Impact of IT
on Customer Relationship Management: A Global Perspective
By WASIF IJLAL
Apr 09 - 15, 2001
Wasif Ijlal is an Associate of the Institute of
Management Consultancy (U.K). As a Management Consultant, Wasif has
identified, explored and developed the links between Strategy and
He completed his first MBA from the Institute of Business
Administration, Karachi in 1994. In 1999, Wasif proceeded to the management
school at the University of Bath in U.K on a Britannia Chevening Scholarship
completing his second MBA with focus on Strategy and Operations Management.
Previously Wasif was working as a Director of management
consultancy for Khalid Majid Husain Rahman, the member firm of Deloitte Touche
Tohmatsu in Pakistan.
Customer relationship management (CRM) is now becoming a
popular buzzword amongst big companies and consultants alike. Banks, airlines,
outsourcing suppliers and dot.com companies are increasingly becoming aware that
applying a personalised approach to their customer relationship management is
vital for a successful future.
CRM is an important concept currently being discussed in
major enterprises around the world. Every major organisation is now embarking or
improving upon its CRM system by using the aid of Information technology in
general and internet in particular.
Definition of Customer Relationship Management (CRM)
Until recently, the term CRM most recently stood for
"customer relationship marketing". Currently, it is more likely to be
understood as shorthand for "customer relationship management". In the
context of today's dynamic environment, CRM can be defined as:
"Customer relationship management is an interactive
process for achieving the optimum balance between corporate investments and the
satisfaction of customer needs to generate the maximum profit".
•measuring both inputs across all functions including
marketing, sales and service costs and outputs in terms of customer revenue,
profit and value.
•acquiring and continuously updating knowledge about customer needs,
motivation and behaviour over the lifetime of the relationship.
•applying customer knowledge to continuously improve performance through a
process of learning from successes and failures.
•integrating the activities of marketing, sales and service to achieve a
•the implementation of appropriate systems to support customer knowledge
acquisition, sharing and the measurement of CRM effectiveness.
•constantly flexing the balance between marketing, sales and service inputs
against changing customer needs to maximise profits.
A CRM programme rests on the following steps:
•Identification of exactly who are the customers.
•Differentiation of the customers within the customer base (some customers are
more profitable than others and some will have a greater life time value to the
•Interaction with the customers who have been identified as having long term
value to the organisation and are worth starting to develop a one to one
learning relationship with.
•Customisation of services, products and other specialised needs to increase
the share of a customer and strengthen the customer relationship.
The customisation factor
The key factor behind CRM is the need for "customisation".
Increasingly the ability to attract and retain customers now solely depends on a
company's ability to tailor-made or customises its product offering exactly to
the needs of the customers.
Although the traditional focus of customisation has been the
product component of the offer, but increasingly customisation now equally
applies to product, service, process, people, distribution, price and
Some of the examples are:
•Dell can manufacture twelve thousand different PC
•Ford can assemble twenty seven million different Ford Fiestas
•Levi's can manufacture an infinite number of customized jeans to meet the
infinite number of body dimensions
•American Express has several categories of card ownership.
Platinum card members enjoy higher credit limits, life-style billing, insurance
benefits and so on.
•Manchester United, the famous English soccer club, differentiates service
levels between regular season ticket holders and executives boxes.
•Royal Bank of Scotland customises the dates on which bank
statements are mailed out
•The construction process between the design-and-build company Mansell and its
clients is infinitely variable
•Extranets allow customer organisations to interact remotely, at their own
convenience, with supplier computer systems
•Banks offer customised contacts, called relationship
managers, to their most valued clients
•Call centre software allows in-bound callers to be identified and the call
routed to a specific customer service agent prior to call pick-up
•Federal Express delivers packages within a number of
•Manchester Business School has a two-tier pricing system
for its executive courses. Frequent customers are offered preferential rates
•Barclaycard, the credit card issued by Barclays Bank (UK), has two APRs on
outstanding credit balances. The lower rate is for high LTV customers only
•Hotels routinely discount their room rates for preferred, valued guests
•Computerised data bases allow direct marketers to
customise the salutation and content of their mailings
•Amazon.co.uk, the internet book retailer, can offer customised information on
newly published titles to customers in alignment with those customers' reading
•Ford dealers customise their post-sales communication to new car buyers
The Context for CRM in a Dynamic Environment
Putting the definition of CRM in a global context, it becomes
apparent that in today's dynamic environment it has become critical for
companies to understand their customers' needs and expectations and to align
their organisational processes, products, and services accordingly. Survival
depends on the ability to identify and forge long-term relationships with their
most valuable customers.
