently,qualifyaproductorservice,orestablishdifferentiation.Atrulypowerfulbrandcandoall three if necessary. To decide what role brands should play, it is important to take a dispassionate look at the Current status of the organisation and product/service offering-how they arc perceived by customers, competitors and employees. In addition, the institution has to understand what these distinct constituencies need to know and believe about the brand. For instance, in General Electric’s appliance business, the retail trade is most interested in product quality, marketing support and access to credit. Consumers are interested in product quality, but in addition seek a set of design attributes. GE’s brands thus play two roles. Services like Banks need to take a similar approach and determine the role of brands in their retail, institutional and internal markets.

Secondly, brand builders must choose a brand architecture consistent with the chosen role and the institution’s products, services and market landscape. There are three types of brand architectures: a single brand-one brand that covers the entire product range; tiered brands, with a parent brand supported by sub-brands for each product line; or multiple brands, with each product carrying its own brand distinct from the parent. Sony, Home Depot and Visa are examples of single brand architecture. A tiered brand architecture is used by companies such as Sears and Nabisco, whereindividualbrandsbenefitfromthecorporatebrandumbrella(example,CraftsmantoolsbySears).Procter&Gamble is a company that uses multiple brand architecture, with each of its products-Tide, Pampers, Ivory Soap, and so on building and supporting its own brand identity.

Which brand architecture to choose depends on business objectives and market conditions? The single brand architecture best applies when customers seek the same attributes across market segments and product lines. The tiered brand architecture allows the institution to build on critical foundation attributes while still tailoring the marketing messagetospecificsegments.Multiplebrandsareneededwheneachmarketsegmenthasdistinctneeds.

The third step in branding a business and developing a brand strategy is to position the brand to effectively communicate the value proposition. Critical here are clarity, consistency and relevance. Volvo (safety), Nike (limitless performance) and Wal-Mart (good deals) are examples of companies that have clear brand positions. The clarity is achieved through the consistent use of all marketing levers (example, price, product design, image and channel selection) to drive home a single message.

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In the fourth step, a company must develop the programs needed to deliver the brand and the brand promise. This happens through programs or services that convey the brand message to the target audience. Nike’s support of grassroots athletic events and Visa’s Olympic sponsorship illustrate the type of programs needed to creatively deploy brands. Nike helps amateur athletes perform, while Visa demonstrates its global reach.

Essentialforgeneratingbrandperformanceisthefifthstepineffectivebranding:creatingordesigninganorganisationto lead and manage a branded business, one that includes the right skills and structure to execute the brand strategy. Citibank, for example, has recently recruited a number of people with brand-building skills, including William Campbell, formerly the marketer behind many of Philip Morris’ successes.

Finally, for a brand to be effective in the marketplace, the business system must be aligned with the brand promise. Whilethismaysoundlikeaplatitude,inrealitythisisthemostdifficultaspectofbranding,particularlyinaservicebusiness. It must start at the very top with a vision and strategy that is embraced and articulated by senior management. Visualising Virgin Air without Richard Branson or Nike without Phil Knight and the importance of leadership in establishing and driving a brand becomes obvious.

1.5 7Ps of Services MarketingCompanies are competing strategically through service quality for greater differentiation in today’s competitive marketplace. Successful companies focus on the services-dominant paradigm with investment in people, technology, human resources policies, and compensation linked to service performance of employees. This is important because contactemployees’attitudesandbehaviourssignificantlyinfluencethequalityofservice.Theypresentthe“faceandvoice”oftheirorganisationstocustomers.

Extension of the 4Ps - 7Ps Services Marketing Framework by Booms and Bitner The 4Ps marketing mix, which represents Product, Process, Pricing and Promotion, have been most widely employed as a model for product marketing. It shows the company preparing an offer mix of the product and price, with an integrated promotion mix to reach the target consumers through the selected distribution channels. The 4Ps of marketing have been the key areas where marketing managers allocate scarce corporate resources to achieve the business objectives. Services have unique characteristics: intangibility, heterogeneity, inseparability and perish ability. To discern the differences between services and physical products, Booms and Bitner suggested the extension of the 4Ps framework to include three additional factors: People, Physical evidence and Process as marketing mix variables for services marketing:

People refer to all people directly or indirectly involved in the consumption of a service, example employees •or other consumers.Physical evidence, that related to the environment in which the service is delivered, and the tangibles that help •to communicate and perform the service.Processisthedeliveryandoperatingsystemsofprocedures,mechanismsandflowofactivitieswhichservices•are consumed.

The additional 3Ps has gained widespread acceptance in the services marketing literature. The 3Ps together represent the service and provide the evidence that makes services more tangible.

1.5.1 3Ps of Services Marketing : PeopleIn Booms and Bitner’s 7Ps services marketing framework, people are all people directly or indirectly involved in the serviceencounter,namelythefirm’scontactemployees,personnelandothercustomers.Duetotheinseparabilityofproduction and consumption for services which involves the simultaneous production and consumption of services, servicefirmsdependheavilyontheabilityofcontactemployeestodelivertheservice.

Contactemployeescontributetoservicequalitybycreatingafavourableimageforthefirm,andbyprovidingbetterservice than the competitions. Service providers (such as hair stylists, personal trainers, nurses, counsellors and call centrepersonnel)areinvolvedinrealtimeproductionoftheservice.Theyarethe“service”.Muchofwhatmakesa service special derives from the fact that it is a lived-through event.


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Servicefirmsmustfindways inwhich theycaneffectivelymanage thecontactemployees toensure that theirattitudes and behaviours are conducive to the delivery of service quality. This is especially important in services because employees tend to be variable in their performance, which can lead to variable quality that is heterogeneity in the performance of services. The quality of a service (a visit to a hospital for medical check-up, having a meal at the restaurant, accountancy and consulting services) can vary from service providers and customers among many otherfactors.Thislackofhomogeneityinservicescreatesdifficultiesfortheservicefirms.Asdeliveryofservicesoccurs during interaction between contact employees and customers, attitudes and behaviours of the service providers cansignificantlyaffectcustomers’perceptionsoftheservice.Thisisimportant,becausecustomers’perceptionsofservicequalityanditsvaluecaninfluencecustomersatisfaction,andinturn,purchaseintentions.

1.5.2 3Ps of Services Marketing : Physical EvidencePhysical evidence refers to the environment in which the service is assembled and in which the seller and customer interact, combined with tangible commodities that facilitate performance or communication of the service. The physical evidence of service includes all the tangible representations of service such as brochures, letterhead, business cards, reports, signage, internet presence and equipment. For example, in the hotel industry, the design, furnishing, lighting, layout and decoration of the hotel as well as the appearance and attitudes of its employees will influencecustomerperceptionsoftheservicequalityandexperiences.Becauseofthesimultaneousproductionandconsumption of most services, the physical facility that is its servicescape can play an important role in the service experience.

For theme park, restaurant, health club, hospital or school, its servicescape is critical in communicating about the service andmaking the entire customer experience positive.The “servicescape” illustrates how three physicalenvironment dimensions (ambient conditions, space/function and signs, symbols and artifacts) provide a means of understanding environment-participant relationships in service systems. As services are intangible, customers are searching for any tangible cues to help them understand the nature of the service experience. The more intangible-dominant a service is, the greater the need to make the service tangible. Credit cards are another example of the use of tangible evidence that facilitates the provision of (intangible) credit facilities by credit card companies and banks. In fact, the physical environment is part of the product itself. In summary, physical evidence serves as a visual metaphor of what the company stands for, and facilitates the activities of customers and employees.

1.5.3 3Ps of Services Marketing : ProcessProcessisreferredtotheprocedures,mechanismsandflowofactivitiesbywhichtheserviceisdeliveredi.e.theservice delivery and operating systems. The process of travelling with a budget airline, is very different from that withafull-fledgedpremiumairline.Becauseservicesareperformancesoractionsdonefororwiththecustomers,they typically involve a sequence of steps and activities. The combination of these step constitute a service process, which is evaluated by the customers.

Furthermore, in a service situation customers are likely to have to queue before they can be served and the service delivery itself is likely to take a certain length of waiting time. It helps if marketers ensure that customers understand the process of acquiring a service and the acceptable delivery times. Creating and managing effective service processesareessentialtasksforservicefirms.

Managing the process factor is essential due to the perish ability of services which means that services cannot be inventoried, stored for reuse or returned. Hotel rooms not occupied and airline seats not purchased cannot be reclaimed. As services are performances that cannot be stored, it is a challenge for service businesses to manage situations of over or under demand. Another distinctive characteristic of the service process that provides evidence to the customer is the standardised or customised approach based on customer’s needs and expectations. Since services are created as they are consumed, and because the customer is often involved in the process, there are more opportunities for customisingtheservicetomeettheneedsofthecustomers.Thefirstconcernstheextenttowhichthecharacteristicsof the service and its delivery system lend themselves to the scope of customisation; the second relates to the extent offlexibilitythecontactemployeesareabletoexerciseinmeetingtheneedsofthecustomers.

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As services are dynamic and experiential, and frequently co-produced in real time by customers and employees, servicefirmsuse“serviceblueprinting”tobettermanagetheserviceencounterandtoallowclearervisualisationof the service processes. Blueprinting is a method invented by Shostack (1984) to accurately portrays the service system with

“lineofinteraction”separatesthecustomeractionareafromthesupplieractionarea•“lineofvisibility”differentiatesbetweenactionsvisibleandinvisibletothecustomer•“lineofinternalinteraction”distinguishesbetweenfrontofficeandbackofficeactivities•“lineofimplementation”separatesbetweenplanning,managingandcontrolling(managementzone)andsupport•activities (support zone).

In a typical service blueprint, the customer occupies the top zone, management occupies the bottom zone and service operations are sandwiched between them. Thus, service blueprint shows how service provider can be empowered to manage the service components to bridge the gap between management intent and customer demand. As the service providersspantheboundarybetweenthefirmandthecustomers,theycanbecomefrustrated.Theroleambiguityexperienced by boundary-spanning employees greatly decrease job performance, which negatively affect customers’ perception of service quality.

In summary, the unique 3 Ps of services marketing: People, Physical evidence and Process are within the control of thefirmanditscontactemployees.Theyinfluencethecustomer’sinitialdecisiontopurchaseaservice,customer’slevelofsatisfactionandrepurchasedecisions.Servicefirmsrelyheavilyupontheirserviceproviderstoenhancethe provision of service quality to acquire and retain their customers in the designed service processes and service escape.

1.6 Problems in Service MarketingThreebasicassumptionspervadethegrowingbodyofliteratureonservicesmarketing.Thefirstholdsthatanumberof unique characteristics-notably intangibility, inseparability of production and consumption, heterogeneity, and perish ability-separate services from tangible goods. The second assumption maintains that these characteristics pose vexingproblemsforservicesmarketersthatarenotfacedbygoodsmarketers.Thethirdandfinalassumptionholdsthat services marketing problems require services marketing solutions that strategies developed from experience in goodsmarketingareofteninsufficient.

The process structure and basic characteristics of services can have serious and less serious consequences for the client behaviour and internal organisation, and through this for the marketing policy of those companies providing services. In this context, there are some core problems companies in the service sector are confronted with:

Insecurity of (potential) clients: This is caused mainly by the intangible nature and person-bound quality of services.

Variable quality• : Since, personnel plays an important role in the service providing process, this process is hard to standardise, which implies a variable quality. This is why the quality of the provided service(s) is an important theme in service marketing.Internal marketing• : The quality of the provided service(s) depends strongly on the motivation and quality of the staff. This is why internal marketing is quite important in the service sector. The company culture often differs from those in production companies, which has to be taken into account.Managing service providing processes:• The production policy of service providing companies consists for a relevant part out of the managing of service providing processes. Marketing managers of production companies usually only deal with the output (or product) of the production process.Client as production factor:• The client is always a (large or small) part of the service providing process. So, managing the client as production factor (or co-producer) is an important task. Attuning marketing and policy marketing and policy should be closely intertwined, ideally even synchronised. In production organisations, this is not a requirement.


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Relation management:• The direct contact with and insecurity of clients create opportunities for the necessary relation management.Capacity management:• Services cannot be stocked up like physical products, so unused capacity will always be lost.Anaccountantwithnothingtodo,orahotelroomthatisnotoccupied,botharebydefinitionnotproductive.In that context, the transitory nature of services becomes apparent. On the other hand, the capacity can fall short when the question for a service shows unexpected peaks. These events could (and perhaps should) lead to the development of capacity management.

The core problems mentioned above are usually dealt with through a combination of three marketing tasks: External marketing means ‘making the promise’•Internal marketing means ‘making the promise possible’ and•Interactivemarketingmeans‘fulfillingthepromisethatwasmade’.•

This is(inastronglysimplifiedform,ofcourse) themarketingconcept that isoftenusedbyserviceprovidingcompanies at present.

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SummaryMost physical goods tend to be relatively high in search qualities, these are attributes, which a customer can •determinepriortopurchasingaproduct,suchascolour,style,shape,price,fit,feel,hardness,andsmell.Itisrelativelyhardertodefinethenatureofaserviceproductpriorto,purchaseandevaluateitagainstcompeting•alternatives.The drivers of consumer choice in services can be broadly categorised as brand name and functional quality.•Theperceivedservicequalityconceptsuggeststhattheservicequalityperceptionisformedbythedisconfirmation•between expected and experienced service.The process consumption of services, that is the involvement of the consumer during the production of the •service, implies that even though the outcome might be positive, a poorly perceived process might cause the whole experience to be tainted.The factors that consumers use to evaluate service offerings that is those, which can be used in differentiating •a service may be contingent on the complexity of the service offering in question.A major problem for the consumer is identifying cues, which provide an insight into the nature of the service •experience.Intrinsiccuesareusuallyproductspecificattributes,oftentangibleinnature.•Extrinsic cues are external to the product, with the examples of brand name and advertising being used by the •author.Extrinsicattributescanserveasvaluesignalsandcansubstituteforactiveweighingofbenefitsandcostand•this is likely to be the case, particularly when the incidence of search and credence qualities is high.Abrand can provide information and communicate efficiently, qualify a product or service, or establish•differentiation.Services’ marketing has a very sensitive aspect where the strategy revolves around the customer.•With appropriate senior management commitment, building a relevant and powerful brand for any consumer-•focused company including a bank is a reasonable goal.The 4Ps marketing mix, which represents Product, Process, Pricing and Promotion, have been most widely •employed as a model for product marketing.People refer to all people directly or indirectly involved in the consumption of a service.•Servicefirmsuse“serviceblueprinting”tobettermanagetheserviceencounterandtoallowclearervisualisation•of the service processes.In a typical service blueprint, the customer occupies the top zone, management occupies the bottom zone and •service operations are sandwiched between them.

ReferencesFactoidz. • Problem in Service Marketing [Online] Available at: <http://business-strategy-competition.factoidz.com/problems-in-service-marketing/> [Accessed 6 March 2012].Sanwal, D. • Service marketing. Xavier Labour Relations Institute, Jamshedpur.Continuum Learning Pte Ltd. • 7Ps of Services Marketing. [pdf] Available at: <http://www.continuumlearning.com/Customer%20Services_7Ps%20of%20Services.pdf>[Accessed 6 March 2012].Zeithaml, V.A., Parasuraman, A. & Berry, L.L., 1985. • Problems and Strategies In Services Marketing. Journal of Marketing, Spring.eHow., 2008. • Marketing Plans : Principles of Service Marketing [Video Online] Available at: <http://www.youtube.com/watch?v=O-mNZixE5ic> [Accessed 7 March 2012]. HolmanVictr., 2011. • 7 P’s of Marketing [Video Online] Available at: <http://www.youtube.com/watch?v=g9Ge2YGZuIA&feature=related> [Accessed 7 March 2012].


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Recommended ReadingRust, R.T., Zahorik, A.J. & Keiningham, T.L., 1996. • Service marketing. HarperCollins College Publishers.Zeithaml. • Services Marketing. Tata McGraw-Hill Education.Gilmore, A., 2003. • Services marketing and management. SAGE.

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Self AssessmentThe drivers of consumer choice in services can be broadly categorised as ____________ and functional 1. quality.

consumer behavioura. brand qualityb. brand namec. consumer named.

Which of the following statement is false?2. The perceived service quality concept suggests that the service quality perception is formed by the a. disconfirmationbetweenunexpectedandexperiencedservice.The actual service experience is based on the actual service process and the outcome of the service.b. Theabsenceofatangiblephysicalgoodonwhichabrandnamecanbeaffixedoftennecessitatesassigningc. greater prominence to the corporate brand name on the various physical products and facilities used to deliver the service.Extrinsic cues such as image and reputation may be particularly important in adding value in cases where d. consumer understanding of service offerings is limited.

Intrinsiccuesareusually___________specificattributes,oftentangibleinnature.3. imagea. productb. advertisementc. brand named.

__________attributescanserveasvaluesignalsandcansubstituteforactiveweighingofbenefitsandcost.4. Producta. Customerb. Intrinsicc. Extrinsicd.

Which of the following is not achieved by branding a product?5. Provides informationa. Communicate effectivelyb. Loyal customer followingc. Establish differentiationd.

In services marketing, the company brand is the __________ brand.6. unimportanta. primaryb. secondaryc. named.


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Which of the following is not one of the components of building a brand?7. To understand the role of the brand in that particular business.a. Brand builders must choose a brand architecture consistent with the chosen role and the institution’s products, b. services and market landscape.The business system must be aligned with the brand promise.c. Alignment of the system.d.

Essential for generating brand performance is the __________ step in effective branding.8. firsta. fifthb. fourthc. thirdd.

____________isthedeliveryandoperatingsystemsofprocedures,mechanismsandflowofactivitieswhich9. services are consumed.

Processa. Peopleb. Physical evidencec. Perishabilityd.

The ____________ of service includes all the tangible representations of service such as brochures, letterhead, 10. business cards, reports, signage, internet presence and equipment.

processa. peopleb. physical evidencec. perishabilityd.

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Chapter II

Customer Relationship Management

Aim


introduce the concept of customer relationship management•

explain the emergence of CRM as a management approach•

describe the concept of CRM and information technology•

Objectives


describe the history and emergence of CRM•

explain various CRM constituencies •

elucidate the need for a CRM strategic framework•

Learning outcome


understand the commercial contexts of CRM•

state various CRM success factors •

classifythefivekeycross-functionalCRMprocesses•


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2.1 Introduction to Customer Relationship ManagementThe phrase Customer Relationship Management (CRM) has been utilised since the early 1990s. As a fairly undeveloped business or organisational practice, consent has not yet emerged about what actually counts as CRM. Even the meaning of the three-letter acronym CRM is contested. For example, although most people would understand that CRM means customer relationship management, others have used the acronym to mean Customer Relationship Marketing.

However, one can identify a number of core CRM attributes, and incorporate them into a description that underpins the rest of the description. CRM is the core business strategy that integrates internal processes and functions, and externalnetworks,tocreateanddelivervaluetotargetedcustomersataprofit.Itisgroundedonhighqualitycustomerrelated data and enabled by information technology. CRM is an integrated information system that is used to plan, schedule and control the pre-sales and post-sales activities in an organisation.

CRMisacorebusinessstrategythataimsto‘createanddelivervaluetotargetedcustomersataprofit’.This•clearly denotes that CRM is not just about IT.CRM ‘integrates internal processes and functions:•

It allows departments within businesses to dissolve the silo walls that separate them. �Access to customer-related data’ allows selling, marketing and service functions to be aware of each other’s �interactions with customers. Furthermore,back-officefunctionssuchasoperationsandfinancecanlearnfromandcontributetocustomer- �related data.Access to customer-related data allows members of a business’s ‘external network’ such as suppliers, partners, �distributors, to align their efforts with those of the focal company. Underpinning this core business strategy is IT such as software applications and hardware.

CRM embraces all aspects of dealing with prospects and customers, including the call centre, sales-force, •marketing,technicalsupportandfieldservice.By enabling organisations to manage and coordinate customer interactions across multiple channels, departments, •lines of business and geographies, CRM helps organisations to maximise the value of every customer interaction and drive superior corporate performance.

2.2 History of CRMTraditionally, most companies were located close to the markets they served, and knew their customers familiarly. Very often there would be face-to-face, even day-to-day, interaction with customers where knowledge of customer requirements and preferences grew. However, as companies have grown larger they have become more distant from the customers they serve. The remoteness is not only geographic; it may also be cultural. Even some of the most widely admired American companies have not always understood the markets they served. Disney’s development of a theme park near the French capital, Paris, was not an initial success because they failed to deliver to the value expectations of European customers. For example, Disney failed to offer visitors alcohol onsite. Europeans, however, are accustomed to enjoying a glass or two of wine with their food.

Geographic and cultural remoteness, together with business owner and management separation from customer contact, means that many, even small, companies do not have the intuitive knowledge and understanding of their customers so often found in micro-businesses, such as neighbourhood stores and hairdressing salons. This has given rise to demand for better customer-related data, a foundation stone of successful CRM.

Therefore, in sum, one can also take the view that CRM is now a technology-enabled approach to management of the customer interface. The use of technology also changes the customer’s experience of transacting and communicating with a supplier. For that reason, the customer’s perspective on CRM is an important consideration in this book. CRMinfluencescustomerexperience,andthatisoffundamentalstrategicsignificance.

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Most CRM initiatives expect to have impact on the costs-to-serve and revenues streams from customers.Also, Customer relationship management is often used interchangeably with the terms ‘relationship marketing’, ‘customer relationship marketing’, ‘enterprise relationship marketing’, ‘technology enabled relationship marketing’, ‘customer managedrelationships’(CMR)or‘customermanagement’.ItisalsousedtorefertoaspecificITsolutionsuchasadatawarehouseoraspecificapplicationsuchascampaignmanagementorsalesforceautomation.Hence,‘CRM’isusedverydifferentlyacrossdifferentindustriesandwithinspecificverticalmarkets.

The emergence of CRM as a management approachThe emergence of CRM as a management approach is a consequence of a number of important trends. These include:

the shift in business focus from transactional marketing to relationship marketing•the realisation that customers are a business asset and not simply a commercial audience•the transition in structuring organisations, on a strategic basis, from functions to processes•therecognitionofthebenefitsofusinginformationproactivelyratherthansolelyreactively•the greater utilisation of technology in managing and maximising the value of information•the acceptance of the need for trade-off between delivering and extracting customer value•the development of one-to-one marketing approaches•

2.3 Types of CRMVarioustypesofCRMareshowninthefollowingfigure.

Types of CRM

Strategic Operational Analytical Collaborative

Fig. 2.1 Types of CRM

Strategic CRMStrategic CRM is a core customer-centric business strategy that aims at winning and keeping profitable customers.

This culture is dedicated to winning and keeping customers by creating and delivering value better than •competitors.Thecultureisreflectedinleadershipbehaviours,thedesignofformalsystemsofthecompany,andthemyths•andstoriesthatarecreatedwithinthefirm.In a customer-centric culture it is expected that resources be allocated where they would best enhance customer •value, reward systems to promote employee behaviours that enhance customer satisfaction and retention, and customer information to be collected, shared and applied across the business. Many businesses claim to be customer-centric, customer-led, customer-focused or customer-oriented, but few •are.Indeed, there can be very few companies of any size that do not claim that they are on a mission to satisfy •customerrequirementsprofitably.


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Operational CRMOperational CRM focuses on the automation of customer-facing processes such as selling, marketing and customer service. CRM software applications enable the marketing, selling and service functions to be automated and integrated.

Some of the major applications within operational CRM are observed in following table:

Marketing automationMarket segmentationCampaign managementEvent-based (trigger) marketing

Sales force automation

Account managementLead managementOpportunity managementPipeline managementContact managementQuotation and proposal generationProductconfiguration

Service automation

Case (incident or issue) managementInbound communications managementQueuing and routingService level management

Table 2.1 Major applications within operational CRM

Marketing automationMarketing automation (MA) applies technology to marketing processes.•Campaign management modules allow marketers to use customer-related data in order to develop execute and •evaluate targeted communications and offers.Customer targeting for campaigning purposes is possible at the level of the individual customer, enabling unique •communications to be designed.

Sales-force automationSales-force automation (SFA) was the original form of operational CRM.•SFA systems are now widely adopted in business-to-business environments.•SFA applies technology to the management of a company’s selling activities. The selling process can be •decomposedintoanumberofstages,suchasleadgeneration,leadqualification,needsidentification,developmentofspecifications,proposalgeneration,proposalpresentation,handlingobjectionsandclosingthesale.SFAsoftwarecanbeconfiguredsothatitismodelledonthesellingprocessofanyindustryororganisation.•Automation of selling activities is often linked to efforts to improve and standardise the selling process. •

Service automation

Service automation allows companies to manage their service operations, whether delivered through call centre, •contact centre, web or face-to-face. CRM software enables companies to handle and coordinate their service related inbound and outbound •communications across all channels.Softwarevendorsclaimthatthisenablesuserstobecomemoreefficientandeffectivebyreducingservicecosts,•improving service quality, lifting productivity and increasing customer satisfaction.

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Analytical CRMAnalytical CRM focuses on the intelligent mining of customer-related data for strategic or tactical purposes.

Customer-relateddatamaybefoundinenterprise-widerepositories:salesdata(purchasehistory),financialdata•(payment history, credit score), marketing data (campaign response, loyalty scheme data) and service data.To these internal data can be added data from external sources such as geodemographic and lifestyle data from •business intelligence organisations.Analytical CRM can lead companies to decide that selling approaches should differ between customer •groups.Higher potential value customers may be offered face-to-face selling; lower value customers may be contacted •by telesales. Furthermore, the content and style of customer communications can be tailored, perhaps for a particular segment, •using customer analytics. This enhances the probability that a given offer will be accepted by the customer.•From the customer’s point of view, analytical CRM can deliver timely, customised, solutions to the customer’s •problems, thereby enhancing customer satisfaction.From the company’s point of view, analytical CRM offers the prospect of more powerful cross-selling and up-•selling programmes, and more effective customer retention and customer acquisition programmes.

Collaborative CRM Collaborative CRM applies technology across organisational boundaries with a view to optimising company, partner and customer value.

Collaborative CRM describes the intentional placement of in general enterprises in the supply chain for the •moreprofitableidentification,attraction,retentionanddevelopmentofcustomers.For example, manufacturers of consumer goods and retailers can align their people, processes and technologies •to serve shoppersmore efficiently and effectively.They employpractices such as co-marketing, categorymanagement, collaborative forecasting, joint new product development and joint market research.Collaborative CRM uses CRM technologies to communicate and perform across organisational boundaries.•Although traditional technologies such as surface mail, air mail, telephone and fax enable this to happen, the •term is usually applied to more recent technologies such as electronic data interchange (EDI), portals, e-business, voice over internet protocol (VoIP), conferencing, chat rooms, web forums and e-mail. These technologies allow data and voice communication between companies and their business partners or •customers.Collaborative CRM enables separate organisations to align their efforts to service customers more effectively. •It allows valuable information to be shared along the supply chain.Some CRM technology vendors have developed partner relationship management (PRM) applications that •enable companies to manage complex partner or channel ecosystems and reduce the costs of partner or channel management.PRM applications are often used to manage partner promotions. A manufacturer of consumer goods might have •a dozen or more different cooperative advertising programmes running simultaneously. PRM allows companies to manage the distribution of funds, plan and control promotions and measure outcomes. •Sometimes the term collaborative CRM is used to describe the application of these same technologies to internal communications, for example across sales, marketing and service functions.


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2.4 CRM and Information Technology (IT)Information technology companies have tended to use the term CRM to describe the software applications that automate the marketing, selling and service functions of businesses. This equates CRM with technology.

Although, the market for CRM software is now populated with many players, it started in 1993 when Tom Siebel founded Siebel Systems Inc. Use of the term CRM can be traced back to that period. Forrester, the technology research organisation, estimates that worldwide spending on CRM technologies will CRM is a disciplined approach todevelopingandmaintainingprofitablecustomerrelationships,andthattechnologymayormaynothavearole.

Like the dotcom organisations that went bust at the end of the last century, CRM (Customer Relationship Management) is making a powerful and dramatic comeback. Today, the most exciting growth areas of the commerce are being found in the electronic arena. The same is true of CRM. In the late 1990s and early years of the 21st century, CRM was offered up as the next wave of marketing.

The tools and techniques that would make traditional marketing outdated. The automated approaches that would make customer relationships automatic and would enable the marketing organisation to sell anything to anyone they chose. CRM was the single solution that would solve every marketing problem. Simply install the software, pluginthecustomerdataandsitbackandwatchtheprofitsrollin.Yet,allofthiswasn’tthatsimple.And,itsimplydidn’t work that way. Millions of dollars and pounds and yen and Euros were spent on CRM systems, software and structures but, not enough seemed to come back.Therefore, it can be said that CRM has more to it than software applications.

2.5 CRM ConstituenciesThere are several important constituencies having an interest in CRM:

Companies implementing CRM• : Many companies have implemented CRM. Early adopters were larger companiesinfinancialservices,telecommunicationsandmanufacturing,intheUSAandEurope.Medium-sizedbusinesses are now following. Also, there is still potential for the CRM message to reach smaller companies, public sector organisations, other worldwide markets and new business start-ups.Customers and partners of those companies• : The customers and partners of companies that implement CRMareaparticularlyimportantconstituency.BecauseCRMinfluencescustomerexperience,itcanimpactoncustomersatisfactionratingsandinfluenceloyaltytothesupplier.Vendors of CRM software• : Vendors of CRM software include names such as Oracle, SAP, SAS, KANA, Microsoft and Stay in Front. There has been considerable consolidation of the CRM vendor marketplace in recent years. PeopleSoft and Siebel, two of the pioneering CRM vendors, are currently owned by Oracle. Vendors sell licenses to companies, and install CRM software on the customer’s servers either directly or through system integrators. The client’s people are trained to use the software.CRM application service providers (ASPs)• : Companies implementing CRM can also choose to access CRM functionality on a subscription basis through hosted CRM vendors such as salesforce.com, Entellus, Right Now and Net Suite. Clients upload their customer data to the host’s servers and interact with the data using their web browsers. The ASP vendors deliver and manage applications and other services from remote sites to multiple users via the Internet. This is also known as SaaS (Software as a Service). Clients access CRM functionality in much the same way as they would eBay or Amazon.Vendors of CRM hardware and infrastructure:• Hardware and infrastructure vendors provide the technological foundations for CRM implementations. They supply technologies such as servers, computers, handheld devices, call centre hardware, and telephony systems.

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Management consultants:• Consultancies offer clients a diverse range of CRM-related capabilities such as strategy, business, application and technical consulting. Consultants can help companies implementing CRM in several ways: systems integration, choosing between different vendors, developing implementation plans and project management as the implementation is rolled out. Most CRM implementations are composed of a large number of smaller projects, for example, systems integration, data quality improvement, market segmentation, process engineering and culture change. The major consultancies such as Accenture, McKinsey, Bearing Point, Braxton and CGEY all offer CRM consultancy. Smaller companies sometimes offer specialised expertise.

2.6 Commercial Contexts of CRMCRM is practiced in a wide variety of commercial contexts, which present a range of different customer relationship management problems. Consider four contexts: banks, automobile manufacturers, and high-tech companies and consumer goods manufacturers.

Banks: Banks deal with a large number of individual retail customers. Banks want CRM for its analytical capability to help them manage customer defection rates and to improve cross-sell performance. Data mining techniques can be used to identify, which customers are likely to defect, what can be done to win them back, which customers are hot prospects for cross-sell offers, and how best to communicate those offers. Banks want to win a greater share ofcustomerspend(shareofwallet)onfinancialservices.IntermsofoperationalCRM,manybankshavebeentransferring service into contact centres and online in an effort to reduce costs, in the face of considerable resistance from some customer segments.

Automobile manufacturers: Automobile manufacturers sell through a distributor/dealer networks. They have few contact with the end-user owner or driver. They use CRM for its ability to help them develop better and more profitablerelationshipswith theirdistributionnetworks.Beingphysicallydisconnectedfromdrivers, theyhavebuilt websites that enable them to interact with these end-users. This has improved their knowledge of customer requirements. Ultimately, they hope CRM will enable them to win a greater share of end-user spend across the car purchase, maintenance and replacement cycle.

High-tech companies: High-tech companies manufacture complex products that are generally sold by partner organisations. For example, small innovative software developers have traditionally partnered with companies such as IBM to obtain distribution and sales. However, companies like Dell have innovated channels. They go direct-to-customer (DTC).

CRM helps these DTC companies to collect customer information, segment their customer base, automate their sales processeswithproductconfigurationsoftwareanddelivertheircustomerserviceonline.Theyhavealsodevelopedautomated relationships with suppliers, so that they carry no or low levels of inventory, which are replenished frequently in rapid response to order patterns.

Consumer goods manufacturers: Consumer goods manufacturers deal with the retail trade. They use CRM to helpthemdevelopprofitablerelationshipswithretailers.CRMhelpsthemunderstandcosts-to-serveandcustomerprofitability.Key accountmanagement practices are applied to strategically significant customers. IT-enabledpurchasing processes deliver higher levels of accuracy in stock replenishment. Manufacturers can run CRM-enabled marketing campaigns, which are highly cost effective.


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2.7 CRM Success FactorsWhile clear intention fuels the power of CRM, there are several other success factors to consider. Five of the most important factors are discussed. Organisations that implement CRM with a strong return on investment share these characteristics:

Strong internal partnerships around the CRM strategy: It is pretty clear that CRM is a way of doing business that touches all areas of your organisation. This means that the management peers need to form strong internal partnerships around CRM. If organisations are early on the road to CRM implementation, then it is time to bring CRMneedstothetable,andbeopentolisteningtotheCRMneedsofotherareas.Onemayfindthatyouhaverequirementsthatare,atleastpotentially,inconflict.Resistthetemptationtogotowarforwhatyouneed.

Employees at all levels and all areas accurately collect information for the CRM system: Employees are most likely to comply appropriately with CRM system when they understand what information is to be captured and why it is important. They are also more likely to trust and use CRM data when they know how and why it was collected.

CRM tools are customer and employee friendly: CRM tools should be integrated into your systems as seamlessly as possible, making them a natural part of the customer service interaction. A major manufacturer of specialty pet foodsredesignedthepop-upscreensforitstoll-freeconsumerphoneline.Intheoriginaldesign,thefinalpop-upscreen prompted the representative to ask the caller’s name and address. Yet, representatives had found that it was easierandfeltmorenaturaltoask,“What’syourname?”and“Whereareyoucallingfrom?”and“What’syourpet’sname?”atthestartofthecall.

Report out only the data you use, and use the data you report: Just because CRM tool can run a report doesn’t mean it should. Organisations should Refer back to CRM strategy, and then run the data actually in use, and share that data with their team.

Don’t go high-tech when low-tech will do: Organisations that successfully implement CRM look for the simplest solution when implementing their CRM strategy. A low-tech solution that works for the people who actually use it is more effective than a high tech solution that is cumbersome, costly and apt to be discarded or inconsistently implemented.

2.8 Key Segments for CRM ApplicationsThe key segments for CRM applications include:

CRM Framework (for example, Cordiant)•CRM Best of Breed (for example, Avaya, NCR Teradata, Broadvision)•Build it yourself (for example, IBM, Oracle, Sun). Integrated CRM and ERP Suite (for example, Intentia, •Oracle, PeopleSoft, SAP)CRM Suite (for example, Epiphany, Siebel)•

2.9 CRM Service Providers and ConsultantsThe wide variety of CRM service providers and consultants that offer implementation support include:

Corporate strategy (for example, McKinsey, Bain) •CRM strategy (for example, Peppers & Rogers,Vectia, Detica, Sophron)•Change management, organisation design, training,HR, and so on (for example,Accenture)•Business transformation (for example, IBM, PwC )•Infrastructure build, systems integrators (for example, Logica, Siemens, Unisys)•Infrastructure outsourcing (for example, EDS, CSC) •Business insight, analytics, research, and so on (for example, SAS, dunnhumby)•Business process outsourcing (for example, Acxiom).•

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A number of these companies operate in more than one of these sectors. It is important for those supplying CRM solutionstopositionCRMinitsstrategiccontextsothattheirpropositionsandbusinessbenefitstopotentialcustomersare represented strongly. CRM sales conducted in the absence of such a perspective should be a source of concern to both companies and their vendors. Establishing this strategic context involves more than simply understanding theoverallbusinessstrategyofanorganisationandwhereaCRMsolutionfitsin.Italsoentailsgettingclosertocustomers and gaining an in-depth understanding of their situations, motivations and behaviours.

While sophisticated technological tools and techniques have made this task easier, the secret of success in using themliesintheirspecification,integrationandcarefulimplementation.Inessence,thismeansdeterminingthekeyCRM processes relevant to that organisation and asking the right questions about them. This task should guide the actions of both providers and users of CRM.

2.10 Five Key Cross-Functional CRM ProcessesSuccessful CRM requires a cross-functional approach, involving not only marketing but the entire enterprise. Developing a cross-functional approach toCRM requiresfirst determining the key processes that need to beaddressed and second identifying the key issues or questions that need to be addressed by the organisation for each of these processes.

CRM processes that need to be considered by most organisations are:the strategy development process•the value creation process•the multi-channel integration process•the information management process•the performance assessment process•

TheidentificationofthesekeyCRMprocessesistheresultofconsiderableresearch,whichincludesdiscussionswith business executives from a wide range of industries. In hindsight, these processes are predictable, given our definitionofCRM.

CRM should be viewed as a strategic set of processes or activities that commences with a detailed review of an organisation’s strategy and concludes with an improvement in business results and increased shareholder value. The notion that competitive advantage stems from the creation of value for the customer and for the company is key to the success of any relationship. CRM activities for all substantial companies will involve collecting and intelligently utilising customer and other relevant data to build a superior customer experience, at each touch-point where the customer and supplier interact while these CRM processes appear to have universal application, the extent to which they are adopted vary according to the unique situation of the organisation concerned. Some organisations may wish toaddtothekeyCRMprocessesidentified.

2.11 The Need for CRM Strategic FrameworkCRM is a cross-functional activity and one that, in large companies, seeks to focus on potentially millions of individual customer relationships simultaneously and hence it can be unwieldy to implement and impossible to get right without a purposeful and systematic framework.

Therefore, CRM acts as a strategic set of processes that can be creatively managed to achieve an improvement in shareholder value.

CRM is an activity that collectively than they can individually and they should therefore be treated as an integrated and iterative set of activities. It is also important to point out that the framework is not intended to include all the aspects of implementation; for CRM implementation issues will vary greatly from one organisation to another.


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However, CRM implementation should begin with strategic planning and end, ultimately, with performance improvement.

2.12 Misunderstandings about CRMGiven CRM recent emergence, it isn’t surprising that there are a number of common misunderstandings about the nature of CRM. These are described below:

Misunderstanding 1: CRM is database marketingDatabase marketing is concerned with building and exploiting high quality customer databases for marketing •purposes.Companiescollectdatafromanumberofsources.Thesedataareverifiedandstoredoncomputers,oftenin•data warehouses. They are then used for marketing purposes such as market segmentation, targeting, offer development and customer communication. Whereas most large and medium-sized companies do certainly build and exploit customer databases, CRM is •much wider in scope than database marketing.A lot of what is described above as Analytical CRM may have the appearance of database marketing, but it is •very less evident in strategic, operational and collaborative CRM.

Misunderstanding 2: CRM is a marketing processCRM software applications are used for many marketing activities: market segmentation, customer acquisition, •customer retention and customer development (cross-selling and up-selling), for example. However, operational CRM extends into selling and service functions.The deployment of CRM software to support a company’s mission to become more customer-centric often •means that customer-related data is shared more widely throughout the enterprise than by the marketing function alone.Operations management can use customer-related data to produce customised products and services. •People management (Human Resources) can use customer preference data to help recruit and train staff for the •front-line jobs that interface with customers.Research and development management can use customer-related data to focus new product development.•Customer data cannot only be used to integrate various internal departments, but can also be shared across •the extended enterprise with outside suppliers and partners. Clearly, there is more to CRM than marketing process.

Misunderstanding 3: CRM is an IT issueMany CRM implementations are seen as IT initiatives, rather than broader strategic initiatives. It’s true, most •CRM implementations require the operation of IT solutions.However, this should not be misunderstood. To say that CRM is about IT is like saying that gardening is about •the spade or that art is about the paintbrush. IT is an enabler, a facilitator. Improvements come about in the way customers are managed through a combination •of improved processes, the right competencies and attitudes (people), the right strategies and the right enabling technologies. The importance of people and processes should not be underestimated.•People develop and implement the processes that are enabled by IT. IT cannot compensate for bad processes •and unskilled people. Successful CRM implementations involve people designing and implementing processes that deliver customer •and company value. Often, these processes are IT-enabled. IT is therefore a part of most CRM strategies. That said, not all CRM •initiatives involve IT investments

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CRM: The right mix of people, process, and technologyThe success of any CRM implementation relies on the faultless assimilation of three vital components: the people, process,andtechnologyusedto“contactthecustomer”fromanypointinanorganisation.

