CRM Unit2
CRM Unit2
CRM Unit2
UNIT II
Unit II: Customer Learning Relationship – Key stages of CRM-Forces driving CRM-
Benefits of CRM- Growth of CRM market in India - Key principles of CRM.
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Key Stages of CRM:
Customer Relationship Management is seen as a means of identifying, establishing, maintaining,
enhancing and where necessary terminating relationships. The definition anticipates that once the
company starts thinking about individual customers, it should recognize that different customers are
at different stages of relational development. Importantly, it also implies that each customer types
should be handled in a different way. This may include different targeted messages and different
‘value options’ from the exchange. The key stages of CRM are explained through the tabular form:
CRM are mainly of two different types. Reactive service is where the customer has a problem and
contacts the company. Proactive service is where the manager decides not to wait for the customer
to contact the firm, but contacts the customer himself in order to establish a dialogue and solve
problems.
Dwyer suggests a five-stage model where each phase represents the following:
1. Awareness: Awareness is where one party recognizes that the other party is a ‘Feasible
exchange partner’.
2. Exploration: Exploration refers to the ‘research and trial stage’ in the exchange. This stage
includes sub phases such as attraction, communication and bargaining, development and
exercise of power and expectation development.
3. Expansion: Expansion refers to the period where there is a continual increase in benefits
obtained by exchange partners and they become increasingly interdependent.
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4. Commitment: Commitment relates to the implicit or explicit pledge of relational continuity
between the parties.
5. Dissolution: Dissolution refers to possibility of withdrawal in any relationship
In defining the scope of E-CRM, three different levels can be distinguished:
1. Foundation services: They include the minimum necessary services such as website
effectiveness and responsiveness as well as order fulfillment.
2. Customer –centered services: These include order tracking, product configuration and
customization as well as security / trust.
3. Value –added services: These are additional services such as online auctions and online
training and education.
Self services are becoming increasingly important in CRM activities. The rise of Internet and e-crm
has boosted the options for self service activities. A critical success factor is the integration of such
activities into traditional channels. An example was Ford’s plan to sell cars directly to customers via
its website, which provoked an outcry among its dealer network.
Risk, Salience and Emotion are separately definable concepts but are not mutually exclusive. There
is a close association between the risk perceived in, the salience associated with and the emotion
generated by any given exchange situation. The high risk is often associated with high salience
products or service and the high emotional outcome, although they are highly subjective and may
differ from individual to individual.
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It should be noted that a particular exchange relationship will generate a perception of high level of
risk, salience and emotion with one customer yet, the same transaction in repeated will only generate
a low level with another.
II. Trust and Commitment:
The requirement for trust and commitment appears to be an important indicator of when relationship
management strategies may be potentially vulnerable. Equally the existence of trust and commitment
among parties is seen by some central to the success of relationship marketing strategies and the
main means by which the affective strength of a buyer-seller relationship can be judged.
Trust:
Trust is seen as an important driver to both relationships and relationship enhancement in that it
would appear to reduce risk perception more effectively than anything else.
Trust is an essential ingredient in healthy personality, a foundation for interpersonal relationships a
prerequisite for co-operation and a basis for stability in social institutions and markets. Generating
co-operative behaviour trust may-
Many different words are used to describe trusting situations. They are
1. Probity: Probity focuses on honesty and integrity that may mean in business terms as
professional understanding and reputation.
2. Equity: Factors such as fair-mindedness, benevolence, caring values and sincerity are in
evidence here.
3. Reliability: Reliability relates to a firm having required expertise to perform its business
effectively and reliably.
4. Satisfaction: Satisfaction represents overall evaluation, feeling or attitude about other party
in a relationship.
Commitment:
Commitment implies that both parties will be loyal, reliable and show stability in the relationship
with one another. It is therefore, a desire to maintain a relationship, often indicated by an ongoing
investment into activities, which are expected to maintain that relationship.
Whatever the industry, it is important to build trust and commitment if the establishment of a lasting
relationship is the goal. There may be number of precursors to trust and commitment, including –
Relationship termination costs
Relationship benefits
Shared values
Communication
Opportunistic behaviour
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III. Perceived Need for Closeness:
Closeness can be physical, mental or emotional and can strengthen the feeling of security in a
relationship. Close relationships are acknowledged to be more solid and likely to be longer lasting
which are precisely the characteristics rational marketers are looking for. Not all the customer want
close relationships and some may only be interested in developing them with some parties and not
with others. Sometimes, establishing high degree of close customer/employee relationship may also
involve high risk and challenge.
Satisfaction can be viewed as contentment. Satisfaction may also be associated with some sense of
happiness. For those services that really surprise in the positive way, satisfaction may mean delight.
And in some situations, where the removal of negative aspect leads to satisfaction, the consumer
may associate a sense of relief with satisfaction. Retention in competitive markets is generally
believed to be a product of customer satisfaction. Satisfaction is a psychological process of
evaluating perceived performance outcome based on predetermined expectations.
Satisfaction drivers
Cumby and Barnes suggest that driver exist on five levels and, that these generally involve
progressively more personal contact with the service supplier:
It is quite possible for the supplier to get things right on the first four levels and to dissatisfy the
customer because of something that happens on the fifth level. This emphasize the importance of
‘critical episode’ in the exchange process
Benefits of CRM:
CRM is the process of acquiring, retaining and growing profitable customers. CRM helps business use technology
and human resources to gain insight into the behavior of customers and the value of those customers that create
loyalty. CRM has several advantages.
