7-Business Mgmt - IJBMR - The enablers - Prakash - Arun Behera - Paid 7

International Journal of Business Management & Research (IJBMR) ISSN 2249-6920 Vol. 2 Issue 3 Sep 2012 63-73 Š TJPRC Pvt. Ltd.,

THE ENABLERS AND DETERRENTS FOR AN ORGANIZATION TO OPERATIONALIZE CUSTOMER RELATIONSHIP MANAGEMENT (CRM) IN INDIAN MANUFACTURING INDUSTRY 1 1

PRAKASH A. & 2SATYA SIDHARTHA PANDA

Research Scholar, CMJ University, Shillong, Meghalaya, SF2, SLV Classic Apts. #41/42, 1st Cross, Opp. BHCS, Subramanyapura Post, Uttarahalli Road, Bangalore 560 061, India

2

Visiting faculty, Christ University, Management studies, KHB Main Road, R .T. Nagar, Bangalore, India

ABSTRACT Satisfaction drives the engines for business to invest and reap benefits. Satisfaction makes companies to consider their customers as catalyst, towards their growth and prosperity. Most of all satisfaction brings life and business much closer towards moments of worthiness of the time spent.

Customer Relationship Management (CRM) has already made a big impact in the world of customer service and will continue to do so. As more and more companies become customer-centric those that fail to do so will lose competitive advantage. The real value of CRM lies in harnessing the potential of people to create a greater customer experience, using technology of CRM as the enabler. Value creation process is a critical component of CRM as it translates business and customer strategies into specific statements of what value is to be delivered to customers and, consequently, what value is to be delivered to the supplier organization. The value management process is crucial to transforming the outputs of the strategy development process in CRM into programmes that extract and deliver value. Only a balanced value exchange will ensure that both parties enjoy a good return on investment, leading to a good long term, profitable relationship. Achieving an ideal equilibrium between giving value to customers and getting value from customers is a crucial component of CRM. Increasing sophisticated approaches and techniques to customer segmentation, value proposition development and life time value calculation will help companies better in understanding how value should be created for customers and the enterprise.

In the recent past two decades Indian Industries have grown exponentially, and have become global companies. These Indian industries have also recognized competition from multi-national companies as well. Indian Industries have identified the need of the hour is to become more customer centric. The prime objective of Indian Industries is to focus on Customer Relationship Management and strategize to be competitive and sustain profitability.

Indian Industries have initiated to implement

Customer Relationship Management (CRM) systems by utilizing Information Technologies.

Customer Relationship Management could be viewed as Customer Information systems intended at enabling companies to realize customer centric objectives. Many companies in India have

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evinced interest and invested in CRM Systems which needs to proved as “Enablers or deterrents for an Organization to operationalize Customer Relationship Management (CRM) in Indian manufacturing industry”

KEYWORDS: Customer Convenience, Customer Relationships, Customer Retention, Customer Loyalty, Customer Profitability

INTRODUCTION CRM is much fragmented environment and mean differently to different business people. Few view CRM as the utilization of customer related information or data or knowledge to deliver appropriate products and services to the customers. Such CRM definitions has emphasized on the goals, logistics and complex characteristics of CRM.

CRM evolved from business processes such as Relationship

marketing and the increased emphasis on improved customer retention through effective management of customer relationships. Relationship Marketing emphasizes that customer retention affects company profitability, in that it is more efficient to maintain an existing customer relationship with a customer than create a new customer (Payne 1999). The Relationship Marketing to build CRM would be strong and needs the companies to explore strategies for maintaining or improving customer retention by adopting database technologies tools.

The advances in database technologies such as database

warehousing and data mining are crucial to the functionality and effectiveness of CRM systems. The repeat customers with multiple attributes are stored in the data warehouse. The technological advances in global networks, convergence and improved connectivity are the key growing factors e-business and CRM. The increase in use of digital technologies by customers and web based transactions is changing customer expectations resulting in CRM implementation in Companies.

The appropriate use of

automation systems such as IVRS (Interactive Voice Recording Systems) and Web based feedback/ a questionnaire is gaining popularity among customers and is cost effective. CRM is a collaboration of Voice, Data and Information leading to complex combination of business and technological factors, therefore CRM needs to be Company strategies.