This critical mix must be adjusted to help customers no matter where, when, or how they communicate with •the organisation.While each of these components presents its own set of challenges, how well a business is able to integrate all •three is paramount to successfully implementing CRM in real time.Ofthethree,the“people”component(companystaff)canpresentthegreatestchallengegiventhesensitivity•of users to change. CRM systems, which support and automate the customer processes, almost always, require changes in the way users do their day-to-day jobs. Users who do not understand the point of these changes, who have not participated informing them, or who •have not been given a solid background and training will understandably be resistant.Gaining user support early on will be an important factor in the ultimate success of your CRM initiative, so be •sure to address the people issues from the outset. CompaniespursuingaCRMinitiativeoftentrytocorrecttheircustomerfacingprocessdeficienciesnotby•agreeing internally on how users would like a process to be done, but rather by purchasing CRM software that contains one or more business processes that have been pre-built by the CRM vendor and •thenforcingthe“not-built-here”processonsystemusers.Thiscanbedangerous.Alltoooften,the“technology”componentofaCRMinitiativeisgivenadisproportionateemphasis,sometimes•to the detriment of the overall project.There are two critical concerns related to your CRM initiative: the need to deal with software vendors and the •challenge of staying on top of technology trends. On the upside, the Internet, which has revolutionised company-customer relationships, is an extremely useful •technological tool (consider it the primary one) for achieving your CRM goals.Proactively managing and integrating the people, process, and technology components of a CRM initiative will •helpensure“themixisright”throughallphasesoftheproject.

2.13 CRM is here to StayThe CRM market has experienced dramatic growth over the last decade despite the effects of economic downturn in the early 2000s. However, the exact size and rate of growth of the CRM market depends very much on how it is defined.LeadingmarketanalystsadoptabroaddefinitionoftheCRMmarket,‘Developmentandintegration’and‘business process and transaction management’ represent around 65 percent of the total.The need for increasingly sophisticatedandscalableoptionsmeansalmostinfinitescopeforprovidersofCRMproductsandservices.

However, despite the popular claim to be ‘complete CRM solution providers’, relatively few individual software vendors can claim to provide the full range of functionality that a complete CRM business strategy requires.The IT challenge is that the requirements for sales, marketing, and customer service and support are complex. Software vendorsarenowoffering‘front-officesuites’,integratedapplicationsforenablingcustomer-facingactivity.

The increasing number, variety, and combination of applications and services to choose from stresses the highly customised nature of CRM, as well as the burgeoning sector of CRM providers.Analysts have pointed out that companies seeking to adopt or improve their CRM and customer-facing activities need to appreciate that when they are being offered a CRM solution by a particular vendor, its nature will vary according to the category of vendor.This variation derives not only from the differences in the products and services sold, but from the differences in thewaythevendorsdefineCRM.


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SummaryThe phrase Customer Relationship Management (CRM) has been utilised since the early 1990s.•CRMisacorebusinessstrategythataimsto‘createanddelivervaluetotargetedcustomersataprofit’.•Traditionally, most companies were located close to the markets they served, and knew their customers •familiarly.Most CRM initiatives expect to have impact on the costs-to-serve and revenues streams from customers.•StrategicCRM is a core customer-centric business strategy that aims atwinning and keeping profitable•customers.Collaborative CRM applies technology across organisational boundaries with a view to optimising company, •partner and customer value.Information technology companies have tended to use the term CRM to describe the software applications that •automate the marketing, selling and service functions of businesses.CRM is practiced in a wide variety of commercial contexts, which present a range of different customer •relationship management problems.Successful CRM requires a cross-functional approach, involving not only marketing but the entire enterprise.•The CRM market has experienced dramatic growth over the last decade despite the effects of economic downturn •in the early 2000s.

ReferencesReynolds, J., 2002. • A practical guide to CRM: building more profitable customer relationships, Focal Press.Bergeron, B. P., 2002• . Essentials of CRM: a guide to customer relationship management, Volume, John Wiley and Sons.Two Types of CRM• , [Online] Available at : <http://www.studymarketing.org/articles/Managing_CRM/Two_Types_of_CRM.html> [Accessed 30 January 2012].DUTU, C., • Cross Functional Processes in Customer Relationship Management [Online] Available at : <http://www.tje.uvt.ro/ro/download/35.html>[Accessed 30 January 2012].HarvestSolutions, 2011., [Video Online] Available at : <http://www.youtube.com/watch?v=Mxw-XGrrhb4&f•eature=related>[Accessed 30 January 2012].Lindstrom, A., 2009. • What is Customer Relationship Management? [Video Online] Available at: <http://www.youtube.com/watch?v=D1HsGLETOgE>[Accessed 30 January 2012].

Recommended ReadingAnderson, K. and Kerr, C. • Customer Relationship Management, McGraw-Hill.Wellington, P., 2010. • Effective Customer Care, Kogan Page Limited.Buttle, F., 2009. • Customer Relationship Management Concepts and Technologies, 2nd ed., Elsevier Ltd

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Self Assessment_______________is an integrated information system that is used to plan, schedule and control the pre-sales 1. and post-sales activities in an organisation.

CRMa. SFAb. RPMc. HRMd.

What helps the organisations to maximise the value of every customer interaction and drive superior corporate 2. performance?

SFAa. RPMb. CRMc. HRMd.

_______________CRMisacorecustomer-centricbusinessstrategythataimsatwinningandkeepingprofitable3. customers.

Operationala. Collaborativeb. Strategicc. Analyticald.

Which of the following statements is true?4. Operational CRM focuses on the automation of customer-facing processes such as selling, marketing and a. customer service.Collaborative CRM focuses on the automation of customer-facing processes such as selling, marketing and b. customer service.Strategic CRM focuses on the automation of customer-facing processes such as selling, marketing and c. customer service.Analytical CRM focuses on the automation of customer-facing processes such as selling, marketing and d. customer service.

__________ CRM focuses on the intelligent mining of customer-related data for strategic or tactical 5. purposes.

Operationala. Collaborativeb. Strategicc. Analyticald.

_____________ CRM applies technology across organisational boundaries with a view to optimising company, 6. partner and customer value.

Collaborativea. Operational b. Strategicc. Analyticald.


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_________________ was the original form of operational CRM.7. Service automationa. Sales-force automationb. Marketing automationc. Sales-tax automationd.

Most ____________ initiatives expect to have impact on the costs-to-serve and revenues streams from 8. customers.

CRMa. SFAb. RPMc. HRMd.

_____________ automation allows companies to manage their service operations, whether delivered through 9. call centre, contact centre, web or face-to-face.

Marketinga. Salesb. Sales-force c. Serviced.

Successful __________ requires a cross-functional approach, involving not only marketing but the entire 10. enterprise.

CRMa. RPMb. HRMc. SFAd.

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Chapter III

The Strategy Development Process

Aim


explain the strategy development process•

elucidate industry and competitive characteristics•

explicit the role of customer strategy•

Objectives


describe business strategy •

enlist three broad business strategies •

explicit customer strategy•

Learning outcome


understand the role of business strategy •

recognise CRM strategy development•

state industry and competitive characteristics•


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3.1 Introduction to the Strategy Development ProcessThe strategy development process involves determining the business strategy and the customer strategy and ensuring thattheyareintegrated.Thereareseveraldefinitionsofstrategy,buttheonegivenbelowbestcapturestheconceptof strategy in the context of CRM.

Strategy is the art of creating value. It provides the intellectual frameworks, conceptual models and governing ideas that allow a company’s managers to identify opportunities for bringing value to customers and for delivering that valueataprofit.Inthisrespect,strategyisthewayacompanydefinesitsbusinessandlinkstogethertheonlytworesources that really matter in today’s economy knowledge and relationships or an organisation’s competencies and customers. Below mentioned are highlights that explain the criticality of customer relationships:

Whilemostcompaniesrecognisetheimportanceofhavingclearlydefinedbusinessandcustomerstrategies,•relatively few actively develop a formal CRM strategy with a focus on building appropriate customer relationships.Yet, central to the concept of strategy is the delivery of value to the customer. •This implies knowing who the customer is, what he or she wants and whether and how the organisation can •satisfy this known demand on a sustainable basis. With much current attention being directed at CRM, some managers advocate the quick introduction of a •particular technology solution to solve their strategic challenges.However, many organisations’ experiences with IT are mixed. Some are hostages of out-of-date legacy systems, •some of a legacy culture where IT is inappropriately viewed as an ever-escalating cost rather than as a source of competitive advantage. The result is either inappropriate investment in new technology (which may fail to break free of the legacy •‘bonds’) or an organisation focused solely on the technology challenge instead of on the underlying critical business issues. Alternatively,theorganisationmayadoptoneparticulartechnologytoorapidly;focusinsufficientlyonbuilding•customer relationships; or resist the use of new technologies for improved CRM.Ratherthanconcentrateimmediatelyonatechnologysolution,managersshouldfirstconsiderCRMinthecontext•of their organisation’s overall strategy development. In other words, what are the goals of the organisation given the opportunities and constraints within which it operates?ThestrategydevelopmentprocessisthefirstprocesstobeconsideredintheCRMStrategicFramework.•ItnotonlyshapesthenatureoftheotherfourkeyCRMprocessesbut,moreimportantly,itdefinestheoverall•objectives and parameters for the organisation’s CRM activities. The strategy development process, in an organisation, focuses on addressing the following key issues:•

Where we are and what do we want to achieve in our business? �Who are the customers that we want and how should we segment them? �

3.2 Business StrategyThefirstpartoftheCRMstrategydevelopmentprocessistoreviewtheorganisation’sbusinessstrategy.Adetailedunderstanding of the business strategy is essential if an appropriate customer strategy is to be implemented. We should emphasise from the outset that CRM is not about developing a business strategy. Rather it is about fully understanding the business strategy in order to determine how the appropriate customer strategy should be developed and how it should evolve over time.

CRM should not seek responsibility for business strategy development.However, it should intervene and ensure that top management’s attention is directed at business strategy where a thorough review of it clearly shows that it is wrongly directed or it is not taking account of changing competitive landscape. This is because it is crucial for the CRM activities to be aligned with and supportive of an appropriate business strategy.

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3.3 The Role of Business StrategyBusiness strategy is a top management responsibility that involves identifying the future direction of the enterprise aswellasmanaging thecreative interactionof thefunctionaldisciplinesofoperations,marketing,financeandhuman resource management.

It is both a process and a way of thinking, which leads to the development of a set of strategies that assist the business in achieving its corporate objectives. Virtually all companies have a business strategy; however, this may be implied or explicit. While some companies are successful with only an implied strategy guiding the chief executive and the management team, it is also seen that companies develop an explicit strategy through a planned approach and thus ,have a greater chance of long-term success.

Almost all large companies who have introduced CRM have developed an explicit strategy. However, newspapers and business journals are a constant reminder that such strategies are often not well-formulated or well-implemented, or both and do not automatically result in success. Corporate success can be the result of an implied strategy being evolved based on creative entrepreneurial insights on the part of a company; or it may be the result of opportunistic effectiveness. That is, effective spontaneous responses to short-term opportunities in the marketplace.

A further factor that can affect corporate success is luck, which often plays an important role in success. However, these factors cannot be relied upon to produce long-term results. While they may result in initial success for a company,afurtherfactor,developingaformalbusinessstrategy,providesanopportunitytoinfluencesustainedsuccessoverthelongerterm.Companieswishingtoadoptsuchanapproachneedclearlytodefinetheirbusinessvision and formulate a business strategy that takes full account of the competitive characteristics within the areas in which they have chosen to operate.

3.4 Business VisionThe process of business strategy formulation should originate with a review or articulation of a company’s vision.Thebusinessvisionshouldexplicitlyreflectthebasicbeliefs,valuesandaspirationsoftheorganisation.Itshouldbe noted, however, that many companies’ statements of their vision display a great deal of similarity and read like publicrelationspromotionsratherthanreflectthecommitmenttovaluesthattheyareintendedtobe.Abusinessvision should be a durable statement of purpose that distinguishes the organisation from its competitors and it should act as an important device for coordinating activity in an organisation.

Acompany’sbusinessvisionshouldreflectthesharedvaluesystemswhichareheldwithintheorganisation.Thevision can provide a framework to enable the diverse staff of an organisation to work together in a coordinated manner towards the achievement of the overall objectives and philosophy of the enterprise. Unfortunately, many companies’ vision statements do not be traditional to these requirements.

Vision statements need not be long and explanatory. The vision of the organisation has a great deal more to do with its performance on vision statement dimension than technological or economic resources, organisational structure, innovation or timing. Most of the company’s history maintains strong customer service focus. But just having a statement of vision and values is not enough. Companies live these on a day-to-day basis.

The business vision and its associated values form an important element of a company’s strategy. Put simply, without a clear, concise and well-communicated vision the company is unlikely to be highly successful in achieving its goals.

Organisationsarenowrealisingthatdevelopingavisionandasetofvaluesassociatedwithitmaybedifficultbutisa very worthwhile activity. A business vision is characteristically developed as part of an enterprise-wide consultative process, which involves input from different functional areas and management levels.


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Competitiveadvantageisdifficult tocreateandsustain.Astheserviceeconomycontinuestogrow,fewpurelyproduct-based businesses now exist. Where they do, their products can be reverse engineered and imitated. Companies providing services have no patent protection and are open to ever greater and faster copying of their service range. Those businesses that are highly successful tend to have a strong culture and compete on the basis of their people and process skills.

A strong and appropriate vision and values enable companies to develop a distinctive culture and a focus for their employees.Thiscanresultina‘peopleadvantage’thatisdifficult,ifnotimpossible,toimitate.Itcanbeconcludedthat a strong vision and values can create differentiation and build motivation; trust and customer focus among employees.

Experience has shown that vision and values are often developed the wrong way. Inventing slogans like: ‘The Customer is King’ or ‘let’s be customer focused’ are exactly the wrong way to develop vision and values. One has to start off by identifying what are the key future factors for success in your marketplace and then build the values around achieving those key factors for success. In that way if you make your values work, they build competitive advantage. Otherwise they are quite irrelevant. To assist in the development of business vision and values work, sevenbestpracticesformakingvisionandvalueshavebeenidentifiedbelow:

Strong values: Values support the vision, are based on key factors

for success and turnedinto measurable

practicesStrong vision: Vision is

memorable, clear, motivating, ambitious, customer related and

translated into measurable strategies

Building foundations: Needs of key stakeholders

understood and linked through vision and

valuesMeasurement:

Rigorous measurement of how effectively

vision and values areimplemented

Branding: Organisation’s branding expresses vision and values

Embedding: Recruitment, training, appraisal,

rewards, promotion and succession, allreflectvalues

Communication: Consistent communication

by action, signals,words

Seven best practices

in making vision and values

work

Fig. 3.1 Seven best practices in making vision and values work

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3.5 Industry and Competitive CharacteristicsHaving developed the business vision, the next step in business strategy formulation is to undertake a review of the industry and competitive environment including an assessment of both existing and potential competition.

The new competitive landscapeThe last decade or so has seen a new competitive landscape emerge, which has profound competitive and technological implications for most businesses.

All companies need to understand this new environment impacts on their ability to create value and attract and •retain customers, at present and in the future.Themeans of value creation they use and inwhat combinationwill depend on each company’s specific•circumstances.However, what is imperative to all is the need to be continually learning about their customers and innovating •new ways in which to provide them with ever-greater value.Thereexistsanewfiercelycompetitiveenvironmentbecausecustomerstodayhavemanychoicesandmassive•power.In this environment the capacity to learn and act fast is increasingly a major source of competitive advantage. •Butalso,itisstillabeginningofarevolutioninthecompetitiveenvironmentinwhichcompaniesfindthemselves•operating. In the new competitive environment, there is a detailed exposition of the nature and implications of changes taking place.

Belowmentionedareanumberoftechnologicalissuesidentified.

Digitisation and information processing powerWith the rise in digital technology has come the ability to capture, store and utilise information in ways unthinkable even ten years ago.

Moreover, as processing power has continued to double every eighteen months at no extra cost to the user, the volume and detail of information that can be so exploited has similarly increased, enabling companies and individuals to make decisions on an ever more information-rich basis.

InterconnectivityIn parallel with this, open software platforms enable this information- processing devices to be connected together intonetworkacrosswhichinformationcanreadilyflow.

Thus, the user of any one device can access information on any other user’s device on the network regardless of distance and as the network gets larger, the information available to any user (and thus, the usefulness to them of the network) increases.

Although, one tends to think of personal computers in this regard, the falling cost of processing power is increasingly also seeing a whole array of domestic appliances from phones to videocassette recorders with embedded processors and thus information processing capability.

Information transmission speedMoreover as bandwidth (that is the speed and volume of information that can be transmitted electronically) continues to increase soon it will pose little limitation on the amount and richness of the information that can be exchanged instantaneously between devices on a network. In short, there has been a rise of networks of devices providing a huge information resource for users and which also allows them to interact with each other in real time regardless of distance.


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Real time activityThe volume and speed with which information can be passed between companies and customers enables an individualiseddialogue,wherethecompanycanadapttotheparticularneedsandprofilesofitscustomers.However,to achieve such interactivity, the company needs to be able to respond to information provided by customers.

A company needs to take advantage of the speed with which volumes of market intelligence data can be collected fromcustomerinteractionstoguideacontinualreviewandadaptationoftheservicesitoffers,toensurethefirmcontinues to meet its chosen customers’ needs better than any alternative organisation open to them. If a company can capture, learn from and adapt to information so gained quicker than its competitors, it stands a greater chance of achieving and maintaining superiority over them with respect to its ability to meet its chosen customers’ needs.

Changes in industry structure and evolutionThe characteristics of the industry need to be assessed not only in terms of the existing structure, but also in terms of future possible structural changes. Recent developments in electronic channels as well as new strategic insights have led to greater competitive activity on the part of both new entrants and existing competitors. This has created increasing challenges to traditional business models.

In many industries, ranging from bookselling to automotive suppliers, the fundamental industry structure and dynamicsarebeingreconfigured.Overthelastdecade,thetraditionalchannelstructuresofmanyindustrieshavebeendismantledandreconfiguredinresponsetonewtechnologiesthathaveopenednewpathstomarket.Managersresponsible for business strategy need to understand both the nature of their industry structure now and how it is likely to alter in the future.

Valuable insights into emerging trends within industry structures can be gained from examining the experiences of other sectors or other industries on a global basis. In particular, the Internet has had a role in both these forms ofstructuralchange.Thesechangesinindustrystructureneedtobeconsideredfirstatamacro-levelaspartofthestrategy development process. Once macro-level decisions have been made regarding the most appropriate paths to market, the extent to which intermediaries are to be used and how these may change over time, the organisation then needs to consider multi-channel options and their combination in greater detail at a micro-level.

Analysing the industry and competitive environmentA number of frameworks and conceptual models are especially helpful in both developing business strategy and assessingifithasbeenformulatedwithsufficientclarityanddetailinthecontextofthecompetition.

Given below are three important frameworks meant for assessing the industry and competitive environment in order to develop an improved business strategy: the industry analysis model, the generic strategies framework, the market leader’s framework.

Industry analysis modelThe industry dynamics in which the organisation functions operates are commonly analysed using a set framework sothatallpossiblyknownforcesandnotsowellknowncontingenciesarebroughtintoreflection.

A contemplation of these ‘forces’ should be increased by a more modern or up to date analysis. The framework is an important aid to understand the competitive characteristics, identifying the key factors for success and determining theprofitpotentialinanindustry.Inundertakingananalysisofanyindustry,itisproposedthatitscharacteristicsandlong-termprospectsshouldbeanalysedintermsoffivedimensions:thenatureanddegreeofcompetition,thebarriers to entry to that business, the competitive power of substitute products, the degree of buyer power, and the degree of supplier power.

Through analysis of these eight dimensions, insights can be gained into both opportunities and threats as well as the key factors for competitive success in the industry under consideration.

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Potential entrantsThe existing barriers to entry and the likelihood of a strong competitive reaction from established competitors are the two factors that determine how strong this force will be. The threat of entry tends to be low if barriers to entry arehighand/oraspiringnewentrantscanexpectextremelyhostileretaliationfromtheestablishedfirmswithintheindustry.Ifthethreatofentryislow,profitabilityoftheindustrytendstobehigh.

Buyer powerThe bargaining power of buyers is high if a number of factors are present. These include: if the products that a company purchases form a large proportion, in terms of cost, of its own product; if the buyer group is operating in anindustryoflowprofitability;iftheproductssuppliedareundifferentiatedanditiseasyforthebuyertoswitchbetween suppliers at little cost; if the products are purchased in large volumes; or if the buyers have the potential to integratebackwards.Suchconditionsofhighbuyerpowerwillresultinlowerindustryprofitability.

Supplier powerSimilarly, the bargaining power of suppliers can be high if there are relatively few suppliers; if the industry is not an important customer of the supplier group; if the supplier has the potential to integrate forward into the customer’s business; if there are few or no direct substitutes for the product; if the industry is dominated by only a few suppliers; orifthesuppliersproductsaresufficientlydifferentiatedsothatthefirmbeingsuppliedthegoodscannoteasilyswitchtoanothersupplier.Conditionsofhighsupplierpowerleadtoreducedindustryprofitability.

Threat of substitutesIn many product areas it is possible to identify products, which can serve as substitutes. In industries ranging from telecommunications to car making, the threat of substitution is present. The higher the threat of substitution, the lowertheprofitabilityislikelytobewithintheindustrybecausethreatofsubstitutiongenerallysetsalimitonthepricesthatcanbecharged.Thefactorswhichinfluencethethreatofsubstitutionincludethesubstituteproductprice-performance trade off and the extent of switching costs associated with changing from one supplier to the supplier ofthesubstitute.Ifthethreatofsubstitutionislow,industryprofitabilitywilltendtobehigh.

Industry rivalry and competitionThedegreeofindustrycompetitionischaracterisedbytheamountofrivalrybetweenexistingfirms.Thiscanvaryconsiderablyandisnotrelatednecessarilytowhetherornottheindustryishighlyprofitable.Intenserivalrycanexist if there is slow growth within the industry; if competitors are evenly balanced in size and capability; where switchingcostsarelow;wherethereisahighfixedcoststructureandcompaniesneedtokeepvolumeshigh;whereexitbarriersarehighsuchthatunprofitablecompaniesmaystillremainwithintheindustry;andwherecompetitorshavedifferentstrategies,theresultofwhichisthatsomefirmsmaybewillingtopursueastrategythatresultsinconsiderableconflictwithintheindustry.Acommonoutcomeofthisispricewars.Ahighdegreeofrivalrydepressesindustryprofitability.

Environmental analysisThis analysis, known as a PESTE analysis, involves a review of political, economic, social, technological and environmental issues. PESTEanalysis encouragesmanagers to reviewbroadenvironmental influenceson theenterprise. A PESTE analysis helps understanding of the competitive dynamics of your industry and should lead to theidentificationofopportunitiesandthreatsfacingyourbusiness.

Disruptive technologiesThe environmental analysis should help consideration of evolutionary technological factors impacting on your business. Successful companies are usually good at responding to such evolutionary changes in their markets but have problems initiating revolutionary changes in their markets, or dealing with disruptive innovation. Such disruptive technologies or innovations should be closely studied as they can create an entirely new market.


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Co-opetition and networksIncreasingly networks of companies are being developed that combine simultaneously cooperation and competition. Such ‘co-opetition’ is widely present in the information technology and CRM industries. Although competition hasbeenincreasingamongthesefirms,sotoohasthenatureoftheircollaborativeactivities.Companiesneedtochallenge themselves todevelop theirbusinessby initiating, leveragingandredefiningrelationshipswithotherplayers to create and capture value.

The aim of this analysis is for managers to identify a position in their industry where their company can best take advantage of, or defend itself against, these forces. A complete and balanced analysis of the competitive environment inwhichafirmisoperatingshouldleadtoagoodunderstandingofthekeyfactorsforsuccesswithinthatindustryandthekeytaskstobeaddressedinthefirm.

The generic strategies frameworkOnce the industry structure has been analysed, an enterprise can consider the appropriate strategy to compete within it. A number of natural or generic strategies that can be adopted by an enterprise have been proposed by various writers. These include a cost leadership strategy, a differentiation strategy, or a focus strategy. These three strategies include:

Cost leadership strategy:• A cost leadership strategy requires a company to set out with the objective of being the lowest cost producer in the industry. Companies must seek economies of scale, proprietary technology notavailabletootherfirms,preferentialaccesstorawmaterialsandcostminimisationoverawiderangeofareas.Differentiation:• Withadifferentiationstrategyafirmseekstobedifferentwithintheindustryitisoperatingin by being unique on some dimension or set of dimensions of value to buyers. The company seeks one or more dimensions to differentiate itself on and, as a result, hopes to earn a premium price for its products or services.Focus strategy:• A focus strategy involves concentrating on a particular buyer group, geographic area or product/market segment. By selecting a particular segment or group of segments the company attempts to tailor its strategy to serving the needs of its segment better than the competition.

Thefocusstrategyisconcernedwithaspecificmarketsegmentandismoreconcentratedthanthedifferentiationapproach which appeals to a wider market. The focus strategy is concerned with servicing a particular target market better than any of the other competitors within the industry who are adopting either focus strategies aimed at other segments or broader strategies of differentiation and cost leadership.

Thealternativestrategiesinthisfigureillustratethatcompaniesmustavoidhavingahighcoststructureandlowdifferentiation a recipe for disaster. They should adopt a strategy of low cost or differentiation. However, the greatest success comes if both can be done together. For example, Ikea has been successful by creatively combining both a differentiation strategy and cost leadership strategy that results in prices lower than those of its major competitors.

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Niche Outstanding success

Disaster Lowest cost

High

High Low

Low

Relative cost

Diff

eren

tiatio

n

Fig. 3.2 Alternative strategies based on differentiation and cost(Source: Payne, A., 2005. HANDBOOK OF CRM: Achieving Excellence in Customer Management,

Butterworth-Heinemann publications)

The market leaders framework

Operational excellence

Product leadership

Customer intimacy

Three broad businessstrategies

Fig. 3.3 The three broad business strategies

It is seen that marketplace success is usually based upon what kind of value proposition the companies pursued – best total cost, best product, or best total solution. By product leadership, it means providing products that continually redefinethestateoftheart.Andbycustomerintimacy,meanssellingthecustomeratotalsolutionnotjustaproductor service’. While these three ‘disciplines’ or ‘generic’ strategies should not be assumed to be mutually exclusive, it will more often be the case that companies have different strengths or weaknesses in each of the three.

While a strong position in each of these markets should be the aim of any business it is suggested that the activities withinthebusinessshouldreflectthechosenunderlyinggenericstrategy.Thus,choosingonedisciplinetoemphasisedoes not imply ignoring the others; as suggested by the business chooses one dimension of value upon which to base its market reputation. Organisations seeking to follow the discipline of operational excellence need to have an internal culture that is based on ‘lean thinking’. This involves focusing on continuing improvement, multi-skilling andallthoseCRMactivitiesthatleadtogreaterinternalefficiency.


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Equally, significant emphasismust be placedupondeveloping superior supplier relationships since, formanyorganisations, the cost of materials and supplies are a major proportion of total cost. By working more closely with suppliersmanyopportunitiesforcostreductionandqualityimprovementscanusuallybeidentified.Inthesameway, it can be argued, the interface with downstream intermediaries such as distributors and retailers will need to be managed closely.

Companies that seek to place the emphasis in their strategic focus upon product leadership will need to invest in creating an internal culture that encourages innovation, risk-taking and entrepreneurship. Businesses that seek productleadershipalsoneedtoconcentrateonsupplierrelationshipsastodayasignificantproportionofinnovationis supplier driven. Closely related to the focus on suppliers for those companies seeking product leadership is the leveragethatcanbegainedthroughdevelopingallianceswithotherorganisations’specificskills,knowledgebasesand market understanding that they can impact.

This is especially true of the relationships that CRM vendors have with their alliance partners. The third ‘discipline’ is customer intimacy. This requires a continuing focus on the means whereby the relationship with customers can be made more personalised and customised. As such it is the ‘internal’ market that becomes of critical importance. A vastamountofresearchconfirmstheimpactofemployeemotivationandcommitmentoncustomersatisfaction.

Customer intimacy emphasises building relationships with existing customers with the greatest potential for growth andprofitability.IntermsofCRM,customerintimacystrategiesareespeciallyappropriate.Here,emphasisisplacedon understanding customer segments, micro-segments and determining where one-to-one strategies are appropriate – a topic which we consider shortly. Some companies are rethinking their strategy and are developing more intimate direct relationships with the consumer.

3.6 Focusing on Business StrategyBusiness strategy is a process, which leads to the development of an effective strategy or set of strategies that help the business achieve its corporate objectives.

It involves undertaking an in-depth analysis of the external environment of the company and undertaking an •analysis of the internal competencies of the company.The external analysis should review issues in the political, social and technological environments as well as •provide an in-depth examination of markets, customers and competitors. The internal analysis consists of a review of a wide range of factors that can ultimately affect the company’s •success or failure. The output of these analyses should enable a thorough assessment to be made of the overall attractiveness of •thebusinessandthefirm’scompetitivepositionwithinthatbusiness.The fundamental objective of this analysis is to identify those trends, forces and conditions that have a potential •impact on the formulation and implementation of the company’s strategies.A variety of techniques can be used to help determine the business strategy. The industry analysis framework •describedaboveenablesacompleteandbalancedanalysisofthecompetitiveenvironmentinwhichafirmisoperating and should lead to a good understanding of the key factors for success within that industry.Such an analysis can make a major impact on managers’ understanding of their strengths and weaknesses and •the opportunities and threats within their industry.For those companies where an examination of the business strategy shows it is unclear, inappropriate or has •inconsistencies, a more detailed review, using appropriate analytical techniques, needs to be carried out.The resulting analysis should lead to a carefully chosen and well-argued case for pursuing a particular business •strategy. Thebusinessstrategyshouldbedevelopedintospecificactionsthatwillleadtoitsimplementationandthe•achievement of its objectives..The successful strategy will be one in which the company differentiates itself from its competitors in a positive •sense using its strengths and distinctive competencies to satisfy customer needs better than the competition.

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While a company can pursue any of the strategies we have outlined in this section, we consider a business strategy •based on customer intimacy is particularly appropriate to the underlying principles and ethos of CRM.

3.7 Customer StrategyThe other half of the strategic equation is deciding, which customers the business wants most to attract and to keep and which customers it would prefer to be without.

Thesignificanceofbeingclearonwhomthetargetcustomerbase(andwhoisnot)isthateveryorganisationpossessesweaknessesaswellasstrengths.Inanenvironmentofincreasingcompetition,fewfirmscansuccessfullybe‘allthings to all people’. Thus, determining a distinctive customer strategy and directing all efforts to maintain and develop it is the only way for a business to survive and indeed thrive.

3.8 The Role of Customer StrategyWhile business strategy is usually the responsibility of the CEO, board and strategy director, customer strategy is typically the responsibility of the marketing department.

Most organisations marketing is still represented by a functionally based marketing department. •Responsibility for CRM is also often vested in functionally based roles including IT and marketing, although •an increasing number of enterprises are now starting to adopt a pan-company approach. While alignment and integration of business strategy and customer strategy is a high priority for all organisations, •special attention should be placed on alignment where different departments are involved in the two areas of strategy development.The prior review of business strategy will be instrumental in reaching a view on broad customer focus. •However,organisationsneedtodeterminemorespecificallytheirchoiceofcustomersandtheircharacteristics.•This is the role of customer strategy.Customer strategy involves examining your existing and potential customers and identifying which forms of •segmentation are most appropriate.The organisation needs to identify the characteristics of their customers and customer segments. •Thismayrequireanalysisofaconsiderablenumberofcustomerdata,whichhassignificantimplicationsregarding•the collection and organisation of these data in appropriate data repositories, such as a data warehouse This involves making decisions about whether a macro-, micro- or one-to-one segmentation approach is •appropriate.

3.9 Focusing on Customer StrategyCustomer strategy involves taking the business strategy and identifying which customer the enterprise needs to focuson.Itstartswithadefinitionofthetargetmarkettobeservedandhowitplanstoservethismarket.Inanintermediate market, the enterprise recognises that it may have a number of customer groups and each of these needs to be fully considered.

Regardlessofwhetherthecustomergroupcomprisesdistributors,intermediariesorfinalconsumers,aneffectivecustomer strategy requires each group to be segmented in an appropriate manner. The market segmentation process involves consideration of the alternative bases for segmenting the market and determining the appropriate level ofsegmentation–macro-,micro-orone-to-oneonthesegmentorsub-segmenteconomics.Theidentificationofsegmentation bases and the appropriate level of segment granularity should involve a high degree of creativity.

Companies should constantly be considering alternative ways of segmenting the market and seeking ways in which theycancreatedifferentialadvantageovertheircompetitors.Oncetheorganisationhasidentifiedandchosentheappropriate customer segments to target and the level of segment granularity, the enterprise needs to focus on the customerrelationshipswithinthem.Herepermissionmarketing,masscustomisationandwhetheracustomerfitsinto more than one segment or community need to be considered.


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Customer strategy is not only concerned with which customer segments to serve but also what products and services to sell to them. Although the latter is primarily a concern of product policy and marketing planning some brief discussion should be made here. Product and service options for a company can be conveniently divided into existing products and services and new products and services.

When these options are placed in a matrix with present and new products on one axis and present and new markets or customer segments on the other this gives rise to the following four broad product/market options: concentrating on marketing existing products or services to existing markets, developing new products or services for existing markets, developing new markets or customer segments for existing products or services, diversifying into new products for new markets or customer segments.

Eachofthesebroadcustomerstrategiesrepresentsanumberofspecificopportunities.Afinalissuetoconsiderunder the heading of customer strategy is the need for creativity and innovation. In an era of unparalleled change and ‘hyper-competition’ managers need to pay special attention to this, as the traditional approach of identifying and responding to new customer needs is not enough .Here, the value opportunities are greatly restricted. Customers often cannot clearly articulate their future needs. Companies who do not think outside their traditional mindset will findtheircustomersgoingtothosewhodo.

Market penetration

1. Increasing number of users a. Attracting competitors users b. Converting non-users into

users2. Increasing purchasing frequency3. Increasing average quantity

purchased per transaction4. Increasing lifetime value

(customer retention)

Product development

1. Product improvement2. Product quality extensions3. Product line extension4. New product development

Market development

1. Increasing number of users in new market segments in present geographic market

2. Increasing number of users in new market segments

a. Regional b. National c. International expansion

Diversification

1. Concentric2. Conglomerate

New

New

Pres

ent

Present

Products

Mar

ket

Fig. 3.4 Review of product/service and market/customer segment options(Source: Payne, A., 2005. HANDBOOK OF CRM: Achieving Excellence in Customer Management,


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3.10 Aligning Business Strategy and Customer StrategyAs noted earlier, alignment and integration of business strategy and customer strategy should be a high priority, especially where they are developed within different functions of the business. This lack of alignment between business strategies may be more common than expected. Subsequent discussion, over a period of time has, showed majorgapsinalignmentbetweenthebusinessstrategyandcustomerstrategyandthespecificneedsofthecustomersin many of their markets. Experienced observers of industry like managers, consultants or academics have their own examples of instances where business strategy and customer strategy are not clearly aligned or where they comeintoconflict.

3.11 CRM Strategy DevelopmentBusiness and customer strategy represent the major components of CRM strategy. From this earlier discussion, it is clear that a given organisation needs to consider its current position within its industry and the future role it realistically can play within it.

Central to this will be making decisions about customer choice, customer characteristics and segment granularity. This includes determining the extent to which an individualised customer, or one-to-one, approach is appropriate and affordable for the enterprise and determining the completeness of customer information that exists and is potentially available.

Such decisions should be based on both the present situation and the possible situation in the future. In this section, we discuss how a consideration of business and customer strategies leads to CRM strategy development. The evolving nature of the competitive situation and the likely costs inherent in creating changes need to be carefully assessed as part of the CRM strategy development process.

Com

plet

enes

s of c

usto

mer

info

rmat

ion

Degree of customer individualisation

Customer based

marketing

Product based selling

Individualised CRM

Manage service and support

Low

Low

Mod

erat

e

Moderate

Hig

h

High

Fig. 3.5 The CRM strategy matrix(Source: Payne, A., 2005. HANDBOOK OF CRM: Achieving Excellence in Customer Management,



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TheCRMstrategymatrix,showninfigure3.5,providesatoolforconsideringacompany’spresentandfuturecircumstances.The vertical axis of thematrix in thisfigures shows completeness of customer information, acombination of how much information is held on customers and how sophisticated is the analysis of that information. The horizontal axis shows the degree of customer individualisation, the extent to which the organisation uses whatever information it has on customers to give them individualised or customised service.

The matrix shows four broad strategic positions, which may be appropriate for a particular organisation depending on thebusinessissuesoutlinedaboveanditsspecificcircumstances.Overtimethereisageneraltrendfororganisationstomigratetowardsthetopright-handcornerofthematrix.Ashiftfromthelowerlefttoupperrightpositionreflectsa movement away from a transactional approach, a very unsophisticated form of CRM (some would say it is not really CRM at all) to individualised CRM, a much more sophisticated form.

Customer-based marketingIn the top left-hand corner of the matrix is ‘customer-based marketing’. Organisations undertaking customer-based marketing now shift their emphasis from individual product sales to a focus on the customer. Here, the organisation seeks to develop a more detailed understanding of its customers. It may also wish to undertake a range of analyses including:customerprofitability,competitorresponses,loyaltyandchurnmanagement,creditscoring,customerloyalty, fraud detection and management, risk management delinquency detection. Not all of these analyses will be relevant for every company. Their relevance will depend on the industry sector, the company’s position in the market and other factors.

To move from product management to customer management, an organisation will want to undertake detailed segmentationandanalysisofcustomersinordertocalculatecustomerprofitability,churnorretention,andsoon,so it can:

make different offers to different customers the essence of CRM•monitor the organisation’s progress towards this goal•identifyindividualcross-sellingandupsellingopportunitiestomaximisecustomerprofitability•

While customer-based marketing is a more advanced form of CRM, those businesses that adopt this approach will not be offering the highly individualised customer service and support found on the right-hand side of the matrix.

Supermarkets are a good example of companies that have been able to exploit customer-based marketing. Using the information about customer behaviour collected at the checkout via loyalty cards and also video recordings of customers’ movements within stores, they can draw conclusions about store layout, position of products on the shelves, presentation and packaging and so on. They can then alter layout and placement and also mail out tailored offers to individual customers. This information enables them to:

alter the mix of products on a shelf on a store-by-store basis to take account of varying socio-demographics•identify and develop additional ‘own-label’ products that exactly match the needs and aspirations of customers •with high net lifetime valuedevelop and promote new products more effectively•

The detailed information that is now being held by supermarkets is shifting the balance of power from the manufacturers of branded products to the supermarket, as they are increasingly able to sell this information to manufacturers.Havingreachedthisposition,themostadvancedsupermarketssuchasTescohavenowidentifiedways to move towards the upper right-hand side of the matrix through more individualised interactions with their customers.

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Individualised CRM‘Individualised CRM’ requires both sophisticated data platforms and sophisticated applications running on them. These applications include:

Advanced one-to-one marketing (both business-to-business and business-to- consumer)•Advanced computer telephony integration (CTI), which enables the business to use the computer interactively •during telephone contact with a customer creating individualised service to the customerMulti-channel integration•Advanced web services and Internet (perhaps using tools such as collaborative browsing, which enable the •customer and the company to browse web pages together from different locations)In particular, this strategic position is relevant for organisations that are seeking to adopt a wide range of channel •options. These may include direct selling, selling through indirect channels such as distributors or brokers and sales over •the Internet using electronic commerce.This latter channel option represents considerable opportunities for building one-to-one marketing systems •which can learn from electronic interactions with customers and which develop a differentiated service, look and feel for every individual customer that comes onto the system.At the most advanced level of individualised CRM, the business is able to respond instantaneously to customer •enquiries and as the communication or transaction with the customer takes place, information feeds back into the operational systems.The whole process becomes a dynamic form of CRM rather than a static one.•Organisations adopting the individualised CRM will seek to offer a complete, individualised and customised •service.This could be via telephone, mail or face-to-face, or it may take the form of electronic commerce via the Internet •where customers can use a web browser to make enquiries or purchases.This form of CRM does not have to be personalised (that is have direct person-to-person contact with the •customer) but it must be individualised.For CRM to be individualised the business needs to develop IT systems that ‘know’ the customer.•Here, the business develops a corporate memory of the customers it is dealing with. The customers may not be •personally known to the business but whenever they contact it (and whomever they contact) they feel that the business knows all about them. Relationships between customer and supplier are continually strengthened through on-going interactions. •In addition, customers are likely to build an emotional bond with the organisation because they have invested •time in the relationship and they may be unwilling to invest that time again with competitors.


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SummaryThe strategy development process involves determining the business strategy and the customer strategy and •ensuring that they are integrated.ThefirstpartoftheCRMstrategydevelopmentprocessistoreviewtheorganisation’sbusinessstrategy.•A detailed understanding of the business strategy is essential if an appropriate customer strategy is to be •implemented.Business strategy is a top management responsibility that involves identifying the future direction of the enterprise •aswellasmanagingthecreativeinteractionofthefunctionaldisciplinesofoperations,marketing,financeandhuman resource management.The process of business strategy formulation should originate with a review or articulation of a company’s •vision.Acompany’sbusinessvisionshouldreflectthesharedvaluesystems,whichareheldwithintheorganisation.•Business strategy is a process, which leads to the development of an effective strategy or set of strategies that •help the business achieve its corporate objectives.Customer strategy involves taking the business strategy and identifying, which customer the enterprise needs •to focus on.Business and customer strategy represent the major components of CRM strategy.•CRM strategy development involves considering the present and potential future position that the enterprise •has within its industry and determining how it needs to address its customer base.