In Peter F Drucker’s words, the purpose of business is to create and keep a customer. Every
businessman understands the truth of these words. Today, when businesses are scrambling to get
customers, the importance of Customer Relationship Management (CRM) must not be ignored.
That’s why analysts, vendors, and solution providers are positive about the growth of CRM in the
country.
Analysts have come out with skyrocketing figures about the growth of CRM in India. In Gartner’s
view, the Indian CRM market size is about 15 percent of the overall APAC market, second largest in
the region, after Australia. Between 2008 and 2013, CRM in India is expected to grow at a CAGR of
12 percent Gartner has significantly revised the growth rate of the Indian CRM market, specifically
for the year 2009 in which it is expected to reach $80.3 million.
According to analysts, CRM has gained prominence over ERP. Sushant Dwivedy, Director-
Microsoft Business Solutions, says, “Initially, they were packaged together as one solution.
However, today, we are seeing a demand for CRM as a separate solution, one which is not
dependent on ERP anymore.”
Growth Drivers:
According to Ramaswamy Rajgopal, Senior Vice President, CSC India, most organizations have
implemented a customer strategy to have a 360 degree view of the customers across the enterprise
and all the products that the enterprise produces. “For example, in the telecom space, the entire
service management is automated with CRM. This includes acquisition of customers through call
centers, service management, and billing. Similarly as the insurance industry diversifies its portfolio,
the CRM application provides an effective way to enable cross-selling as well as provide a single
point of customer contact to the enterprise,” he adds. Most packaged applications today offer
solutions that address the specific industry needs with robust analytics allowing for end- to-end
customer management.
Dwivedy of Microsoft says, “Today, getting new customers is a problem. Retaining them is even
harder, which is in direct proportion to the growth factor of CRM.” For Team Computers’ Chopra
and Religare’s Grewal, one factor driving the growth of CRM is the needs for the companies to
optimize marketing spend and deliver offerings in a more defined manner.
“For example, in the auto industry, cross-selling has been happening between sales, financing, and
insurance, and, to some extent, after-sales. The advent of vendor/brand agnostic service agencies
will mean increased competition and obviously companies having more customer awareness will
win,” adds Grewal.
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In spite of the economic slowdown, the CRM (Customer Relationship Management) market in
India witnessed a healthy growth. IDC expects the CRM software market to grow at a CAGR
(compounded annual growth rate) of 40 per cent to reach Rs 188.4 crore in 2006. The CRM services
market is expected to grow even faster at a CAGR of 53 per cent to reach Rs 377 crore by the year
2006.
The CRM market in India is in the initial phase when there would be high demand for consulting
services in order to bring a fit between the business and CRM application and also around
deployment and implementation of the same. Organisations have started using 'Service Quality' as a
key differentiator and are using it as their USP to increase revenues and to gain market share and
that's precisely the reason why CRM has been hot in service verticals like financial and telecom
services.
According to Kapil Dev Singh, Country Manager, IDC India," Unlike ERM, which is top-driven
and therefore faces a lot of inertia, CRM initiatives in most organisations are driven by the actual
users (Customer Support Department, Sales Function, etc.). Further, the implementation cycles for
CRM are shorter and automation of CRM related processes have a direct impact on a company's
profitability. Therefore more and more Indian enterprises are expected to invest in CRM solutions to
provide improved services to the customers and drive CRM market."
This is supported by the fact that four out of five companies are spending on modular CRM (i.e point
solutions). According to IDC's end-user survey conducted among 200 organisations, nearly 81 per
cent stated that they are using modular CRM, while 19 per cent stated that they are using complete
CRM package. The CRM applications that are primarily used are marketing automation closely
followed by customer care and support automation.
According to the survey, the key business drivers for investing in CRM solutions are customer
retention & loyalty and improving cost efficiencies. Another important reason that emerged for
CRM adoption was to make sales force management more effective. This shows that Indian
businesses are beginning to feel the heat from increasing competition and are actively trying to retain
their loyal customer base.
Principles of CRM
CRM is much desired and enjoyable trip to arrive at a desired destination for the businesses. Though
there is no magic formula for effective CRM, but there are certain guiding principles for CRM to
function effectively. The following are the principles of CRM.
1. Start with a Strategic Customer Focus:
The Companies identify who they are and what the vision is and try to consider from strategic
customer perspective. They try to consider and define the following three distinct criteria:
1. If they generate revenue for the organization.
2. If they make the decision to acquire a particular product/service and.
3.If they are the “beneficiaries” of that product /service.
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The criteria of buying is compared to the micro and macro environments and evaluated to choose a
fine tune strategy.
5. Re-organize Metrics:
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The following CRM metrics are set-
1.Employee participation in CRM and usage
2.Strategic Customer Acquisition
3.Customer consolidation, retention and defection rates
4.Brand impact
5.Customer satisfaction ratings and loyalty ratings
6.Customer knowledge
7.Customer Entanglement
8.Learning Relationships
These metrics are linked to business metrics such as revenue cost efficiency, Cross sell/Up sell rate,
Market Share, Mind Share Customer share and profitability. They help to assemble the resources
required and prepare an achievable CRM Roadmap.
Thus, the following CRM strategies and solutions have to be borne in mind for overall
CRM success