CUSTOMER RELATIONSHIP MANAGEMENT (CRM) CRM is a vastly fragmented environment and mean different things to different people. Few managers view CRM as Information Technology or database marketing, and have become slogan to companies’ competitive strategy.

The Technology advancements in the recent times have enabled

business organizations to automate their processes and have witnessed varied experiences especially after the dotcom bust in 2001. The application aspects of CRM have been an evolving process including behavioral and economic facets. Marketing practices has also evolved continuously from Trading to industrial to market segments and now focusing to become customer centric oriented practice.

NON-TRADITIONAL COMPETITION Customer is the King” despite having “Non-traditional Competition” as one of the challenges.

The tremendous growth of interest and investments in Customer Relationship Management” (CRM)

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The Enablers and Deterrents for an Organization to Operationalize Customer Relationship Management (CRM) in Indian Manufacturing Industry

worldwide could be attributed to emergence of service and market economy, global orientation of businesses and aging population of advanced economies and disposable income of younger population.

With these factors the businesses are facing new challenges of the increased criticality of Customer Relationships.

Non-Traditional Competition such as a)

New Entrants from outside the industry – could be diversification of businesses;

beverage

manufacturer or products companies entering Aviation industry or telecom industry b) Substitute technologies such as Digital photography substituted conventional film photography c)

Suppliers as competitors, such as when buying industry has high margin and the supplier has low margin, which motivates the suppliers to sell their components/products entering retailing

d) Customer becomes competitor – emergence and consolidation of organized retailing. Retail giants such as Reliance or Food World compete with International Brands with their own private labels such as “Reliance” or “Food World” and many more.

MARKET MATURITY The focus has shifted from industry capacity creation to market creation. Globally excess capacity exits in industries such as agriculture, automobile, appliances, commodity utilization, and even telecom bandwidth. Therefore the industry capacity is now searching for markets. More companies from developed countries, facing slow or zero growth markets, now depend on repeat customers in their domestic market and have entered markets in India, also face competition from home grown companies.

MISALIGNMENT BETWEEN REVENUE AND PROFITS In the later part of 1900s companies realized that their efforts to acquire new customers and market share, also realized their built-in inefficiencies through costs, and customer subsidization. Hence companies initiated Cost reductions and Activity Based Costing. Studies by Shapiro (1987) and Foster (1996) analyzed cost of business with customer acquisition and comparing it to revenue generated by them.

If we analyze the transaction data and plot the revenue and profits by customers, it would be clearly visible that the misalignment between revenue and profits. The distribution is exponential, while costs are distributed in a linear relationship with customer size. The Revenues are sharply skewed from largest customers to the smallest customers, while costs tend to decline more gradually, a smaller number of highly profitable customers are subsidizing a large number of non-profitable customers. In India, this aspect could be seen in Banking-Financial sector or Automobile sectors and other industries too.

PERSPECTIVE OF CUSTOMER RELATIONSHIP MANAGEMENT CRM is highly fragmented environment and mean differently to different business people. Few view CRM is the utilization of customer related information or data or knowledge to deliver appropriate products and services to the customers. Such CRM definitions has emphasized on the goals, logistics and complex characteristics of CRM.

CRM evolved from business processes such as Relationship

marketing and the increased emphasis on improved customer retention through effective management of customer relationships. Relationship Marketing emphasizes that customer retention affects company

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profitability, in that it is more efficient to maintain an existing customer relationship with a customer than create a new customer (Payne 1999). The Relationship Marketing to build CRM would be strong and needs the companies to explore strategies for maintaining or improving customer retention by adopting database technologies tools.

The advances in database technologies such as database

warehousing and data mining are crucial to the functionality and effectiveness of CRM systems. The repeat customers with multiple attributes are stored in the data warehouse. The technological advances in global networks, convergence and improved connectivity are the key growing factors e-business and CRM. The increase in use of digital technologies by customers and web based transactions is changing customer expectations resulting in CRM implementation in Companies.

The appropriate use of

automation systems such as IVRS (Interactive Voice Recording Systems) and Web based feedback/ a questionnaire is gaining popularity among customers and is cost effective. CRM is a collaboration of Voice, Data and Information leading to complex combination of business and technological factors, therefore CRM needs to be Company strategies.

