What CRM Is and What It Can Do for an Organisation - Essay Example

Executive Summary Gone are the days when customers always use to be at the receiving end and had to accept whatever was offered from the manufacturers. Down the time line the scenario has drastically changed. Especially with the advent of service led economic state of affairs has put customer at the centre of focus. Now whether it is a product or service, it must be developed, marketed and sustained the way customers want. Companies do no more perceive the selling process as just a transaction. Rather they consider each and every transaction as an opportunity for getting into a long term relationship with the customer. This phenomenon has taken a very strategic outlook and has been undertaken by the industrial and service sector as well versed and conceptualized procedure and is baptized in the industry as ‘Customer Relationship Management’ or in short as CRM. This strategic process acts as bridge between the fore end and back end of any company. Thus a company gets connected with the target customer starting from the inception of the idea of any product or services till the post use disposal of the same. But the incorporation of CRM is easier said than done. It needs a very strong commitment from the top management of any company and also needs a change in the cultural outlook. The way it is dealt by different companies depends on various factors like nature, size and scale, financial health of a company. It is also very important to have compatible and strong IT infrastructure. Without this CRM remains merely a concept. Thus it is needed that a company undertake a through cost benefit analysis. This assignment endeavors to highlight the importance of CRM keeping in view. The objective of this assignment is to thoroughly understand what CRM is and what it can do for an organisation. Table of Content S. No. Topic Page 1 Overview 3 2 Contexts 4 3 Requirements 5 4 Benefits 5 5 Risks 6 6 Conclusion 6 7 References 6 1. Overview One of the inclusive and holistic definitions of CRM is given by Francis Buttle. It says that: “CRM is the core business strategy that integrates internal processes and functions, and external networks, to create and deliver value to targeted customers at a profit. It is grounded on high-quality customer data and enabled by IT.” This definition clearly signifies that CRM is an integrative strategic process. It correlates the internal process with external network keeping customer in view. It is a fact based data driven IT enabled process. The aim of adopting CRM is not to reap huge benefits or profits. Rather it is undertaken to deliver value to the customer. The value proposition itself is very subjective in nature and hence it is obvious that for successful implementation of CRM, huge data pertaining to the customer is needed. The data need to be acquired, segregated, organised and retrieved through strong IT infrastructure. This needs a lot of resources to be put in. Hence there is a huge cost involved. Thus it is needed that a company must carry out a revealing cost benefit analysis so that adoption of CRM remains economically positive proposition for it. Doing so, CRM will prove to be a win-win proposition which will deliver value to the customer keeping the financial viability of the business. The same idea is also highlighted and validated by another definition of CRM by Fred Newell. This definition says that CRM is… “to add value to the customer relationship in the customer’s terms to maximise the value of the relationship to the customer for the customer’s benefit and the company’s profit.” The scope if CRM is also an important parameter to consider. CRM is not only for the existing customer base. Rather it incorporates past as well as potential customers also. The definition by Russell clearly signifies this scope. It says that: “The aim of CRM is to identify the profitable customer segments and to maximize the relationship with each entity within those segments. These may be current, past or potential customers. It may be B to B, B to C, or goods or services.” 2. Contexts 2.1. Business-to-Business versus Business-to-Customer The quantum of data offcourse changes as the modality of transaction changes. It’s huge for B-to-C as compared to B-to-B. But the vitality of the data is more prominent in the later one as each transaction is folds more than that of the former one. The nature of data changes from being microscopic to macroscopic. The extent of generalisation increases in the case of B-to-B. Moreover in case of B-to-B, the customers are technically more sound and competent. Thus the front end staffs for CRM have to be equally competent. The tenure of CRM propositions for B-to-B is also comparatively longer. 2.2. Goods based versus services based organisations The advent of CRM can be attributed to service based businesses. The customer touch points are more prominent and deliberate in case of services than in case of goods. Customer more often acts as a partial employee. This is because customer has to self serve the service oftenly. Thus CRM for service sector has more explicit benefits. The results of CRM initiatives are quite apparent. In case of goods based businesses, the extent of customer participation is relatively less. Hence CRM initiatives need not be that customised. 