ReferencesCRM Business Strategy• [Online] Available at: <http://www.crmforecast.com/strategy.htm> [Accessed 1 February 2012].CRM Strategy• [Online] Available at: <http://www.slideshare.net/ezendu/crm-strategy> [Accessed 1 February 2012].Kumar, V. and Reinartz, W. J., 2009. • Customer Relationship Management: A Databased Approach,John Wiley & Sons.Ed, P., 2008. • Customer Relationship Management, Pearson Education India.rbifast, 2009. • CRM - Customer Relationship Management [Video Online] Available at: <http://www.youtube.com/watch?v=em8PH5o-qUw> [Accessed 1 February 2012].dalekathryn, 2010. • CRM - Customer Relationship Management [Video Online] Available at: <http://www.youtube.com/watch?v=v9rRBlSX4m8> [Accessed 1 February 2012].

Recommended ReadingButtle, F., 2008. • Customer Relationship Management, 2nd ed., taylor & francis.Buttle, F., 2010. • Customer Relationship Management, 2nd ed., Wiley.Rogers, M. and Peppers, D., 2010. • Managing Customer Relationships: A Strategic Framework, 2nd ed., Wiley.

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Self AssessmentThe strategy development process involves determining the __________ strategy and the customer strategy and 1. ensuring that they are integrated.

businessa. clientb. companyc. organisational d.

Thefirst part of the __________ strategy development process is to review the organisation’s business2. strategy.

HRMa. CRMb. CPMc. CPPd.

Match the following 3.

Embedding1. Support the vision, are based on key factors for success and turned into A. measurable practices.

Branding2. Needs of key stakeholders understood and linked through vision and-B. values.

Building foundations3. Organisation’s branding expresses vision and values.C.

Strong values4. Recruitment, training, appraisal, rewards, promotion and succession, all D. reflectvalues.

1-A, 2-C, 3-D, 4-Ba. 1-D, 2-C, 3-B, 4-Ab. 1-C, 2-D, 3-A, 4-Bc. 1-B, 2-A, 3-C, 4-Dd.

Which of the following is one of the business strategies?4. Operational excellencea. Customer relationshipb. Company relationshipc. Company excellenced.

Business and customer strategy represent the major components of __________.5. management strategya. company strategyb. relationship strategyc. CRM strategyd.


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Which of the following statements is true?6. Customer strategy is a process, which leads to the development of an effective strategy or set of strategies a. that help the business achieve its corporate objectives.Company strategy is a process, which leads to the development of an effective strategy or set of strategies b. that help the business achieve its corporate objectives.Business strategy is a process, which leads to the development of an effective strategy or set of strategies c. that help the business achieve its corporate objectives.Company-client strategy is a process, which leads to the development of an effective strategy or set of d. strategies that help the business achieve its corporate objectives.

___________ involves taking the business strategy and identifying, which customer the enterprise needs to 7. focus on.

Customer strategya. Management strategyb. Company strategyc. Relationship strategyd.

The process of ______________ formulation should originate with a review or articulation of a company’s 8. vision.

management strategya. company strategyb. CRM strategyc. business strategyd.

A company’s ____________ vision should reflect the shared value systems,which are heldwithin the9. organisation.

businessa. financialb. strategic c. customerd.

__________ is not only concerned with which customer segments to serve but also what products and services 10. to sell to them.

Company strategya. Customer strategyb. Management strategyc. CRM strategyd.

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Chapter IV

The Value Creation Process

Aim


explain the value creation process•

elucidate the value the customer receives•

discuss how relationship adds value•

Objectives


describe customer acquisition and its economics•

explain traditional• means of customers’ assessment of value

highlight the importance of value assessment•

Learning outcome


understand the formulation of value proposition•

recognise the importance of brand image•

know the framework• for customer retention improvement


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4.1 Introduction to Value Creation ProcessCreating customer value is increasingly seen as a key source of competitive advantage. Yet, despite growing attention to this aspect of strategic development, there is remarkably little by way of agreement among managers andcommentatorsonwhatconstitutes‘customervalue’.Further,companiestypicallydonotspecifyinsufficientdetail what valuetheyseektodelivertoclearlyidentifiedcustomersegmentsandmicro-segmentsandhow they propose to deliver this value.

The value creation process consists of three key elements: determining what value the company can provide its customers with (the ‘value customer receives’); determining the value the organisation receives from its customers (the ‘value organisation receives’); and, by successfully managing this value exchange, maximising the lifetime value of desirable customer segments.

However, the emphasis in many companies is on this latter element of value. To these companies, customer value means: the money that can be extracted from the customer and the money made from selling more and more of the existing products and services to the customer.

Yetintoday’scompetitivearenawhereagrowingnumberofbusinessesviaforagreatershareofafinitecustomerpool,ithasbecomeimperativetoconsidercustomervaluealsointermsofcustomerbenefitandhowwecanensurethe customer proposition is relevant and attractive and that the customer experience is consistently positive. This chapter examines the value creation process. The value creation process is a critical component of CRM as it translatesbusinessandcustomerstrategiesintospecificstatementsofwhatvalueistobedeliveredtocustomersand, consequently, what value is to be delivered to the supplier organisation.

Business strategy•Businessvision•Industryand

competitive characteristics

Shareholder results•Employeevalue•Customervalue•Shareholder

value•Costreduction

Performance monitoring•Standards•Satisfaction

measurement•Resultsand

KPI’s

Value customer receives•Value

proposition•Value

assessment

Value organisation receives•Acquisition

economics•Retention

economics

Value creation process:

Multi-channel integration process:

Performance assessment process:

Strategy development process:

Customer strategy•Customer

choice and customer characteristics

•Segment granularity

Sales force

Outlets

Telephony

Direct marketing

Electronic commerce

Mobile commerce

Inte

grat

ed c

hann

el m

anag

emen

t

Data repository

IT systems

Analysis tools

Front–officeapplications

Back–officeapplications

Cus

tom

er se

gmen

t life

time

Valu

e an

alys

is

Virt

ual

Phys

ical

Information management process

Fig. 4.1 The value creation process(Source: Payne, A., 2005. HANDBOOK OF CRM: Achieving Excellence in Customer Management,

Butterworth-Heinemann publications.)

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The value the customer receivesThevaluethecustomerreceivesfromthesupplierorganisationisthetotalpackageofbenefits,oraddedvaluesthatenhance the core product. Competition exists not between what companies produce in their factories but between ‘whattheyaddtotheirfactoryoutputintheformofpackaging,services,advertising,customeradvice,financing,delivery arrangements, warehousing, and other things that people value’. The value the customer attributes to these benefitsis inproportiontotheperceivedabilityoftheoffertosolvewhatevercustomerproblempromptedthepurchase.

Inthissection,wefirstreviewthenatureofwhatthecustomerbuysbyexplaininghowthecoreandaugmentedproduct, relationships and brands all contribute to an enterprise’s value proposition. We then examine the nature of the value proposition and the value assessment.

The nature of value Customersdonotreallybuyproductsorservicesaswhentheybuytheyexpectbenefitsandvaluefromthetotaloffer the company provides. This is not just a semantic point; it is an important distinction, which can be strategically vitalforthelong-termsurvivalofafirm.Therearemanyexamplesofcompanieswhohavetakenanarrowviewand considered their business purely in terms of the traditional products or services. As a result, they were forced out of business when a competitor or competitors effectively reshaped the market by not only getting customers, but by keeping them.

4.2 Core and Augmented Offer Add ValueFor an effective CRM strategy to be realised an understanding of exactly what the customer is buying is critical. Customersderivebenefitsfromthepurchaseofeithergoodsorservices.Thisiscalled‘theoffer’.Anoffercanbevisualisedasacentralcoresurroundedbyaseriesoftangibleandintangibleattributes,featuresandbenefits.Ifyouthink of the core as offering the customer essential solutions, then the surrounding elements are about services and supportofvariouskinds.Thesemayincludepackaging,information,finance,delivery,warehousing,advice,qualityof the web site, warranty, reliability, styling and so on.

Potential

Augmented

Expected

Core

Total product is the sum of all four levels

Fig. 4.2 The total value offer


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The offer can be viewed at several levels. These include: Core or generic: For consumer or industrial products this consists of the basic physical product. The core elements for a camera, for example, consist of the camera body, the viewer, the winding mechanism, the lens and the other core basic physical components, which make up the camera. For a banking service, the core elements might be safety and transactional utility in the form of deposits and withdrawals.

Expected: This consists of the generic product together with the minimal purchase conditions, which need to be met. When a customer buys a videocassette recorder they expect an instruction book, which explains how to programme it, a warranty for a reasonable period should it break down and a service network so that it can be repaired.

Augmented: This is the area that enables one offer to be differentiated from another. For example, IBM’s hardware has a reputation for excellent after sales service. Because of this high quality service it may be preferred by customers even though the core product , the hardware may not be the most technologically advanced. They differentiate by ‘adding value’ to the core, in terms of service, reliability and responsiveness.

Potential:Thisconsistsofallpotentialaddedfeaturesandbenefitsthatareormaybeofutilitytosomebuyers.Thepotentialforredefinitionoftheproductgivesadvantagesinattractingnewusersorenhancingrelationshipswithexistingcustomers.Thiscouldmakeitdifficultorexpensiveforcustomerstoswitchtoanothersupplier.

Thus,afirm’sofferisacomplexsetofvalue-basedpromisesandtheofferthatisdevelopedbytheenterpriseoftenneeds to be varied according to the target market being considered. People buy to solve problems and they attach value to any offer in proportion to this perception of its ability to achieve their particular ends. In other words, value isassignedbybuyersinrelationshiptotheperceivedbenefitstheyreceivematchedagainsttheirexpectations.

This approach reconciles the company’s traditional view of the product, seen in the terms of various inputs and processes needed to produce it and the consumer’s view of the offer, as being a set of solutions and supporting benefits.Togethertheseelementscomprisethetotalvalueoffer.

The core product for a computer is a machine that permits input, processing, storage and retrieval of data. This is the minimum requirement. The expected product consists of not just the above but also service support, warranty, a recognisable brand name and attractive packaging. The augmented product may include the supply of free diagnostic software, a generous trade-in allowance, user clubs and other augmentations, which are valuable to personal computer buyers. The potential product may consist of future applications including a systems controller, facsimile machine or a music composer.

Thisconcepthashadasignificantimpactonthinkingofmanagers.Itsspecialcontributionliesinarecognitionthat additional elements, beyond that of the product itself, have a profound impact on the value that can be added for customers. Its limitation has been that there has been no structured approach available for managers to use to identify which elements could be added to the core product.

Thus, the ‘total value offer’ highlights the importance of extending the core offer but does not provide much guidance on how to do it.

4.3 Relationships Add ValueOnce a superior offer has been developed, the enterprise needs to focus on building enduring relationships with customers. Customers value relationships with trusted suppliers who make a superior offer. As relationships are an important dimension of value, considerable efforts need to be expended on building and enhancing these relationships over time.

However, experience suggests that most companies direct the greater part of their marketing activity at winning new customers.

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While businesses need new customers, they must also ensure that they are directing enough of their effort at existing customers. Those companies that focus too much on marketing to new customers often experience the ‘leaking bucket’effect,wheretheylosecustomersbecausetheyaredirectinginsufficientmarketingactivitygenerally,andcustomerservicespecifically,atthem.

Customer ladder of loyaltyThecustomer ladderof loyalty, illustrated in, identifies thedifferent stagesof relationshipdevelopment.Salesmanagement and charity marketing have used such ladders for many years. We have shown the ladder steps but havedepictedtheladderasarock-faceinthisfigure.Thissuggeststhatthetransitionofcustomersfromoneleveltoanother is not necessarily an effortless one but may require considerable energy on the company’s part to effect the change. The ladder is relevant for all groups within a channel chain referred to above – direct buyers, intermediaries aswellasfinalconsumers.Thefirsttaskistomoveanew‘Prospect’uptothefirstrungtoa‘Buyer’.Thenextobjective is to turn the new purchaser into a ‘Client’ who purchases regularly and then a ‘Supporter’ of the company and its products. The next step is to create ‘Advocates’ who provide powerful word-of-mouth endorsement for a company.

In a business-to-business context an advocate may ultimately develop into a ‘Partner’ who is closely linked in a trusting and strategic relationship with the supplier.

General Electric’s (GE) Appliance Division in the USA is a good example of an organisation, which has created value bybuildingacloserrelationshipwithitsfinalconsumersthroughaninnovativecallcentreandmovingcustomersfrom a ‘buyer’ or ‘client’ level to a ‘supporter’ or ‘advocate’ level on the ladder.

Positions on the ladder, once reached, are not necessarily stable over time. Different patterns occur in different industries. Research in industries such as retailing suggests that advocacy may reach a peak at the time of purchase but may drop off after that. Thus relationship- based efforts may need to be put in place to build on earlier transactions.

On the other hand, the position on the ladder may build slowly over time as a result of continued product use or experience with a company. The author only became an advocate of Hewlett Packard printers after many years of faultlessprinteroperation,duringwhichtimeallhisotherpiecesofofficeequipmentdevelopedfaultsorbrokedown.

It is not always desirable to progress a relationship with every customer. Some customers or customer segments may not justify the investment needed to develop a ‘Supporter’ or ‘Advocate’ relationship, as it may prove too costly to do so. Some customers at the ‘Client’ level may be ‘mercenaries’ who exhibit little loyalty and are often expensive toacquireandquicktodefect;othersmaybe‘hostages’whoaredissatisfiedbutarelockedinbyswitchingcostsormonopolistic supplier behaviour. Managers therefore, need to consider the existing and potential lifetime value of customers and determine whether it is appropriate to make this commitment. We address this later in the chapter.

The role of advocatesThe ‘Advocate’ level on the customer ladder of loyalty is worthy of special emphasis. But neither company practice nor academicresearchpaysufficientattentiontotheimportantareaofadvocacyandreferralmarketing.Feworganisationshave any formal processes that utilise referrals from existing customers. Though many organisations recognise that customers can be the most legitimate source of referrals to their prospective customers, most tend to simply let referrals happen rather than proactively developing marketing activities to leverage the power of advocacy.

The role of terroristsTurning as many customers as possible into the most valuable type of loyalist, the apostle, and eliminating the most dangerous type of defector or hostage, the terrorist, should be every company’s ultimate objective’. In particular, this latter category ‘the terrorist’, not mentioned earlier, is of special interest. Terrorists represent the most dangerous group of defectors. These are customers who have had a bad experience and make it a crusade to tell others about their anger and frustration. Unfortunately, terrorists are typically far more committed and effective at creating negative word of mouth than advocates are at demonstrating positive word of mouth.


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Consumer ‘terrorism’ and militancy is on the increase and as customer expectations appear to increase at a faster rate than organisations’ capacity to improve customer service, one can expect increased activity in this arena in the years ahead. Consumer advocate columns in Sunday newspapers and many sites on the Internet provide enormous opportunities for ‘terrorist’ activity. The low cost and pervasive nature of the Internet make it an ideal channel for aggrieved customers to communicate their dissatisfaction, frustration or anger to a wide range of existing or prospective customers. The following selection represents a very small number as part of their value creation activities, organisations should consider not just the task of building customer satisfaction and advocacy but also how to deal with negative reactions to their products or services.

A content review of the websites listed above suggests that in many cases it was not so much the issue that there was a problem experienced by customers, but rather little or nothing was done to address it. Leading CRM companies take the view ‘the customer who complains is your friend’. They create customer value by building mechanisms to surface problems and to react accordingly on the customer ladder of loyalty is worthy of special emphasis. Referrals from customers are among the most relevant, effective and believable sources of information for other customers. A number of researchers have argued that word-of mouth is the most effective source of information for consumers.

While commercial sources normally inform the buyer, personal sources legitimise or evaluate products for them. Legitimisation makes the step of converting prospects into customers on the ladder of loyalty that much easier. Brands add valueThe brand is also an important element in contributing to the value proposition. Originally the role of a brand was to enable a customer to identify the manufacturer of a product. Over time the concept of a brand broadened to include further meaning: symbols, images, feelings and relationships. Brands add value to the company because they add value to the customer.

Thus, a product is something that is made by a company; a brand is something that is bought by a customer. A product can be imitated by competitors, while a brand is different from that of its competitors. A strong brand is unique. Brand-equity assets generally add or subtract value for customers. They can help them interpret process and store hugequantitiesofinformationaboutproductsandbrands.Theyalsocanaffectcustomerconfidenceinthepurchasedecision (due to either past-use experience, familiarity with the brand and its characteristics).Potentially more important is the fact that both perceived quality and brand associations can enhance customers’ satisfaction with the use experience. Knowing that a piece of jewellery came from Tiffany can affect the experience of wearing it: the user can actually feel different.

It is already discussed above, how the core and augmented product offer adds value. A brand adds to this offer in ways that differentiate it from other similar products, ways that are important and of value to the customer. What distinguishes a brand from an unbranded product and gives it value to the customer is the sum total of customers’ perceptions about both product performance and their complete experience with the brand.

Brands have become a major determining factor in repeat purchase and an important way of adding differentiation. Branding also has an important role in helping customers be assured of high and consistent quality. Perceived quality is as dependent on factors such as reliability, responsiveness, assurance and empathy, as it is on tangibles. This means that managers should give increased attention to these factors, which increase customer value as a means of brand building.

The American Express green card is a good example of a strong brand that is valued highly by customers as a result of association with these factors. Historically, in strict product terms, it has compared unfavourably with Visa or MasterCard:

Until relatively recently American Express offered no convenient option to pay off its bill monthly. The entire balance had to be paid upon receipt of the statement only a quarter of the number of merchants worldwide that take Visa/MasterCard accept American Express Emergency cash is available to American Express holders at only 20 per cent

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of locations at which it is available to the Visa or MasterCard holder. The American Express yearly fee is typically more than any Visa or MasterCard, some of which do not charge any annual fees. Despite these shortcomings, American Express green card is a highly successful brand.

Many consumers are willing to pay more for a less useful, less convenient credit card. By positioning their card as a ‘travel and entertainment card’ and themselves as a customer focused organisation, American Express has created a distinctivesetofperceivedbenefitsthatnoothercardhasachieved.Amongtheseisahighdegreeofresponsivenesswhenthecardholderhasarealproblemsuchasalostcard.Theauthorrecentlyreflectedonhow,over15yearsago,theAmericanExpressofficeinNewYorkcouldreplaceastolencardwithintwohours,whileinthe2000sittooka major British bank over 15 days to accomplish the same task.

As a result of such experiences, the brand image is further enhanced or diminished in the eyes of the customer.

4.4 The Importance of Brand ImageExamples of the value of brand image are apparent in all industries.

Building brand value through relationshipsCRM is about persuading consumers to participate in a dialogue by establishing a relationship that helps bond the consumer to the brand. By building a relationship with customers, the organisation can create real and tangible value for them.

A good example of this value creation can be seen in motorcycle manufacturer, Harley-Davidson’s successful turnaround. Harley’s success is closely tied to needs, aspirations and relationships with its customer base and they have played to that strength the behaviour of employees also contributes greatly to the brand.

Singapore Airlines is known as one of the most successful airlines in the world and one of the best for customer service. It is a good example of an enterprise putting considerable emphasis on building a brand relationship through moments of truth. The brand, through its ‘Singapore Girl’ campaign, is closely associated with high quality service. Itdeliversthisoutstandingservicebyhavingaratioofoneflightattendantforeverytwenty-twopassengers,thehighest in the world and well above the industry average. Singapore Airlines’ branding places great emphasis on its staff. In a very real sense their staffs is the brand.

Branding and the InternetTwo brand experts, Martin Lindstrom and Tim Andersen, use Procter & Gamble as an illustration of the increasing importance of branding on the Internet. In 1930, Procter & Gamble did not spend any media dollars on radio. All money was dedicated to the print media. By 1935, some 50 percent of the total Procter & Gamble media budget was devoted to radio. In 1950, three percent of Procter’s media spending went to television. By 1955, 80 percent oftheirtotalmediabudgetwasdevotedtotelevision.In1998,Procter&Gambleestablishedtheirfirstworldwideonline centre.

The purpose to ensure that Procter & Gamble would be ready to move their television budget onto the Internet at the right time. By 1999 P&G Interactive were named Marketer of the Year by Advertising Age. They have led thewayingainingonlineconsumeracceptance,standardisingmeasurementanddefiningadvertisingmodelsandmaking online media easier to buy. They have also demonstrated considerable ingenuity in their Internet branding campaigns.

For example, in an online campaign for Bounty paper towels, P&G created a new advertising format called ‘sequential messaging’ in which it broke down the message into four units and delivered them to the user at different areas of thesite,basedontheirlevelofinvolvementwiththecompany.P&Gfoundthatsequentialmessagingsignificantlyincreased purchase intent. At the time of writing, US consumers spend some $93 billion annually on shopping directly online.Afurther$138billionisspentbythemongoodsandservicespurchasedofflineafterfirstseekinginformationonline. This research, carried out by the Dieringer Research Group for the American Interactive Consumer Survey, underlines the importance of the Internet as a channel for the brand. Overall, some 23 million Americans spend $500


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ormore,bothonlineandoffline,afterfirstgatheringproductinformationonline.WhenaskedabouttheimpactoftheInternet on brand images, 45 per cent of all online adults, which equates to 25 per cent of all US consumers, said that their brand opinions had changed in one or more of the ten common product categories covered by the survey.

However, despite this great shift to Internet activity, Lindstrom and Andersen point out that the future Internet generation does not trust the Internet as an information source. They cite a Time-CNN survey on young people that shows trust of information on the Internet is only one third the levels that it is in other media such as newspapers and television. They conclude that brands will need to act as a trusted ‘consumer guide’ on the Internet, a development which will make much greater future demands on the online brand to create customer value. Goodwill and trust cannotbebought;theyareearnedovertime.Consideringnoonlinebrandcanrepresentmorethanafive-yearhistory,there have been only a few online brands that have earned consumer trust, for example, Yahoo!, Amazon, AOL and Excite. It could be said that ‘real world’ trusted brands such as Disney have ‘free tickets’ to consumer web trust while the online brand market is still immature.

However, established brands like Disney have realised they have to employ the same brand management respect for the customer that they would have in the real world to maintain and extend that ‘Disneyesque’ trust from real world to online world. Disney takes all that is good about their company (family values, safe community and trust) and transfers it online.

Value and branding in contextThree decades ago branding was mainly the domain of consumer goods. Now, we see efforts to establish and sustain distinctive brands in every sector. In the past, many companies have emphasised the brand name rather than brand equity.

Brand equity represents the set of brand assets and liabilities that collectively add to or subtract from customer value and this has recently become a key area of focus for all enterprises. With a widespread acceptance of the importance of brands, there has been increasing recognition that the consumer’s choice depends less on evaluation of the functional benefitsofaproductorserviceandmoreontheirassessmentofthecompanyandthepeoplebehindit.

Inanofflineenvironment,therelationshipthatcustomershavewithabrandisfrequentlytheresultoftheirinteractionswith the staff of that organisation and their perceptions of service quality. The brand relationship is the outcome of a series of brand contacts that the customer has with the organisation. Over time these customer contacts or ‘moments of truth’ result in increased or decreased customer value.

In an online environment, the Internet creates major opportunities and threats for brands. The greatest opportunities relate to speed and cost. The great advantage the Internet has over more traditional media is its ability to manage customer relationships from awareness to buying action. It also potentially enables customer contact hours per day at much lower cost. However, as noted above it is a much less trusted medium.

Overall, there are more similarities than differences when building a traditional versus an online brand. The key issueistoensurethatwherecustomersuseofflineandonlinechannelsthereisbrandconsistencyandtheyhavesuperior customer experiences.

4.5 The Value PropositionHaving examined how product and service offers, relationships and brands can be utilised in order to create customer value, we now turn our attention to how these components of customer value can be utilised in a formal statement of value, or value proposition.

In recent years, managers have started to use the term value proposition increasingly frequently. This term is employed in two ways by organisations. First, in general terms it is used to describe the notion of creating value in a very broad sense.Second,inmorespecificterms,itisusedtodescribeadetailedanalyticalapproachtovaluecreation.

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However, the term is most frequently used in the general sense without any analytical underpinnings. Discussions with many organisations suggest that relatively few attempts have been made by them to develop a structured approach to formulating value propositions. Where they do have a formal statement of their value proposition, this isoftennotbasedonanyanalysis.Avaluepropositiondefinestherelationshipbetweenwhatasupplieroffersandwhatacustomerpurchasesbyidentifyinghowthesuppliersatisfiesthecustomers’needsacrossdifferentcustomeractivities (example; acquiring, using and disposing of a product).

Specifically,itdefinestherelationshipbetweentheperformanceattributesofaproductorservice,thefulfilmentofneeds and the total cost. The aim of all businesses is to create a value proposition for customers, be it implicit or explicit,whichissuperiortoandmoreprofitablethanthoseoftheircompetitors.

Valuepropositionsexplaintherelationshipbetweentheperformanceoftheproduct,thefulfilmentofthecustomer’sneeds and the total cost to the customer over the customer relationship life-cycle (from acquisition of the product through to usage and ownership and eventual disposal). As every customer is different and has changing needs, it is crucial that the value proposition for each customer is clearly and individually articulated and cognizant of the customer’s lifetime value.

Thus, the economic value of customer segments to the organisation informs decisions about the value proposition.

Formulating the value propositionFormulatingthevaluepropositionformsthefirstpartofthevaluepropositionconcept.Theapproachfollowedindeveloping these value propositions involves determining:

the target customers•thebenefitsofferedtothesecustomers•the price charged relative to the competition, and•a formal statement of the value proposition.•

The value proposition approach suggests companies should adopt a three-step sequence of:Analysing markets based on value•Assessing opportunities in each segment to deliver superior value.•Explicitly choosing the value proposition.•

Step 1: Analysing markets based on valueThisfirststepinvolvesunderstandingtheprice/benefitopportunitiesthatexistwithinthemarketandherethevaluemap can prove a useful tool. Value maps provide a graphical presentation of the relative positions of different competitorsintermsofthebenefitsandpriceattributesthatrelatetocustomervalue.Ifallcompetitorsareinasimilarpositiononsuchamap,commoditisationandreducedprofitabilitywouldprobablyresult.Thissituationisapparent with many players in the airline industry.

On the other hand, highly successful companies tend to establish differentiated positions on the value frontier. If companies fall consistently in the underperformer region of the map their future survival is questionable.

These researchers suggest three generic strategies for developing differentiated value propositions on the value map:

Extend the value frontier towards the low end of the value map : The strategy adopted by Southwest Airlines •in the USA and by easy Jet and Go airlines in Europe.Extend the value frontier towards the high end of the value map• : This strategy was adopted by British Airways andAirFrancewiththeirConcordefleetsbeforetheywereretired.Pursuitofthisstrategyisoftenbasedontechnological innovation.


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Shift the value frontier• :ThestrategyadoptedbyVirginAtlanticwithits‘upperclass’service,offersfirstclassfacilities and a highly distinctive personality based on a business class fare structure.

High-performance companies characteristically focus on the development of superior value propositions in order totakeadvantageofnewgrowthopportunitiesandidentifiable,premiercustomergroups.

Step 2: Assessing opportunities in each segment to deliver superior value When a critical review of any market is undertaken it soon becomes obvious that the idea of a single market for a given product or service is highly restrictive. All markets are made up of market segments, or groups of customers withthesameorsimilarneeds.Reachingthemostprofitableandsuitablemarketsegmentsisamatterofevaluatingthe opportunities and limitations in each segment for delivering superior customer value.

Even where the offer made to customers is technically identical to competitors’ offers, efforts to differentiate the totalor‘package’offerintermsofrelationshipsandbrandingcanreapsignificantrewards.Manycompaniesthathave adopted a market aggregation or macro-segmentation strategy in the past are now actively addressing new ways of appealing to customers at lower levels of segment granularity.

Inconsideringnewattributesthatmayformpartofanenhancedoffermadetomorespecificcustomersegments,companieswillfinditusefultousethe‘supplementaryservices’approachasacreativitytool.Valuemapsmayalsobeconstructedatthemarketsegmentleveltoenableveryspecificprice/benefitopportunitiestobeevaluatedwithinthem, thus highlighting the most promising ones and the most appropriate propositions for these segments.

Assessments of potential opportunities for delivering superlative value should involve a rigorous analysis of cost, competitiveoffersand,importantly,organisational‘fit’onbothstrategicandoperationallevels.Partofthisexerciseshould include a formal assessment of the market attractiveness and business strengths within each segment. Frameworks such as the directional policy matrix25 can be used to do this analysis.

Step 3: Explicitly choosing the value propositionHavingidentifiedthetargetmarketsegments,thenextpriorityistocreateavaluepropositionofwinningrelevance.The characteristics of the segments that form some markets may vary so radically that different value propositions will be required for different segments.

For example, in the automotive industry, the needs and preferences of customers in the luxury segment who buy Rolls-Royce cars are clearly distinct from those of customers in the trendy youth segment who buy Smart cars or VWBeetles.Businessesthatjustifiablyexhibitlessmarkeddifferencesbetweentheirproductandserviceoffersmaybenefitfromapproachingthevaluepropositionissuebydevelopingagenericvaluepropositionforthemarketasawholeandthendevelopingmorespecificvariantsforeachspecificsegment.

Onceformulated,valuepropositionsshouldbecarefullyreviewedtoconfirmthattheyaretrulydistinctiveandappropriate.

The value delivery systemThe means by which the value proposition is delivered represents the other half of the value proposition concept. The importance of having a system or framework for value delivery stems from the realisation that focusing on the traditional physical sequence of ‘make the product/service and sell the product/service’ is suboptimal. The value delivery system emphasises that companies need to shift from a traditional view of seeing their business as a set of functional activities to an externally oriented view that sees their business as a vehicle for value delivery. The value delivery system consists of three parts, choose the value, provide the value and communicate the value.

Choose the value• : Choosing the most appropriate value proposition involves understanding the forces driving demand, customer economics, the buying process and how well the competition serves customer needs, particularly in terms of their products, service and prices charged.

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Provide the value• : Developing a product and service package that provides clear and superior value involves focusingonproductqualityandperformance,servicecostandresponsiveness,manufacturingcostandflexibility,channel structure and performance and price structure.Communicate the value:• Engaging in promotional activity to persuade customers that the value offered is better than that of competitors not only involves sales promotion, advertising and the sales force, but also the provision of outstanding service in a way that is recognised and remembered by the target audience.

Building the value propositionCorrect formulation of the proposition and building a value delivery system to ensure it has an impact on the customer base represent the two main elements of the value proposition. Much of the success of a value delivery system depends on the thoroughness and innovation with which value is both generated and reinforced throughout the supplier organisation.

Differentiating the winners is the extent, to which this value proposition is echoed in the business system, through changes in branch service delivery, new products, systems that provide integrated information to customers and those serving them, relationship pricing, and so on.

Executingthesechangesismoredifficultthanchoosingthevaluebutalsoprovidesformidableobstaclestoimitation’.British Telecommunications plc (BT), one of the world’s leading telecommunications providers and one of the largest private sector companies in Europe, has developed a sophisticated approach to the development of value propositions.

Value assessmentTo determine if the value proposition is likely to result in a superior customer experience, it is necessary to quantify the relative importance that customers place upon the various attributes of a product.

Avalue assessment basedon subjective judgements about the attributes andbenefits that are important to thecustomer can fall prey to the assumption that the supplier and customer attach the same importance to the various productattributes–rarelydothey.Managersseekingtobuildcustomer-orientedoffersneedtoknowwhatspecificcombination of product and service features, relationships and brand are most important to the organisation’s key customer segments. This is the domain of value assessment.Value assessment can be undertaken by a company using its managers’ perceptions of what customers view as important or by seeking this information directly from its customers.

Experienced and informed managers may have a reasonably accurate perspective regarding the product and service featuresandbenefitsthataremostimportanttotheircustomers,especiallywheretheseviewsaresupportedbyotherevidence. We have seen good examples of companies successfully using their manager’s experience to identify key attributes by which customers make choices. However, a frequent mistake made by companies is assuming customers attach the same importance to these attributes as do the company’s own managers.

Experiencesuggeststhatevenwhenanorganisationcorrectlyidentifiesmostofthoseattributes,whicharemostrelevanttothecustomer,frequentlytherelativerankingofthesebythecustomerandthesuppliervarysignificantly.A much better way is to assess the offer from the customer’s perspective and to take into account differences in customer perception across market segments.

The most common means of discovering the perceived value of product attributes is to ask a representative sample ofcustomerstorankthemintermsofimportanceonafive,sevenortenpointscale.Mostmanagersareveryfamiliarwiththisapproach,whichrequestsrespondentstorankparticularfeaturesorserviceattributesonafourorfivepointscalefrom‘verysatisfied’to‘verydissatisfied’or‘veryimportant’to‘veryunimportant’.


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However, where a large number of attributes are concerned, this method is impractical and offers little real insight. An alternative approach is to ask respondents to place a weight from 1 to 10 against each attribute while ranking themonascaleof,say,‘verysatisfied’to‘verydissatisfied’.Thisapproachisalsopronetoproblems,particularlywhere respondents do not know the importance of some features, may be unwilling to disclose their opinions, may ratetoomanyattributesasbeingveryhighinimportance,ormaybeinfluencedbypeerpressure,causingsomefeatures to be overrated. Another approach is to request respondents to allocate a total of 100 points among all the elementsidentified.However,thiscanbeadauntingtaskandcanresultinanarbitraryallocationofpoints.

Dissatisfaction with such methods led researchers to develop a research technique called ‘trade-off analysis’. This tool is a much more robust method for identifying the implicit importance that customers attach to key attributes.

Improving value assessment using trade-off analysisA more realistic evaluation of customer value can be obtained by asking a representative sample of customers to rank the product’s attributes and then, using an analytical tool such as conjoint analysis, or trade-off analysis, to apply a weighting system to discover the weight given to different levels of each attribute.

Here, advanced computer analysis is used to calibrate the importance ‘weights’, which can then be aggregated to provide an objective measure of the ‘utility’ that customers prescribe to each elements of customer value. This technique is based on the simple concept of trading off one attribute against another.

Forexample,thepurchaserofanewcarislikelytotradeoffanumberofspecificproductattributesinagreeingthepurchasepriceandspecifications.Vehicleperformance,petroleconomy,numberofseats,safetyfeatures,bootcapacity, low price, and so on will have factored in his decision. Trade-off analysis can also be used to identify customers who share common preferences in terms of product attributes and may reveal substantial market segments with service needs that are not fully catered for by existing offers.

Trade-off analysis possesses several advantages over more traditional forms of value assessment, as it:Employs measures of attribute importance that do not rely on direct rating by respondents•Forces a trade-off among very important attributes to determine which are the most important•Achieves this for each customer separately.•

There are two formsof trade-off analysis.The ‘full profile’ approachpresents respondentswith a full-profiledescription of an offer and asks them to rate the offer’s constituent elements. The ‘pair wise’ trade-off approach asks respondents to rank combinations of variants of two attributes, from the least preferred to the most preferred and then repeats this for a series of other pairs of attributes.

The‘fullprofile’formoftrade-offanalysisisamorecommonlyusedapproachandisoftendeemedmorerealisticby researchers as all the product’s aspects are considered at the same time. However, if the number of attributes islargethenthejudgingprocessusedforeachindividualprofileinthe‘fullprofile’approachcanbecomeverycomplex and demanding. For that reason other researchers prefer the ‘pair wise’ trade-off approach. The Robotic Components example (see box) demonstrates the use of the pair wise trade-off analysis. Specialist research texts providemoredetaileddiscussionofthesetrade-offapproachesincludingthefullprofileform.

Trade-off analysis can be used to identify customers who share common preferences in terms of attributes. Experience of researchers and consultants working in this area suggests that this form of analysis may often reveal substantial market segments with service needs that are not fully catered for by existing product or service offers. Numerous studies using this approach have now been carried out by both consultants and market researchers. As a result, its commercial acceptance as a means of value assessment has grown greatly.

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The value the organisation receivesThe value the supplier organisation receives from the customer has the greatest association with the term ‘customer value’. Customer value from this perspective is the outcome of providing and delivering superior value for the customer, deploying improved acquisition and retention strategies and utilising effective channel management. Fundamental to the concept of customer value are two key elements.

First,determininghowexistingandpotentialcustomerprofitabilityvariesacrossdifferentcustomersandcustomersegments.

Secondly, understanding the economics of customer acquisition, customer retention, opportunities for cross-selling, up selling and building customer advocacy. How these elements contribute to increasing customer lifetime value is integral to this view of value creation.

4.6CustomerProfitabilityCarefully segmenting the market and developing an approach that maximises the value of your most desirable customer segments and the corresponding lifetime value that these customer groups produce for the company lie at the heart of the value creation process.

Companiesneedtounderstandtheexistingprofitabilityoftheirkeycustomersegments(and,incertainbusinesses,theprofitabilityofindividualcustomers)andinitiateactiontorealisethepotentialprofitabilityofthosesegmentsandconsequently improve customer lifetime value. It is somewhat surprising that most companies focus on identifying theprofitabilityofproductsratherthancustomerswhenitiscustomerswhogenerateprofits,notproducts.Productscreatecostsbutcustomerscreateprofits.Thisdistinctionisnotjustsemantic.Wefindthatthedifferencebetweenprofitandlossistypicallydeterminedafter a product is manufactured. The costs of storing, moving and supporting productsaresignificant.

Customers differ widely in their requirements for delivery service, in their ordering patterns and, indeed, in the productstheypurchase.Eachproducthasitsownuniqueprofileofmargin,value/density,volumeandhandlingrequirements. Similarly, customers will order different product mixes, will have their own unique requirements as to the number of delivery points and, of course, the number of times they order and the complexity of their orders will differ. Putting all these factors together can produce widely differing cost implications for the supplier. The 80/20 rule, or ‘Pareto Law’, suggests that 80 per cent of the total sales volume of a business is typically generated by just 20 per cent of its customers and that 80 per cent of the total costs of servicing all the customers will probably be incurred by only 20 per cent of the customers (but probably not the same 20 percent).

Theprofitability of customers varies considerablywhetherwe are examining this at the customer segment orindividual, or one-to-one, customer level. From this example, it can be seen that there is a ‘tail’ of customers who are actuallyunprofitableandwhothereforereducetotalprofitcontribution.Itisessentialtounderstandwhichsegmentthesecustomersfitinto.AkeyaimofCRMistodevelopcloserelationshipswithcustomersinsegmentsthatare,orhavethepotentialtobecome,highlyprofitable.Sotheabilitytocreatecustomersegmentprofitandlossaccountsat the appropriate level – segment, micro-segment or individual customer – is fundamental to a successful CRM strategy.Theproblemisthattraditionalaccountingsystemsmakeitdifficult,ifnotimpossible,toidentifythetruecosts of serving individual customers.

Companies often assume that there is an ‘average’ cost of serving a customer, thus forgoing the opportunity to target those customers or segments that have real potential for transforming their own bottom line.


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4.7UnderstandingFutureProfitPotentialOncetheenterprisehasaclearviewonexistingprofitabilityofitsmajorcustomersorcustomersegmentsitthenneeds toconsider their futureprofitability.Theorganisationneeds to identify thepotential tobuildandextendcustomersegmentprofitabilityfurther.Manyorganisationshaveacustomertypologythathelpsbusinessesranktheir customers and identify relevant strategies. They suggest ranking customers into groups, or quintiles, in terms of their potential lifetime value and propose that emphasis is placed on three groups:

MVCs or most valuable customers are those customers, which have the highest actual lifetime values. They represent the core of a company’s current business and the CRM objective with regard to them is customer retention.

STCs or second tier customers represent those customers with the highest unrealised potential. They could be a sourceofgreaterprofitabilityforthecompanythantheycurrentlyareandtheCRMobjectivewithregardtothemis customer growth.

BZs or below zero customers arethosecustomerswhowillprobablyneverearnsufficientprofittojustifytheexpenseinvolved in serving them. The CRM objective with regard to them is customer divestment.

A customer value typology such as this is useful in helping an organisation reach appropriate decisions as to how it can best utilise its resources. Because of the high value that they already represent for a business the focus for MVCs is developing appropriate customer retention strategies. STCs may be similar to MVCs in terms of their potentialprofitabilityandlifetimevalue.

Here, the opportunity is to obtain a larger size of their wallet as they may be purchasing products from our competitors. BZsrepresentcustomerswhousuallycostmoretoservethantheyareeverlikelytoreturninprofittoourcompany.Ifthereisnopotentialforprofitimprovement,weneedtoconsiderhowtodivestourselvesofthesecustomersprovided it is ethically responsible to do this. Ideally, we should persuade them to shift to one of our competitors wheretheycanbeequallyunprofitableforthem.

Thissuggestsweneedtobecarefultoacquireonlythosecustomersthathavethepotentialtobeprofitableforourenterprise.Ideallytheorganisationshouldseektodevelopfinancialsystemsthatroutinelycollectandanalysecustomerprofitabilitydata.Essentialtosuchanalysisistheneedfororganisationalunderstandingofhowcustomeracquisition, customer retention and opportunities for cross-selling, up selling and building customer advocacy contributetoprofitabilityacrossdifferentcustomersegments.

4.8 Customer Acquisition and its EconomicsTheroleandrelativeimportanceofcustomeracquisitionvariesconsiderablyaccordingtoacompany’sspecificsituation. For example, a new market entrant will be mainly focused on customer acquisition, while an established enterprise will be more concerned with customer retention. The customer acquisition process is typically concerned with issues such as:

acquiring customers at a lower cost•acquiring more customers•acquiring more attractive customers•acquiring customers utilising new channels•

The starting point in understanding customer value from the perspective of the supplier organisation is to determine the existing customer acquisition costs within the major channels used by the company and to identify how these costs vary within different customer segments.

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Framework for customer retention improvementGiventhedramaticimpactthatimprovedcustomerretentioncanhaveonbusinessprofitabilityandthefactthatmanyorganisations continue to place too much emphasis on customer acquisition at the expense of customer retention, wenowoutlineastructuredapproachwhichorganisationscanfollowtoenhancetheirretentionandprofitabilitylevels.