Review The business in India at present is a perfect competitive environment and winning new customers and retaining the existing customer’s demands use of technology.

Paul Grenberg in his

st

“CRM-Essential Customer Strategies for the 21 Century at the Speed of Light” writes “It’s no secret that I have always been a big believer in CRM. It was on a recent trip to Japan, however, that I was totally blown away by just how powerful it can be. As I left plane, I switched on my handheld. A few years ago, I would have been to check out what appointments I had lined up, or what e-mails I had received, but now – with the advances made in CRM technology and delivery – it meant finding out everything going on in my organization, I was informed about what had happened while I had been incommunicado: I accessed information about new deals with ADP and Sun Trust Bank – all before I made a phone call, before I checked e-mail, and before I got through Customs!”.

“With developments like these, it’s an exciting time in the world of CRM. As a former salesperson at Oracle, where I spent 13 years, I’ve long been fascinated with CRM provides: a 360 degree view into an organization that can be leveraged at every level to drive the return on investment of marketing programs and to increase efficiency of customer service”.

“More and more customers are realizing those benefits. Much as Paul Greenberg discusses in his book, the market has exploded. It’s rewarding to see the marketplace recognize and validate the benefits of CRM-enhanced productivity, competitive edge, and business success”.

“The increased popularity in CRM solutions makes sense: the products now offered are so vastly improved and the ROI is better than ever before. One key essential in the development of these offerings has been the power of Internet. As we all know, the rapid evolution of the Internet has profoundly impacted every industry. In our business, it’s forever changed the way we deliver and the way we use software applications. The new so-called on-demand or “no-software” CRM solutions eliminate the need for traditional software”.

“In the last, Customer Relationship Management (CRM) has evolved from being a buzzword to key element of firms’ competitive strategy” – G Shainesh and Jagdish N Sheth authors of “Customer

The Enablers and Deterrents for an Organization to Operationalize Customer Relationship Management (CRM) in Indian Manufacturing Industry

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Relationship Management – A Strategic Perspective” writes “ While technology based CRM solutions witnessed a roller coaster ride especially after dot-com bust in 2000 and 2001, the conceptual and application aspects of CRM concepts, including behavioral as well as economic aspects”. Further writes “CRM attempts to tie together, within a firm, people, processes and technologies that have, until now, been separate. This has not been easy. Managers ended up spending a lot of time grappling with change managerial issues, while implementing technology oriented CRM solutions”.

“Changing Mindsets, practices and systems are painstakingly protracted processes requiring perseverance and top management support” - a strategic perspective and a managerial orientation to explore and understand various facets of CRM.

CRM IMPLEMENTATION ISSUE Generally CRM implementation involves:

FORMATION PROCESS Defining the purpose (objectives) of engaging in CRM; selecting customer partners for appropriate CRM programs, developing programs or relational activity schemes. The overall purpose of CRM is to improve marketing productivity and enhance mutual value for relationship mutual benefit.

MANAGEMENT AND GOVERNANCE PROCESS Ensure smooth functioning of the CRM programs. Managers need to take decisions related to role specification, communication, common bonds, planning process, process alignment, employee motivation and monitoring procedures.

PERFORMANCE EVALUATION To help assess the programs and take corrective actions in terms of relationship governance or in modifying relationship marketing objectives and program features. The performance evaluation metrics for CRM program should reflect the defined objectives for multi dimensional customer loyalty and customer accountability program. CRM performance can be conceptualized as multi-dimensional measure having strategic, financial and marketing dimensions.

EVOLUTION

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Individual customer relationships and CRM programs evolve and change over a period of time due to dynamic nature of competitive markets. Decisions regarding the continuation, termination, enhancement, and modifications of the relationship programs to be undertaken regularly. Relationship performance and satisfaction influence the evolution of the CRM programs.

SCOPE OF CRM IMPLEMENTATION CRM program implementation is to be viewed as a discipline as well as set of discrete software technologies which will focus on automating and improving the business process associated with managing customer relationships in the areas of sales, marketing and customer service and support. The Organization planning to implement should aim to achieve the end goal of one-to-one marketing.