2.3. Commodities versus customised Commodities are generic in nature where as the customised are personalised as per the preference of the customer. The CRM is more crucial for customised products or services as compared to commodities which cannot be differentiated. It is very difficult for any company to brand any commodity and then to exploit the benefits of CRM. In case of customisation, the customer is delighted and the expectation level is high. Hence CRM efforts are more crucial. 2.4. Single focus versus diversified organisation The CRM efforts of a diversified organisation need to be segregated and hence it is more difficult to integrate a common CRM platform for the whole company. Thus in that case each strategic business units can have their own IT infrastructure for CRM and use it accordingly. This complexity is absent in case of a single focused company. The IT platform is very simple and cost effective. There is no need of strategic integration. 2.5. Long supply chain, versus selling direct to the customer The number of strategic partners involved with company having a long supply chain is more in number than for a direct selling company. The strategic points for data collection are more in the former. Thus more intervention points are required on its IT platform and hence more complex. The CRM efforts are shared among the partners. In case of direct selling it is very easy to collect the data. CRM efforts are sole responsibility of the company. 2.6. Product focused versus customer focused organisation The CRM efforts for a product focused company are aimed on improvement of the product whereas the in case of customer focused company aims the CRM effort for customer satisfaction. Apart form this there is not much difference in the context. 3. Requirements CRM is a strategic initiative. Thus the commitment should first start from the top management. There need to be some ground work done before adopting CRM. The prominent among such initiatives are cultural conditioning. The culture should be customer oriented. It has been found through various researches that the primary reason for failure of any such IT based initiatives is not technical but human related. Then comes acquisition of compatible IT infrastructure. The choice among the plethora of variants available should be made on the need based priorities of the company. It is equally important to condition the staff involved through proper training. The training will instill required skills in the CRM handling staff. 4. Benefits The benefits derived from implementation of CRM are immense. In fact it must be noted here that the benefits are perceived over long term. It would be unfair to expect any immediate benefits through CRM. Moreover the nature of the benefits is mostly intangible. The long term engagement of customers through CRM yields great economic profits through trust and loyalty. 5. Risks The industry is flooded with examples of CRM initiative failures. If not implemented properly, it can backfire and cause great economic havoc. A company can loose market share and can incur huge losses. The most significant threat for CRM initiative comes from human interface. First among them is the lack of commitment from top management. The poorly handled change management efforts are also directly attributable causes. Apart from it the technical compatibility is a big issue. Absence of staff training as discussed above is a big loop hole. 6. Conclusion CRM is a customer centric strategic initiative which aims for providing value to the customer. The accrual of economic benefit to the company is an ultimate outcome of it. The benefits are realized on long term basis and are mostly intangibles. The efforts for CRM implementation need strong IT infrastructure. Thus it needs carry out cost benefit analysis. Proper change management initiatives are needed for successful CRM efforts. The top management needs to be committed for bringing desired change in the cultural orientation of the organization. Human resource need to be adequately trained on the compatible IT setup. 7. References a) Baohong s, shibo li, and catherine z, 2006, “Adaptive” learning and “proactive” customer relationship management, journal of interactive marketing volume 20 / number 3–4 /summer / autumn 2006 b) Bulding W, Staelin R, Ehret M, & Johnston W. J., 2005, “A Customer Relationship Management Roadmap:What Is Known, Potential Pitfalls, and Where to Go,” Journal of Marketing Vol. 69 (October 2005), 155–166 c) Thompson S.H., Devadoss P.,Pan S.L., 2006, “Towards a holistic perspective of customer relationship management (CRM) implementation: A case study of the Housing and Development Board, Singapore,” Decision Support Systems 42 (2006) 1613–1627 d) Kumar V., Lemon K.N. and Parasuraman A., 2006 “Managing Customers for Value: An Overview and Research Agenda,” Journal of Service Research 2006; 9; 87 e) Chalmeta R., 2005, “Methodology for customer relationship management, “ The Journal of Systems and Software 79 (2006) 1015–1024 f) Payne A and Frow P, 2005, “A Strategic Framework for Customer Relationship Management,” Journal of Marketing Vol. 69 (October 2005), 167–176 Read More