Three major steps are involved in such an approach, which are as follows:Step 1: Measurement of customer retentionThemeasurement of retention rates for existing customers is thefirst step in improving customer loyalty andprofitability. It involves twomajor tasks:measurementofcustomerretentionratesandprofitabilityanalysisbysegment.

To measure customer retention, a number of dimensions need to be analysed in detail. These include the measurement of customer retention rates over time, by market segment and in terms of the product/service offered. If customers buyfromanumberofsuppliers,shareofwalletshouldalsobeidentified.Theoutcomeofthisfirststepshouldbeacleardefinitionofcustomerretention,ameasurementofpresentcustomerretentionratesandanunderstandingoftheexistingandfutureprofitpotentialforeachmarketsegment.

Step2:IdentificationofcausesofdefectionandkeyserviceissuesThisstepinvolvestheidentificationoftheunderlyingcausesofcustomerdefection.Traditionalmarketingresearchinto customer satisfaction does not always provide accurate answers as to why customers abandon one supplier for another.Alltoooftencustomersatisfactionquestionnairesarepoorlydesigned,superficialandfailtoaddressthekey issues forcing respondents to tick pre-determined response choices.

Therootcausesofcustomerdefectionsshouldbeclearlyidentified,foritonlybyunderstandsthemthatthecompanycan begin to implement a successful customer retention programme. Often this research task needs to be undertaken by very experienced market researchers.

Step 3: Corrective action to improve retentionThefinalstepintheprocessofenhancingcustomerretentioninvolvestakingremedialaction.Atthispoint,planstoimproveretentionbecomehighlyspecifictotheorganisationconcernedandanyactionstakenwillbeparticularto the given context. Some key elements include marshalling top management commitment, ensuring employee satisfaction and dedication to building long-term customer relationships, utilising best practice techniques to improve performance and developing a plan to implement customer retention strategy.

Organisations are now recognising that enhanced customer satisfaction leads to better customer retention and profitability.ManyorganisationsarenowreviewingtheirCRMstrategiestofindwaystoboostretentionratesasameansofimprovingtheirbusinessperformance.Achievingthebenefitsoflong-termcustomerrelationshipsneedsafirmcommitmentfromseniormanagementandallstafftounderstandandservetheneedsofcustomers.Italsorequiresaclearunderstandingofthepotentialbenefitsintermsofcustomersegmentlifetimevalue.


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SummaryThe value creation process consists of three key elements: determining what value the company can provide •its customers with (the ‘value customer receives’); determining the value the organisation receives from its customers (the ‘value organisation receives’); and, by successfully managing this value exchange, maximising the lifetime value of desirable customer segments.Thevaluethecustomerreceivesfromthesupplierorganisationisthetotalpackageofbenefits,oraddedvalues•that enhance the core product.Customersdonotreallybuyproductsorservicesaswhentheybuytheyexpectbenefitsandvaluefromthe•total offer the company provides.An offer can be visualised as a central core surrounded by a series of tangible and intangible attributes, features •andbenefits.Once a superior offer has been developed, the enterprise needs to focus on building enduring relationships with •customers.The brand is also an important element in contributing to the value proposition. Brands add value to the company •because they add value to the customer.Formulatingthevaluepropositionformsthefirstpartofthevaluepropositionconcept.•The value delivery system emphasises that companies need to shift from a traditional view of seeing their •business as a set of functional activities to an externally oriented view that sees their business as a vehicle for value delivery.Correct formulation of the proposition and building a value delivery system to ensure it has an impact on the •customer base represent the two main elements of the value proposition.Value assessment can be undertaken by a company using its managers’ perceptions of what customers view as •important or by seeking this information directly from its customers.The value the supplier organisation receives from the customer has the greatest association with the term •‘customer value’.Theroleandrelativeimportanceofcustomeracquisitionvariesconsiderablyaccordingtoacompany’sspecific•situation.

ReferencesArmesh, H., Rasoulzadah, H., Kor, B., Salarzeh, H. and Saljogh, Z. • Customer Relationship Management [Online pdf] Available at: <http://www.eurojournals.com/ajsr_12_07.pdf> [Accessed 30 January 2012].Prof. Payne, A.• The Value Creation Process in Customer Relationship Management [Online pdf] Available at: <http://logmgt.nkmu.edu.tw/news/articles/White%20Paper-The%20Value%20Creation%20Process%20In%20CRM.pdf> [Accessed 30 January 2012].Sugandhi, RK.,2003. • Customer Relationship Management. New Age International.Anderson, K. and Kerr,C., 2002. • Customer Relationship Management. Madison: McGraw-Hill.DiscoverSugarCRM., 2009. • What is CRM? [Video Online] Available at: <www.youtube.com/watch?v=BMtv6sbmdLc> [Accessed 30 January 2012].Hani1973226., 2010. • CRM Steps to CRM Strategy and Customer Relationship [Video Online] Available at: <www.youtube.com/watch?v=pPDiZQ0DNBw> [Accessed 30 January 2012].

Recommended ReadingProf. Payne, A. • The Value Creation Process in Customer Relationship Management.Payne, A. and Frow, P., 2005. • A strategic Framework for Customer Relationship Management.Srivastava, J. and Wang, J., Lim, E. and Hwang, S., 2002. • A case for Analytical Customer Relationship Management.

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Self Assessment______ consists of the generic product together with the minimal purchase conditions, which need to be met.1.

Potentiala. Augmentedb. Expectedc. Cored.

Which of the following statements is true?2. The value creation process consists of three key elements.a. The value creation process consists of two key elements.b. The value creation process consists of four key elements.c. Thevaluecreationprocessconsistsoffivekeyelements.d.

For consumer or industrial products ____ consists of the basic physical product.3. potentiala. augmentedb. expectedc. cored.

Match the following4.

1. MVCs A.Thosecustomerswhowillprobablyneverearnsufficientprofittojustify the expense involved in serving them.

2. STCs B. Have the highest actual lifetime values.

3. BZs C. Is useful in helping an organisation reach appropriate decisions as to how it can best utilise its resources.

4. Customer value typology D. Represent those customers with the highest unrealised potential.

1-C, 2-B, 3-D, 4-Aa. 1-B, 2-D, 3-A, 4-Cb. 1-A, 2-C, 3-D, 4-Bc. 1-D, 2-C, 3-B, 4-Ad.

5. Which of the following statements is true?5. Themeasurementofretentionratesforexistingcustomersisthefirststepinimprovingcustomerloyaltya. andprofitability.The measurement of retention rates for existing customers is the second step in improving customer loyalty b. andprofitability.The measurement of retention rates for existing customers is the third step in improving customer loyalty c. andprofitability.The measurement of retention rates for existing customers is the fourth step in improving customer loyalty d. andprofitability.


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______representcustomerswhousuallycostmoretoservethantheyareeverlikelytoreturninprofittoour6. company.

BZsa. MVCsb. STCsc. Customer value typologyd.

_______ 7. is the area that enables one offer to be differentiated from another.Potentiala. Augmentedb. Expectedc. Cored.

A __________ is useful in helping an organisation reach appropriate decisions as to how it can best utilise its 8. resources.

BZsa. MVCsb. STCsc. Customer value typologyd.

Which of the following statements is false?9. Brand is also an important element in contributing to the value proposition.a. The role and relative importance of customer acquisition varies considerably according to a company’s b. specificsituation.Formulating the value proposition forms the second part of the value proposition concept.c. The value the supplier organisation receives from the customer has the greatest association with the term d. ‘customer value’.

______ represents those customers with the highest unrealised potential.10. BZsa. MVCsb. STCsc. Customer value typologyd.

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Chapter V

The Performance Assessment Process

Aim


introduce performance assessment process•

discuss the need for a systematic approach•

explain the key drivers of shareholder results•

Objectives


illustrate about shareholder value, customer value, employee value and cost reduction•

describe linking shareholder value, employee value, customer value and cost reduction•

elucidate developing appropriate standards, metrics and KPIs•

Learning outcome


understand the QCi customer management assessment tool •

talk about metrics and its various categories•

explain measuring CRM return on investment•


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5.1 Introduction to the Performance Assessment ProcessPerformanceassessmentprocess is thefinalprocess in the strategic framework forCRM.Thepurposeof thisprocess is to ensure that the organisation’s strategic aims in terms of CRM are being delivered to an appropriate andacceptablestandardandthatabasisforfutureimprovementisfirmlyestablished.Theprocesshasadualfocuson shareholder results, which provides a ‘macro-view’ of the key drivers of CRM performance and on performance monitoring, which involves a more detailed ‘micro-view’ of the key descriptors of CRM performance. This process involves focusing on two key issues:

Howcanwecreateincreasedprofitsandshareholdervalue?•How should we set standards, develop metrics, measure our results and improve our performance?•

Together these issues provide an understanding of how CRM delivers shareholder results and how CRM performance can be measured and thus further enhanced. As emphasised throughout this book, CRM breaks with traditional management practice in which it involves the whole organisation and emphasizes avoiding functional divides. In doing so, CRM embraces a new logic for commercial relevance: business success ultimately derives from the creation of customer value, which is achieved through the skilful management and development of customer relationships involving all key stakeholders.

Market leaders will be those who can demonstrate an unfailing ability continually and consistently to deliver products andservicesthatfulfilcustomers’needsandexpectationsandcandosoinamannerthathighlightsorganisationalcompetencies and cost-effectiveness. This is a tall order and demands the coordinated effort of all company members and partners throughout the supply chain.

Likewise, the evaluation and enhancement of performance needs all the required information to be supplied in a timely and accessible manner by the information management process. This requires the adoption of a more inclusive and comprehensive perspective. We believe that concerns about the effectiveness of CRM solutions are a key factor driving companies to consider CRM in this broader context of business strategy and to monitor CRM performance more carefully against specially selected criteria.

5.2 The Need for a Systematic ApproachHistorically,firmshavetoorganisethemselvesintermsoffunctionalresponsibilityandthusperformancemeasureshavereflectedtheindividualobjectivesofdepartmentsorstrategicbusinessunits.Forexample,financehasbeendrivenbyprofit,salesbyvolumeandmarketingbycustomeracquisition.Themovementtowardsgreaterconvergenceand consolidation in many industries has blurred the distinctions among the aims of traditional allocations of organisational responsibility.

More collaborative work practices have necessitated more consultative measurement and monitoring systems. In short,aredefinitionofthebusinessmodelrequiresarecalibrationofbusinessperformance.BecauseCRMisacross-functional activity, CRM performance measurement must use a range of metrics that span the range of processes and channels used to deliver CRM.

Till today, there is no universally recognised system for measuring the success of CRM. This is partly due to the fact that every CRM programme is unique and cannot be judged identically and partly because formalised CRM is a relatively new discipline. Although customer relationship management is often considered the remit of marketing as it builds on the tenets of relationship marketing, in practice it forms part of the job of every employee in every department.

ThissharingofcustomerresponsibilitycompoundsthedifficultyofagreeingspecificmeasuresthatwillaccuratelyreflectCRMperformanceandstrategicprogress.Earlyattemptstomeasuremarketingperformancewerelargelydirectedatmonitoringfinancialoutputs.Theseincludedprofit,salesandcashflow.Inthe1980s,therewasarealisationthatnon-financialmeasuresalsoplayedapartindeliveringtheoverallperformanceofmarketing.Organisationshave began to recognise that variables such as brand equity, customer satisfaction and customer loyalty were very important in transforming marketing inputs to organisational outputs.

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During the 1990s, the emphasis switched to the use of multiple measures that would together provide a more completepictureofmarketingperformance.However,thismethodraisesdifficultissuesformanagers,includingwhich measures should be included in performance monitoring models and how to account for the interrelationships between measures.

Clearlywhatisneededforthe2000sisamoredefinitiveframeworkthatidentifiestheprincipalmeasuresofCRMperformance and how these measures organise into a system that can be used continually to monitor, track and improve performance in support of the CRM vision. The performance assessment process provides a structure for developing a system based on the following key actions:

Understandthekeydriversofshareholderresultsandthesignificanceoflinkagesbetweenthem.•Identify the appropriate standards, metrics and KPIs against which various CRM activities can be measured.•Establish an effective CRM performance monitoring system to apply these measures on an ongoing basis. •Each of these key actions is now examined in turn.•

5.3 Understanding the Key Drivers of Shareholder ResultsTo achieve the ultimate objective of CRM which is, the delivery of excellent shareholder results through an increase inshareholdervalue,anorganisationmustmaximisethemainsourcesofrevenue,profitandgrowthwithinthecontext of both business and customer strategy. The four main elements are:

building employee value•building customer value•building shareholder value•reducing costs•

Thefirstthreeelementshaveanimpactonthekeystakeholders.Thelatterisapotentiallysignificantmeansofdirectlyimprovingprofits.Thedevelopmentof‘linkagemodel’or‘serviceprofitchain’confirmstherelationshipcorrelationbetweenvaluecreationandprofitability,aswellasthelinkagebetweenemployeevalue,customervalueand shareholder value. The linkage model suggests that an improvement in leadership and management behaviour has apositiveimpactonemployeeattitudesandemployeesatisfaction.Themoresatisfiedandmotivatedanemployee,the longer they are likely to stay with an organisation and the better they will do their job. This will have a positive effect on customer satisfaction, so customers will stay longer and generate higher sales for the company.

Theresultisstrongerprofitabilityandincreasedshareholdervalue.Thismodelprovidesakeylogictothebroaderperspective of CRM.

Leadership andmanagement

behaviour

Employeeattitude

Customersatisfaction

Financialperformance

Fig. 5.1 The linkage model

5.4 Shareholder Value, Customer Value, Employee Value and Cost ReductionMany organisations now recognise the importance of improving their performance by managing the value input and impact of each major stakeholder group. It is obvious that certain stakeholder groups are more important than others. While this importance will vary to some extent from organisation to organisation, three stakeholder groups, shareholders, customers and employees have emerged as the core focus for most organisations in terms of value management and performance improvement. The three key stakeholders, the ‘forces of loyalty are pivotal in achieving commercial success.


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It is useful to make a subtle distinction between building shareholder value and achieving shareholder results. In thiscontext,shareholdervaluecreationmaybeviewedinamorenarrowsenseasbeingconcernedwithidentifiablevalue in terms of returns on capital that stem from initiatives such as improved customer satisfaction and increasing customer retention, excluding stock market measures.

Shareholder results include how shareholders and the stock market respond to these improvements in shareholder value:thatis,theyreflectthestockmarketperspective.Researchshowsthatshareholderstakearangeofnon-financialmeasures into account when valuing companies. Hence, issues such as communicating a coherent and well-planned CRMstrategymayhaveasignificantparttoplayinachievingimprovedshareholderresults.

Costreductionisanobvioussourceofpotentialincreaseinprofitsandshareholderresults.Improvingefficiencyandthe use of lower cost channels are common means of achieving cost reduction. However, as we will discuss shortly it is important that this is not done at the expense of lowered levels of customer satisfaction and customer value.

5.4.1 Employee ValueIn addressing CRM performance, it is tempting to focus immediately on standards for CRM, metrics and key performance indicators (KPIs).However, the needfirst to focus on drivers of shareholder results should beemphasised. Organisations also need to make sure that the other most critical elements which represent 75 percent of the competency determinants for success, such as people, processes, organisation, culture and leadership actively support CRM activities in a relevant manner. The competency determinants for success involve people, organisation, culture and leadership. Thus, the people element is absolutely critical in making CRM work.

Employee value needs to be considered from two perspectives which are, the value employees deliver to the organisation and the value the organisation delivers to employees. Further, a motivated employee can add value to the customer. The value employees deliver to the organisation is usually measured against a number of performance objectives.

Often these represent short-term goals, where employee performance is appraised against performance targets. Employee value of this form is closely linked to employee retention, for long-tenured employees are more likely to know their jobs and the goals of the organisation and are thus able to be more productive. The value the organisation deliverstoitsemployeescomprisesthebenefitstheworkforcereceivesinexchangefortheopportunitycost,timeand labour expended in performing their jobs.

Thisbundleofbenefitsincludestheinternalservicequalitycreatedbymanagementpractices,encompassingrewardand appraisal policies, training and development opportunities and the motivation and empowerment of employees. Linkingemployeeremunerationtospecificcustomerobjectives,suchascustomersatisfactionandcustomerretention,supports the creation of value for both the employees and the organisation.

How the company’s leadership, human resources and culture are organised are therefore key factors in determining employeevaluewhich, in turn,hasasignificantbearingoncustomerandshareholdervalue.This isevident inthe types of measures used to monitor the value delivered by employees, for example, product quality measures, employee turnover, recruitment costs and employee satisfaction.

5.4.2 Customer ValueCustomer value is concerned with both the value the organisation receives from the customer and the value the customer receives from the organisation. The value the organisation receives from the customer is determined by theprofitsobtainedfromthecustomeroverthelifetimeoftheirrelationshipwiththeorganisation,ortheir‘customerlifetime value’ and the economics of customer acquisition and retention. The value a customer receives from the organisationisdefinedbytheperceivedbenefitsoftheoffermadetothecustomer,whichextendbeyondthecoreproductor service.Thesehigher-levelbenefitsor ‘addedvalues’, emanatenot frombasicproduct featuresbutfrom intangible factors such as the provision of better customer service or association with a quality brand image. A number of measures are used to monitor this aspect of customer value including customer retention, customer acquisitioncosts,customersatisfactionandcustomerprofitability.Inthenatureof‘theoffer’acompanymakes

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to its customer, customer value is an inherent part of the product or service offer, which the company can actively managetobenefitthecustomer.

Customersdonotbuygoodsorservices,butratherabundleofbenefitsintheformofproductfeaturesandaddedvalue. This total offering or ‘the offer’ as it is commonly called, represents the value that customers get when they buy goods or services. Relationships and branding are used to increase customer value like, building better relationships with customers through offering; superior customer service is one way of securing competitive advantage. The use of customer service is a more important competitive weapon derives from increasingly sophisticated customer requirements and the demand for ever-higher standards of service. Developing greater customer involvement with the company’s products is a good way to use the brand to enhance customer value.

The value proposition: The value proposition comprises three key steps namely, choose the value, provide the value and communicate the value. Success rests on the thoroughness and innovation that goes into developing the value proposition and communicating it throughout the supplying organisation.

The value of customers to the company: To calculate a customer’s real worth, the company must look at the expectedprofitflowfromthecustomeroverthecustomer’slifetime,ratherthantheresultsthisyear.Longerthecustomerrelationship,greateristheprofitpercustomer.

5.4.3 Shareholder ValueThegrowingpowerandinfluenceoffinancialanalystshasdrivenmanycompanyboardstoregardthecreationofshareholder value as their primary business objective. However, the emphasis is frequently placed on quarterly results rather than the long term. Balancing long-term and short-term returns and communicating this balance to shareholders, is therefore becoming a priority. Shareholder value is created by achieving a favourable rate of return on capitalinvested.Therearefiveprincipalstrategiesthatcanleadtothecreationofshareholdervalue.Theseare:

increasing the return generated on existing capital invested•investing more capital where the rate of return exceeds that required•divesting assets which generate a return lower than that required, thus releasing capital for more productive •useextending the period over which returns above the required rate are generated•reducing the cost of capital•

These strategies require a ‘value based management’ approach that emphasizes on creating and maximising the wealth of shareholders in every aspect of the business. Such an approach involves measuring and managing the followingkeyfinancialvariables,or‘valuedrivers’:

the opening amount of capital invested•the rate of return generated on capital•the rate of return that investors require•the growth in the value of capital invested•the time horizon over which returns are expected to exceed those required by shareholders•

Most of what has been written on shareholder value focuses on the value the organisation delivers to shareholders. Over the last decade there has been particular emphasis on tools that measure shareholder value creation and shareholder results, including economic value added (EVA), shareholder value added (SVA), market value added (MVA)andcashflowreturnoninvestment(CFROI).Althoughthereisanongoingdebateastowhichtechniquemost accurately measures shareholder value, what is important is to consider shareholder value in the context of the whole business and, in particular, in relation to customer value.


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Although, the issue of value the shareholders deliver to the organisation is emphasised much less, the loyalty of shareholders and other investors is an issue of considerable importance. Many of world’s leading companies (in terms of high customer loyalty and high customer retention) are either privately owned, mutual or public companies, where there is a high shareholder loyalty and thus, a high value delivered by shareholders to the organisation.

Delivering value to shareholders is an increasing concern of CEOs. However, an obsession with maximising shareholder value has sometimes led to the neglect of other stakeholder groups, causing high employee turnover, poor quality products and services and ultimately reduced shareholder value. It is therefore, crucial that shareholder valuebeviewedasabalancebetweenimmediatefinancialreturnandlonger-termsustainability.

5.4.4 Cost ReductionCostreductioncanrepresentagoodsourceofincreaseinprofitsandshareholderresults.Opportunities for cost reduction lie in:

exploiting economies of scale•benchmarking best practice within and outside the industry•outsourcing non-core activities•leveraging shared activities across the organisation•improvingCRMefficiencyandeffectiveness•

Better information management can be a primary source of cost reduction in CRM. Deploying electronic systems, such as automated telephony services, which lower costs by enabling reductions in staff and overheads, is an attractive potential source of cost reduction. However, an over concentration on cost reduction as a means of delivering shareholder results can be counterproductive if it decreases customer value.

For example, the creation of a central call centre in a bank will help reduce costs but may disenfranchise customers who prefer to interact with bank employees whom they know. Dealing with bank representatives who are unfamiliar with their individual circumstances and banking habits can be regarded as an affront to their long-standing status as loyal customers. A bank recently had to reverse its new policy of customers only being able to speak to a central call centre, rather than directly to their branch, as a result of many complaints from angry customers.

Thus, any cost reduction strategy needs to be considered in the context of its effect on customer value. The utilisation of new electronic channels, such as online self-service facilities on the Internet, which lower the costs of customer acquisition, transaction and servicing, offers a further opportunity for cost reduction. With its innovative web site, Dellplacesmuchofthebuyingprocessinitscustomers’hands.Usingthebenefitsofwebself-service,customerscanconfigureownproductandplacetheirownorders.Thisdramaticallyspeedsupthebuyingprocess,improvesaccuracy, decreases costs of correction and problem resolution and is considerably less labour intensive for Dell.

Further,storageanddistributioncostsarecutbecauseofmoretimelyandefficientstockmanagementanddelivery.Achieving a productive balance between cost reduction and customer satisfaction means understanding the value thatmaybecreatedorsacrificedinthemanagementofcustomerrelationship.Thisvaluefactorconstitutesacentralelement of CRM, for it is what drives success in the organisation.

A well-managed value process will lead to a better quality of workforce, in terms of the organisation’s ability to attract and retain highly motivated, committed and appropriately skilled employees. Such a dedicated workforce is more likely to deliver a better customer experience, which in turn will deliver better shareholder value through increased sales, repeat orders and customer referrals.

The importance of an appropriate value exchange is clear that is concentrating on how much value (in the form ofprofits)anorganisationcanextractfromitscustomers,withoutunderstandingwhatcustomersvaluefromtheorganisation in order to provide it satisfactorily, is not a sustainable strategy in today’s competitive environment. Nor isa strategyofprofit improvement throughcost reductionwherecost savingsaremadeat theexpenseofcustomer value. Thus, an integrated approach is needed to optimise the contribution of each stakeholder group and the opportunities for cost reduction, as well as to exploit the linkages between them.

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5.4.5 Linking Shareholder Value, Employee Value, Customer Value and Cost ReductionInadditiontotheprofit-enhancingpotentialofeachgroup’svaluecontribution,thereispotentialcontainedinthelinkages between them. There is also an obvious connection between cost reduction and the three key stakeholders discussed above. Also, cost savings can be used to increase employee value (example, through investing in staff training or job incentives), increase customer value (example,through augmenting the value proposition) or increase shareholder value (example, through improving ‘the bottom line’).

Conversely, improvement in these value areas can result in substantial cost reductions. For example, an improvement in customer value may drive increased customer satisfaction, resulting in high levels of advocacy among the customer base and consequent savings in marketing costs. This knock-on effect is evident in organisations such as First Direct, the UK bank, which acquires a third or more of its customers through customer referrals rather than throughtraditionalmarketingactivities.Thus,itsacquisitioncostsforeachcustomeraresignificantlyreduced.Thelinkage noted above between three areas: employee value, customer value and shareholder value, but one also needs to know how they are related.

Thelinkagemodelshowninfig.5.1abovegivesaninsighttothelogicbutnotthespecificrelationshipsbetweenvariables within these areas. It is not clear for most organisations how much one variable needs to improve to achieve a given level of improvement in another variable. For example, if employee attitudes and satisfaction increase by ameasurableamount,whatspecificimpactwillthishaveoncustomersatisfactionandresultingprofitability?Asdiscussed shortly, some leading companies are using advanced modelling approaches to verify the exact nature of the linkages between these sources of added value in their businesses and use them to improve shareholder results.

As the search for new and improved ways of measuring the performance of key variables across these critical linkages continues, organisations are recognising the importance of addressing these higher-level drivers before determining CRM standards, metrics and key performance indicators (KPIs).

5.5 Developing Appropriate Standards, Metrics and KPIsDespite the increasing focus in businesses on customer-facing activities, there is growing concern that the standards and metrics generally used by companies for assessing CRM performance which are not as advanced as they should be. In particular, more detailed standards, measures and KPIs are needed to ensure that CRM activities are planned and performed effectively and that a feedback loop exists to maximise organisational learning and improvement. As shown in the strategic framework for CRM, assessing CRM performance involves a consideration of contribution andinteractionofmultipleprocesses.Thefiveinterrelatedandcrossfunctionalprocessescommontoallcommercialorganisations are:

strategic development process•value creation process•multi-channel integration process•information management process•performance assessment process•

These processes centres on how the organisation delivers value to the customer while enhancing the value received by the company in terms of shareholder results. While these processes have universal application, the extent to which they are emphasised will vary according to the situation of the organisation concerned. Companies need to simultaneously consider what standards and metrics should be used by them and what their CRM priorities are, giventheirspecificcircumstances.Organisationscanbenefitfromfirstlearningaboutexistingstandardsandmetricsused by other organisations before reinventing what others have already done.


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5.5.1 StandardsThe lack of an internationally recognised set of standards for CRM has hindered efforts to measure and benchmark best practice which is a prerequisite to helping achieve improved performance in CRM. Few companies as yet have developed their own integrated and detailed processes for measuring CRM performance.

The complexity of measuring many processes contributing to the success of CRM makes this a potentially daunting task. However, the increasing importance of CRM measurement has recently resulted in a number of organisations developing CRM standards for more general use. These standards typically relate to either a complete view of CRM activityoraspecificpartofit.TwooftheleadinginitiativesaretheQCiCustomerManagementAssessmentToolused as a general CRM review and the Customer Outsourcing Performance Centre (COPC) standards for customer service centres.

5.5.1.1 The QCi Customer Management Assessment Tool (CMAT)CMAT is a proprietary assessment tool for understanding how well an organisation manages its customers. It is carried out by trained assessors who are experienced CRM practitioners within QCi Assessment Ltd, a specialist CRM consultancy, or one of its partner organisations. The model is based on the following elements:

analysis and planning•the proposition•people and organisation•information technology•process management•customer management activity•measuring the effect•customer experience•

Each of these elements is further sub-divided into component parts. For example, ‘people and organisation’ covers:

organisational structure•roleidentification•competenciesdefinitionandgapanalysis•training requirements and resources•objective setting and monitoring•supplier selection and management•

CMAT uses over 250 questions to assess the organisation’s performance. Each question in the assessment is based on known and demonstrable good practices from the clients of QCi and from accepted industry benchmark organisations. A ‘scoring based on evidence’ approach is taken to answering each question and a broad range of people, from senior directorstooperationallevelpractitioners,areinterviewed.Theapproachisspecificallydesignedtoidentifyclearplans,realdeliveryandanidentifiableeffectofeachofthepracticesquestioned.Inthiswaytooallthecommongapbetweenseniormanagementperceptionofthesituationandthefrontlinerealityisoftenidentified.

The output of the assessment is a report and board-level presentation that positions the organisation against a relevant benchmark of other organisations. It also provides a quartile positioning for each of 27 CRM areas into which the sections of the Customer Management model are divided. The assessment has been carried out in over 100 organisations worldwide which provides a rich set of data for a company to benchmark its performance against. The objective of the CMAT tool is to provide an objective and quantitative assessment of how well the organisation currently manages its customers with a score that correlates to business performance and benchmarks the organisation against a relevant set of other organisations.

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It also forms a clear ‘baseline’ against which improvements delivered by a CRM programme can be measured andprovidesabroad-basedcheckthatallthenecessaryCRMfoundationsareinplacebeforeinvestinginspecificprogrammes or technology.

5.5.1.2 Customer Operations Performance Centre (COPC) StandardOther standards focus on particular aspects of CRM in more detail. One such approach is the COPC Standard developedbyusersofcustomerservicecentres,callcentresandfulfilmentservicesintheUSA.Itwasinitiatedbyrepresentatives of a number of leading companies including American Express, Dell Computer Corp., Microsoft, Novell and L.L. Bean, in response to their concerns about the performance of call centre providers.

The developers of this standard believed that improvement standards could help augment service quality within a service environment, just as has been seen in manufacturing industries that employed similar quality measures. Although some service providers used existing standards such as ISO 9000, these were orientated towards manufacturingindustriesandfailedtogivetheoperationalbenefitsthatwereneededinservicebusinesses.

The COPC-2000 standard10 is awarded to companies successfully completing a formal audit measuring the effectiveness of their internal customer-facing operations. Among its aims is to distinguish between excellent service providers and those that are mediocre, enabling companies who are outsourcing call or service centres to use this informationbeforetheymaketheirpurchasingdecision.Thestandardincludesdevelopingprocessspecificationsbased on customer requirements, so service delivery processes are customer and not operationally driven. The COPC standard is based on a number of well-recognised criteria. There are four key areas used within these standards.

Performance standards: includes customer satisfaction, product and service quality, employee satisfaction and •supplier performance.Processes: includes process control, supplier management, internal quality audits and product development.•People: includes recruitment and development, compensation, recognition and the work environment of •employees.Planning and leadership: includes leadership, planning and performance review.•

Although,COPCdoesnotsetspecificperformanceobjectives thateverycallcentremustmeet, itdoesrequirethat all performance metrics are tracked by linking them to customer satisfaction drivers. This information is then used to improve overall call centre performance. The aim of the COPC standard is to improve performance of all outsourced call centres through widespread adoption of standards. The measures have been widely accepted and, although call centres have often chosen not to pursue accreditation; many employ the performance metrics. While COPCissupportedbymanycallcentreproviders,onlyasmallnumberhavebeencertifiedtillnow.Theprocessisdifficultandcostly,sosomeorganisationsarechoosingtoadoptthestandardsandusethesetobenchmarktheirperformance, without going through the accreditation process.

WhiletheCOPCstandardsaredesignedforspecifictypesoforganisationswithastrongemphasisoncustomerservice delivery, they are useful as an example of an integrated approach to measuring effectiveness within a key area of CRM.

5.5.2 MetricsTheidentificationofappropriatemetricsisanotherchallengeforcompaniesseekingtoevaluateandenhancetheirCRM performance. The main problem lies in determining the critical measures of CRM related activity that are most appropriate to the organisation and managing them effectively. It is important at this stage to note the distinction between metrics and KPIs. Metrics involve all those CRM related activities that should be measured. Key performance indicators are the high-level measures that are critical to the success of business and that should be monitored closely by the Board and top management. We consider four main categories of CRM metrics which are:


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Operational metrics

Output and Comparative

metrics

Customer metrics

CRM Metrics

Strategic metrics

Fig. 5.2 Categories of CRM metrics

These key metrics represent the ‘vital statistics’ of healthy CRM, signalling the strength or weakness of the underlying CRMprocesses.Othermorespecialisedmetricsmayalsobeneededtomeetspecificcompanyrequirements.Inany event, these CRM metrics should be applied regularly to provide an overall appraisal and monitoring of CRM effectiveness.

5.5.2.1 Customer MetricsCustomer metrics measure both the value delivered by the organisation to the customer and the value delivered by the customer to the organisation. They are focused around measures of customer attitude and behaviour. Customer metrics are used to measure:

customer acquisition and customer retention rates•customer satisfaction measures•customer lifetime value•customer experience within channel and across multi-channels•customer complaints and seriousness of them•segmentandmicro-segmentprofitability•share of wallet•product density (number of products and services used by a customer)•customer recommendation and advocacy measures•increase in customer value through cross-sell and up sell•

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5.5.2.2 People and Process MetricsPeople and process metrics focus on how well the organisation’s resources are managed to optimise CRM at an operational level. People metrics are concerned with standards used to monitor the skills and motivation of employees indeliveringthecustomerexperience.ProcessmetricsreflecttheefficiencyoftheorganisationindeliveringCRM,including cost savings secured through process enhancement. People metrics are used to measure:

employee performance against customer service standards•employee satisfaction•employee attitudes and motivation•employee productivity•staff absenteeism•employee retention and employee tenure•recruitment costs•

Process metrics are used to measure:customer service levels•orderfulfilment•supplier performance targets•variation within key customer processes•new product/service development targets•time to market•process improvement targets•

5.5.2.3 Strategic MetricsStrategic metrics measure the organisation’s success in achieving its business objectives within the strategic approach to CRM that has been adopted. They measure for example, the extent to which business strategies meet the required shareholder value targets and strengthen the organisation’s position in the marketplace. Strategic metrics are used to measure:

shareholder value added/market value added•profitabilityandcashflow•returns on net assets, sales, CRM investments and so on•growth rates•expense ratios•market positioning•innovation•brand equity•specifictargetsforotherstakeholders•

5.5.2.4 Output and Comparative MetricsOutput and comparative metrics measure the output of organisation’s CRM strategy, especially in relation to competitor activity and recognised best practice. These comparative measures are frequently more important than absolute measures. Sole reliance on internal metrics can be dangerous as they provide an isolated and insular view of the situation.

For example, a market share of 20 percent may be advantageous if the largest competitor has a market share of 10 percent. However, it may be risky if the two largest competitors have market shares of 30 percent each. Similarly, highlevelsofservicequalityandcustomersatisfactionaregenerallyonlybeneficialiftheyarehigherthanthoseof the competition.


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Output and comparative metrics are used to measure:relativeprofitability•relative market share•relative customer satisfaction•relative customer retention•relative employee retention and satisfaction•relative product or service quality•cost reduction•improvements in employee value (in terms of employee retention and satisfaction)•increased competitive differentiation•

5.5.2.5 Special MetricsSpecial metrics are sometimes used in conjunction with the four main categories of metrics outlined above. For example, companies with intermediaries may need to implement customer performance measures at different channel levels. Businesses with a strong e-commerce component may need to address different characteristics of an Internetchannelbydevelopingspecifice-metrics.Interestingly,despitetheavailabilityofdatafromwebchannels,relatively few companies use these data to measure and monitor the effectiveness of their e-CRM activities. Special e-metrics are used to measure:

Stickiness: the web site’s ability to hold visitors’ attention and to get them to become repeat users of the site.•Focus: the scope and intensity of site visitor behaviour.•Personalisation index: how well the e-business uses personal customer data captured during site visits.•Lifetimevalue:thecontributiontocompanyprofitsoverthedurationofcustomerrelationship.Measuringlifetime•value is particularly important as less valuable customers using other channels can be moved to improved levels ofprofitabilitythroughusingthewebchannelLoyalty value (this includes visitor frequency, visit duration, number of pages viewed per visit, time elapsed •betweentheuser’sfirstvisitandmostrecentvisit)Freshness factor (how often content on a website is reviewed and renewed versus how frequently users visit •the site).

5.5.3 Key Performance IndicatorsAs noted above, it is necessary to make a distinction among the metrics outlined above. Some of them will be relevant at an operational level and some important at a strategic level. The latter metrics are the key performance indicators that are critical to the success of the business and which need to be monitored regularly at Board level. Metrics and managing for value, taken together, give the board the information it needs. Decisions regarding which CRM metrics and high-level KPIs should be adopted for measuring the effectiveness of CRM processes and activities should not be taken casually. Using the wrong measures or measuring the wrong things is clearly self-defeating. Many companies will therefore need to establish a formalised system for monitoring CRM performance in order to ensure that the right metrics are used to manage activities at operational level and the right KPIs drive strategic decisions at Board level.

5.6 Establishing a CRM Performance Monitoring SystemAs a company gains a good understanding of existing CRM standards, as well as CRM metrics and models in general use, it should also be considering its own requirements. This involves determining the key CRM standards, metrics and KPIs needed for its business and putting a CRM performance monitoring system in place. CRM starts with the strategy development process. A key aspect in this process is agreement on the high-level goals and strategy of the business. This can then lead to the development of a strategy map or a success map that captures the performance model underlying the business strategy.

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5.7 Developing Strategy Maps and Success MapsExpertsinperformancemeasurementhaveidentifiedasignificantbarriertoimprovedmeasurementwhichis,theneedforseniormanagementtoagreeonthebusinessperformancemodelfortheirfirmbeforeacomprehensivesystemofperformancemeasurementcanbedeveloped.Anumberofauthorshavepointedoutthebenefitsofdevelopingstrategy, or success, maps.

A success map by experts provides a graphic outline of the highest-level goals the organisation is striving to achieve and the current progress status. By juxtaposing the proposed end goal and the existing position, it is possible to identify the metrics necessary to ensure that the goal is achieved successfully. This process can be used to distil a wide range of measures down to those that matter most.

5.8 Evaluating and Communicating CRM Return on InvestmentInadditiontodefiningandapplyingtherightstandards,metricsandKPIs,aneffectiveCRMperformancemonitoringsystem must be capable of measuring and communicating the return on investment (ROI). Since CRM places considerable emphasis on the use of IT in managing customer relationships, it is a potentially costly management option, in terms of both required IT expenditure and inherent adjustments to internal infrastructure and existing systems.

Given the number of reported CRM failures, the business case for investing in CRM should therefore address the following questions:

Is an investment in improving CRM likely to lead to improved business performance?•How can investments in CRM be measured?•

5.9 Relating CRM Performance to Business Performance Although, common sense would suggest that successful CRM performance should lead to improved business results, decisions to investinCRMmustbesoundlyjustified.CompaniesthathaveusedsuccessmapstolinkarangeofkeyCRMmetricstofinancialandshareholderresults,suchasthoseusedbySears,Roebuck,support the view that well-based CRM initiatives are worth the often considerable investment they entail.

A QCi study showed CMAT results correlate strongly with business performance. The study examined data from 21companies(12ofthesewerefromfinancialservices,twofromutilities,twofromdistributionandthreefrommanufacturing). A panel of independent experts assessed the business performance of each organisation against a broadrangeofmeasuressuchassalesgrowth,profitabilityandassetgrowth.Theassessorsdidnotknowhowwelleach organisation had performed in its CMAT assessment. The ranking of organisation’s business performance was then compared to its ranking in terms of CMAT score.

5.10 Measuring CRM Return on InvestmentA further issue of concern is measuring the return on CRM initiatives. An important research report examined how companies measure the payback on their investment in CRM projects and found that the following four criteria are typically used when evaluating the success of investments in CRM activities. These criteria carry advantages and disadvantages.

Improvements in customer service, satisfaction and retention:• These metrics are of greatest value when specificallylinkedtoapproachesthatshowtheirimpactonprofitandshareholdervalue.Wehavenotedearlierthatcustomerretentionofyourbestcustomershasacriticalimpactonprofitability.Return on investment (ROI) on the CRM systems adopted:• MeasuringROIonCRMsystemsisbeneficialwhere therearespecificinvestments incertainCRMapplications,suchassalesforceautomation(SFA)orcampaignmanagementsystemswhichcanbedirectlylinkedtocustomermetrics,orwherethereareidentifiableefficienciesorcostreductions.However,itisimportanttoensurecustomersatisfactionisnotadverselyaffectedas a result of introducing such systems.


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Changes in overall company performance:• Changes in overall company performance as a result of investment inCRMmaybedifficulttoevaluateasitcanoftenbehardtotellwhatwouldhavehappenedwithouttheCRMinvestment. Performance improvements for example, could be the result of many factors such as decreased promotional activities by competitors.Increaseincustomerandsegmentprofitability:• Measuringincreaseintheprofitabilityofcustomersandcustomer segments and understanding how this ultimately impacts on shareholder value is an area of growing interest.Itinvolvesaconsiderationofbothcurrentandfutureprofitimpactpotential.Hence,estimatesofpotentialcustomer lifetime value need to be calculated alongside existing customer lifetime value.

Return on investment measurement is an important element of CRM. CRM performance assessment should be viewed in the context of a strategic approach to CRM. The typical criteria for measuring CRM ROI listed above clearly embrace this company-wide view of CRM.