Understand and Differentiate Organizations need to understand their customers in order to have a relationship with them, Understandings of customers such as know their values, required types of services and their likes.

Profiling to understand demographics, purchase patterns and channel preferences.

Segmentation to identify logical unique groups of customers that tend to look alike and behave in a similar fashion Identification of actionable segments in a practicable manner Develop and Customize In a customer focused world, product and channel development has to follow the customer’s need, identify customer’s wants, determine the value and desire of the customer Organization need to develop products and channels based on customer needs and service expectations Challenges of customization based on the potential value delivery by the customer segment Interact and Deliver Customer do not just interact through normal marketing and sales channels, or media All areas of organization need to have easy access to relevant and actionable customer information All areas need to be trained to use customer information to tailor interactions based on both customer needs and potential customer value Acquire and Retain Learning about customers is a time consuming process – maintain interactions without interruptions Continuation of “deliver on customer’s definition of value” – efforts and cost involved Customer change as they move different stages of their lives, hence organization needs to modify its services and value proposition as they change Prioritizing the Changes The gaps between current stage of the organization as compared to intended ideal, optimal stage of the organization is looking for Cost to implement – initial one-time costs, and also anticipated ongoing expenses Overall benefit – some changes may have larger impacts on the organization’s ability to increase customer value and loyalty

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The Enablers and Deterrents for an Organization to Operationalize Customer Relationship Management (CRM) in Indian Manufacturing Industry

Feasibility – based on organization’s readiness, data and systems support, resource skills-sets and number of other factors Time Required – including the time necessary for training and addressing “cultural” change management issues related to specific strategy Involvement of Top Management - Creating an Action plan It is necessary in planning process a very detailed action plan be prepared with involvement of top management - Develop an Action Plan One of the top leader in the organization need to lead and drive the implementation process, monitor and ensure the CRM goal is achieved Leadership Action Plan needs to create additional strategies by identifying the actions necessary to lead the organizational change – Executives to identify their roles and responsibilities and actions necessary to eliminate barriers and nurture change in Organization process and strategies Selecting and Implementing a Technology - Few Key Issues Buy ready solution or customized solution, make decision evaluating adoptability of the solution based on set of criteria like: o

Flexibility in incorporating changes

o

Scalability with the growth

o

Adjustability with the existing architecture of systems (legacy systems)

o

Adjustability with the global best practices

Commercial impact evaluate in terms of the lifetime of the solution CRM Solution providers expertise in a specific industry vertical Solution providers implementation worldwide and also in Asia/India Solution providers focus on CRM, specifically in ERP (Enterprise Resource Planning) Solution providers credentials including financial, client list, life history, etc Preferred implementation partners Technical Hand Holding expected Suggested solution including implementation timeline Training and Maintenance

OBJECTIVE OF THE CRM IMPLEMENTATION STUDY “Enablers or Deterrents for an Organization to Operationalize Customer Relationship Management (Crm) in Indian Manufacturing Industry” 1.

“Enablers or deterrents for an Organization to operationalize

Customer Relationship

Management (CRM) in Indian Medium & Small Enterprises in particular” The Main Objectives of The Study are a.

To Analyze the causes for issues in CRM implementation

b.

Explore the actual problems faced by the company

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c.

To find out the possible ways to reduce the CRM implementation issues which will help them to update the processes and lead to customer relationship management for the success of business

d.

To provide suitable recommendations and suggestions to implement CRM strategically

India’s stable economic conditions with its affordable population and the demand for various products and services are emerging as growing market. Post implementation of WTO (World Trade Organization) agreement and post 2008 world economic downturn, the competition among Indian manufacturing companies has increased multi-faceted. The great modernization is the positive side of globalization, the financial crisis of 2008-09 and the recession followed were negative side. Indian Manufacturing Companies are competing to retain their market share domestically and are facing competition from the entry of multi-national companies. These homegrown companies need to retain their existing customers, look out for potential customers and also retain & increase profitability. For e.g. in FMCG there are thousands of customers, each with many attributes, such information is stored in a data warehouse that can hold millions of records. The technological advancement in global networks, convergence and improved connectivity are the key factors of growth of e-business and CRM. The increasing use of digital technologies by customers, particularly the Internet, is changing the business scenario in India and even the expectations of customers are scaling to higher levels. The appropriate use of automation technologies like IVRS (Interactive Voice Response Systems) and the web based FAQ (Frequently Asked Questions) is becoming popular with customers and is highly cost effective. This combination of business and technological advancements does result in changes company’s business strategies.

