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 Operations Management.
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 common goal.
•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 organisation).
•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 communication.
Some of the examples are:
•Dell can manufacture twelve thousand different PC configurations
•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 pre-specified windows
•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 interests
•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 processes.
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 organization.
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 PC products.
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 that objective:
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 site.
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.