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SummaryPerformanceassessmentprocessisthefinalprocessinthestrategicframeworkforCRM.•To achieve the ultimate objective of CRM which is, the delivery of excellent shareholder results through an •increaseinshareholdervalue,anorganisationmustmaximisethemainsourcesofrevenue,profitandgrowthwithin the context of both business and customer strategy. Employee value needs to be considered from two perspectives which are, the value employees deliver to the •organisation and the value the organisation delivers to employees. Customer value is concerned with both the value the organisation receives from the customer and the value the •customer receives from the organisation. Thevalueacustomerreceivesfromtheorganisationisdefinedbytheperceivedbenefitsoftheoffermadeto•the customer, which extend beyond the core product or service.Shareholder value is created by achieving a favourable rate of return on capital invested. •Over the last decade there has been particular emphasis on tools that measure shareholder value creation and •shareholder results, including economic value added (EVA), shareholder value added (SVA), market value added (MVA)andcashflowreturnoninvestment(CFROI).Costreductioncanrepresentagoodsourceofincreaseinprofitsandshareholderresults.•CMAT is a proprietary assessment tool for understanding how well an organisation manages its customers. •Customer metrics measure both the value delivered by the organisation to the customer and the value delivered •by the customer to the organisation. People and process metrics focus on how well the organisation’s resources are managed to optimise CRM at •an operational level. Strategic metrics measure the organisation’s success in achieving its business objectives within the strategic •approach to CRM that has been adopted. Output and comparative metrics measure the output of organisation’s CRM strategy, especially in relation to •competitor activity and recognised best practice. A success map by experts provides a graphic outline of the highest-level goals the organisation is striving to •achieve and the current progress status.

ReferencesBolton, R. N. & Tarasi, C. O. • Managing Customer Relationships [Online] Available at: <http://www.ruthnbolton.com/Publications/01Malhotra-V3-Chap1.pdf> [Accessed 31 January 2012].Handbook of CRM: • Achieving Excellence in Customer Management. The performance assessment process [Online]Availableat:<https://aquila1.iseg.utl.pt/aquila/getFile.do?fileId=17412&method=getFile>[Accessed31 January 2012].Dyche., 2002. • The CRM Handbook. Pearson Education India.Baran, R. J., Galka, R. J & Strunk, D. P., 2007. • Principles of customer relationship management. Cengage Learning.SageViews., 2008. • Golden Rules to successful Customer Relationship Management [Video Online] Available at: <http://www.youtube.com/watch?v=n3LEnCyaa5I> [Accessed 31 January 2012].petersgyoung., 2007. • Customer Relationship Management (CRM) [Video Online] Available at: <http://www.youtube.com/watch?v=EPn_Zd4VA4Q&feature=related> [Accessed 31 January 2012].


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Recommended ReadingButtle, F., 2008. • Customer Relationship Management, 2nd ed., taylor & francis.Buttle, F., 2010. • Customer Relationship Management, 2nd ed., Wiley.Rogers, M. and Peppers, D., 2010. • Managing Customer Relationships: A Strategic Framework, 2nd ed., Wiley.

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Self Assessment______________ leaders will be those who can demonstrate an unfailing ability continually and consistently 1. todeliverproductsandservicesthatfulfilcustomers’needsandexpectations.

Organisationa. Marketb. Businessc. CRMd.

Which among the following statements is true?2. Organisations have began to recognise that variables such as brand equity, customer satisfaction and customer a. loyalty were very important in transforming marketing inputs to organisational outputs.Organisations have began to recognise that variables such as brand equity, customer satisfaction and customer b. loyalty were very important in transforming marketing inputs to organisational inputs.Organisations have began to recognise that variables such as brand equity, customer satisfaction and customer c. loyalty were very important in transforming marketing outputs to organisational outputs.Organisations have began to recognise that variables such as brand equity, customer satisfaction and customer d. loyalty were very important in transforming marketing outputs to organisational inputs.

Which model suggests that an improvement in leadership and management behaviour has a positive impact on 3. employee attitudes and employee satisfaction?

Serviceprofitchaina. Customer valueb. Linkagec. Employee valued.

Which among the following element does not have an impact on the key shareholders?4. Building employee valuea. Building customer valueb. Building shareholder valuec. Reducing costsd.

Which among the following is not a competency determinant of success?5. Peoplea. Cultureb. Leadershipc. Valued.

__________________ value needs to be considered from two perspectives which are, the value employees 6. deliver to the organisation and the value the organisation delivers to employees.

Organisationala. Employeeb. Customerc. Shareholderd.


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Which among the following statements is true?7. Customer value is concerned with both the value the organisation receives from the customer and the value a. the customer receives from the organisation. Organisational value is concerned with both the value the organisation receives from the customer and the b. value the customer receives from the organisation. Shareholder value is concerned with both the value the organisation receives from the customer and the c. value the customer receives from the organisation. Employee value is concerned with both the value the organisation receives from the customer and the value d. the customer receives from the organisation.

_____________ value is created by achieving a favourable rate of return on capital invested.8. Customera. Employeeb. Shareholderc. Organisationald.

Match the following9.

EVA1. Shareholder Value AddedA.

CFROI2. Economic Value AddedB.

SVA3. Market Value Added C.

MVA4. Cash Flow Return on InvestmentD. 1-B, 2-D, 3-A, 4-Ca. 1-A, 2-C, 3-B, 4-Db. 1-C, 2-B, 3-D, 4-Ac. 1-D, 2-A, 2-C, 4-Bd.

Which among the following is not an element of the CMAT model?10. Analysis and planninga. Training requirements and resourcesb. Customer management activityc. Information technologyd.

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Chapter VI

Organising for CRM Implementation

Aim


introduce organising for CRM implementation•

explain CRM readiness assessment•

elucidate CRM maturity assessment•

Objectives


describe the barriers to CRM success•

enlistthefivelevelsofmaturityinthedevelopmentofCRM•

explain CRM readiness audit•

Learning outcome


understand the comprehensive CRM audit•

identify the key CRM priorities•

recognise the need to establish a CRM vision•


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6.1 Organising for CRM ImplementationBefore a CRM strategy is developed, it is important to assess whether the organisation is really ready and willing to implement customer-focused strategies and CRM initiatives. CRM is not an appropriate strategy for a company to adopt if it does not have the leadership of enterprise engaged in supporting CRM and a board-level sponsor committed to its success. Thus, the cultural and leadership implications of CRM implementation must be fully understood if it is to have any chance of contributing to business improvement.

In the very beginning, the essence of CRM was captured in the statement: ‘CRM is information-enabled relationship marketing’. This concise description can be seen to hold much greater meaning now that we have examined many of the complexities and requirements of effective customer relationship management. CRM is indeed about leveraging relationshipsformutualbenefitthroughtheskilfulutilisationofcustomerknowledge.However,itisalsoaboutbuilding stronger and more productive relationships with other stakeholders, particularly employees. This is evident in the fact that the main source of competitive advantage today is customer intimacy achieved through excellent customer service. Here employees have a critical role to play in its delivery.

Also consider how the elements of CRM readiness assessment, CRM change management, CRM project management and employee engagement come together to support the organisation and implementation of a CRM strategy. Considering CRM readiness assessment which helps the CRM sponsors and leaders assess the overall position in terms of readiness to progress with CRM initiatives and to identify how well developed their organisation is in comparison to other companies.

CRM readiness assessment

Employee engagement

Process 1: Strategy development

Process 5: Performance assessment

CR

M p

roje

ct m

anag

emen

t

CR

M c

hang

e m

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emen

tEnabling processes

Process 2: Value creation

Process 3: Multi-channel

integration

Process 4: Information management

Fig. 6.1 Key elements in organising for CRM implementation(Source: Payne, A., 2005. HANDBOOK OF CRM: Achieving Excellence in Customer Management,

Butterworth-Heinemann publications.)

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6.2 CRM Readiness AssessmentIn undertaking an assessment of CRM readiness two tasks should be undertaken. First, an assessment should be made of overall CRM maturity relative to other companies that have embarked on the CRM journey and barriers to CRM successshouldbeidentified.Thiswillprovideamoregeneralperspectivetothecompany’scurrentsituationandhelp them benchmark where they are relative to other organisations. This is important as it provides the opportunity to assess relative competitive advantage. Second, a CRM readiness audit will help determine both how advanced the companyisinitsoverallreadinesstoadoptorfurtherdevelopCRM,andinwhichofthefiveprocessesintheCRMstrategy framework any organisation needs to place greatest emphasis. This audit will help the enterprise to identify the key areas of importance in terms of CRM performance. Thus, a decision to adopt or enhance an enterprise’s CRM activities should be based on understanding:

its current stage of development and potential barriers to success•its overall readiness to adopt CRM and•the CRM activities that need to be addressed•

An assessment of these three elements through a CRM maturity assessment and a CRM readiness audit will assist the organisation in deciding how to organise its CRM activities.

6.3 CRM Maturity AssessmentTheemphasisanorganisationplacesonusingdatatohelpdesignandimplementCRMstrategiesisreflectedinthe organisation’s stage of CRM development. It has been discussed earlier how each organisation should adopt a level of sophistication in CRM strategy appropriate to their competitive environment and their needs now and in the future.

There are four broad strategic options facing organisations which are: product-based selling, customer-based marketing, managed service and support and ‘individualised’ CRM. The latter requiring collection and analysis of extensive information about customers and the desire and ability to give customers highly individualised service. These options, considered as part of the strategy development process, now need to be considered in a much broader context of overall CRM implementation requirements.

In particular, the degree of CRM development in other organisations provides a useful context for an enterprise to consideritsownCRMinitiatives.Researchonthissubjecthasshownthatthereareidentifiablestagesofmaturityin CRM development. Each stage represents a level of CRM maturity characterised by the extent to which customer informationisusedtoenhancethecustomerexperienceandcustomer-generatedcashflows.

However, each stage encompasses issues beyond choice of strategic options. More often than not CRM development requireswide-rangingadjustmentswithinthefirm,especiallywheremarketingneedstoshiftfromaproductortransactional focus to a customer relationship focus. The kinds of organisational changes needed to embrace CRM can range from a revolution in mindset to a realignment of systems and processes. Special change management, project management and customer engagement activities are usually necessary to minimise disruption and risk and maximise performance.

Strategies that do not take these dimensions on board are unlikely to succeed with their implementation of CRM. A study carried out to investigate the development of CRM in organisations showed that CRM is typically more advancedintheretailfinancialservicessectorthaninotherindustrysectors,wefocusedonthissectorinordertoexaminethestagesofCRMdevelopment.FivelevelsofmaturityinthedevelopmentofCRMwhichwereidentifiedare:


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Building a data

repository

Moderately developed CRM

Well developed CRM

Highly advanced CRM

Pre-CRMplanning

Fig. 6.2 Levels of maturity in the development of CRM

Stage 1: Pre-CRM planningThefirst stage is planning for the introductionCRM.This is the point atwhich organisations recognise theimportance of CRM, however, they have not yet progressed to a stage where the CRM project has been fully scoped. Organisations at this stage should particularly consider the implications for their organisation of the four broad strategic options discussed earlier namely, product-based selling, customer-based marketing, managed service and support and ‘individualised’ CRM. Companies planning to introduce CRM especially need to undertake a CRM readiness audit.

Stage 2: Building a data repositoryThe second stage of CRM is concerned with building an appropriate data repository, often in the form of a data warehouse. As discussed earlier, construction of the main data repository includes collecting and reviewing existing data and cleaning and de-duplicating customer records. If the data repository is to be used predominantly for analytical CRM a data warehouse needs to be built to support the required analytical tasks. If the data repository is to be used primarily to support operational CRM then an operational data store (ODS) is required.

Where companies need to address analytical and operational CRM, it is likely that both forms of data warehouse may be required. Plans for the organisation’s data infrastructure are based on data warehouse. Pilot data warehouses, an ODS or smaller data marts may be built as a preliminary step, prior to full implementation.

Thekeytaskassociatedwithbuildingadatawarehouseiscustomeridentificationanddatacapture.Duetothedataquality issues that emerge as companies begin to collect and centralise their customer data, organisations in the early stagesofCRMdevelopmentfindtheyhavetofocusheavilyonidentifyingwho their customers are. We have found multiplerecordsforasinglecustomerandmissingorout-of-dateaddressesarecommonproblems.Managersfindgaps, ambiguities and omissions in data they previously had assumed were complete and accurate. Often, enormous amounts of effort have to be expended in compiling accurate customer information. This typically involves collecting information from many separate databases and legacy systems.

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Stage 3: Moderately developed CRMOrganisations which are moderately developed in CRM are those which have typically progressed to a full data warehouse, although it may still be limited to a single business unit rather than being enterprise-wide. They begin to use tools such as sales force automation, call centres and computer telephony integration and campaign management in a more sophisticated manner but still on a ‘stand alone’ basis.

At this stage, the CRM focus shifts towards data mining and identifying the value that can be extracted from the organisation’s existing customer information. Having gathered and cleaned their data, these organisations turn their attentiontothetaskofcustomerprofitabilityanalysisandsegmentationandrecognisetheneedtoidentifytheirmostprofitablecustomers,toprofilethemandtofindmorecustomerslikethem.

However,fewcompaniesatthisstageareabletogenerateentiresatisfactorycustomerprofitabilityanalyses.Insomecasesinitialcustomerprofitabilityanalyseswereseentochallengereceivedwisdom.Forexample,onebankfoundthatthemostprofitable10percentandtheleastprofitable10percentofitscustomershadpurchasedalmostidentical numbers of the bank’s products. Clearly, for this bank, their existing strategy of ‘sell more products, make more money’, was not always correct.

Some organisations at this stage change their approach to segmentation as a result of the development of their data warehouse. Previously, segmentation was viewed by them as a way to divide up the total customer base into more orlesshomogeneousgroups.However,itwasthendifficulttodeterminewhichindividualcustomerswentintowhich segment.

Afterthedatawarehousebecameoperational,managerswerebetterabletoidentifytheirmostprofitablecustomers.Theycouldthenprofiletheseindividualsandfocuseffortsonacquiringmorecustomerslikethem.Insuchcases,the segmentation approach shifted from one using a set of general customer characteristics to one incorporating the levelofcustomerprofitabilityorcustomervalue.

Stage 4: Well developed CRM‘Well developed’ suggests an organisation that is moving towards an enterprise-wide data warehouse, widening its userbaseandincreasingthenumberofusersandfurtherdevelopingfront-officetoolssuchassalesforceautomationand contact centres. Such organisations will be more advanced in e-commerce applications. A key task at this stage iscustomerprioritisation.GainingadeeperunderstandingofprofitablecustomersbecomesanimportantpartofCRMactivities.Useofincreasinglysophisticatedsegmentationandprofilingtodothisbecomescommon.

Customerprioritisationalsoleadstostrategiesforreducingthecostofservinglessprofitablecustomers,suchasencouraging customers to switch from using a counter service to using the telephone or Internet. Typically, the segmentationexercisealsoidentifiesundesirablecustomergroups.Organisationsinthisgrouputilisemuchmoreeffective campaign management by fully exploiting their data warehouses. One insurance company at this stage of development contrasted their current highly targeted approach with their previous practice of mailing one twelfth of their database each month, irrespective of whether the products they were prioritising were relevant to the customers they were mailing.

Stage 5: Highly advanced CRMOrganisations that have reached a highly advanced or ‘best in class’ status are fully integrated, offering extensive data warehouse access within the company across departmental functions. They may use advanced techniques such asneuralnetworksandgeneticalgorithmstogeneratemorerefineddataandcontinuallylearnfromtheircustomerinformation. They are highly advanced in terms of their market segmentation strategies and understanding of the required level of segment granularity. They routinely use predictive modelling. As these organisations typically have a wide user base using their data warehouse, they also employ data visualisation tools to present data in an easier-to-use chart format. Relatively few organisations have reached this level of CRM sophistication.


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A task associated with such advanced usage of CRM is more active customer management in which organisations use tools such as campaign management to engage in an ongoing dialogue with a customer and to reap the maximum profitpotentialthroughoutthecustomer’slifetime.SuchorganisationswithmoredevelopedCRMintegrateaclearerunderstanding of the value of the customer with active customer management.

6.3.1 Reviewing the Stage of CRM MaturityOrganisations should use these guidelines on CRM maturity to review their own stage of development. Generally, managers characterise their stage of development fairly accurate. However, it is found that IT managers tend to rank their own organisations at a higher CRM stage than their marketing colleagues. This is possibly because the IT managers have not understood how data are used by the marketing department and what their data requirements are. Experienced CRM managers and consultants should already know which stage of CRM development a company is at. However, we have found several large corporations and many mid-sized companies with a surprising lack of knowledge as to how far they had progressed with their CRM, when compared with their competitors.

Thus, a view should then be taken on the stage of development of competitors. This will require some research. Competitors’ customers, industry reports, multi-client research studies and vendors who have provided solutions to a range of companies in that sector are good sources of this information. Submissions for industry awards and web sites of CRM vendors are often good sources of competitive information. If particular information on competitors isconsideredessentialbutdifficulttofind,someoftheleadingstrategyconsultingfirmshaveprovedtobeverysuccessfulinfindingoutsuchinformationthroughverydetailedindustryinterviewsandotherresearchmethods.

OrganisationsinearlierstagesofCRMdevelopmentcanalsobenefitgreatlybybenchmarkingCRMactivitiesofleading non competitors who are at an advanced stage of CRM. We have led a number of benchmarking programmes in ‘CRM best practice’ and found companies in non-competing industries can be extremely generous in sharing their knowledge.

CRM best practice workshops of approximately three days’ duration typically involves a review of CRM maturity, a CRM readiness audit, visits to leading exemplars of relevant CRM practices and action planning. Such workshops are usually directed at senior management including the operations board and senior CRM managers. A short workshopcanbeverypowerfulinunderstandingthebusinessbenefitsassociatedwithCRMandinprovidingthebusiness leaders with strong motivation to provide the leadership necessary to ensure successful implementation of CRM activities.

6.4 Identifying Barriers to CRM SuccessWhile reviewing CRM readiness it is useful for companies to consider the barriers typically faced by other organisationsindevelopingtheirCRMprogrammes.OurresearchhasidentifiedanumberofcommonbarrierstoCRM success. Interestingly, the problems of existing legacy systems which executives, might expect to be a main sourceofdifficultiesanddelays,appeartobelesscommonthanproblemsassociatedwithinternalattitudesandorganisational structure. Some of the barriers are discussed below:

Lack of skills: • Lack of skills in building and using the new IT-based CRM system is a major barrier to the implementation of CRM. A CRM manager was referred to as a ‘chronic technological skill shortage’. The organisation for which he works was unable to recruit enough technically skilled people for a large-scale CRM implementation project. Other executives also highlighted the need for skills in operating the new system and several said that they relied on vendor training to meet this need, which was not always available quickly and wasnotofauniformstandard.AnalyticalskillsinaskingtherightquestionsoftheCRMsystem,wasidentifiedas being of special importance in making the most of the CRM investment.Inadequate investment: • Gaining adequate funding for CRM requirements is an important issue for organisations, particularly as many of the projects expanded dramatically in cost and sometimes in scope. Some organisations had overcome the problem of funding by adopting what was referred to as a ‘quick wins’ approach. By structuring theirCRMimplementationprojectstodeliverquickwinsandvisiblebenefitsatincrementalstages,suchasimprovements in customer service or higher response rates to campaigns, they were able to demonstrate immediate progress and returns. This helped to improve internal buy-in and motivate other parts of the business to extend the CRM systems within their own areas.

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Poor data quality and quantity: • Organisations at different stages of CRM development experience different issues with respect to data quality and data quantity. For companies at an early stage of CRM development data quality is a key issue. The extent of data quality problems and the amount of work necessary to remedy them surprised many managers. More advanced companies tend to have undertaken data cleansing and de-duplicating, for these organisations data quantity is a greater problem than data quality.Failuretounderstandthebusinessbenefits:• Lowinitialawarenessofthebenefitsofamarketingdatabaseamong senior management is also a barrier for companies less advanced in CRM implementation. This problem tends to overcome as the data warehouse goes live and begins to deliver results. CRM managers point out that the data warehouse is perceived as a high cost and senior management often failed to understand the potential financialbenefitsintheearlierstagesoftheCRMproject.Functional boundaries: • Managers at the functional or business unit level may be reluctant or unwilling to cooperate at early stages of the CRM project. It may require considerable organisational effort to make functional andbusinessunitmanagersawareof thebenefitsofgreatercompany-wideoperationsandcross-functionalworking. This is a change management issue that we examine later in this chapter.Lack of leadership and top management involvement: • A lack of top management involvement and leadership of CRM activities is a further barrier to CRM success. Enlightened CEOs should view themselves as ‘chief customerofficer’also.Theirroleistoensureahighlevelexecutive,ideallyatBoardlevel,actsasasponsorandchampion for the company’s CRM activities and that the importance of transforming the company’s relationships with customers through CRM is understood and shared by the Board and senior management Inadequate measurement systems: • CRM managers often point out how poor or inappropriate measurement and reward systems can hinder the initiationandfulfilmentofCRMprojects.Measuresusedtodeterminethesuccess of CRM performance are often considered inadequate. Sometimes, the problem is that the organisation is not clear about its goals or does not communicate its goals to its people. There are, of course, other issues that will impede successful CRM implementation, some of which are addressed later. Any company undertaking CRMneedstounderstandthesecommonbarrierstoCRMsuccessandanymorespecificpotentialproblemareas relevant to their particular business and consider the implications for their organisation in advance of the introduction of customer management initiatives.

6.5 CRM Readiness AuditOnce the stage of CRM development and potential barriers to CRM have been considered, the company should then proceed with a more detailed assessment of its CRM readiness. The strategic framework for CRM can be used by enterprises to assess their CRM readiness and to identify and address CRM priorities. As noted earlier, although thesefiveCRMprocesseshaveuniversalapplication,theextenttowhichtheyareemphasisedwillvaryaccordingto each organisation’s unique situation. Large customer-facing businesses are likely to need to review all these CRM processes and the key questions underpinning them in considerable detail.

In such cases, key issues will include leadership and CRM sponsorship; how a company compares itself with other organisations;howsatisfiedcustomersarewiththeproductsandservicesofferedbytheorganisation;andwhetherthe company has skilled and motivated people and appropriate IT systems to deliver an outstanding customer experience. However, smaller companies will have more limited resources and they may need to focus on a smaller numberofmorespecificpriorities.Considertwoformsofreadinessassessment:theoverviewCRMauditandthecomprehensive CRM audit. If an organisation is in the early stages of CRM development, it may be useful to start with an overview audit to help get senior management understanding and buy-in at an early stage.


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6.5.1 The Overview CRM AuditThe overview form of readiness audit can be used quickly to form an initial view on the key CRM priorities, to definetherelativeimportanceoftheseprioritiesandtodeterminewhereeffortneedstobeapplied.

The ‘overviewCRMaudit’ involves examining each of the five processes inCRM strategy framework anddetermining the key areas of importance that need to be examined for an organisation. First, the company’s existing capabilitiesonthefivekeyCRMprocessesshouldbeconsidered.Second,theproposedchangeinemphasisshouldbe determined. To gain insight into an enterprise’s adoption of CRM, it is valuable to have a cross-section of managersindependentlyassesstheirorganisation’sperformanceacrossthefiveprocessesoutlinedaboveintermsof the existing and proposed future emphasis Priority initiatives are then developed to address each of the priority gapsthatareidentified.Wehaveusedthismappingapproachwithmanyorganisationsandoftenfoundsignificantdifferences in the gap between current position and desired position and the relative emphasis on each process. In case of this retail bank, changes were considered to be necessary in all processes, with the greatest improvement needed in value creation and performance assessment processes. A number of important new CRM initiatives were identifiedandprojectteamswereformedtoimplementthem.

However,dependingontheorganisation’sspecificobjectivesandsituation,therelativeimportanceofthesemayvary. If this is the case, a weight can be assigned to each area and used to compute a more representative overall performance score for the organisation. Although, simple in concept, the completion of this overview audit and a structured discussion with a company’s managers around the scorings has been found to be extremely valuable in highlighting areas on which an organisation should concentrate in order to improve its CRM performance. To extend the response rate it is possible to develop a simple web-based programme to collect and aggregate the information from around the company, as can be done with a more comprehensive audit.

6.5.2 The Comprehensive CRM AuditAs with any organisational initiative, the success of a CRM programme depends very much on the existence of a sufficientlevelofpreparednesswithintheorganisation.Whiletheoverviewauditisausefuldevicetohighlightopportunities and challenges and build consensus on the way forward, a more detailed insight into an enterprise’s existingandpotentialuseofCRMisusuallyneeded.ThisinvolvesamoredetailedreviewofthefivekeyCRMprocesses as well as a consideration of cultural, leadership and sponsorship issues. These latter factors are of particular relevance in preparing for a CRM programme and generating enthusiasm for it.

Each company will have different business priorities and market objectives. For this reason it is recommended that a tailored set of questions must be developed for each of the major CRM processes. This audit includes a set of100questions,20oneachofthefiveCRMprocesses.Althoughthisgenericauditcanbeusedasitstands,werecommend it is adapted to suit the size and nature of the organisation concerned. These questions should form the basisofanauditdesignedspecificallytoreflecttheneedsandcircumstancesoftheenterprise.

Inthiscomprehensiveaudit,thefiveCRMprocessesarebrokendownintotwosub-sectionseachcomprisingtenquestions. For example, the strategy development process is divided into business strategy (including leadership and sponsorship) and customer strategy; the value creation process is divided into the value the customer receives and the value the organisation receives and so on. There are two elements to score on a scale of 0 to 5, these are: rating for the organisation and importance to the organisation.

An organisation can approach a comprehensive CRM audit in two ways. First, it can develop its own audit tailored from the generic list of questions relating to CRM processes. Second, other standardised CRM assessment tools can beusedwithoutmodification.Ifatailoredauditisrequired,werecommendacross-functionalteamofexecutives,drawn from different functions including Marketing, IT, Human Resources and Finance, is used to develop an audit to suit the special circumstances of your organisation.

When completed and pilot tested, a cross-section of managers can then be asked to complete the audit using either a paper form or a web-based application. The data from this audit can then usefully be presented in a series of graphs or matrices that show the rating for the organisation and the importance to the organisation.

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This will help establish key CRM priorities. Such an audit covers quite complex issues. We have found completing the audit as part of one or more CRM workshops, with formal presentations that explain the concept of CRM in detail, helps ensure full understanding and a common vocabulary is used in the organisation.

AnumberofotherCRMassessmenttoolshavealsobeendeveloped,mainlybyconsultingfirms.ThesearetypicallynottailoredtothespecificcircumstancesofanorganisationorindustrysectorandarenotweightedtoreflecttherelativeimportanceofspecificCRMissuestotheorganisationconcerned.Theseauditsvarygreatlyindetailandquality. Some are little more than a quis and others show little evidence of thinking through the wide range of strategic issues relevant to CRM.

6.5.3 Determining Key CRM PrioritiesRegardlessoftheCRMreadinessassessmentauditused,theoutputofitshouldbetheidentificationofthespecificCRM activities and priorities that need to be addressed. These then need to be considered in the context of the strategy development process discussed in detail earlier.

Companies’ individual circumstances will dictate how they wish to consider their key CRM priorities. In a bank, twelvegroupsofemployeesidentifiedaninitiallistofoveronehundredactivitiesandtasksthatwereconsideredworthy of more detailed examination. Each activity was then considered in more detail. On closer inspection some ofthemwererelatedtoeachothersowasreclassifiedandasignificantnumberwererejectedasbeingofminorimportance. As a result of this exercise the number of activities was reduced. Issues that were considered to have a high impact on the business that were easy to implement were addressed immediately. A total of six projects that were hard to implement, but potentially had a high impact on the business, were assigned to six task force project teams. Those that were hard to implement but had little expected payback were to be monitored over time to see if theirimportancechangedinthefuture.Anumberofthoseactivitiesthatwereclassifiedaslowimpactbuteasyandinexpensive were proceeded with as they were considered likely to have a positive impact on employee morale.

Aclassificationmatrixsuchasthiscanmakeamajorcontributiontohelpingtheenterpriseformaclearviewonitskey priorities. Every organisation starting a substantive new CRM programme needs to consider its overall readiness for a CRM implementation and what needs to be done to prepare the enterprise for it.

Among the questions the enterprise should consider are: Is everyone in the organisation aware of the objectives, requirementsand‘strategicfit’oftheproposedCRMprogrammeanddotheyunderstandtheirownindividualrolewithin it? Will they accept their part with the necessary degree of commitment and cooperation? Are the requisite systems and processes in place to equip and support them in the endeavour? Will the CRM project be designed and developed to succeed, that is, has the organisation fully considered the competitive context, the implementation time frame, the need for leadership and the dedication of resources in terms of both material expense and human expertise?

These areas are ones where CRM change management and CRM project management play a critical role.

6.6 Establish a CRM VisionWith a CRM leader in place, an early change management issue that needs to be addressed is the organisation’s shared values. In a sense, these shared values are the ‘glue’ that holds the organisation together. A clear and well-communicated CRM vision is an important means of building shared values. A business vision and its associated values form an important element of a company’s strategy and we reviewed the research undertaken by Hugh Davidson into making vision and values work in organisations.

A CRM vision is a powerful means of creating shared values and a customer focus. Many companies score poorly on the development of a clear and strong vision because their visions are neither memorable nor motivating. Davidson has suggested the key issues an organisation should address in order to overtake other companies in terms of vision management are:


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establish candidly who you are and what you stand for•develop a future vision that excites and challenges•involve all your people in developing vision and values•communicate by action, signals and repetition•embed vision and values into all practices, behaviours, processes and systems•developadistinctivebrandpropositionforyourorganisation,whichhonestlyreflectsitssubstanceandsetsit•apartregularly measure how well you are managing vision and values.•

Successful CRM implementation involves developing strong support for a customer orientation. A well-accepted vision will help build commitment to CRM throughout the organisation, but it needs to be carefully and explicitly linkedtotheCRMproject.CRMconsultantshaveemphasisedhowtheCRMprocessesshouldbedefinedsothatend-users and non-technical personnel understand what needs to occur from an operational point of view to achieve the CRM vision.

The process mapping must ensure a close and continuing relationship between strategic vision and the implementation of ‘the solution’. Without this close relationship, CRM is nothing more than the implementation of a few software toolsandoperationalchangestoachievesomeprocessefficiencies.Consequently,thevisionislosttorealisetheCRM vision, users must see the impact on how they work on a daily basis, and what achieving the vision means to them. The vision therefore needs to be explicit and understandable. The link between CRM vision and CRM solution is the very essence of the CRM project challenge.

6.7 Utilising a CRM Technology SolutionIt is observed that the ‘hard’ CRM implementation approach often had only a vague strategic understanding of the CRMprojectinplacebeforetheydefinedtheprocessandtechnicalrequirements.ThissuggeststhatstandardITprocesses may often be used to derive strategic CRM guidelines, a reversal of the best practice approach where IT processes are developed from strategic and customer-based considerations. The Strategic Framework for CRM outlinedin thisbookemphasises thatstrategicconsiderationsshouldbeaddressedfirstbefore theITsolutions.ToolssuchastheBenefitsDependencyNetworkoutlinedabovewillthenhelpidentifythegeneralCRMtechnologyrequirements in the context of business strategy and drivers

6.7.1 Adopting a CRM SolutionTwo-thirdsofalltelecomoperatorsandhalformoreofallfinancialservices,pharmaceuticalandtransportationcompanies are either implementing or already operating such solutions. More than 40 percent of the companies in the high technology, aerospace, retailing and utilities sectors have invested in CRM systems.

Most large organisations dealing with a substantial number of customers have adopted or will adopt one or more IT-based CRM solutions. Medium-sized and smaller organisations need to consider their existing and potential scale in relationship to the technology requirements. Management consultants have written extensively on CRM project management. Drawing on a range of sources the consultant outlines a number of organisational conditions that make a company an ideal candidate for adopting an IT-based CRM solution:

Do you have a large number of people in sales and service in direct contact with customers, say more than •30?Are you in a highly collaborative environment, with customer interaction requiring input from multiple players •within each function (sales and service)?Doyousellcomplexproductsthatrequireahighdegreeofconfigurationandcustomisation?•Do you have a large number of customers, say more than 10,000?•Isatypicalcustomerrelationshipworthalottoyoufromaprofitstandpoint,thatiswillitcostyoutolose•one?Can your customers interact with you across multiple channels?•

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Do you have frequent contact with large groups of customers, or all customers, across multiple channels?•Is there a need to customise what you are saying to each customer through these channels?•

Companies which respond ‘yes’ to most of these conditions should certainly consider adopting a CRM solution, if they have not already done so. For other companies, a consideration of the CRM strategy matrix will help determinetherelevanceandtimingofnewCRMsolutionadoption.HavingidentifiedtheneedforadoptionofaCRM technology solution, attention then needs to be turned to vendor selection, determining if a pilot project is required and detailed project planning.

6.8 Piloting CRM ProjectsSome organisations consider that a large-scale and very comprehensive approach to CRM improvement, covering many CRM initiatives more or less simultaneously, is necessary. Certainly, some companies need such a total, comprehensive and large-scale approach. However, we have found that more often an incremental and modular approach to CRM development or enhancement is appropriate. Such an approach involves a series of smaller individualCRMprojects,undertakeninanappropriatesequence,eachwithclearlydefinedobjectivesandROIoutcomes.

These projects will help determine whether the immediate emphasis needs to be placed on analytical CRM, operationalCRMorcollaborativeCRM.TheprojectmightinvolveaspecifictaskwithinaCRMprocess,suchasupgrading a call centre operation or introducing an SFA procedure, or a complete CRM process, such as improving multi-channel integration.

Further, many of these projects will best be initiated by means of a ‘pilot’ project. There are various reasons for a pilot project to be considered. Pilots can be used to prove a CRM concept at a much lower cost, to trial an approach with high business or political risk, to avoid incurring large-scale licence fees before the application is proven, lack of existing or potential buy-in, and so on.

Buy-in is an important issue and it can be at many levels including individual, departmental, regional, national or international. We re-emphasise that the CEO and senior management should endorse and support any CRM project through their buy-in and active involvement. However, if support for a project does not currently exist, then those chargedwithCRMimplementationmayfirstwishtolimittheprogrammetoapilotprojectforproofofconceptand buy-in.

Interdepartmentalconflictanddisagreements,highlightedintheearliersectiononchangemanagement,alsoarea frequent cause for lack of buy-in. It is easier to launch a pilot project when faced with organisational or cultural resistance to change than it is to ‘hit the wall’ head on. Without top-level support, innovators can only stretch the ‘cultural elastic’ so far and it may be counter-productive and politically misguided to attempt to challenge and overturnthecompany’ssystemofbeliefsandassumptionswithoutpilotingtheprojectfirst.

InternationalCRMprojectsfaceparticularproblemsthatareamplifiedbygeographicandculturaldifferences.Thereare two types of CRM pilot such as:

Conference-room pilot• : It takes place in a conference room, rather than in the working environment. It tests processes without the risk of any adverse impact on either customer relations or the reputation of the CRM solution within the business and paves the way for a more general pilot in the live environment. It can also be used for piloting CRM training concepts and it should replicate a complete period of use for the user – perhaps three months. This can be done in a fraction of the elapsed time and can provide extensive use of the solution in a short time-scale. Live pilots, by contrast, are typically more resource-intensive and require similar resources to when the project goes live. Live pilot (Operational pilot)• : Here, the same hardware and ideally the same version of the software as planned for the roll out should be utilised. In practical terms, running pilot project training provides an opportunity to identifyhoweasyorhowdifficultitwillbeforuserstolearnthesolutionandalsotoidentifyanyissuesrelatingto cultural change.


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6.8.1 Planning for CRM Project ImplementationTheCRMprojectplanmustbedevelopedintospecificactionsthatresultintheprojectbeingimplementedandthebusinessobjectivesachieved.TheCRMstrategyframeworkoutlinesasetofclearlydefinedprocessesthatshouldbe addressed in the plan. The format of a CRM plan will vary considerably from one organisation to another and it must be carefully crafted to meet the needs of the organisation.

The CRM plan must be produced in a manner that stands the tests of completeness, consistency, ease of understanding and succinctness. Project plans are best communicated and managed if they are presented visually. Further, areas of potential risk should be considered. Here, contingency planning has an important role to play. In practice, plans are not always developed in a linear manner. It should be recognised that the early stages of planning may be ‘messy’ and that planning is an interactive and iterative process.

6.8.2 Establishing Project Priorities and their DirectionIn the planning phase of CRM projects it is necessary to develop an integrated plan covering projects, project goals, metrics for measuring success and project priorities and then develop a roadmap for implementing them. Determining priorities is especially important. A project involving setting up direct marketing activities can be completed within three months, while other projects such as sales force automation may take a number of years. Projects should be brokenupintodiscretestepswithdeliverablesbeingdefinedatappropriatepointsintime.Experiencesuggeststhatwith longer projects there is a high risk that the project may be discontinued if the project duration is more than threeyearsorsometangiblebenefittothebusinessisnotachievedwithin18months.

As the CRM project plan is implemented two issues should be considered: creep in project scope and understanding the implications of scale. As a project grows in scope, the system’s development can take on a life of its own, incorporating new features that do not support business objectives but add considerable complexity and cost. IT professionals have learnt that the bigger a project, the harder it is to integrate and the more likely it is to miss deadlines or be scrapped altogether.

The business objectives that the CRM system was intended to achieve must be kept under constant scrutiny and any efforts to increase the scope of the project must be evaluated very carefully. As a project is planned it is critical that the implications of scale increase are understood. Point estimates of future demand are quite useless. Estimates should be based on three levels of potential future demand: optimistic, most likely and pessimistic. As the numbers of users and customers grow, the system must be robust enough to accept the changes in volume. Also, having sufficientcapacitytoprovidehighlevelsofcustomersatisfactionneedstobeconsideredintheplan.

The main features of CRM implementation can be summarised under three very broad headings: people, systems and processes. An organisation cannot develop and operate appropriately customer focused systems and processes withoutproperlymotivatedandtrainedemployees.Staffingresourcesneedtobeplannednotonlyonthebasisofmost likely demand, but also potential peak demand. Ensuring the delivery of a superior customer experience during times of unexpectedly high demand requires the active engagement and commitment of all customer-facing staff and is a hallmark of a well-planned CRM implementation.

6.8.3 CRM Training and DevelopmentCRM initiatives should usually include both employee training and executive development activities. Depending on their scope and scale these activities could be considered as part of change management or employee engagement.

CRM training and development activity starts with a needs analysis. This will involve a thorough review to identify the requisite mix of knowledge, skills or attitudes that need to be developed for effective CRM to take place. It should bebasedoninterviewswithappropriateexecutivesandemployeeswithinthefirmandneedstobeundertakenbysomeone with a good understanding of the organisation and particular training requirements of any CRM technology being adopted.

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The focus of executive development will be on ensuring managers understand the full extent of the company’s CRM initiative including its opportunities and potential problems. As noted earlier, research suggests that executives are often not fully aware of what they are implementing, or the costs and timing of the CRM programmes. We have found a number of instances where detailed employee training is in place but there is no supporting executive briefingorexecutivedevelopment.

Executive development activities programmes typically comprise a series of workshops or events involving managers drawn from all functions within the organisation. These should precede employee training and should make management fully aware of the nature and objectives of the company’s CRM initiatives. The objectives and scope of these programmes will vary considerably across different organisations. Employee training may be focused on developing particular skills or on changing attitudes. A skills oriented approach may be appropriate for introduction of a new call centre system. An approach emphasising attitude change may be used to address issues such as improving customer service or building a customer-oriented culture. Where a CRM technology solution is adopted in the organisation, the training should include sessions designed immediately to practice and apply the newly acquired knowledge.

Where implementation problems are being experienced they should be discussed frankly with employees, together with an explanation as to what is being done to address them. Lack of this awareness can cause CRM initiatives to falter or fail. For example, in major sales force automation project in a large company the failure to communicate problems such as software synchronisation and resulting resistance by the sales force to using the system, almost caused failure of the project.

In many instances a CRM employee training and executive development programme needs to be cascaded throughout the organisation so that all levels of employees are informed and engaged. A large-scale CRM programme will typically have different component parts aimed at different levels within the organisation. The case study on implementing CRM at Mercedes-Bens is a good example of an integrated CRM development programme that has a set of tailored developmental, experiential and executive development activities that cascade from the board of directors to all customer-facing employees.

6.9 The CRM BudgetMany CRM budgets are underfunded in terms of what is required for successful implementation. In this chapter, we have examined four critical elements of a successful CRM programme namely, readiness assessment, change management,projectmanagementandemployeeengagementthatsupportthefivekeyCRMprocesses.Ofthese,thelast three represent line items that may be seriously underfunded or totally neglected as line items in the budget.

Onlythereadinessassessmentrepresentsanitemthatisgenerallymodestincostandwhichcanbereadilyidentifiedin terms of its cost. If one can examine the budget items that are typically associated with CRM when viewed from an IT perspective, the total is likely to be a very large amount. However, it may not be enough as costs associated with change management, project management and employee engagement may not have been taken into account.

Lack of company experience about the real total costs of a major CRM initiative is the usual major reason for this. Most of the historical investment in CRM goes into data and technology, but these aspects represent only 25 per cent of the competency determinants for CRM success. It is the areas that involve people, organisation, and culture and change where the funding level may be neglected or not adequately provided for in the CRM budget. However, these areas are critical to the success of companies’ CRM initiatives.


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The IT department is frequently responsible for planning the CRM budget, as the most obvious and visible expenditure will be for the software licences, hardware, systems integration and consulting. However, the IT department is often less experienced with regard to CRM projects? As a result, they omit non obvious costs in the budget and may make budgetary mistakes on both the hard and soft elements of CRM projects:

Seriously underestimating the number of data sources that need to be migrated over and the corresponding •quality.Seriously underestimating how consulting costs can spiral out of control when there is no cross-functional •agreement on business processes.

Thismayresultinalotofadditionalwork,asconsultantsandthebusinessworktodefinethingsthatthesystemintegrator’s methodology assumed were already known being unaware, or underestimating, certain business-related line items that are not present in other types of IT projects, which consequently fall through cracks. These include: user training on a far greater scale than what they are used to, resources for change management, to drive process change and ensure data quality; and resources for data operations, to manage the importing and exporting of data. Seeing budget is a means to drive a project through to implementation only after which, the project time is assumed tobeeitherself-sufficientorabletowaittillthenextbudgetcycleforsubsequentfunding.