It must be kept in mind that CRM is not a product. CRM is a
business philosophy that touches upon many independent parts of the organisation.
It is a concept that requires a new customer-centric business model, which must
be supported by a set of applications integrating the front and back office
These coordinated applications ensure that the customer is
satisfied which translates into a more profitable organisation.
The Internet as a Powerful Information Tool for Building a
Successful CRM Programme
With the invasion of the internet, companies world wide now
have easier access to the information. This also means that the time and costs
associated with gathering information which form the basis for a CRM system have
gone down. The following are just some of the reasons why more and more
companies are going towards a web based CRM system:
1. Increased customer satisfaction:
The Web offers customers immediate and convenient access to
information. This avenue of self-service increases customer interaction and
satisfaction levels while reducing per-customer costs for the company.
2. Lower operating costs:
Diverting enquiries from live representatives to
search-and-retrieval engines and automated agents can dramatically reduce costs
in all areas such as associated with call centers, including staffing,
equipment, training, and telecommunications.
3. Increased profitability:
Selling costs are lower as a great amount of customer
activity can be guided through personalised software agents.
4. Abundant marketing data:
A personalised Web-enabled experience creates a wealth of
data for the organisation. Organizations can track customer travel through the
site, find out what terms customers are seeking, and get them to volunteer for
programmes that provide them with specific messages and critical information.
This type of data is unique, invaluable, and continuously fed back to the
The Use of Web Based Technology by PC Manufacturers
Traditionally, warranty cards have been a key vehicle for
basic contact data collection. A typical warranty card provides manufacturers
with valuable marketing data on where customers learned about products, what
triggered their buying decisions, how they were planning to use the products,
and where the products were bought. Unfortunately, with warranty cards, the
response among buyers is very low.
Using the Internet produces radically different results. Now,
as soon as the PC made by Dell or any reputed global PC company is hooked up and
turned on, customers are asked to register online. By making registration easy
and by offering customers a suite of value-added services such as additional
software, free software updates, and free electronic technical support,
manufacturers have been able to achieve 80 to 90 per cent response rates.
Information gathered during the registration process
dramatically improves a company's understanding of its customers and enables
them to better tailor their marketing programmes in order to sell products,
accessories, and services that often carry higher profit margins than the core
E-Business and CRM
The most important element of any CRM programme is accurate
and timely information. Whereas traditionally in the pre-internet days,
information was collected through focus groups, surveys, customer site visits,
and input from the sales force, now with the penetration of Internet, collection
of data has become more efficient and cost-effective.
E-business is fundamentally changing the way companies
operate. Many companies already are leveraging this electronic channel to gather
or enhance information about their customers. This is proving particularly
useful and effective for organizations that employ a multi-tiered sales model
involving resellers, dealers, or distributors.
The key driver behind the efforts to pursue a technological
driven CRM is the common sense realisation that targeting people appropriately
generates higher sales or deliver better value.
By integrating new Web-based front office tools and processes
with sales, service, marketing, channel, administrative, and back end financial
systems, companies are increasing their efficiency and effectiveness, making it
easier for them to do business with customers, partners, and suppliers.
Web-enabled CRM in the environment brings a wealth of
benefits to the organization, such as in-depth customer identification and a
higher level of customer/company interaction.