This provides a good argument for input from a cross-functional CRM team with representatives from marketing, humanresources,procurementandfinance,aswellasITinthedevelopmentoftheCRMbudget.Aconsiderationof the full implications of change management, project management and employee engagement by these groups willhelpensureamoreaccurateandbalancedbudget.Also,thebenefitofapilotwillhelpidentifybudgetcostsmore accurately.

For international projects, there is frequently the expectation that everything should be centrally funded. While this may be the case for software licences, consulting, implementation and IT costs, it is rarely so for in-country change management resources. With no central funding for the CRM project, countries may be unable or unwilling to provide the resources for this critical function. As a result, the success of CRM initiatives in other countries may be under threat.

CRMbudgetsaredifficulttodetermineandtheirpreparationwillbenefitfromearlyinvolvementwithbusiness-orientedinternalfinancestaffandexperiencedCRMmanagersorconsultants.OurexperienceinreviewingCRMbudgets for large organisations points to several other problems in:

Significantlyunderestimatingchangemanagement,trainingandemployeeengagementcosts.•Significantlyoverestimatinglicencecostsandnotunderstandingthediscounts thatcouldbeachievedfrom•vendors in a ‘soft’ market.Not understanding the items that could be capitalised as capital expenditure and the items that needed to be •expensed as operating expenditure.Notunderstandingtheinternalfinancialapprovalsystemforlargeexpendituresbyseniorfinancecommitteesand•theboardusingbusinesscasemodellingthatwassuperficialandbasedonpointestimates(ratherthanlookingat a range of estimates including pessimistic and optimistic scenarios).Not properly considering the political issues associated with international business units and their agreement •to sign up to potentially large local budget commitments.Key element of a CRM programme not being time and money ‘boxed’ to force the 80:20 rule of delivering •quick wins.Not having some contingency funding sources available.•

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CRM budgets are frequently inaccurate, underfunded and poorly constructed. This is usually because of a lack of company experience in developing CRM budgets, a failure to consider non-IT related elements of CRM, not taking into account independent expert advice in vendor assessment and licence negotiations. There is also a lack of published material on this topic. Considerable efforts should therefore be directed at constructing thorough and well-argued budgets to implement the CRM project. Having progressed to the stage of developing a comprehensive and detailed plan for a strategic approach to a new CRM initiative, it would be highly disappointing to have the budget for it delayed or under-resourced because of reductions in budgeted items, or not approved.


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SummaryBefore a CRM strategy is developed, it is important to assess whether the organisation is really ready and willing •to implement customer-focused strategies and CRM initiatives.A CRM readiness audit will help determine both how advanced the company is in its overall readiness to adopt •or further develop CRM.TheemphasisanorganisationplacesonusingdatatohelpdesignandimplementCRMstrategiesisreflected•in the organisation’s stage of CRM development.Experienced CRM managers and consultants should already know which stage of CRM development a company •is at.OrganisationsinearlierstagesofCRMdevelopmentcanbenefitgreatlybybenchmarkingCRMactivitiesof•leading non competitors who are at an advanced stage of CRM.When reviewing CRM readiness it is useful for companies to consider the barriers typically faced by other •organisations in developing their CRM programmes.Gaining adequate funding for CRM requirements is an important issue for organisations, particularly as many •of the projects expanded dramatically in cost and sometimes in scope.With a CRM leader in place, an early change management issue that needs to be addressed is the organisation’s •shared values.

ReferencesFinnegan, D. J. and Willcocks., 2007. • Implementing CRM: From Technology to knowledge. John Wiley @ sons, Ltd.Sharma, R., Sinha, C. and Kumar, A., 2007. • Customer Relationship Management: Concepts & Application. Wiley-India.Developing and implementing a CRM Strategy• [Online] Available at: <http://www.business-intelligence.co.uk/reports/crm_strat/summary.asp> [Accessed 31 January 2011].

Developing a CRM Strategy• [Online] Available at: <http://www.mycustomer.com/lib/5049> [Accessed 31

January 2011].

TheKweci., 2011. • CRM Lecture/Discussion @ Central University [Video Online] Available at: <http://www.

youtube.com/watch?v=YxapXMVmLCs&feature=related> [Accessed 1 February 2012]. TheKweci., 2011. • CRM Lecture/Discussion Central University 2 [Video Online] Available at: <http://www.youtube.com/watch?v=lQ22mYjLeSs&feature=related> [Accessed 1 February 2012].

Recommended ReadingAnderson, K. and Kerr, C. • Customer Relationship Management, McGraw-Hill.Wellington, P. 2010. • Effective Customer Care, Kogan Page Limited.Buttle, F. 2009. • Customer Relationship Management Concepts and Technologies, 2nd ed., Elsevier Ltd.

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Self AssessmentThe main source of competitive advantage today is customer intimacy achieved through excellent 1. customer_______________.

servicea. productb. relationshipc. positiond.

In undertaking an assessment of CRM readiness ____________tasks should be undertaken.2. threea. twob. fivec. tend.

A CRM ____________will help determine both how advanced the company is in its overall readiness to adopt 3. or further develop CRM.

assessmenta. readiness auditb. strategyc. processd.

Which of the following statement is true?4. The emphasis an organisation places on using data to help design and implement CRM strategies is never a. reflectedintheorganisation’sstageofCRMdevelopmentThere are only two broad strategic options facing organisations – product-based selling, and customer-based b. marketing.In particular, the degree of CRM development in other organisations does not provide a useful context for c. an enterprise to consider its own CRM initiatives.The kinds of organisational changes needed to embrace CRM can range from a revolution in mindset to a d. realignment of systems and processes.

Match the following.5. Pre-CRM planning1. Building an appropriate data repositoryA.

Building a data repository2. Moving towards an enterprise-wide dataB.

Moderately developed CRM 3. Recognise the importance of CRMC.

Well developed CRM 4. Progressed to a full data warehouseD. 1-C, 2-A, 3-D, 4-Ba. 1-B, 2-D, 3-A, 4-Cb. 1-D, 2-C, 3-B, 4-A c. 1-A, 2-B, 3-C, 4-D d.


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Organisations that have reached a highly ___________or ‘best in class’ status are fully integrated, offering 6. extensive data warehouse access within the company across departmental functions.

activea. surprisingb. predictivec. advancedd.

Which of these is not a barrier to CRM success?7. Lack of skillsa. Adequate investmentb. Poor data quality and quantityc. Functional boundariesd.

Which of the following statement is false?8. RegardlessoftheCRMreadinessassessmentauditused,theoutputofitshouldbetheidentificationofthea. specificCRMactivitiesandprioritiesthatneedtobeaddressed.The overview form of readiness audit can be used quickly to form an initial view on the key CRM b. priorities.As with any organisational initiative, the success of a CRM programme does not depends on the existence c. ofasufficientlevelofpreparednesswithintheorganisation.Once the stage of CRM development and potential barriers to CRM have been considered, the company d. should then proceed with a more detailed assessment of its CRM readiness.

A clear and well-communicated CRM___________ is an important means of building shared values.9. valuea. visionb. emphasisc. viewd.

_____________CRM projects face particular problems that are amplified by geographic and cultural 10. differences.

Internationala. Trainingb. Developmentc. Technologyd.

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Chapter VII

Business Application and Technology Issues CRM

Aim


elucidate business application trends•

highlight increased consolidation and mergers among CRM vendors•

explain intelligence analytical tools in CRM solutions•

Objectives


provide CRM software selection tips•

explain ten steps to effective CRM Implementation•

enlist technical feature requirements of software selection process•

Learning outcome


identify key trends that are helping to propel CRM initiatives•

understand increased number of mobile CRM offerings•

knowCRMsystemspecificationsdocument•


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7.1 Business Application TrendsFrom2006to2007,anumberofnewCRMbusinessapplicationtrendshavemadeasignificantimpactamongusers.Here, are eight major trends that currently affect the business functional evolution of CRM systems with noticeable increases in the following:

Consolidation and mergers among CRM vendors•CRM focus on the small- to mid-sized business segment•Use of business intelligence analytical tools (predictive modelling) in CRM solutions•Number of mobile CRM offerings and a move toward real-time CRM•CRM offerings via the software as a service (SaaS) model•Availability of search engine marketing functionality•Availability of Web 2.0-type functionality•Implementation of CRM software by CRM vendors•

7.1.1 Increased Consolidation and Mergers among CRM VendorsResponding to customer pressure to provide comprehensive applications, CRM vendor consolidation by major players islikelytoincrease.SomesmallCRMvendors,particularlythoseinwell-definednichemarkets,willsurvive.Someexamples of key CRM acquisitions over the past few years include the following:

Oracle acquires PeopleSoft (2004) and Siebel (2005)•CDC Software acquires Pivotal (2004)•FirstWave acquires Connect-Care (2003)•Infor acquires SSA Global Technologies (2006)•M2M Holding acquires Onyx Software (2006)•

Oracle’s acquisitions of PeopleSoft and Siebel along with the emergence of SaaS will encourage further consolidation among CRM software companies as multimillion-dollar CRM enterprises will view other acquisitions as necessary to survive in an increasingly competitive CRM market.

CRM functionality is offered more often as part of a larger suite of products. One example is the announcement that thePeopleSoftandSiebelCRMfunctionalitywillberolledintotheOracleFusionapplications.Thesignificanceof these key CRM acquisitions is still yet to be determined. Some of these organisations have already effectively integrated their offerings, such as FirstWave Software, which appears to have effectively integrated Connect-Care software, while others, such as Oracle’s acquisition of PeopleSoft and Siebel, have not. However, many are still in the integration phase.

Likely impact: Customers will have more choices in comprehensive CRM software.

7.1.2 Increased CRM Focus on the Small-to Mid-Sized Business SegmentMoresmall-andmid-sizedbusinesses(SMB),definedasthosecompanieswithlessthan$500millioninannualrevenues, or alternatively, companies employing 20 to 150 people, are adopting CRM systems. For example, in 2004, AMR Research predicted that the SMB market will reach $44.1 billion in CRM sales by 2010, given that only a maximum of 20 percent of SMB companies are using CRM applications.

Another study by Access Markets International found that mid-sized businesses are likely to spend more than $1 billion in CRM applications in the U.S. at the end of 2007. In the same study, CRM spending within the mid-market CRM segment is predicted to grow at a compound annual growth rate of 9 percent until at least 2011.

Consequently, the SMB market has become increasingly attractive to CRM software vendors. CRM applications targeting SMBs offer easy-toimplement solutions with an opportunity for a quick ROI. For example, Salesforce.com, RightNow, and NetSuite have targeted the SMB market with Web-based SaaS CRM software for a moderate

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monthly fee. Siebel has also realigned its technology to aggressively target SMBs with its Siebel CRM OnDemand solution. Microsoft’s CRM offering is now targeted solely to SMBs. SAP rolled out a hosted version of its CRM software application for the SMB market in early 2006.

Likely impact: Customers can choose from a range of better CRM software offerings in tune with the needs of small- to mid-sized companies.

7.1.3 Intelligence Analytical Tools in CRM SolutionsBusiness intelligence analytical tools, or predictive modelling (techniques from statistics and data mining that process current and historical data to make predictions about future events), now can predict the monetary value andprofitabilityofaparticularcustomer.Thesepredictionscan range fromprofilingcustomersbasedon theirbehaviour to segmenting markets and from predicting customer purchases based on past purchase information and psychographic/demographic data to determining cross-selling opportunities. Marketers are discovering that analytics programsarebeneficialfortailoringmarketingmessageswithoutviolatingprivacyandothergovernmentregulations.Businessintelligenceanalyticswillremainanimportantpartofthecorporateagendaascompaniesfindthattheyface a 10-fold increase in the amount of data generated by their IT systems until 2011.

AMR Research forecasted at the beginning of 2007 that analytics applications that year will sell better than other CRM components, including call management, sales force automation, and marketing automation. IDC forecasted that core and predictive analytics will have a compound annual growth rate of 7.7 percent and 8 percent, respectively, between 2007 and 2008. IDC also predicted that the worldwide analytic applications software market will be worth $11 billion in 2008. Many analysts have also now opted to cover this increasingly important functional area, such as Gartner’s Business Activity Monitoring offering. The Gartner Group predicted that by 2012, business intelligence analytics will be an integral part of 85 percent of all business applications.

As a result, CRM vendors are integrating analytical tools/functionality directly more often into their CRM offerings. A top example is Unica, which specialises in marketing campaign software with analytical tools for market segmentation, along with SAS, which has an alliance with Siebel and Amdocs to integrate their data mining and statistical tools with the CRM suite from Siebel and Amdocs. Other examples include SAP’s mySAP CRM application, PeopleSoft’s Customer Behaviour Modelling application, and Infor CRM.

Likely impact: Customers will have access to better, faster analysis of what is happening within their businesses, which will allow decision makers to make better-informed decisions.

7.1.4 Increased Number of Mobile CRM Offerings and a Move Toward Real-Time CRMCRM vendors continue to develop and release CRM application modules, especially those that are bundled with or work on a large variety of handheld and/or wireless devices. These include personal digital assistants (PDAs)(with various operating systems) and smartphones that support wireless infrastructure technologies like CDMA (Code Division Multiple Access), GSM (Global System for Multiple communications), TDMA (Time Division Multiple Access), CDPD (Cellular Digital Packet Data), SMS (Short Messaging Services), and packet radio networks. Smartphones use cellular network instead of wireless hotspots to transfer information, which means the user does not have to go to a Starbucks or hotel lobby to access data in the CRM system.

Wireless components are increasingly allowing users to make business decisions in real time, along with creating analytics in real time; all of this points toward the growing direction of real-time CRM. Annual growth in the wirelessCRMmarketisexpectedtobebetween35and40percentthrough2008;IDChasidentifiedmobileCRMas a substantial portion of the growth expected for mobile and wireless products/services. I predict that by the end of 2008, all CRM applications will be ready for wireless use. By 2010, Vision Gain projects that the mobile CRM market will surpass traditional CRM growth rates, representing 20 percent of total CRM revenues in U.S. mobile solutions.Thesemobilesolutionsaremoreoftenbeingadoptedbyfinancialservices,manufacturing,andprofessionalservicesindustriesthatneedaccesstoreal-timeinformationinthefield,accordingtoa2006Gartner.


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Group report stating that 45 percent of the American workforce is using mobile technology of some kind. The market for mobile CRM products will be considerably larger in the U.S. than in Europe, which has been slower to adopt handheld device solutions for enterprise applications.

For example,AntennaSoftware (www.antennasoftware.com), knownmainly as awireless-readyfield serviceconnector to CRM leaders Siebel Systems, SAP, and Amdocs, offers an AntennaNetwork that integrates CRM, fieldservice,andsupply-chaintactics.Thesoftwareenablesservicetechstoautomaticallycallonmanufacturerknowledgebases,break-fixdata,andthelikeviaawirelessWebconnection,andleveragessomeofthelatestfielddevices including the Motorola’s Accompli. Another example is Salesforce.com’s mobile module, which uses the same source code to communicate with PDAs, BlackBerry devices, and mobile phones. This mobile module was introduced when Salesforce.com acquired Sendia in April 2006. By integrating Sendia’s application server to the Salesforce.com AppExchange platform, Salesforce.com now sells the AppExchange Mobile package, which provides wireless access for businesses via Salesforce.com and AppExchange applications from mobile devices. PeopleSoft’s CRM application is available on laptops and handheld computers without a connection to a corporate network or the Web. Saratoga Systems has released Saratoga CRM Wireless, which offers tight integration with small mobile data devices such as RIM BlackBerry. Siebel, Onyx, Amdocs, and SAP all provide access to their CRM application modules on handheld devices on Microsoft (MS) Windows CE and

Palm operating systems. Sage, which acquired Corum’s mobile division in 2006, announced plans to make mobile functionality available for its entire CRM product line. Some CRM companies also offer mobile enterprise applications aimed at vertical industries. For example, the Siebel Pharma Handheld application lets pharmaceutical sales professionals manage physician information, activities, call reports, and the distribution of pharmaceutical samples over a PDA.

Likely impact: Customers will have increasing access to time-sensitive information in the CRM database from handheld and/or wireless devices, giving companies new options for improving customer satisfaction, productivity, andfinancialperformance.

7.1.5 Increased Implementation of CRM Software by CRM VendorsCRM vendors are now offering implementation of their CRM software in-house as an incentive to their customers to purchase their CRM software application. Prices for such implementation have dropped as much as 50 percent from 2005 prices as user-friendly application development tool kits based on open standards have become the norm. Nevertheless, implementation costs are still by far the greatest cost in an overall CRM budget. The CRM industry stilldependsheavilyonsuccessfulimplementationstopropelfuturegrowth.Inmyfirm’ssurveyofthe2007Top15CRMvendors,weconfirmedthistrend.OftheTop15SMBCRMcompanies,88percentdeclaredtheyaredoingmore of their own implementations now than in 2006, whereas 80 percent of the top 15 enterprise CRM companies are performing more of their own implementations than in 2006. Likewise, 56 percent of all SMB vendors are currently handling 60 percent or more of their own implementations, whereas 80 percent of all enterprise vendors are currently handling 70 percent or more of their own implementations.

CRM vendors are likely to increase their implementation offerings in the future to increase client satisfaction with their CRM applications. According to a 2007 Forrester Research survey, 40 percent of companies surveyed would not recommend their CRM professional service provider to others; this indicates the need for successful implementation ofCRMsoftwareapplicationsinthemarketplace.PivotalandOnyxofferstandardisedimplementationfixed-feeimplementation packages. First Wave currently provides its customers with offerings from professional service organisations to implement the First Wave CRM application at customer sites.

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Likely impact: Customers now have more appropriate CRM implementation offerings to choose from, thereby increasing the overall potential for successful implementations of CRM applications. New business application trends arelikelytoemergeannually.Although,itisalwaysdifficulttodetermine,whichtrendswillstickandwhichwillpass,itisseenthattheseeighttrendscontinuingandmaturingovertime,basedonobservationsbymyfirm’sSoftwareTesting Laboratory, along with market input from customers and leading authorities. Customers are encouraged to understand these trends and to ask potential vendors about their current and future plans for each of the trends.

7.2 The Technology ComponentGiven the ever-expanding number of technology offerings and alternatives, the technology component of any CRM implementation can be overwhelming. Two primary issues are related to technology: dealing with CRM software vendors and staying on top of CRM technology trends. Let’s start with CRM software vendors. Today’s CRM technology will address most of CRM user requirements. Customers can choose from dozens of competent, financiallysoundCRMvendors.Nonetheless,cantheCRMvendordeliverwhatitpromises?Theresponsetothisquestion is not always evident.

Here are a few examples. In one case, a leading CRM software vendor claimed its software seamlessly integrated withallback-officesystems.Once thesoftwarehadbeenpurchased, thepurchasingcompanyrealised that theintegration was not seamless, and it actually required a fairly expensive ($200,000) piece of enterprise application integration(EAI)middlewaretoconnectitseamlesslytoitsSAPback-officesystem.Inanothercase,aleadingCRMsoftware vendor claimed that all CRM system users needed to purchase their customer service base module if users expected to exchange data among the sales, marketing, and customer service functions. Fortunately, the purchasing company found out that this was not necessary since all functions could easily draw and share information from the common database regardless of the base module used. The purchasing company nearly purchased $150,000 of unnecessary software.

In a third case, one of the largest database software vendors claimed that its emerging CRM software offering would contain the most comprehensive CRM functionality in the industry. Quite a few potential buyers actually waited months and months for the promised functionality to arrive. Finally, under pressure from a variety of sides including analysts, the database vendor was forced to admit that it would not be able to offer promised functionality. Soon after, the company opened its emerging yet incomplete CRM software’s API (application program interface) to third-party software vendors. One of the lessons learned concerned CRM software vendors: Remember these vendorsencounterfiercecompetition(andanalyst/venturecapitalpressure)thatmayforcethemtostretchthetruthfrom time to time. So ask the company to demonstrate its product promises and solutions in real time. Staying on topofCRMtechnologytrendshasbecomeincreasinglydifficultbecauseoftheproliferationofCRMtechnologiesin the marketplace.

Rather than trying to keep up with each new technology, companies should track technologies that are most likely to impact the CRM industry’s future as well as their own company’s CRM efforts. For example, this may include customer self-service applications that are built on top of an effective knowledgebase, emarketing applications (permission-based direct marketing, wireless, and voice recognition capabilities), or the use of major framework tools to consolidate and enhance N-tiered architectures (distributed among three or more separate computers in a distributed network) within a CRM implementation.


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Likely impact: Customers now have more appropriate CRM implementation offerings to choose from, thereby increasing the overall potential for successful implementations of CRM applications. New business application trendsarelikelytoemergeannually.Althoughitisalwaysdifficulttodeterminewhichtrendswillstickandwhichwillpass,Iseetheseeighttrendscontinuingandmaturingovertime,basedonobservationsbymyfirm’sSoftwareTesting Laboratory, along with market input from customers and leading authorities. Customers are encouraged to understand these trends and to ask potential vendors about their current and future plans for each of the trends.

7.3 A Wireless WorldMobileCRMusers,suchasfieldsalesandservicepersonnel,areamongthebiggestfansandkeybeneficiariesofwireless technology. All CRM project leaders should recognise this value as well. The following three key trends are helping to propel CRM initiatives as well as our emerging wireless society living and working in real time:

Hotspots • : Hotspots are public areas where people can access the Internet using devices based on 802.11b, or Wi-Fi (a wireless network standard with a range of about 300 feet from a network’s access points), or radio transmitters. Of the estimated 150 million laptops and 14 million PDAs in the U.S., most include the Wi-Fi feature. The availability of hotspots has increased dramatically since 2005. A growing number of U.S. towns and cities now offer free or subsidised Wi-Fi access, including San Francisco; Philadelphia; Raleigh, North Carolina; Anaheim, California; and New Orleans. British Telecom has built a number of citywide Wi-Fi networks in the U.K. in partnership with local government, while the city government of Paris is currently building a free citywide Wi-Fi network in partnership with Alcatel-Lucent. American Airlines and Virgin American are alsopreparingforhotspotavailabilityintheirentiretranscontinentalfleetof767sin2008.Expectadditionalhotspots in the next few years; the Wi-Fi Alliance states that there currently are 530,000 hotspots in the U.S., 800,000 in Europe, and more than a million in Asia.Chips ahoy • : Leading computer chip manufacturers, led by Intel, have built wireless radio chips into their processorssince2004.Infact,Intelhasalreadydelivereditsfirstfamilyofintegratedwireless802.11bradiochips as part of the Centrino mobile processor architecture. Intel has also committed to investing $100 million in Wi-Fi companies, and plans to spend triple that amount promoting its Centrino chips. In fact, all of the laptop manufacturers now include Intel Centrino-based chips with built-in Wi-Fi or a Wi-Fi wireless chip in laptops shipped with an AMD mobile processor. The bottom line is that all laptops, even the low cost ones, now have built-in Wi-Fi.Today, not tomorrow • :As a result of the wireless boom, more hardware and software vendors are investing larger amounts of research and development (R&D) funds to bring wireless architectures and applications to market. These include Amdocs, Antenna, AvantGo, MobileAware, Ericsson, Microsoft, Openwave, OracleMobile, Palm, Siebel, Sun Microsystems, and many more. A 2006 Infonetics Research study found that 60 percent of American companiesalreadyuseWi-Fi,andthisislikelytoexceed85percentby2010.Basedonastudybymyfirm,weproject that there will be more than 7 billion wireless computer devices connected to the Internet by 2010.

What does all this mean for the CRM industry? Based on a 2007 survey of CRM software vendors, 90 percent of all CRM software applications now work in a wireless environment. The wireless impact on\ CRM has already started to change the way customer-facing personnel work: Look for rapid answers to customer questions, fewer delays,instantaccesstoorderstatusandinventory,andreal-timeintelligence,allofwhichconfirmCRM’sdrivingrole behind the real-time enterprise (RTE).

Business in an instant brought to you by mobile and wirelessHere’s an interesting perspective from Tim Bajarin, president of Creative Strategies, who is the industry’s leading authority in the mobile and wireless space.

About 10 years ago, he had an interesting discussion with Bill Gates while on a visit to Microsoft. At the time, he was touting some new mobile software that Microsoft was about to release and when talking about it, he reiterated thatthiswaspartofhisvisionfor“informationatyourfingertips,anytimeandanywhereyouhappentobe.”

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In fact, if you have been following Microsoft for any length of time you already know that this mobile mantra has been one of the major drivers for the company as it looks to the future. This is why they have made such a major investment in Windows Mobile software and smart phones and why today this idea of delivering a more robust mobile OS for laptops, tablets and smart phones has become part of their DNA. As of last year, laptops outsold desktops and by the end of the decade, many analysts believe that laptops will account for 65 percent of all computers sold. Today, smart phones represent only about 7 percent of the 1.1 billion cell phones sold annually, but by 2010, analysts believe that smart phones will account for as much as 22 percent of all cell phones sold each year. The reason for all of this mobile activity is the fact that we are becoming more and more a mobile society. Business and consumers want their information, email, applications and even entertainment on demand, no matter where they happen to be. That trend is clearly in the sight of all of the major personal computer, consumer electronics, telephony carriers, and mobile handset makers as they rush to deliver high speed wireless networks and mobile devices of all kinds that are capable of delivering business in an instant.

New third generation (3G) and fourth generation (4G) wireless networks (that is EVDO, HSDPA, and so on) will soon deliver wireless connections with speeds well over 4 MBPS. In the future, WiMAX networks will become the wireless workhorse that can deliver high speed wireless connections up to 70 MBPS. And WIFI hotspots are popping up all over the US to make it easier to get connected even if you don’t have a cellular modem in your laptop. As more and more applications get delivered via the Internet cloud, the need for high speed smart wireless devices will increase. No wonder that all of the work behind the scenes is getting business and consumers alike ready for a world where business applications, information and even consumer driven entertainment is delivered as Bill Gates suggested“anytimeandanywhereyouhappentobe.”

7.4 Using People, Process, and Technology to DifferentiateNowadays, most organisations operate in crowded and highly competitive marketplaces. Doing more with less is the norm: Personnel tend to be stretched to the limit; cost-cutting is prevalent. So when new processes and technologies emerge that can help organisations cost-effectively achieve long-term differentiation, they get noticed. Given the need to outfox the competition and to secure long-term customer loyalty, savvy organisations can apply support capabilities with great success. Organisations that have successfully developed support capabilities have applied a three-step structured approach—based on people, process, and technology—to achieve long-term product and service differentiation. Here are the highlights of this approach.

7.4.1 People IssuesThe people piece of the approach accounts for 50 percent of the overall success. People are naturally resistant to change. Unless properly planned, change can actually be seen as disruptive; people may be hesitant to want to complement products and services with support capabilities to achieve long-term differentiation. To overcome resistance to change, consider the following:

Be sure that relevant internal and external customers are aware of the pending support changes.•Take time to help these customers understand what these changes are going to mean for them, such as more •efficientandrewardingwork.Help customers adopt the idea of enhancing support capabilities, and show them the impact that this has had •on other companies; take time for training.Get customers involved in the change process; invite them to join the discovery team or task force responsible •for successfully introducing new support capabilities.For those customers who get involved and see the value of enhanced support capabilities, make them your •change management agents or ambassadors. Gain their commitment to help others understand the value of enhanced support capabilities.

Simply stated, people make or break a company’s ability to develop and successfully implement support capabilities to achieve long-term product and service differentiation. Take time to work with people to drive success.


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7.4.2 The Process ElementThe process part accounts for 30 percent of the overall success of complementing products and services with support capabilities to achieve long-term differentiation. When implementing the process piece, the organisation needs to map out and document key internal and external customer-facing support processes (example, processes for customer inquiries,customerrequests,problemresolution,customersurveysandsoon).Lookateachidentifiedkeyprocessand determine whether it is optimal or could be improved. These are the types of questions you will want to ask to determinethecurrentviabilityofeachidentifiedkeysupportprocess:

Ownership• : Does the process have one or more than one owner? A process may have more than one person or department participating in the process, but successful processes will have only one owner.Metrics• : Does the process have a stated metric? (example, We will resolve 90 percent of customer support querieswithinone188CRMinRealTimehour).RememberthewordsofmanagementguruPeterDrucker,“Ifyoucan’tmeasureit,youcan’tmanageit.”Interfaces• : What other persons or departments are involved in the process? For example, in a customer support center, sales as well as product development may help to resolve a customer issue. In a successful process, these interfacesarewellgreased,andinformationflowsseamlesslyacrosspersonsordepartments.Procedures• : Does the process have clearly stated procedures so that everyone knows how to implement each step of the process, regardless of who is working with the process? The steps of each process should be well-documented and available to all potential users.Integrity• : Is the process practiced the same way for all customers? In successful processes, in addition to documented procedures, all relevant personnel have been trained to apply the process consistently.Vision• : Does the process support the long-term differentiation via support capabilities of the organisation? With a successful process, this linkage is obvious. Organisations often get carried away with process analysis and can get into analysis-paralysis too quickly. Remember to chart out key customer facing processes initially. This usually consists of between six and processes, but no more. Get these key processes right; where appropriate, sub processes will follow. If you are stuck determining what constitutes a key process, ask the customers.

7.4.3 Technology HelpsLast of all is the technology piece of the approach. This piece accounts for at most 20 percent of the overall success of expandingyour support capabilities.Why?Because there aremanyfine technologies currently available tohelp internal and external customers receive increasingly higher levels of support. The issue tends not to be one of actual technology, but rather, it involves the readiness of the company and its customers using people, process, and technology 189 190 CRM in Real Time to absorb and properly use the new technology, such as the process and peoplesideoftheequation.Whenacompanyselectsitstechnologypartner,specificallyforitssoftwaretoenhancesupport capabilities, the following types of questions are frequently asked:

Does the software vendor offer both internal support products (IT help desk support software) as well as external •support products (customer support centre software)?Are the vendor’s support products integrated seamlessly?•Does the vendor have a proven track record for implementing these products?•Doesthisincludeexperienceinthecompany’sspecificindustry?•Does the vendor offering include needed implementation and maintenance support for its products (either itself •or via partners)?How well and easily do the vendor’s support products integrate with other CRM software components such as •sales, marketing, business analytics, or ecustomer applications? Are the other CRM software components part of the company’s or are they third-party applications? How are •third-party components maintained?Does the vendor work (either through formal or informal alliances) with other relevant vendors that form a •part of your enhanced support capability solution, such as with hardware vendors, communications equipment vendors, network vendors, business process consultants, and others? Is the vendor’s product based on technology that meets current company goals and direction?•

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A word of caution: It’s easy to get overwhelmed or even carried away by the technology piece of this structured approach. Remember, it starts with good internal support processes that are then extended to external customers. Next comes, needed change management skills to ensure that people buy into the need for the change with the enhanced support capabilities.Then and only then are we able to turn to technology.

7.5 Ten Steps to Effective CRM ImplementationRecentpollssuggestthatCRMremainsamysterytomanycorporateexecutivesdespiteitsmanybenefits.Why?Because most executives don’t understand the processes behind CRM, and they are somewhat intimidated by the technological issues associated with automating CRM tasks. Given the enormous impact of implementing CRM solutions, it’s well worth investing time and resources to ensure that the CRM initiative succeeds. That’s why my firmhasdevelopeda10-stepapproachtohelporganisationsimplementCRMsystemssuccessfully.Thoughwecan’t guarantee it, our experience over the past two decades suggests that by following the 10 steps listed here, organisationscangaingreaterconfidencethattheirCRMimplementationwillsucceed.Ourexperiencealsoindicatesthat missing any of these steps increases the likelihood that the CRM initiative will be bogged down, fail outright, or become a dinosaur soon after implementation.

Step 1: Organise your project management teamInitially, you should form a project team consisting of the following members:

A project champion, preferably a senior executive, who will be responsible for ensuring appropriate managerial •andfinancialbackingthroughouttheproject.Theprojectchampionwillbeinvolvedaboutanaverageofsixhours per month during the 6 to 12-month project life cycle.A project leader• who has business process and technical skills. This person will be responsible for implementing the project on a day-to-day basis. This will usually be a full-time position during the project’s life cycle.A project user group• of CRM end users (staff) who are responsible for providing input to the project leader during the project’s conceptualisation phase and who test the system during the design and implementation phases. The project user group will be involved about an average of eight hours per month during the six to 12 month project life cycle.

Step 2: Determine the functions to automateEffectiveautomationatacompanystartswithaCRMaudit,whichidentifiesthebusinessfunctionsthatneedtobe automated and lists the technical features that are required in the CRM system. While several different audit methodologies are available, we recommend one that contains questionnaires, face-to-face interviews with customer-facing personnel (those who have direct contact with customers or serve a support role), face-to-face interviews withcustomers,ifpossible,visitswithsalesrepresentativesinthefieldaswellassaleschannelpartners,areviewofbusinessprocesses,a technicalassessment,andafinal report.Youmaydecide tohireaCRMconsultant toconduct the audit, or you may want to conduct the audit yourself. If you choose the latter, start by assigning the task to a project team composed of internal and/or external personnel who are familiar with your sales and marketing operations. You may even wish to send one or more members of your project team to a CRM seminar where audit implementation details are discussed.

Regardless of your approach, the audit step is critical. If the audit is not performed properly, it’s likely that you won’t be able to implement an effective CRM system. In my experience, companies that took the time to audit properly havemoreeasilyandquicklyrealisedthebenefitsofCRMthanthosecompaniesthatdidnot.Thelatterarenowpaying the price in wasted time, effort, and money. Automate what needs automating. For example, automating an inefficientbusinessprocesscanbeacostlymistake.DuringmyvisitwiththeCRMmanagerofaleadingItaliancarmanufacturer,itwasapparentthathewantedtousetheCRMsystemto“onceandforall,controlhisunstructuredItaliansalesforce.”ThisisnotthecorrectbasisforapproachingCRM,andusingCRMtotrytocontrolasalesforceis a grave error. In this case, the company’s CRM system never took off.


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Toensurethatyouautomatewhatneedstobeautomated,yourCRMauditshouldaddressa“wishlist”ofhowsalespeople, marketing personnel, customer support staff, and management would like to improve their work processes.Atonecompanyduringanaudit, theNo.1salesmanexpressedawish:“IfonlyIcouldgetupdatedinformationonbothmypotentialclientandmycompetitorspriortothesalescall.”Rememberthatthepeopledoingthe job know how to do it better. Take time to work with them, and you will learn what needs to be automated.

Step 3: Gain top management support/commitmentCompanies that successfully automate the customer-facing functions view the CRM systems more as a business tool than as a technological tool. Keep this in mind as you approach top management for support. Top management commitment can be secured by demonstrating that automation can help with the following:

Support the business strategy since automation delivers the information required to make the key decisions that •enable a business strategy to be realised.Measureimpactsandimprovesresults;thiscanbegaugedaccordingtobothtangibleandintangiblebenefits•already described Significantlyreducecostsandtherebyitpaysforitselfoveraspecifiedtimeperiod.•Document your case for automation based on business impact.•

Step 4: Employ technology smartlySelect information technology and systems that use open architecture, which makes it easy to enhance and enlarge the system over time. Look for software applications that are modularised and can be easily integrated into or interconnected with your existing information databases. Ensure the technology you select is portable. For example, make sure it usesUNIX,NT, .NET, Java/Active-X, and other such standards. Forfirms conducting businessbetween thefieldandheadquartersor across regions, select softwareapplications that arenetworkcompatibleandthatpermiteasyWebconnectionand/ordatasynchronisationbetweeninformationonfieldcomputersandonregional or headquarter computers. To accommodate future changes, be sure the technology you select can easily becustomisedaswellasmodified.Inotherwords,letthetechnologyhelpyougrow.Althoughtechnologyisonlyone step in the overall approach for successfully implementing CRM, it is vital to the functioning of CRM systems. Users should be familiar with the following leading technologies that will continue to drive customer acceptance of CRM in the future.

Object-oriented programming (OOP)Object-OrientedProgramming(OOP)isaprovensoftwaretechniquethathassimplifiedsoftwareprogrammingfor the technical team, and is easier for the CRM end user to use. Recently introduced technology in this category includes the .NET platform that is programmed with development environments such as Java, C++, and Active-X. By using these object oriented architectures, CRM software vendors provide a framework where new components can plug into. As corporate cultures and business processes change, individual objects (applets and servlets) can be updated, rewritten, deleted, or added, and then quickly distributed and installed throughout the user environment withouthavingtorewritetheentireapplication,businesslogic,userinterface,orback-officeapplication.

7.6 Open Source TechnologyOpen source code is available free of charge to the general public. The rationale for this is that a large community of developers who are not concerned with proprietary ownership will produce a more useful and bug free product foreveryone’sbenefit.Theopensourceconceptreliesoncommunitymemberstofindandeliminatebugsintheprogram code, a process that commercially developed and packaged programs do not use.

The information is shared throughout the open source community and does not originate or channel through a corporation’s research and development department. Open architecture in CRM applications is huge in today’s marketplace. The ability to integrate with other Web services for mashups (a Web application that combines data from more than one source into a single integrated tool, such as cartographic data from Google Maps merged with real-estate listings on craigslist) is critical. There is a move toward segmentation with application functionality wherethespecificfunctionalitycanbeprovidedasaservice.Forexample,lookatcompaniessuchasFirepond,which has a software package that can integrate into existing CRM applications and provides extended product catalogue capabilities for order entry.

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7.7 Integrated Development Environment (IDE)Integrated Development Environment (IDE) provides comprehensive facilities to computer programmers for software development. An IDE normally consists of a source code editor, a compiler and/or interpreter, automation tools, and (usually) a debugger. IDEs are designed to maximise programmer productivity by providing tightly knit components with similar user interfaces, which minimises the amount of mode switching the programmer must do compared to discrete collections of disparate development programs. IDEs allow the user to simply dive down into the code. But other CRM applications like Siebel have an independent layer that allows the user to extend the application. These IDEs are typically written in a fourth-generation language and should be easy to manipulate and use to extend the application’s functionality. These tools depend heavily on a mature object-oriented application that has been abstracted for use by a developer who is not required to understand the code complexities but rather just what he can do with the available objects. Although this feature has been around for a while, IDEs and the user’s ability to extend the application are now getting sophisticated.

7.8 Software as a Service OneCRMtrendiscertainlythe“NoSoftware”approachtakenbycompaniessuchasSalesforce.com,NetSuite,andRightNow.SoftwareasaService(SaaS)isamultitenantapplicationthatisredefininganapplicationintoanoutsourced framework service to build any application. While the concept is not new, it still is not widespread in today’s marketplace. In the past, outsourcing your mainframe CICS (Customer Information Control System) environment was possible, but applications still needed to be Ten Steps to Effective CRM Implementation 195 developed with coding. In today’s marketplace, it is technically feasible to build a fairly robust application with little or no coding.

7.9 Web and Telephony IntegrationUsing a single network for both telephone and data communications, integrated business tools simplify customer communicationsthatresultinenhancedcustomerserviceandimprovedoperatingefficiency.ComputerTelephonyIntegration (CTI) is a growing technology in the CRM industry and should be factored into an overall evaluation of CRM solutions in any organisation. With the emergence of voice over Internet protocol (VoIP), many integrators are exploring the best way to leverage this broadband capability.

7.10 United Messaging (UM)United Messaging (UM) integrates different streams of communication (email, SMS, fax, voice, and audio) into a single,orunified,messagestore,accessiblefromavarietyofdifferentdevices(commoncomputerapplicationandtelephone). Today, UM solutions are increasingly accepted in the corporate environment. The aim of deploying UM solutions is to enhance and improve business processes as well as services. UM solutions that target professional customers integrate communications processes into the existing information technology infrastructure into (CRM) and mail systems (Microsoft Exchange, Lotus Notes, and SAP).

7.11 Enterprise Service Buses (ESB)A new breed of middleware products called Enterprise Service Buses (ESB) offer XML- and SOAP-based integration platforms that can be deployed throughout an enterprise network. By combining messaging, routing, Web services, and message-transformation capabilities into a single technical solution for bidirectional data exchange, ESBs are a strong and growing option in the technical design of a CRM solution.

7.12ProfitOptimisationTechnologyWhile providing CRM information to other levels of an organisation through ESBs and middleware has grown, a newandemerging196CRMinRealTimetechnologycalledprofitoptimisationhasbeenshowntobeafactorinan overall CRM plan. CRM applications are a rich resource for data on customer-buying behaviour. By applying sophisticated mathematical techniques, these software applications can help companies analyse this data and better understand the segments of customers who buy their goods and services. And, these applications recommend what prices should be charged. Another way that these applications leverage CRM data is by creating micro-segmented modelsthatallowcompaniestotargetspecificgoodsandservices,promotions,bundles,and,mostimportantly,pricestospecificcustomergroups.Thesesegmentedoffersensurethatcustomersarereceivingtheproductstheywant


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andthatthepricechargedrealisesthemaximumamountofmarginavailablefromthatsegment.Profitoptimisationis even enabling companies to judge in a split second whether a sales opportunity is good for the company and immediately recommend counteroffers when the deal is unacceptable. Traditional methods of analysing these sales opportunitieswerearearview-mirrorapproachtodeterminingwhichsaleswereprofitableandwhichwerenot.Profitoptimisationallowscompaniestobepreemptoryinreactingtochangesintheirmarkets.Profitoptimisationapplications use sales data created in CRM applications (as well as ERP, or Enterprise Resource Planning, and supply-chain manufacturing systems) and push the reach of this knowledge to other parts of the company that may notuseCRMdirectly.Forthefirsttime,peopleinmarketingandmanufacturingwhoareresponsibleforpricinggoodsandservices,andpricingmanagerswhomustapproveexceptioncasepricingrequestsfromthefield,haveall the information they require to do their jobs.

7.13 Creating a CRM Business CaseA successful CRM initiative is based on a solid CRM business case. The business case is a critical document that describes a company’s current CRM-related processes, the desired state of CRM in a company, how the company intends to integrate people, process, and technology to get to the desired state, the costs and expected return of the CRM initiative, the risks and mitigating factors associated with the initiative, the organisational/ operational impact of the initiative, and CRM program metrics against which success/failure can be measured. The CRM business case is as relevant to smaller CRM projects as it is to multiple CRM projects within a larger enterprise-wide CRM program. An organisation that embarks upon a CRM initiative but that fails to create a comprehensive CRM business case risks the success of the CRM project from the start. The CRM business case should not be an option.

Not only should it be done, but it also should include precise metrics to measure throughout the life of the CRM initiative. Despite early claims of high failure rates in CRM initiatives, companies today that take the time to create a comprehensive CRM business case containing the following metrics greatly improve the likelihood of success. RememberthewordsofmanagementguruPeterDruckerwhoremindedeveryone,“Ifyoucan’tmeasureit,youcan’tmanageit.”

7.14 CRM Software Selection TipsWhenacompanydecidestofindaCRMsystemtoautomatethesales,marketing,andcustomerserviceprocesses,this decision may be prompted by the sales force, sales management, marketing, customer service, or other members of the executive staff. While it’s not important who initiates the procedure, it is important that executives from sales, marketing, customer service, and other departments work together to ensure that the CRM process integrates differentneedsacrossthesefunctionsandthatsufficienttimeisallocatedtothisintegrationprocess.Whilethesesteps may seem obvious to many, this is not always the case for some companies.

How to select softwareSeveral CRM software selection methodologies currently exist to help organisations get the process started. Here, is thefollowing10-stepmethodologythatmyfirmhasdevelopedand implementedwithreasonablesuccessatdozens of companies worldwide.

Step 1: Technical baseline reviewYourtechnicalstaffshoulddefinethecurrenttechnicalplatformandcapabilities,includingdatasynchronisation,linksto ERP (EnterpriseResource Planning) systems, and potential system expansion (theInternet/Web for ebusiness).

Step 2: Customer visits with the customer-facing personnelA CRM project team member should talk to a cross section of customer-facing representatives from sales, marketing, customer service, and other partners. Allot anywhere from a half-day to a full day per representative. Observations from the visits will serve as input for the brainstorming session and the needs-analysis questionnaires.

Step 3: Brainstorming sessionYour CRM project team should conduct a structured session with key personnel, including sales representatives, marketing and sales managers, executives, customer service managers, and IT specialists to discuss their perceived CRM business functional needs. Plan on allowing three hours for a group (between 10 and 18 people). These

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participants are typically chosen as the super user group to participate in later CRM audit steps and act as ambassadors for the pending CRM system.

Step 4: Needs analysis questionnairesA customised needs-analysis questionnaire should be administered to a group of between 30 and 60 potential CRM system users, including participants in the brainstorming session. Three different questionnaire types are typically sent to three different decision-making groups: customer-facing personnel, managers, and executives. While the three questionnairesmayaskafewofthesamequestions,thesequestionnairesshouldalsoaskspecificsthatfocusonthedifferentdecision-makingresponsibilitiesofthesethreegroups.Thequestionnairescanconfirmandconsolidatefindingsrevealedduringthefieldvisitsandthebrainstormingsession,aswellasencouragerespondentstodoapreliminary prioritisation of the business functional needs, technical features, and user-friendliness issues.

Step 5: Business process reviewReview and highlight your business processes to address existing business process issues as well as business process requirementsRecommendationsshouldbedefinedforastep-by-stepapproachtoimplementbest-in-classbusinessprocesses that apply to the CRM system. This way, you can plan properly for short-term as well as long-term business needs of your CRM system. Step 6: Business functional prioritisationIdentifyyourprioritisedbusinessfunctions,basedontheresultsofthefieldvisits,thebrainstormingsession,theneeds-analysis questionnaires, and the business process review. The results can be presented to your management team.

Step 7: Technical Platform RecommendationsIn light of your prioritised business functions and the results of your technical platform review, make recommendations for appropriate technical platform alternatives for CRM software, hardware, and communications.

Step 8: CRM reportThe report, which will be presented to your management team for approval, should contain the information needed toformulateyoursystemspecifications,includingbusinessandtechnicalrequirements.

Step 9: Software selectionIfyoudecidetouseexternalsoftware,considerlookingatbetweenthreetofivesoftwarepackagesthatincludetheCRMfunctionsyouhaveidentified.AnexperiencedCRMconsultantmaybehelpfulinwritingyourRFP(Requestfor Proposal) and reviewing, selecting, and negotiating with your selected CRM vendor.

Step 10: Software implementation assistanceOnce you have made your software selection, a CRM consultant can help implement your CRM initiative, primarily in the areas of project management and systems assurance. This includes the following points:

Help select your systems integrator, your training partner, and your approach•Evaluate project plans•Participate in weekly operations review meetings•Assist in implementing specific tasks/projectmanagement (trainingmanuals, pilot rules, andperformance•measurement criteria)Help with system assurance/customer satisfaction (ongoing process improvements)•

The CRM software selection process should usually be accomplished within 8 to 12 weeks, assuming the prospective company has committed to an aggressive CRM timeframe. Regardless of the methodology you use, be sure to use a structured approach.


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7.14.1 Technical Feature RequirementsDuring the CRM software selection process, your team needs to draft an initial list of technical feature requirements. These features should come directly from discussions with key placeholders who helped develop the CRM system. Some confusion may arise between the technical features of a CRM system, which facilitate the use of the system, and technical platform issues, which deal with the architecture used to support your CRM system.

Decisions concerning technical platform issues most often rest with the company’s IT department. Here are the following examples of technical platform issues:

Will your CRM system have a Net-native (hosted on Web or ASP), Web-centric architecture (browser-based), •or is a Web-enabled client/server architecture adequate?What operating system environments will be compatible with your CRM system (Active Directory, Microsoft •(MS) Windows family of OS products, Novell, UNIX, or Linux)?How will your CRM system be accessed (Internet/Web, virtual private networks, handheld devices, or wireless •technology)?How will your data be synchronised between CRM system components and users (servers, databases, and •locations)?Does your technical infrastructure and data storage capacity accommodate any additional needs that a CRM •solution will present, or would outsourcing your CRM solutions to a hosted solution, such as Siebel or Salesforce.com,providebettercost/benefit?Does your technical infrastructure promote the integration of your phone system into a CRM solution for •managing contacts, call centers, and the help desk?Which database(s) will be used for your CRM system, including the number and location of database servers •(Oracle, MS-SQL Server, Sybase, and IBM DB2)?Are themiddleware (Scribe,Tibco, orBEA) components in place to allow integration of back-office or•legacy system data into your CRM solution? Do these solutions (or the ones built in-house) accommodate the bidirectional exchange of information?Should you move to more advanced data-sharing technologies such as Web services, XML, or SOAP-based •technologies to interconnect your legacy systems?Should a data warehouse solution be integrated with your CRM solution? If so, what tools do you need to derive •the maximum value from your CRM solution: data transformation (Informatica, Oracle Warehouse Builder, SqlSvr DTS, or Business Objects ETL) and data mining (Cognos or Business Objects/Crystal Reports)?With which groupware platforms (Lotus Notes/Domino or MS Outlook/MS Exchange) will your CRM systems •need to interface?With which ebusiness platforms (BEA, IBM WebSphere, Vignette, or BroadVision) will your CRM systems •need to interface?What security features are available to protect your CRM system data?•What interaction with the National Do Not Call Registry will be required in your CRM implementation?•Will your existing computer hardware support the CRM system?•

If not, which new hardware will be necessary? While CRM users should be aware of these issues and provide user input where needed, such as technical integrity across multiple company systems, decisions about technical platform issuesremainlargelyoutsidethejurisdictionofusers.Hereareafewguidelinestodefinewhichtechnicalfeaturesshould be included in the CRM system:

WorkwithanITdepartmentand/oranexternalconsultanttodefinepossibletechnicalfeaturesthatcouldbe•included in the CRM software. Remember that technical features are required in a CRM system to facilitate the eventual implementation of •your prioritised business functional requirements. For example, if placing your company price lists online is a prioritised business function, you will want to make sure the software you choose has the appropriate technical features to update price lists easily.

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Learn about possible technical features by reviewing existing CRM software. Review some of the vast quantity •of packaged and hosted CRM software solutions to gain insight into the latest technical features.

AfirmworkedonaCRMassignmentwithapublishingcompanywheretheprojectleaderhadatechnicalbackground.Duringthesystemspecificationmeeting,heshowedusthelatesttechnicalfeaturesforCRM.Whilemanyoftheproposed technical features would be valuable to his company’s system, others were little more than technical toys. Tobringrealitytotheplayingfield,weaskedtheprojectleaderaboutthetop10businessfunctionalrequirementsfor the proposed system. After getting four out of 10 correct, he began to listen more carefully to user needs. Ensure that the technical features will assist your CRM system users directly to implement prioritised business functions successfully. While often dazzling, technical features should not be judged on their wizardry, but rather on their business value. Some of the greatest value of technical features is their ability to help users feel comfortable with the system, enable them to access and navigate the system, and help make the system intuitive to their needs.

7.15 Writing the CRM System SpecsOnce you have completed your CRM system needs analysis, prioritised your business functional requirements, and definedthetechnicalfeaturesanduser-friendliness/supportrequirements,youcanwriteasystemsspecificationsdocumentforinternalITpersonnelorforaqualifiedshortlistofexternalvendorsviaanRFP.It’simportanttoremaininchargeoftheexternalvendorprocess,yetprovidesufficientinformationsothatexternalvendorsaswellasinternalITpersonnelcancustomiseanddeliverasystemthatfulfillsyouruniquesetofCRMneeds.Whilewearen’tsuggestingthatthere’sonlyonebestwaytowriteyoursystemsspecificationsdocument,weunderstandthateach company has its own set of rules and regulations about writing one. However, here are a few recommendations thatcanhelpstructureaCRMsystemspecificationsdocument:

General conditions section: • Listgeneralconditionsofsignificancetoyourcompanysuchastherighttoreject,performanceconditions,responseverification,andconditions.Vendor instructions• :ProvideacleardescriptiontotheCRMvendoraboutthepurposeofthespecificationsdocument, communications regarding the proposal, timetable for the proposal, selection and award process, vendor response deadlines, vendor presentation rules, and contract negotiations. Proposal guidelines/formats• : Specify the format of any proposal (in electronic format), present exceptions to the RFP, list what is needed for vendor contact information, and provide evaluation criteria (product features andoperationalcapabilityconsistentwithspecifiedrequirements,specialisedrelevantexperienceof thefirm,completenessinaddressingallaspectsoftheRFP,andfinancialstabilityofthevendor).Vendorprofile• : Ask the vendor to provide the following background information:

Size of the company and whether it is local, national, or international �Locationoftheofficethatwillhandleyouraccount �Anaffirmationthatthevendorhasahistoryofprovidingqualitywork �Aprofileofthevendor’sproductlinesalongwiththeindustriesserved �A list of elements that differentiate the vendor from other organisations �The names of at least three clients who can be used as reference �

Business functional requirements • :Myfirmrecommendsthefollowingapproach(thefunctionshavebeenselectedforexemplarypurposes).Aftermostofthebusinessfunctionsthatarelisted,fillintherankingspaceaccordingtofivecategories:

F+ (Functionality fully provided) �F (Functionality partially provided, and it can be enhanced to full functionality) �D (Functionality does not exist, but it can be provided at no additional cost) �DB (Functionality does not exist, but it can be provided at an additional cost) �X (Functionality does not exist, and the vendor has no plans to develop any additional options) �


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For“F”and“D,”indicatewhetherCompanyXcandevelopthis,orwhethervendorsupportisneeded.For“F,”“D,”and“DB,”provideatimeestimateforthedevelopment.Aftereachbusinessfunctioncheckedwith“F+,”“F,”“DB,”and“D,”provideacomprehensivedescriptionofthebusinessfunctionnowofferedinyoursoftwarepackage(use additional sheets as needed).

Then, list your business functional requirement, as well as technical features and user-friendliness/support criteria; have the vendors assess how well their software meets your needs. In Appendix C, we’ve included a list that provides examples of the types of business functions, technical features, and user-friendliness/support criteria that you might expecttofindinaCRMsystemRFP.Remember,yourRFPwillprobablyonlycontainasubsetofthesecriteria,based upon your prioritised list of required functions and features.

Once the vendors have submitted their RFP responses, the next step is to review their responses and to invite between one and three vendors to make presentations at your facilities, which usually take an average of four to eight hours each.Tokeepthevendorsfocusedonyourcompany’sspecificneeds,asktheselectedvendorstodemonstratethefunctions and features that they responded to positively in their RFP.

To help ensure a realistic assessment of the software, ask the selected vendors to set up their software on equipment at your site and within a technical environment similar to the one that you are likely to use for the eventual system (example, with 10,000-plus user records in the system for a test).

IfyourITdepartmentwillbebuildingyourCRMsystem,yoursystemspecificationsdocumentwouldobviouslyconcentrate on the details needed for business functional requirements, technical feature requirements, and user-support requirements.

Taketimetocarefullywriteasystemspecificationsdocumentthatwillbesenttoaqualifiedshort-listofexternalvendors in an RFP or by internal IT personnel. This way, you are likely to improve the chances that the CRM system youreceivecloselymirrorswhatyouspecified.

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SummaryBusiness intelligence analytical tools, or predictive modelling (techniques from statistics and data mining that •process current and historical data to make predictions about future events), now can predict the monetary value andprofitabilityofaparticularcustomer.Moresmallandmid-sizedbusinesses(SMB),definedasthosecompanieswithlessthan$500millioninannual•revenues, or alternatively, companies employing 20 to 150 people, are adopting CRM systems.CRM vendors continue to develop and release CRM application modules, especially those that are bundled with •or work on a large variety of handheld and/or wireless devices.Integrated Development Environment (IDE) provides comprehensive facilities to computer programmers for •software development. An IDE normally consists of a source code editor, a compiler and/or interpreter, automation tools, and (usually) •a debugger. IDEs are designed to maximise programmer productivity by providing tightly knit components with similar •user interfaces, which minimises the amount of mode switching the programmer must do compared to discrete collections of disparate development programs.

ReferencesSelling Power. • Eight Trends that Are Driving CRM’s Future [Online] Available at: <http://www.sellingpower.com/content/article.php?a=4> [Accessed 1 February 2012].ISM.• CRM Application Trend [Online] Available at: <http://www.ismguide.com/index.php?option=com_content&view=article&id=73&Itemid=112> [Accessed 31 January 2012].Kincaid., 2003. • Customer Relationship Management: Getting It Right! Pearson Education India.Dyche., 2002. • The CRM Handbook. Pearson Education India.DiscoverSugarCRM., 2009. • What is CRM? [Video Online] Available at: <http://www.youtube.com/watch?v=BMtv6sbmdLc> [Accessed 1 February 2012].joshyissac., 2011. • Learn how useful Customer-relationship-management(CRM)-flash Animation.mp4 [Video Online] Available at: <http://www.youtube.com/watch?v=ollnYSgX3s4> [Accessed 1 February 2012].

Recommended ReadingGoldenberg, B., 2008. • CRM in Real Time: Empowering Customer Relationships. Information Today, Inc.Anderson, K. and Kerr, C., 2002. Customer relationship management. McGraw-Hill Professional.•Knox, M., 2003. • Customer Relationship Management: Perspectives from the marketplace.


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Self AssessmentCRM _____________ continue to develop and release CRM application modules, especially those that are 1. bundled with or work on a large variety of handheld and/or wireless devices.

vendorsa. technologiesb. implementationc. growthd.

_______________ now have more appropriate CRM implementation offerings to choose from, thereby increasing 2. the overall potential for successful implementations of CRM.

Vendors a. Customersb. Manufacturersc. Processorsd.

Organisations that have successfully developed support capabilities have applied a three-step structured approach 3. based on people, process, and ______________ .

time a. intelligenceb. technologyc. marketplaced.

___________CRMusers, such asfield sales and service personnel, are among the biggest fans and key4. beneficiariesofwirelesstechnology.

Mobilea. Softwareb. Groupc. Businessd.

Which of these are public areas where people can access the Internet using devices based on 802.11b, or Wi-Fi, 5. or radio transmitters?

Chips ahoya. Hotspotsb. Metricsc. Interfacesd.

Match the following.6.

1. Ownership A. have clearly stated procedures

2. Metrics B. have a stated metric

3. Interfaces C. other persons or departments are involved in the process

4. Procedures D. have one or more than one owner1-D, 2-B, 3-C, 4-Aa. 1-B, 2-D, 3-C, 4-Ab. 1-C, 2-B, 3-D, 4-Ac. 1-C, 2-A, 3-D, 4-Bd.

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Whichoftheseisaprovensoftwaretechniquethathassimplifiedsoftwareprogrammingforthetechnicalteam,7. and is easier for the CRM end user to use?

Open Source Technologya. Object-Oriented Programmingb. Integrated Development Environmentc. Web and Telephony Integrationd.

Which of the following statement is false?8. United Messaging (UM) integrates different streams of communication (email, SMS, fax, voice, and audio) a. intoasingle,orunified,messagestore.Using a single network for both telephone and data communications, integrated business tools simplify b. customer communications.CRM applications are a rich resource for data on customer-buying behaviour.c. An unsuccessful CRM initiative is based on a solid CRM business case.d.

______________ provides comprehensive facilities to computer programmers for software development.9. Integrated development environmenta. Open source technologyb. Web and telephony integrationc. Open source technologyd.

CRM vendors are now offering implementation of their CRM software in-house as an incentive to their customers 10. to purchase their CRM _____________application.

softwarea. environmentb. communicationc. developmentd.


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Chapter VIII

The Future of CRM

Aim


introduce CRM as evolving real time enterprise•

defineRTE•

introduce short-term CRM initiatives•

Objectives


explain the vision of RTE•

elucidate the RTE Timetable•

enlist 10 steps for creating the RTE•

Learning outcome


understand sources to assist in CRM software selection publications•

exemplify the sets of vendors that will play a prominent role in the rise of the RTE industry•

highlight the sources to assist in CRM software selection publications•

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8.1 IntroductionCRM is here to stay and will evolve. The desire to improve customer satisfaction and retention of customers will constantly drive the need to improve CRM systems. Economy is now driven by customers and not by sellers as in the past. There are different type of customers, different types of business models, and selling strategies. And it is a matter of time when there will be different types of CRM software to support these models.

These CRM systems can truly deliver value to users and customers: CRM systems that are smarter, dynamically personalised for each individual’s needs, and capable of helping us handle the more complex challenges that a more closely-connected world throws at us 24 x 7.

Technology will improve to put more functionality tools in CRM applications as there is more demand for knowledge management systems, sales coaching systems, and service intelligence systems. Information today is in the form of maps,charts,andgraphsgeneratedbyreportwritersandvisualprofilingprograms.Thesewillgivewaytovoiceactivated and speech feed-back tools and other elaborate visual aids using 3-D and CAD style graphics.

8.2 CRM: The Evolving Real-Time Enterprise The CRM industry has come a long way during the past 20 years. What started as sales force automation (SFA) opportunity in the early 1980s, soon emerged into an SFA, customer service, and support industry in the late 1980s. Marketing was added to the equation in the early 1990s. Later in that decade, business analytics and e-customer applications were added to the mix of CRM applications. CRM application suites emerged with the entry of enterprise resource planning (ERP) players. The late 1990s was a “goldenage”forCRM,with30to50percentannualgrowththat helped propel CRM to the No. 1 position in software application license revenues worldwide. CRM still retains the No. 1 position among software application license revenues and will continue to do so for years to come.

The turbulent dot-com crash in 2001 meant a considerable decrease in CRM growth rates and a closer look at the CRMvalueproposition.TheCRMfailurerateswerebanteredaroundasmuchasitsbenefitsandtheentiresoftwareindustry were under attack for not meeting customer expectations. Stock prices of CRM public companies crashed, resulting in a real wakeup call. Today, CRM software vendors that once relied on third-party integrators to install their software now install more of those in-house. The vendors that also once simply sold CRM software are now increasingly offering complementary business-process and change-management services. CRM software vendors commandedhighpricesfortheirwares,andbyusingsystemsintegrators,thoseinflatedpricesincreasedhigherstill.Following the dot-com crash, a new alternative was born in the form of application service provider (ASP) hosted solutions. The result? Software and implementation prices have dropped dramatically in recent years. And with the entrance of Microsoft in the CRM space and Oracle’s purchase of PeopleSoft and Siebel, the industry received another stamp of approval. Today, CRM has achieved best-practice status within most industries.

In 2003, most industry watchers looked for a year of renewed growth in the CRM industry. CRM software vendor revenues, as well as CRM implementation service revenues, started to rebound. Customers, vendors, and implementationfirmsfinallyunderstoodthatCRMisnotsolelyaplugand-playtechnologysolution.Theystartedtograspthesignificanceofgettingtherightmixofpeople,processes,andtechnologytodriveCRMsuccess.Back-office/front-officeintegrationisontherise.Consolidationamongthesoftwarevendorsisalsoincreasingwithinthe industry. CRM software vendors started creating vertical market software solutions to differentiate themselves. Self-service applications and other customer support applications have also become more popular. Wireless has become the norm; industry forecasts indicate that 80 percent of all CRM applications will be wireless ready by the end of 2008. Meanwhile, the ASP (application service provider) or SaaS (software as a service) model continues to grow.


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8.3 Government CRMThere are a growing number of short-term CRM initiatives at civilian federal agencies, organisations. Today, government agencies are under increasing pressure to control costs, improve productivity, and deliver better products and services much like their private sector counterparts. But separately, these government agencies face their own set of CRM challenges.

For example, suppose Agency X is a global postal service. Faced with increased pressure from private sector competitors, Agency X decides to compete by creating and offering a better service than the competition. The agency takes time to learn more about customer needs, segments the customer base, and puts together a unique offering peridentifiedsegment.

Agency X then decided to implement a CRM initiative to realise its service-driven initiative. Initially, the troops seemedfiredup.Then,AgencyXnoticedsomeresistancefrompersonnelwhowererequiredtomakeneededprocesschanges.AsoneAgencyXemployeeasked,“Whydowehavetochangeprocessesthathaveservedthisagencyanditscustomerswellformorethan50years?”Althoughit’snotatypicaltoseethissortofreactiontoanyCRMinitiative, it presents a particular challenge in the government sector. Unlike in the private sector, managers may not be able to provide enough incentives to help motivate change. Also, buy-in tends to be made on a horizontal level (the agency head, Congressional Oversight Committees, labour unions), which can lead to drawn-out negotiations, major delays, and even the demise of meaningful CRM initiatives. Suppose Agency Y is a member of the intelligence community. This particular agency gathers intelligence, and interprets and provides it to a number of customers includingthepresident,hiscabinetmembers,themilitary,lawenforcementofficials,andothermembersoftheintelligence community. Agency Y turned to a CRM initiative as a way to better serve its customer base, which seemed to make sense until the head of Agency Y asked the CRM leader to present a business case justifying the expense.

Unlike the private sector, Agency Y could not argue about revenue enhancements, and it couldn’t justify the initiative on cost savings, which might translate into a budget reduction. This meant that Agency Y had to justify the CRM initiative based largely on improved customer service and satisfaction, which are not easy metrics to obtain in the intelligence community. With continued belt-tightening and the help of federal mandates such as the Federal Enterprise Architecture(FEA)andthePresident’sManagementAgenda(PMA),justificationeffortsfornewtechnologiessuchasCRMcaninclude“costavoidance,”whichisagency-speakforanythingthatreducescosts.

Despite the challenges, the CRM opportunity in government remains strong. There isn’t a single federal, state, or local agency that isn’t under increased pressure to control costs, improve productivity, or deliver better products/services to internal users or external constituents. And there isn’t a single government customer who wouldn’t appreciate lower costs or better products/services. CRM has a long and impressive track record of delivering these benefitsandmore,whenproperlyimplemented 8.4 RTERTE (Real-Time Enterprise) is the process of interconnecting a company’s entire operations via internal and Internet applications to enable all information to be shared in realtime. This allows the company to function like a 24-hour nerve center, instantly alerting individuals to changes in customer demand, competitive situations, inventory, availability ofsupplies,andprofitability.ButtheconceptbehindRTEisnotnew.Air-trafficcontrollers,bigcitypoliceforces,and energy/utility/stock traders all function in real time. Inevitably, nearly every company operates at least partly in real time. But the idea of large businesses operating in real time—all the time—is relatively new. Take a look at the following companies: Amazon, Best Buy, Cisco Systems Inc., DaimlerChrysler, Dell, Department of Defence, eBay, Federal Express, GE, Google, Hewlett-Packard, KeyCorp, Morgan Stanley, Motorola, PJM Interconnection, The Limited, Tyco, United Parcel Service Inc, U.S. Steel, and Wal-Mart. These companies have become RTEs by spending enormous amounts of time, money, and resources over a number of years. Look at their names carefully. Notice anything about them? You should. Each of them is a leader, most often the No. 1 company in its respective industry. They have all been able to successfully achieve sustainable, competitive advantage. The good news is that any company (even yours) can now leverage the lessons these companies learned that helped them accomplish full-time RTE status.

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8.4.1 Future of RTESowhereistheindustryheadedoverthenextfewyears?CRMincreasinglyintegratesfront-officeapplications(sales,marketing,customerservice)withback-officeapplications(ERPapplicationsforfinance,humanresources,manufacturing, and inventory control), with e-customer applications (Web shopping, Web self-service, and permission-based marketing), and with supply-chain applications (B2B exchanges). With all of those bases covered, what could a person consider as the inherent weakness in the current CRM scenario? Right now, the weakness is obvious. These many differing software applications are being stuck together using proprietary pipes that are expensive to implement and often require high maintenance middleware solutions to run effectively. And this is where the evolutionary start of the Real-Time Enterprise (RTE) begins. RTE technology seamlessly links different applications withacommon,standards-basedopenarchitecture“pipe”basedon.NETandJ2EEtechnicalarchitectures.TheRTEpipeofferseasyandopenintegrationlinksbasedonXML,abusinessworkfloworbusinessprocessengine,and real-time analytics capabilities. Now disparate applications can be put together in a cost-effective way. CRM softwaresuitesarenolongerrequired.Best-in-classsoftware“point”solutionswillgrowandbeusedmoreoften.While the technology advances of .NET, J2EE, and XML help propel the growth of the new emerging RTE industry, anothersignificantissuewillalsofactorintotheequation:theentranceofthefederalgovernment.Giventheneedtodrive down costs and to better manage customer/constituent relationships (both internal and external), government agenciesaresignificantlysteppinguptheiracquisitionanduseofCRMsoftware.AndthiswilllikelydriveCRMand RTE revenues much higher in the future.

8.4.2 A Natural ProgressionThe migration toward RTE status seems to evolve in a natural progression, supported by RTE process and technology enhancements. On the process side, many enterprises today are truly global companies with global processes that work around the clock. With the steady lengthening of regular business hours, the Internet provides customers with the ability to be inside your company at all hours. On the technology side, the market has progressed from batch processing to online processing to client/server processing to Internet processing. Increasing computer capabilities and speed have driven entirely new business processes such as real-time decision making or email. Greatly reduced technical infrastructure costs including those for hardware, storage, and bandwidth are clearly a reality today.

8.4.3 Vision of RTEIn an RTE, the majority of software applications move to the Internet. Advancements in Internet technology mean that regardless of the computer device (PC, handheld PDA, notebook computer, iPhone, television, or any other device), comprehensive, complete, and personalised software applications are accessible from anywhere at any time.Theold“softwareapplicationclients”arereservedforadwindlingnumberofremoteuserswhoconductalarge portion of their business off-line.

Internet software applications contain browsers that offer individual users personalised processes that are backed up by applications to these processes. In other words, each Internet application knows who you are, when you log on, what your preferences are, and which business processes and information needs to address, and optimises your Internet experience each time. Real-time processing architectures are already available, based on lessons learned by the early adopters. These architectures contain new software components including entitlement, personalisation, change notification,multitiersupply-chainintegration,performancemanagement,multilevelpartnerrelationshipapplications,global synchronisation/ integration, and wireless communications. In an RTE, every piece of information is current. Whetheryouarethecustomer,thedistributor,theinternalordertaker,amemberofyourfinancedepartment,oratier-one, -two, or -three suppliers, you will immediately know about shifts in demand because new opportunities or competitive situations will automatically trigger new supplies, billing requirements, and more.

8.4.4 An RTE TimetableTheleadingtechnology/businesspublishersarelikelytorefertoRTEasthe“greatestbusinessaccomplishmentofthedecade.”TheevolutionoftheRTEdecadewillfallintothefollowingthreedistinctperiods:


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2002–05: IncubationDuring this period, you read and heard a great deal about RTE. Companies moved toward real-time status, along with more RTE vendors, more RTE case studies, etc. Many RTE conferences took place, and many RTE white papers were written.

2006–09: Hot new marketThere were many RTEs in 2006 and 2007, which will translate to many more viable RTE examples to follow. Many case studies that are published will document the RTE value proposition. Venture capitalists begin to fund real-time enterprise technology vendors, and you can also expect to see early real-time technology vendors go public. Those companies that proactively become RTEs will begin to pull away from the pack. Their market leadership accomplishments will become 280 CRM in Real Time regular, recurring stories in the leading business press. Competitors will begin to wonder what happened.

2010: RTE moving full blastJust like in the early days of CRM, there will be an increasing number of new real-time technology vendors, consultants,andanalystsintheindustry.RTEcompanieswillbeprofiledincasestudiesthatappearsinmultipleindustries and in various media and publications. More companies will budget appropriate funds to become RTEs. Leading RTEs will sustain and enhance their leadership positions. Their reach will cut across entire demand-and-supply chains. Mobile communications and browsers will become the norm for those who use RTE systems. Customers will enjoy working with RTEs. Venture capitalists will invest heavily, and the market capitalisation of RTE vendors will soar.

8.4.5 RTE VendorsThe existing players are eGain, HP, Infor CRM, NetSuite, Oracle, RightNow, Salesforce.com, SAP, Teradata, TIBCO, andothers.TheyhaveidentifiedRTEasapartoftheirfuturedirection.

BEA,IBM,andMicrosoft.NETcanbefoundinthisgroup.Microsofthasmadeasignificantcommitmentwith .NET, the software giant’s platform for XML Web services. In recent discussions with senior Microsoft executives, I learned that Microsoft is looking for .NET to become the programming model for RTE, and Microsoft would rather encourage third parties to build these applications on top of the .NET platform than to build its own RTE applications.

While Aleri, Antenna, Nokia, and others are taking the lead here, it’s too early to tell which of these RTE vendors may become a future RTE industry leader.

8.5 Questions to Ask CRM Software ProvidersThe process of selecting the best software vendor for a real-time CRM initiative is not easy. Software vendors come and go, while technological changes often shake the very base on which vendors build their applications. With thesepotentialdifficultiesinmind,askeachvendoronyourshortlisteachofthe12questionsthatfollow.Butfirst,herearetwoobservations:Ifyoufindthatavendoronyourshortlistisevasiveinrespondingtoanyofthese12questions, continue to ask questions now rather than later; also, do not rely on any single answer as the basis for your vendor selection decision. Instead, get the answers to all 12 questions, and then apply business judgment to decidehowwellthevendor’sresponsesdealwithyourspecificneeds.

CRM software selection tipsQuestion 1: How long has the vendor been in business and what’s the history of its business?The CRM industry celebrated its 28th anniversary in 2007. To the best of our knowledge, no CRM software vendors are older than 23; most are between 10 and 15 years old. This may make the number of years in business less relevant, but we don’t think so. A software vendor such as FirstWave, which began in 1984 as Brock Control Systems, has weathered good and bad times, and through an initial public offering as well as organisational acquisitions and structural reorganisations. Over the years, FirstWave has proven to be a resilient CRM player with products that consistently score high in independent user reviews. While longevity is not necessarily an essential characteristic of a solid CRM vendor, we want to make the point that longevity has a value. Dozens of outstanding CRM vendors—

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several of which are today’s market leaders—have been in business between 10 and 15 years, have quality CRM software offerings today, and are likely to continue to offer them in the future. For example, McGraw-Hill may havebeenviewedasarisk-takerwhenitbecamethefirstcustomerofYOUcentric(nowpartofOracle),avendorthat was reasonably new to the CRM industry. McGraw-

Hill was willing to take that risk with YOUcentric’s Java-based, Web CRM offering and has not looked back since. So, while some vendors are backed by venture capital or others are new to the CRM industry, no hard and fast rules exist about their long-term viability. In fact, CRM software vendors come and go whether they are established players, such as Sales Technologies (that pulled out of the CRM marketplace in the early 1990s), or new players, such as Corepoint (a CRM vendor that was backed by IBM in the late 1990s but never made it off the ground). So, whilethenumberofyearsinbusinessisimportant,thatfactaloneisnotsufficienttodeterminewhethertheCRMvendor is appropriate for you.

Question 2: Does the vendor have experience and customers in your industry sector?Experience in your particular industry can be quite important. Software vendors who demonstrate their understanding of how your industry works, including your industry’s best demonstrated practice CRM in Real Time within their software offering, may be a real plus. However, you should not be swayed by a vendor’s demonstration of industry-specificsoftware,becausecreatingimpressivedemonstrationsusingtoday’ssoftwaretoolsarereasonablyeasy.Moreimportantly, ask questions about the company’s active customers in your industry, and whether they are willing to provide you with the names/contacts of these customers. Answers to these questions will let you conduct your own duediligenceabouthowwellthisparticularCRMvendorhasmettheneedsofalive,industry-specificcustomer.

Youmayfaceanotherdilemma:SupposeanewCRMsoftwarevendordoesnothavespecificindustryexperienceyethassoftwarewithtechnologyandflexibilitythatseemsidealbasedonyourspecificneeds(Pivotal’scustomercontactcenter). Increasingly, the industry is seeing a vertical focus from CRM software vendors (Siebel and StayinFront inthepharmaceuticalindustry),andtheneedforexperienceandcustomerswithinyourspecificindustrymaysoonbecome a moot point.

Question 3: What is the vendor’s technological direction (web strategy or CRM module expansion intentions)?It’simportanttounderstandyourCRMprovider’stechnologicaldirectionandhowthisdirectionfitsinwithyourcompany’s technological direction. The best way to determine this is to hold a half-day technology session with thevendor’schieftechnicalofficer.Theobjectiveofthissessionistodeterminewherethevendorisheaded(newbusinessmodules,newdevelopmenttools,andthelikelytimeframesforeach),torevealwhatyourspecificneedsare today and in the future for business functions and technical features, and to understand whether you and the vendor see eye to eye. Don’t be surprised if you are asked to sign a nondisclosure agreement, which is standard for these types of meetings.

Question 4: Who are the members of the vendor’s management team, and what are their backgrounds?The cumulative background and experience of a vendor’s management team can provide insight into its stability and credibility within the CRM market. Ideally, you want to see a mix of business discipline backgrounds (accounting, finance, information systems, andoperations) aswell as industry background (healthcare, consumerpackagedgoods, or

CRMSoftwareSelectionTips177CPG)thatrepresentsthevendor’sproductfocusandofferings.Also,findoutabout the companies where the management team members were previously employed. Are those companies thriving and are they still in existence?


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Question5:Howisthevendorfinanced?FindoutaboutthefinancialbackingofaprospectiveCRMvendor.Venturecapital(VC)groupsfinancemanynewcompanies in the high-tech area, particularly software companies. In many cases, the payback periods for the VC funds are very aggressive, so the venture capitalists want to be paid back in a short period of time. Therefore, the software vendor may feel additional pressure to sell as many seats or licenses as it can as quickly as possible. If the VC organisation has dictated an exit strategy by acquisition, there is also increased pressure on the software vendor todowhateveritdeemsnecessarytomakethefinancialslookattractive.Inotherwords,gobeyondthefinancialstatementswhenreviewingthefinancialstabilityofthevendor.

Question 6: Is source code included with the product?More and more vendors are providing tool kits that let the customer make changes to the software without using third-party implementation consultants. Much of the underlying code is programmed into reusable objects. Nevertheless, the lack of a provided source code can limit your ability to customise the CRM system without the help of vendor technicians or third-party consultants. If the vendor does not provide the source code, you need to know why. What happens if the vendor goes out of business? Do you get the source code to ensure your system will continue to function?Readthefineprintthatexplainswhatisandwhatisnotprovided.

Question 7: What training is offered, including for the enduser, train-the-trainer, or systems administrator?RememberthatoverthelifeoftheCRMsystem,thecostoftrainingcanbeuptofivetimesthecostofthesoftware.Does the vendor provide any training? Is the training provided in-house, on-site, or online? Does the vendor pass the training responsibility on to the resellers or implementation 178 CRM in Real Time partners? Regardless of whether the vendor offers some or all of the training programs, ask how the vendor measures the performance of its own trainers, and how it will measure the effectiveness of its own training methods for resellers or users. Does the vendor have structured plans for ongoing training, refresher training, and training for new hires? Is the vendor using the latest technologies to provide training services, such as Web-based training?

Question 8: How does the vendor support its software (does it have a guaranteed response time)?Many vendors provide support services as part of their maintenance agreements. Find out what types of support are offered with a maintenance agreement (phone support, Web-based self-service, and/or on-site support). Some vendors offer a la carte support programs such as pay-per-incident or per-support interaction. Are the support services passedonfromthevendortothethird-partyimplementationpartner?Ifthesupportservicesare“outsourced”toathird-partycompany,whatcertificationprogramsdoesthevendorhavetoteach,train,andcertifythird-partypartnerpersonnel?

Question9:Whatisincludedinthemaintenanceagreement(whatisthefixednumberofupgradesperyear)?ThemaintenanceprogramsprovidedbyCRMvendorscanvary incostandcomplexity.Getspecificsonwhatexactly is provided by the agreement, its time frame, and who will provide the service and support (the vendor and/or the vendor’s implementation/service partner). Ask the vendor how upgrades and updates will be made available, whether via a download from a Web site or via a reseller. Will you have access to a dedicated technician or group of techniciansbyphone,email,orWebsite?Can thevendorguaranteeaspecific turnaround timeforproblemresolution? What kind of resources has the vendor devoted to the particular support/service options?

Question10:Whatisthewarrantyperiodandbug-fixpolicyduringthisperiod?Find out what type of warranty policy a CRM vendor has for its products. Many vendors offer a standard 90-day warranty period, but ask the CRM Software Selection Tips 179 vendor what is included, and if it is exclusive of an annualmaintenanceagreement.Findoutfromthevendorhow,when,andwhereanysoftwarefixes,updates,andupgrades will be available. Also ask the vendor about the extension of the warranty and any costs associated with the extension.

Question 11: How does the vendor implement the software (by itself or via a third-party implementer)?Most CRM vendors provide comprehensive product suites that employ the services of third-party CRM implementation companies. If the vendor provides the implementation using its own technical staff, how many consultants are dedicated to implementationefforts?Does thevendorprovideany typeof“rapid implementation”option,and

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ifso, is thisappropriate toyourownbusinesssituation?Askquestionsabout thequalificationsof thevendor’simplementationstaff;inthecaseofthird-partyimplementationpartners,findoutaboutthetypeofcertificationandlength of training required to become a vendor implementation partner. If the vendor uses third-party implementation companies, ask how the original vendor ensures quality. Make sure the vendor and/or the implementation partners areusingtheCRMsoftwareforitsownfront-officeoperations.

Question 12: How important is your business to the vendor?Will you be an important customer for the vendor? Will the vendor commit necessary resources to ensure the successful implementation of your CRM system? To make sure the software vendor provides appropriate attention, some customers insist that they sign on as members of the software vendor’s management board of advisors. Regardless how you do it, secure guarantees from the software vendor showing that it is prepared to commit the necessary resources to make your real-time CRM initiative a success.

Once you have the answers to these 12 questions, apply your business judgment: Find out which of these questions are most applicable to the success of your CRM initiative before deciding which software vendor best meets your needs.WhensizingupaCRMsoftwarevendor,determinethefitbetweenthedirectionofyourCRMinitiativeandthat of the vendor.CRM in Real Time when you have determined this, make the selection and start implementing your CRM system.

8.6 Tips for Negotiating with CRM VendorsThe CRM software marketplace growth rate has declined from its peak of about 35 percent annually from 1995 to 2000 primarily because of CRM implementation problems. Many CRM industry analysts consider a growth rate between 10 and 15 percent as a likely rate for 2007 to 2008. This projected growth rate has come about from the emergence of the SaaS CRM model and the increase in CRM demand from the SMB market segment. And this is good news for CRM software buyers who now have the negotiation advantage. Many CRM software vendors are lookingformorebusinessnowandarewillingtonegotiatesubstantialdiscountsregardlessofwhattheofficialcompany policies suggest. In fact, I helped one of our clients (a payroll services company) secure a 52 percent discount on the list price from a leading mid-market vendor. In the end, we helped arrange a 500-person license deal for a cost of $682,000 ($1,364 per seat), which was a substantial savings from the initial bid of $1.4 million. In early 2008,Iwasabletohelpnegotiatea1,200-personlicensedealthatincludedallconfigurationandimplementationwork for $2 million, ($1,667 per seat) which was again a substantial savings from the initial bid of $3.4 million. Negotiating deals require a good understanding of what can and cannot be negotiated with the vendor. The following 10 negotiating tips work well in the current buyers’ market. You’ll need to do some homework to determine the competitive CRM software pricing, or ask a consulting company to help.