This means that once an organization does identify a specific
customer, it does so with richer data about that person. Getting to know
Web-enabled customers means moving them to familiar status as quickly as
possible to help solidify leads. Several methods have emerged for accomplishing
1. Premium content and services (Example: www.economist.com)
Many sites register their customers in order to let them
access support databases, promotions, product bulletins, and pertinent
information. Companies may not charge for this registration, but registration
enables companies to capture specific customer information and track these
specific customers while they are visiting.
2. Personalization (Example: www.amazon.com)
Another method is personalization, which lets companies
reduce clutter for customers. It helps companies in segmenting their customers
more effectively. From the customer's side, it reduces the time they would
otherwise spend in searching through enormous data. This technique also gives
organizations the power to provide specific, focused updates to repeat visitors
who already are registered and have personalised their profiles.
3. Automated customer advocates (Example: www.lastminute.com)
Agent technology can help customers with their service
updates and alert them of special promotions. Registered and personalized
customers can be led through the site, with maximum value to the customers and
maximum efficiency to the organization.
The Web-enabled company can establish a close, one-to-one,
specific relationship with customers. The technology does the hard work of
identifying the customer, offering the services desired, and ensuring that the
experience is rewarding enough that the customer will want to come back to the
It has to be kept in mind that Web-based CRM doesn't
completely remove the person to person interaction so fundamental to many
companies' sales processes and buying processes. In many businesses, Active CRM
technology means a contact with a web site requesting information is followed up
immediately by a phone call. Sales people are able to utilise the power of the
information available within the organisation and on the Internet to support
their preparation for a business meeting with a client.
As companies increasingly realise the importance of being
close to the right customer at the right time, luckily there have been a lot of
significant technological advances which are enabling customised value
propositions to be developed, communicated and delivered to customers.
The penetration of computer hardware, software and telephony
into supplier and customer environments has enabled closer relationships to be
developed. The real costs of computer memory and processing, and data and
process management software have fallen dramatically in recent years.
Making it all Work in a Synergy
In his article "Making CRM Work" (White Whale,
2000), James Pound elaborated on the key three elements that must be aligned to
ensure a successful CRM system:
•Designing a customer- strategy
•Customer management process need to be integrated
•Organisational changes to put into place
•Taking a holistic approach of the process view
•Culture change and competency development:
•Team members to be skilled in problem solving.
•Ability to interact with customers and new technologies.
Systems and Technology
•Systems strategy to be aligned with customers strategy
•Ability of all channels to manage knowledge about the customer.
Systems which are developed to support CRM should be piloted,
developed in a step by step approach and be justifiable on an ongoing basis.
The market for CRM solutions is booming with statistics
estimating a 20% compound annual growth rate of 58% until 2002. As corporations
around the world seek innovate and comprehensive products to enhance
productivity, increase marketing effectiveness and improve customer
satisfaction, CRM is increasingly proving to the solution to these challenges.
All the major consultancies including the big four firms now
provide comprehensive CRM solutions. There has been a spur in the number of
boutique consultancies specialising in CRM solutions.
From the vendor's side, CRM is flooded with vendors from all
areas. ERP vendors such as Oracle, PeopleSoft, and SAP are attempting to expand
their business as saturation is reached in the back-office market.
Companies such as Cisco, HP, IBM, Lucent, Nortell, Geneysis,
and Quintus are realizing the opportunity of the CRM trend. These businesses are
expanding to include the necessary software in order to provide CRM offerings.
Old call centers and customer service applications are being
revived and repositioned to also jump on the CRM bandwagon. Last, but not least,
even the giants such as Microsoft and Compaq are declaring their CRM strategy
and tying it into their other lines of business.
It has to be kept in mind that CRM is not a magic solution
and as such should not be treated as one. In order to implement a successful CRM
programme, a company needs to have a strategic alignment amongst its processes,
technology and strategy. It takes hard work and a tremendous amount of effort
from all involved developing a CRM system that adds to the value of the services
developed and ultimately improves the bottom line of the company.