8.7 CRM Software Selection Tips 181Besureyouunderstandtheneedforeachoptionalsoftwaremodulebeingrecommendedbythevendor:“What•isthevalueaddedforeachoftheirrecommendedoptionalsoftwaremodules?”Be particularly sensitive to the vendor’s desire to scale up its perception of any part of your business (especially •if the vendor happens to excel in this area), such as your e-business or marketing requirements.Include as many of the vendor’s optional modules as you can into the base agreement. This way, you can lock •in prices regardless of when the modules will actually be used.Beasdefinitiveasyoucanintheagreement.Useyourcompany’swell-definedbusinessneedsandscreendesigns•as exhibits or attachments within the agreement.Listanddefineyourdeliverables/acceptancecriteriawithin theagreement.Besure that thesedeliverables/•acceptancecriteriahaveclearlydefinedmetrics,whichareimportanttodeterminewhenparticularpaymentsshould be made within the agreement (see the next point).


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Spread your payments over the life of the agreement, which should be divided into deliverables/acceptance •criteria in phases. Base your payments on the vendor meeting these deliverables/acceptance criteria. While most vendors do not like to link payment to this criteria, more vendors are accepting payments over the project implementation timetable. I remember one vendor president telling me that his software worked well and that all monies had to be paid upfront. Spreading out payments is particularly agreeable when the CRM software vendor also has been contracted to do or assist with implementing any software. Here, is one possible payment model: 20 percent of payment upon signing the agreement,20 percent on the successful accomplishment of an initial set of deliverables/acceptance criteria, 20 percent on •thesuccessfulaccomplishmentofthenextsetofdeliverables/acceptancecriteria,andthefinal40percentuponthesuccessfulaccomplishmentofafinalsetofdeliverable/acceptancecriteria.Consider requesting a site license for your company on a national and/or international basis. When considering •site license pricing, determine the current expected number of CRM users (let’s call this variable X) as well as the expected number of CRM users within 12 to 24 months (let’s call this variable Y). Negotiate the site license based on a price that is greater than X, which will be list price minus 1 percent (this is the minimum discount amount), and less than Y.Waitbetween60and90daysbeforeyourfinalacceptanceofthe• system.The maintenance charges • certainly can and should be negotiated. Calculate the annual maintenance charge with the percent discount off of the net price (what you actually pay) rather than on list price. While the asking price may be 18 percent, the norm is more likely to be between 12 percent and 15 percent. Start the maintenance chargesafterthesystemhasreceivedfinalacceptance;itisnotunreasonabletohavethemaintenancechargesbeginupto12monthsafterfinalacceptanceofthesystem.Alternatively,negotiateonefreeyearofmaintenanceeither from the date that the agreement is signed or the date the system was accepted.Buy a block of the company’s program and project managers’ time, or the CRM vendor implementation •consultants’ time to secure a discount rate.Structure the agreement so your company initially purchases little more than a developer server license and •about 15 pilot-user licenses. Then, assuming the CRM vendor is a publicly traded company, time the remaining software purchases around the vendor’s quarterly or year-end close.

The current buyer’s market will not last forever, but it’s quite likely that CRM software vendors will continue to welcome new business. While limits exist to vendor discounts along with a need to ensure a good spirit of partnership when the negotiations have been completed, plenty of negotiation room remains with CRM vendors today.

While the CRM software vendors will appropriately suggest the peruser cost of their software needs to be weighed against the value their software delivers, I’m convinced that CRM software prices will continue to come down.

Early RTE adoptersMicrosoft has spent millions establishing its RTE initiative called Agile Business; Siebel is pushing forward with its RTE offering called Universal Application Network. Recent advances in real-time analytics from companies such asTeradataareaddingfueltotheRTEfire.LeadingITconsultanciessuchastheGartnerGroupnowtracktheRTEindustry. In January, a Gartner survey found that more than 20 percent of CIOs at Global 2000 enterprises cited RTEasoneoftheirtop-fiveinvestmentareas.WhyhavegloballeaderssuchasAmazon,Cisco,Dell,eBay,FederalExpress, General Electric, U.S. Steel, and Wal-Mart committed millions of dollars to build RTE capabilities? The RTE value proposition rests on reduced costs, operational excellence, enhanced productivity, better decision making, customer delight and loyalty, and sustainable competitive leadership. As an example of the RTE value proposition in action, PJM Interconnection is a regional transmission organisation that plays a vital role in the U.S. electric system. PJM ensures the reliability of the largest centrally dispatched control area in North America by coordinating the movement of electricity in all or parts of Delaware, Maryland, New Jersey, Ohio, Pennsylvania, Virginia, West Virginia, and the District of Columbia. PJM’s members transact much of their business on PJM’s Web site. Using online tools that provide real-time data about the electric system, PJM triggers the buying and selling of power among its members, arranges transmission service, schedules contract purchases, carries out business strategies, and makes critical business decisions. The RTE business model lets PJM rapidly add new members and provide lower prices to customers. Improved business process tools have helped companies easily link supply-and-demand RTE processes. New integration tools have also helped.

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Finally, one more RTE driver is the wireless revolution. With the wireless industry growing at an annual rate of more than 30 percent, it is only a matter of time before companies work in real time over wireless networks.

8.8 CRMCRM plays a driver role in creating the RTE, primarily because CRM already has many of the RTE building blocks in place. Many companies 282 CRM in Real Time have already implemented CRM systems that connect suppliers, internal customers, distribution channel partners, and end users. Sales, marketing, and customer service CRM applications interconnect. Data gets shared across company personnel who touch the customer.

The CRM industry also has considerable integration experience. While not always completed with excellence, the industry has successfully integrated dispersed data sources and has learned many lessons along the way. In addition, many CRM initiatives and supporting systems, if not most, include the implementation of customer touch programs. These customer touch programs cut across demand and supply chains, which is a critical success factor for realising RTE status. And perhaps most importantly, there is the emerging Net generation. These future leaders tend to be active e-customers and users of today’s CRM systems. They do not question the value of the RTE. Instead, they question why it’s taking so long to get there.

Today, it is no longer an option to optimise your customer relationships. Given the more knowledgeable and less loyal customer base today, particularly the Net generation, no organisation can risk securing anything less than outstanding customer relationships. That means having up-to-the-minute customer knowledge and providing support fromanywhere,anytime;thisdefinesCRM’sfuturewithreal-timeCRMsolutions.

Real-time CRM solutions result from the explosion in Web services and hosted applications, wireless expansion, and businesses accepting the Web as their primary platform for engaging customers. As the CRM industry continues to develop more sophisticated real-time CRM solutions, organisations will have the opportunity to revolutionise their customer relationships using valuable real-time CRM tools and techniques. You’ll need to stay informed about key developments in the people, process, and technology related to real-time CRM solutions. Top management teams of best-in-class companies have already reached this conclusion, including several from our own customer base. At AAA Mid-Atlantic, for example, where we have worked closely with its top management team for years to help deliver a world-class CRM initiative, real-time CRM solutions have meant putting new business processes into placetocreateandusereal-timecustomerprofilestoperformreal-timecustomerservice,andtoperformreal-timecross-selling and up-selling. Ataglobalfinancialservicescompany,wehelpeditssalesandmarketingmanagementteamdevelopatechnicalinfrastructure and execute business functionality that supports working in real time at all times. At the core of these improvements is a real-time, Web-based, world-class customer-self service capability.

Real-time CRM solutions are being propelled by the following key business drivers that will expand in importance over the next decade:

The need to be increasingly customer-focused, especially the ability to understand the strong demands of the •Net generationIncreased competition and the need to maintain long-term differentiation through real-time customer service •excellenceAn increased emphasis on better market segmentation and on understanding the growing real-time expectations •from leading, attitudinal-based market segmentsTheneedfortighterlinkagesbetweenfront-officeandbackofficeprocessesandtechnologysystemstoensure•a real-time understanding of your customers

The need for improved business analytics and metrics (customer- balanced scorecards) so decision makers can be quickly alerted to key marketplace and buyer developments.


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Severalyearsago,BillGatesspokeabout“informationatyourfingertipsanytimeandanywhere.”ThefutureofCRM, especially real-time CRM solutions, has already begun to deliver on this vision.

RTE critical issues Becoming an RTE is now within the reach of almost every company, provided RTE vendors, analysts, the media, and users can work together to address the following critical issues:

Effective integration of people, process, and technology:• WhiletheRTEpropositionincludessignificantinfrastructure enhancements for most companies, RTE is considerably more involved than a pure technology play.Success by example:• The RTE value proposition will catch on more via successful case studies than by marketing promises or media hype.HelpingpotentialRTEs tounderstandhowemergingRTEcomponentsfit together:• For example, the key is to know how technology, end-to-end business processes, and required areas of change management complement each other.Laying out clear, pragmatic road maps: • This process will help companies become RTEs. RTEs of all sizes andindustriesalreadyrealisethevaluepropositionsofpowerfulexecutionandstructuralefficiencies.Thesecompanies are creating and sustaining leadership positions within their respective arenas. The competition is wondering how they will catch up, if ever. With this in mind, the time is right for executives worldwide to enhance theirknowledgeofRTEsandbecomedriversofwhatwillbecomethe“greatestbusinessaccomplishmentofthedecade.”

8.9 Steps for Creating a Real-Time EnterpriseThe real-time enterprise (RTE) concept requires interconnecting a company’s entire operations via internal and Internet applications, and enabling all information to be shared in real time. As we noted before, this allows the company to function like a 24-hour nerve centre, instantly alerting individuals to changes in customer demand, inventory,availabilityofsupply,competitiveanalysis,andprofitability.ManycompaniestodayarealreadyreapingtheexecutionandefficiencybenefitsthatresultfrombecominganRTE,includingCisco,Dell,andWal-Mart.WhatcanwelearnfromtheseandotherRTEcompanies?Eachwillconfirmtheimportanceofusingastructuredapproachfor creating the RTE. The following 10 steps can be undertaken for creating the RTE, along with overall timeframes involved in the process of moving toward RTE status.

Step 1: Analyse your current building blocksSuccessful RTEs build on current investments in the area of CRM, SCM (supply-chain management), and ERP (enterprise resource planning). I believe CRM is the driver behind the RTE. Why? Because CRM systems already connect suppliers, internal customers, distribution channel partners, and end users; CRM already shares processes and data across sales, marketing, customer service, and executive functions; and CRM already moves data in CRM, SCM, and ERP applications. So start by analyzing what CRM systems and initiatives you now have in place. Look for an understanding of how best to exploit these efforts to become an RTE. For example, how can you leverage or expand your current

CRM processes? How can you leverage or expand on the people changes that you already have in place? How can you leverage and expand your current technology? Run similar analyses for your SCM and ERP building blocks.

Step 2: Create an RTE road mapCreating an RTE road map includes creating a clear vision of how your company will function as an RTE, along with people, process, and technology components. Your road map will lay out which RTE processes need to be in place and how to accomplish them, what your RTE people issues are and how to overcome them, and which RTE technologies are needed and how to implement these technologies over time. Your road map also will describe how you intend to reach out to your suppliers and customers, usually through focus groups, to validate your emerging RTE vision.

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Step 3: Prioritise processes and functions to automateNext, you want to prioritise the RTE processes and which RTE business functions to automate. For example, assume your RTE vision suggests you have three major business processes that require enhancements to become an RTE. You’llneedtoagreeonwhichofthesethreebusinessprocessesyouwillimplementfirst,second,andthird.Inotherwords,theRTEroadmap(Step2)leavesyouwiththetotalpictureoftheRTE“puzzle,”andinthisstepyouaredeciding which pieces you should be adding and in which order.

Step 4: Secure supplier, partner, and customer buy-inTo secure buy-in on the supplier, partner, and customer side, determine and communicate what’s in it for each of them. In other words, why should they be interested in participating in your RTE? You will want to meet with themtoallaytheirfears,totalkthroughtheirvalueproposition,CRMinRealTimeandtodiscusskeybenefitstoparticipating in your RTE. One of the most effective tools in this step will be your RTE communications plan.

Step 5: Demonstrate RTE value, gain top management supportTo accomplish this step, you will need to build a value proposition based upon both execution (lower costs per transaction,higherrevenuesperemployee)andstructuralefficiencies(securingsustainable,competitiveadvantage).Youcanalsoincludesoftefficiencies(highercustomerdelightandintimacy),buttheRTEvaluepropositionhastohave enough substance so top management overwhelmingly concludes that the value far outweighs the cost. Here’s a hint: Wrap your RTE value proposition within your RTE business case. This is a critical step in that it is a potential stoppoint,apointwheremanagementcansay,“I’mjustnotconvinced,andeitherdropit,postponeit,orsendyourRTEeffortsbacktothedrawingboard.”

Step 6: Launch change, training, and communications programs earlyIn an RTE, people work differently; they are very visible. They can’t dust things under the rug, there are no private C drives. So you have to talk to people about how this will affect their day-to-day jobs, and describe what a day in the life of the RTE will be like. You will need to determine whether they need to be retrained on emerging RTE processes and on the use of RTE technologies to support these processes. You will also want to launch your RTE communication program intensively at that point.

Step 7: Use real-time technical architectures and applicationsWith the explosion in new real-time technical architectures and applications, you’ll need to begin to understand them. They include impressive Ten Steps for Creating a Real-Time Enterpriseadvancements in integration and messaging environments, new network capabilities, new supply-chain applications, entitlement capabilities, and more. There arenew,efficientwaystotriggerRTEprocessesandworkflowthatallowoneRTEsoftwareapplicationtoimpactmultiple other RTE software applications, all in real time. Smart browsers know who you are when you come in; they know what processes to evoke and how to optimise your customer experience each time you access the RTE. And they are attractively priced.

Step 8: Execute your RTE road map in small, executable stepsWe have all learned from our CRM, SCM, and ERP experiences that tackling too large a technology project can spell doom from the start. If you are going to implement a winning RTE, remember to tackle the job in small bites and lots of successful quick wins. In today’s economic climate where questions immediately get raised regardless of the investment type (let alone a large investment and commitment like creating an RTE), what executives are looking for is measurable quick wins; the one thing that will kill your RTE is doing too much too quickly and not being able to show the value of what you have done. Small, accomplishable steps will also help you to secure continued buy-in from top management.

Step 9: Deliver strong RTE analytics and operational excellenceMake sure that at each step of your RTE road map implementation, you provide analytical feedback that reinforces the business value of your RTE to your top management team. At each stage of implementing your road map, deliver the comprehensive analytics and document your quick wins. On the operations side, document operational excellence, which means writing down RTE procedures, policies, and job description changes so that they can be repeated throughout your RTE implementation. Be sure to drive operational excellence throughout the implementation of your RTE road map; the importance of this cannot be underestimated.


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Step 10: Measure, record, and communicate RTE successThis closes the loop with Step 5, where you have demonstrated RTE value and gained top management support. The way to sustain continued support is by measuring your quick wins throughout the implementation of your RTE road map, and then recording and communicating these wins on a monthly or quarterly basis to your top management team, your internal RTE users, and your suppliers, partners, and customers on the outside. Ongoing measurements, recordings, and communication need to happen throughout the lifetime of your RTE.

As you move through the various steps in this process, plan on accomplishing Steps 1 to 5 in about two to four months (three to six months for a more bureaucratic company), and plan an additional six to 12 months to accomplish Steps 6 to 10 with the understanding that these steps will be done in two-month deliverables. Putting it all together, plan on eight to 16 months to create your RTE (nine to 18 months for a more bureaucratic company). Speaking pragmatically,aquickwinispossiblewithinfourorfivemonths,butifyouwanttoachievesustainable,competitiveleadership (as Cisco, Dell, Wal-Mart, and other RTEs have done), think eight to 16 months ahead. Whatever overall timeframe you end up with for delivering RTE excellence, keep this advice in mind: Don’t expect or promise too much too quickly; you want to ensure your real-time success.

8.10 The Future of CRM: Real TimeLet’sventureforward5or10yearsandexplorewhatworkinginreal-timeCRMislike,where“always-on,alwaysconnected”becomestheprevalentwaytoconductbusiness.

The Net generation, also known as the Millennial, are between ages 12 and 32. This PlayStation generation is the firstagegrouptobebornintodigitaltechnologyexclusively,andtheyareaccustomedto3DimagesandtheWorldWide Web; email to them is old-fashioned, and they don’t even know what a typewriter is. Most importantly, your Net Generation customers and employees will expect you to conduct business with them and through them in an always-on, always-connected real-time way. As this generation enters the work force and becomes your customers, access to information any time and any way they want it will be normal business procedure for them, and they will expect the companies they deal with and work for to provide this level of real-time connectivity at all times. This always-on, always-connected concept is a result of the move from an analog to a digital world, which my firmforecastsasbeingcompletedbytheyear2030.Inthedigitalworld,broadbandrules,everymobiledevicehasa wireless connection to the Internet, and all computing devices are connected to each other, synchronised, and always up to date.

In other words, working in real time becomes the norm for conducting business. From the hardware perspective, computingdevicesthatrivalearlierPCsarealreadysmallenoughtofitintoyourpocket.JustlookatApple’siPhoneand other smartphones that are already on the market. A decade ago, cell phones were mainly a luxury item used by doctors, lawyers, and real-estate agents. These phones basically did one thing: made mobile phone calls. Today’s cell phones are already multifunctional; they house applications such as GPS devices, video phone services, cameras, email, real-time news updates, and Internet browsing. They are getting lighter, smaller, and more powerful and will alwaysconnecttoyouroffice,yourcustomers,oryourfamilyfromanywhereintheworld.Thesesmall,portabledevices become the lifeblood for businesspeople who live in the always-on, always-connected real-time world. And as the Web becomes a key way to deliver applications, smartphones with full Web browsers will make them even more powerful.

On the software side, the idea of an all-in-one CRM application by 2012 will be replaced by plug-and-play, best-in-class business functional modules that build in best-in-class business processes. All remaining horizontal CRM applicationswill be replaced by vertical solutions that optimallyfit industry-specific businessmodels.ThesehardwareandsoftwaretechnologyadvancementshavealreadyhadasignificantimpactonCRMandwillcontinuetodosoastheyfinallyallowcompaniesandcustomerstoeasilyworkinrealtime,allthetime.Insales,thismeansreal-time inventories and collaborative selling where the buyer plays an active role in the sales process. In service, this means the pervasive use of self-service that builds on extensive real-time knowledge bases as well as vendors who instantly alert customers to anything important (RFID tags attached to products as well as navigation systems that alert companies and customers to product movements in real time). In marketing, this means automatic re-segmentation of markets based on real-time information, auction-based pricing, and collaborative customers who

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actively participate in real-time product testing and feedback. In business analytics, this means real-time reporting with actual intelligence- based recommendations coming directly from your applications. Remember: This always-on, always-connected concept will come with every piece of digital information and will be capable of being shared instantly.

For many years, it has been suggested that CRM is a business approach that integrates best-in-class business processes that internal and external customers buy into and that real-time technology also supports. Finding the right formula for the new people, process, and technology integration mix in an always-on, always-connected real-time world will not be easy. And here comes the twist: While technological advances will inevitably occur, working in real time still requires that you establish those necessary processes that optimise the customer experience each time they visit you online. Because at the end of the day, we’re all people who make our buying decisions based on a good customer experience.

8.11 Trade Shows/ConferencesTradeshowsandconferencescanbeanexcellentwaytofindoutmoreaboutCRMautomation(example,destinationCRM’sannualconferenceexhibition).Speakerswithexpertiseinthisfieldcanprovideusefulinformation.Tradeshows and conferences also often have a vendor exhibition attached to the show or conference, where you can view CRM software. To decide which trade show or conference you should attend, we recommend asking the vendors, who will provide trade show or conference brochures along with free passes to the exhibition. There are several regional events coordinated by chapters of Sales and Marketing Executives International (SMEI) and the CRM Association. The American Marketing Association also has conferences where sales and marketing automation is a regular topic. More information on dates and locations of the trade shows can be obtained by searching the Web. Attending a CRM conference can provide a wealth of knowledge about industry trends, vendors, and products. In addition, these shows typically offer excellent seminars conducted by leading experts. But because there’s much information available and you have only a few days to take it all in, you need to prepare a game plan. Here are a few guidelines:

Assess the show • : Start by learning what the show has to offer. Ask the conference promoter to send a show guide with information on the technical seminars and special presentations, as well as an exhibitor listing and exhibitionhallfloorplan.Studythebrochureanduseittoscheduleyouractivities.Toavoidanyschedulingconflicts,besuretolisttheseminarsyouwanttoattend,includingdate,time,androomnumber.Onceyougetto the show, prepare a list of potential vendors to visit.Determine your goals • : To ensure that all of your company’s.CRM issues are addressed; make a list of goals you want to accomplish at the conference. If you’re the only person from your company attending the show, ask colleagues for their input.Developaspecificplanforseekingexpertadvice• : Plan to meet with seminarspeakers. Be prepared with a list of questions about your project and issues that you want addressed. Set up a time to meet with experts when they have more time to discuss your project. If that isn’t an option, keep a list in hand and talk to important speakers immediately after the seminar. Speakers are interested in furthering the industry and helping CRM projects succeed, so don’t be shy.Research show exhibitors • : Use the Web to gain preliminary information about a company’s niche, products, and customers. If you need more in-depth information, talk to a representative. You’ll save valuable time at the show by focusing only on those companies capable of matching your project’s technical and business requirements. Be sure to take advantage of all these vendors being located in the same place by arranging a demonstration of each promising CRM software package.Talk to the show promoter • : Conference promoters can usually provide additional tips and information to help take the stress out of attending an out-of-town conference. For instance, many provide shuttle bus service to and from the conference center through selected hotels. Also, ask about hotel and airfare discounts that might be available.

Remember: Attending a conference is an investment in time and money. By devising a strategy before embarking on your journey, you’ll get more value out of the price of attendance.


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Web sites and forumsThere are now numerous Web sites that provide CRM-related information, resources, and links to other CRM Web sites.IfyouwanttofindbackgroundinformationaboutCRMindustrytopicsandsoftware,wesuggestthatyouperuse the following Web sites:

IT Toolbox CRM (www.crmassist.com)•Destination CRM (www.destinationcrm.com)•CRMCommunity.com (www.crmcommunity.com)•MyCustomer.com (www.mycustomer.com)•SearchCRM.com (www.searchcrm.com)•CRM Daily (www.crm-daily.com)•InformationWeek.com (www.informationweek.com)•Computerworld.com (www.computerworld.com)•CNET.com (www.cnet.com)•CRMToday (www.crm2day.com)•eCRMGuide.com (www.ecrmguide.com)•ISM, Inc. (www.ismguide.com)•

Research companiesThere are a number of organisations that publish research about information systems technology, including CRM technology, CRM industry statistics, etc. These organisations include the following:

ISM, Inc. (www.ismguide.com)•IDC (www.idc.com)•Aberdeen Group (www.aberdeen.com)•Forrester (www.forrester.com)•In-Stat (www.instat.com)•Yankee Group (www.yankeegroup.com)•AMR Research (www.amrresearch.com)•Beagle Research (www.beagleresearch.com)•

Although the quality and price of the published information will vary, many of the analyses provided by these organisations can be useful.

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SummaryCRMincreasingly integrates front-officeapplications (sales,marketing,customerservice)withback-office•applications (ERP applications forfinance, human resources,manufacturing, and inventory control),withecustomer applications (Web shopping, Web self-service, and permission-based marketing), and with supply-chain applications (B2B exchanges).RTE is the process of interconnecting a company’s entire operations via internal and Internet applications to •enable all information to be shared inreal time. RTE allows the company to function like a 24-hour nerve center, instantly alerting individuals to changes in •customerdemand,competitivesituations,inventory,availabilityofsupplies,andprofitability.CRM plays a driver role in creating the RTE, primarily because CRM already has many of the RTE building •blocks in place.The real-time enterprise (RTE) concept requires interconnecting a company’s entire operations via internal and •Internet applications, and enabling all information to be shared in real time.

ReferencesGoldenber, B., 2008.• CRM in Real Time: Empowering Customer Relationships. Information Today, Inc.Anderson, K., & Kerr, C., 2002. • Customer relationship management. McGraw-Hill Professional.Lee, D. Smarketing! [Online] Available at: <http://www.destinationcrm.com/Articles/Editorial/Magazine-•Features/Smarketing!-48506.aspx> [Accessed 31 January 2012].Tutorial-Reports.com. • Future of CRM. [Online] Available at: <http://www.tutorial-reports.com/software/crm/future.php> [Accessed 31 January 2012].CDC Software.• Roundtable Discussion: The Future of CRM [Online Video] Available at: <http://www.youtube.com/watch?v=KNdajPAyQWA> [Accessed 31 January 2012].CRM Lecture/Discussion Central University 2.• [Online Video] Available at: <http://www.youtube.com/watch?v=lQ22mYjLeSs&feature=related> [Accessed 31 January 2012].

Recommended ReadingDyche, J., 2002.• The CRM handbook:A business guide to customer relationship management. Addison-Wesley Professional.Peelan, E., 2005. • Customer relationship management. Financial Times Prentice Hall.Knox, S., 2003. • Customer relationship management. Butterworth-Heinemann.


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Self Assessment_____________ is now driven by customers and not by sellers as in the past.1.

Enterprisea. Automationb. Opportunityc. Economyd.

CRM application suites emerged with the entry of enterprise resource _____________ players.2. planninga. failuresb. vendorsc. initiativesd.

TheCRMfailurerateswerebanteredaroundasmuchasitsbenefitsandtheentire____________industrywere3. under attack for not meeting customer expectations.

softwarea. technologyb. architecturec. serviced.

Which of the following statement is false?4. The turbulent dot-com crash in 2001 meant a considerable decrease in CRM growth rates and a closer look a. at the CRM value proposition.Technology will improve to put more functionality tools in CRM applications as there is more demand for b. knowledge management systems.CRM software vendors started creating vertical market software solutions to differentiate themselves.c. Economy is not driven by customers and but the by sellers as always.d.

_______________ is the process of interconnecting a company’s entire operations via internal and internet 5. applications to enable all information to be shared in real time.

RTEa. FEAb. ASPc. ERPd.

Which of the following statement is false?6. The migration toward RTE status seems to evolve in a natural progression, supported by RTE process and a. technology enhancements.In an RTE, not many software applications move to the Internet.b. Internet software applications contain browsers that offer individual users personalised processes that are c. backed up by applications to these processes.Theleadingtechnology/businesspublishersarelikelytorefertoRTEasthe“greatestbusinessaccomplishmentd. ofthedecade.”

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Match the following.7.

Incubation1. increasing number of new real-time technology vendorsA.

Hot new market2. existing players are eGain, HP,and so onB.

RTE moving full blast3. read and heard a great deal about RTEC.

RTE Vendors4. translate to many more viable RTE examplesD. 1-C, 2-D, 3-A, 4-Ba. 1-C, 2-B, 3-D, 4-Ab. 1-D, 2-B, 3-A, 4-Cc. 1-A, 2-B, 3-C, 4-Dd.

The process of selecting the best _________for a real-time CRM initiative is not easy.8. software vendora. market capitalisationb. business publishersc. leading technologyd.

The CRM software marketplace growth rate has declined from its peak of about ___________ percent annually 9. from 1995 to 2000.

55a. 35b. 20c. 49d.

___________ plays a driver role in creating the RTE, primarily because CRM already has many of the RTE 10. building blocks in place.

CRMa. FEAb. ASPc. ERPd.


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Case Study I

Nortel Networks: Case Study Overview

Nortel Networks operates in the global telecommunications market. Although, Nortel suffered badly from the dramatic downturn of the telecoms sector at the start of the 2000s, the company’s use of performance assessment is highly developed.

This case describes how Nortel developed a sophisticated CRM performance assessment process. Understanding how value is created and delivered has played a critical role for the company as Nortel changed from being a manufacturer of equipment to a primarily service organisation offering network solutions. This change in focus requiredverydifferentskillsandresources,puttingpressureontheorganisationtobeextremelyflexiblewhilecontinuing to deliver high quality customer service.

Initially Nortel focused on the key role of employees within the value\ creation process. It then directed attention to understanding how customer satisfaction and shareholder value are linked. Nortel understood that its relationships with customers would be threatened unless the company understood its value creation process. To achieve this, seniormanagementidentifiedthattheyneededtoputinplaceasophisticatedmeasurementsystem.Thisallowedclose monitoring of the value created by people and processes so that managers could allocate appropriately the investment resources of the business.

Nortel found that employee satisfaction accounts for 52 percent of customer satisfaction, making this measure critical to successful CRM; so the company developed an appropriate employee recognition and reward system that was closely linked to business results and customer loyalty.

(Source: Payne, A., 2005. HANDBOOK OF CRM: Achieving Excellence in Customer Management, Butterworth-Heinemann publications).

QuestionsWhat does this case study describe?1. AnswerThis case describes how Nortel developed a sophisticated CRM performance assessment process. Also how value is created and delivered has played a critical role for the company as Nortel changed from being a manufacturer of equipment to a primarily service organisation offering network solutions.

What did Nortel suffer from?2. AnswerNortel suffered badly from the dramatic downturn of the telecoms sector at the start of the 2000s, the company’s use of performance assessment is highly developed

What did Nortel initially focus on?3. AnswerInitially Nortel focused on the key role of employees within the value\ creation process and then directed attention to understanding how customer satisfaction and shareholder value are linked.

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Case Study II

Sears, Roebuck & Company: Case study overview

Sears has held a position of eminence in the US retail sector for over 100 years. During this period, it has become a household name, with Americans associating it with quality and value. However, over the last decade or so, Sears hashadtofighthardtoovercomethedifficultiesofamaturemarketandadversetradingconditions.Thiscasestudyexamines events over the last ten years. It focuses on how the senior management approached the situation facing the companyinthe1990s,whenSearsfacedgiganticfinanciallosses.Theirremedyincludedadoptinganewapproachtomanaging business performance. They developed a model that links the performance of management, employees and customersdirectlytocompanyprofitsandsoprovidesomeimportantinsightsintothevalueofadoptingCRM.

This case study shows how effective CRM depends not only on managing relationships with customers, but also with other important stakeholders. It describes the roles played by three stakeholder groups: employees (including senior management and employees), customers and suppliers. The CEO and his top team recognised that to implement successful CRM, it was necessary to change the behaviour of its senior managers. The leadership skills of managers were responsible for the culture of Sears and this had an important impact on revenues. Sears acknowledged that successful relationships with customers are dependent upon successful management of employees. Senior managementidentifiedkeyprofitindicatorswhichallowedthemtomanagetheirbusinessmoreefficiently.Threekey areas were monitored involving many metrics, including 25 employee measures, 20 customer measures and 19 financialperformanceindicators.

(Source: Payne, A., 2005. HANDBOOK OF CRM: Achieving Excellence in Customer Management, Butterworth-Heinemann publications).

QuestionsWhatdidSearshadtofighthardtoovercome?1. What does this case study examine?2. What kind of model did Sears develop?3.


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Case Study III

Halifax: Case study overview

Halifax Bank, a subsidiary of HBOS Group, is the largest home mortgage lender in the UK and offers a diverse setoffinancialandassetmanagementservices,includingretailandbusinessbanking,consumercredit,savingsproducts, pension products, life insurance and other investment- related products. The continuing rise in the number of inbound calls to Halifax’s contact centre offered tremendous scope for enhancing value creation.

In order to harness the full sales and relationship-building potential of each telephone interaction, the bank needed to be able to demonstrate individual customer knowledge and relevance in real time. Determined to capitalise on the growing dialogue with its customers, Halifax deployed marketing solutions from E.piphany, Inc. to meet its cross-selling objectives. This provided real-time decisioning to allow for the construction of a consolidated customer profileandthedeliveryofapersonalisedproductoffer.UsingtheReal-Timesystem,thecall-centreagentscouldrapidly access a customer’s information and match it to directly relevant offers in the course of conversation.

In 2000, Halifax piloted E.piphany Real-Time software with 160 of its call-centre agents to support cross-sell development. Within six months of introducing the system to the call centre, investment costs had been recouped and offer acceptance rates among some of the top-selling agents had increased by more than 55 per cent. By adopting a phased approach, the company was able to measure performance improvement and economically reinvest incremental return. Building on the success of the pilot project, Halifax has rolled out the system to all 750 retail bank outlets.

(Source: Payne, A., 2005. HANDBOOK OF CRM: Achieving Excellence in Customer Management, Butterworth-Heinemann publications.)

QuestionsWhat is Halifax Bank and what do they offer?1. What did Halifax’s contact centre offer?2. What did Halifax deploy from E.piphany?3.

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Bibliography

ReferencesAnderson, K., & Kerr, C., 2002. • Customer relationship management. McGraw-Hill Professional.Armesh, H., Rasoulzadah, H., Kor, B., Salarzeh, H. and Saljogh, Z. • Customer Relationship Management [Online pdf] Available at: <http://www.eurojournals.com/ajsr_12_07.pdf> [Accessed 30 January 2012].Baran, R. J., Galka, R. J & Strunk, D. P., 2007. • Principles of customer relationship management. Cengage Learning.Bergeron, B. P., 2002• . Essentials of CRM: A guide to customer relationship management, Volume, John Wiley and Sons.Bolton, R. N. & Tarasi, C. O. • Managing Customer Relationships [Online] Available at: <http://www.ruthnbolton.com/Publications/01Malhotra-V3-Chap1.pdf> [Accessed 31 January 2012].Buttle, F., 2010. • Customer Relationship Management, 2nd ed., Wiley.CDC Software.• Roundtable Discussion: The Future of CRM [Online Video] Available at: <http://www.youtube.com/watch?v=KNdajPAyQWA> [Accessed 31 January 2012].CRM Business Strategy• [Online] Available at: <http://www.crmforecast.com/strategy.htm> [Accessed 1 February 2012].CRM Lecture/Discussion Central University 2• [Online Video] Available at: <http://www.youtube.com/watch?v=lQ22mYjLeSs&feature=related> [Accessed 31 January 2012].CRM Strategy• [Online] Available at: <http://www.slideshare.net/ezendu/crm-strategy> [Accessed 1 February 2012].dalekathryn, 2010. • CRM - Customer Relationship Management [Video Online] Available at: <http://www.youtube.com/watch?v=v9rRBlSX4m8>[Accessed 1 February 2012].

Developing a CRM Strategy• [Online] Available at: <http://www.mycustomer.com/lib/5049> [Accessed 31

January 2012].Developing and implementing a CRM Strategy• [Online] Available at: <http://www.business-intelligence.co.uk/reports/crm_strat/summary.asp> [Accessed 31 January 2012].DiscoverSugarCRM., 2009. • What is CRM? [Video Online] Available at: <http://www.youtube.com/watch?v=BMtv6sbmdLc> [Accessed 1 February 2012].DiscoverSugarCRM., 2009. What is CRM? [Video Online] Available at: <www.youtube.com/•watch?v=BMtv6sbmdLc> [Accessed 30 January 2012].DUTU, C., • Cross Functional Processes in Customer Relationship Management [Online] Available at : <http://www.tje.uvt.ro/ro/download/35.html>[Accessed 30 January 2012].Dyche., 2002. • The CRM Handbook. Pearson Education India.Ed, P., 2008. • Customer Relationship Management, Pearson Education India.Finnegan, D. J. and Willcocks., 2007. • Implementing CRM: From Technology to knowledge. John Wiley @ sons, Ltd.Goldenber, B., 2008. • CRM in Real Time: Empowering Customer Relationships. Information Today, Inc.Handbook of CRM: • Achieving Excellence in Customer Management. The performance assessment process [Online]Availableat:<https://aquila1.iseg.utl.pt/aquila/getFile.do?fileId=17412&method=getFile>[Accessed31 January 2012].Hani1973226., 2010. CRM Steps to CRM Strategy and Customer Relationship [Video Online] Available at: •<www.youtube.com/watch?v=pPDiZQ0DNBw> [Accessed 30 January 2012].HarvestSolutions, 2011 [Video Online] Available at : <http://www.youtube.com/watch?v=Mxw-XGrrhb4&fea•ture=related>[Accessed 30 January 2012].


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ISM.• CRM Application Trend [Online] Available at: <http://www.ismguide.com/index.php?option=com_content&view=article&id=73&Itemid=112> [Accessed 31 January 2012].joshyissac., 2011. • Learn how useful Customer-relationship-management(CRM)-flash Animation.mp4 [Video Online] Available at: <http://www.youtube.com/watch?v=ollnYSgX3s4> [Accessed 1 February 2012].Kincaid., 2003. • Customer Relationship Management: Getting It Right! Pearson Education India.Kumar, V. and Reinartz, W. J., 2009. • Customer Relationship Management: A Databased Approach,John Wiley & Sons.Lee, D. Smarketing! [Online] Available at: <http://www.destinationcrm.com/Articles/Editorial/Magazine-•Features/Smarketing!-48506.aspx> [Accessed 31 January 2012].Lindstrom, A., 2009. • What is Customer Relationship Management? [Video Online] Available at: <http://www.youtube.com/watch?v=D1HsGLETOgE>[Accessed 30 January 2012].Mukherjee, K., 2007. • Customers Relationship Management: A Strategic Approach to Marketing.Prentice –Hall of India.Payne , A., 2004. • The role of multichannel integration in customer relationship management [Online] Available at: <http://www.sciencedirect.com/science/article/pii/S0019850104000367> [Accessed 31 January 2012].petersgyoung., 2007. • Customer Relationship Management (CRM) [Video Online] Available at: <http://www.youtube.com/watch?v=EPn_Zd4VA4Q&feature=related> [Accessed 31 January 2012]. Prof. Payne, A.• The Value Creation Process in Customer Relationship Management [Online pdf] Available at: <http://logmgt.nkmu.edu.tw/news/articles/White%20Paper-The%20Value%20Creation%20Process%20In%20CRM.pdf> [Accessed 30 January 2012].rbifast, 2009. • CRM - Customer Relationship Management [Video Online] Available at: <http://www.youtube.com/watch?v=em8PH5o-qUw>[Accessed 1 February 2012].Reynolds, J., 2002. • A practical guide to CRM: building more profitable customer relationships, Focal Press.SageViews., 2008. • Golden Rules to successful Customer Relationship Management [Video Online] Available at: <http://www.youtube.com/watch?v=n3LEnCyaa5I> [Accessed 31 January 2012].Selling Power. • Eight Trends that Are Driving CRM’s Future. Available at: <http://www.sellingpower.com/content/article.php?a=4> [Accessed 1 February 2012].Sharma, R., Sinha, C. and Kumar, A., 2007. • Customer Relationship Management: Concepts & Application. Wiley-India.

TheKweci., 2011. • CRM Lecture/Discussion @ Central University [Video Online] Available at: <http://www.

youtube.com/watch?v=YxapXMVmLCs&feature=related> [Accessed 1 February 2012].

TheKweci., 2011. • CRM Lecture/Discussion Central University 2 [Video Online] Available at: <http://www.

youtube.com/watch?v=lQ22mYjLeSs&feature=related> [Accessed 1 February 2012]. Tutorial-Reports.com. • Future of CRM. [Online] Available at: <http://www.tutorial-reports.com/software/crm/future.php> [Accessed 31 January 2012]Two Types of CRM• [Online] Available at : <http://www.studymarketing.org/articles/Managing_CRM/Two_Types_of_CRM.html> [Accessed 30 January 2012].

Recommended ReadingAnderson, K. and Kerr, C., 2002. • Customer relationship management. McGraw-Hill Professional.Baran, R., Galka, R., and Strunk, D., 2008. • Customer Relationship Management.Integra Software Services.Buttle, F. 2009. • Customer Relationship Management Concepts and Technologies, 2nd ed., Elsevier Ltd.Dyche, J., 2002.• The CRM handbook:A business guide to customer relationship management. Addison-Wesley Professional.

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Goldenberg, B., 2008. • CRM in Real Time: Empowering Customer Relationships. Information Today, Inc.Knox, M., 2003. • Customer Relationship Management: Perspectives from the marketplace. Butterworth-Heinemann.Knox, S., 2003. • Customer relationship management. Butterworth-Heinemann.Payne, A. and Frow, P., 2005. • A strategic Framework for Customer Relationship Management.Peelan, E., 2005. • Customer relationship management. Financial Times Prentice Hall.Rogers, M. and Peppers, D., 2010. • Managing Customer Relationships: A Strategic Framework, 2nd ed., Wiley.Shanmugasundaram, S., 2008. • Customer Relationship Management:Modern Trends and Perspectives.Prentice-Hall of India.Srivastava, J. and Wang, J., Lim, E. and Hwang, S., 2002. • A case for Analytical Customer Relationship Management.Sugandhi, RK., 2003. • Customer Relationship Management. New Age International.Wellington, P., 2010. • Effective Customer Care, Kogan Page Limited.


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Self Assessment Answers

Chapter Ic1. a2. b3. d4. c5. b6. d7. b8. a9. c10.

Chapter IIa1. c2. c3. a4. d5. a6. b7. a8. d9. a10.

Chapter IIIa1. b2. b3. a4. d5. c6. a7. d8. a9. b10.

Chapter IVc1. a2. d3. b4. a5. a6. b7. d8. c9. c10.

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Chapter Vb1. c2. c3. d4. d5. b6. a7. c8. a9. b10.

Chapter VIa1. b2. b3. d4. a5. d6. b7. c8. b9. a10.

Chapter VIIa1. b2. c3. a4. b5. a6. b7. d8. a9. a10.

Chapter VIIId1. a2. a3. d4. a5. b6. a7. a8. b9. a10.

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