C R M Implementation Issues Generally CRM implementation involves business process change and the introduction or up gradation to new information technologies. The Senior Management of Indian Industries need to set the company’s vision for CRM and direction of strategies for CRM initiatives. These Senior Management leaders need to have authority and control of expenditure, setting and monitoring of performance of CRM initiatives. As CRM reaches all functional areas of business, the company/organization has to view and adopt holistic approach and integrate the customer oriented business processes and the integration of CRM systems. Holistic approaches to CRM help the company coordinate and effectively maintain the growth of various customer contact points (customer touch points) or channels of communication. The problems of channel conflict have to be identified where customer experiences differ depending on the sales channels.

Many organization outsource CRM solutions from few alternative solutions available and face critical issue during implementation. These CRM solution providers may not have core competency in a specific industry vertical which results in failure of CRM initiatives. Most of Indian companies do not have in-house capabilities to develop CRM solutions for its own use, even if the company wants to develop its CRM solution, it takes long-time to develop and later to implement which results in high costs and also technical skill set / technical personnel required for the development of customized CRM system may not be available as there is high attrition of technical people. CRM software development

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The Enablers and Deterrents for an Organization to Operationalize Customer Relationship Management (CRM) in Indian Manufacturing Industry

could be lengthy process and there may be positive aspects if the responses are received fast & appropriately from both internal & external environment of the company. CRM could be facilitating the outsourcing of more business operations directly to the customers such as self-tracking systems through internet which could make impact on enabling the “customer convenience” and huge annual cost savings for the company.

All Customers are not Profitable CRM is a useful tool in terms of identifying the right customer groups and for helping to decide which customers to serve and discord the customer who are not profitable to the company. Discarding of customers is necessary because of the high-maintenance, high cost involved in maintaining such relationship and the consequently drop in company’s profitability. The estimates have shown significant differences between the most profitable customers and the average.

Company could not have a

profitable relationship with all the customers and the practice of targeting customers with differentiated product or service is already spreading specially in banking and financial services such as banking, credit cards, insurances, etc., This aspect is to be recognized in other business sectors like manufacturing – automobiles, telecom, etc. To identify such customer groups the company need to adopt transaction and relationship marketing. The transaction customers are unpredictable, unstable and have little or no loyalty; such transaction customers would expect best prices always.

Relationship customers would

have more potential for loyalty and they may pay premium price for the products and services of the company. Once the relationship customers are recognized, they are unlikely to defect as long as they receive quality service. Relationship customers are also cost-effective than acquiring new customers as they already know and require less efforts to re-buy or buy company’s other products or services.

CRM is needed to retain and offer the Relationship customers the best possible services in order to avoid them to defect to competitors. Relationship customers are to be grouped as distinctive sub-groups as Top level Loyal customers, Medium Level Loyal customers and Low level loyal customers.

Loyalty among Customers Top level Loyal Customers Medium level Loyal Customers Low level Loyal Customers

Top Loyal, medium loyal and low loyal customers and extend services accordingly.

The

medium loyal customer sub-group probably buying products / services and would be giving good profits to the company.

These medium loyal customers are greatest potential source to growth, increase

profitability to the company. The low loyal customer extend only marginal profits to the company and are easier sub-groups of defecting to competitors. These low loyal customer sub-group may be giving business to competitors too. These sub-groups of existing customers may have potential for growth but

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the expenses and efforts involved in such percentage of customers, may deter the effectiveness of servicing exiting customers specially Top Loyal and Middle loyal customers CRM should be used to identify such customers and seriously consider the response required.

Transaction customers may contribute little or may have adverse effect (Word of Mouth). Therefore the consequence of CRM is invaluable for identifying the existing transaction customers and help the company to discard them at the earliest.

This may have an effect on prospects of company’s

profitability in short term.

Customers Also Switch To Competitors If the services extended are not satisfactory. For eg. in Indian banking and financial sector, a study by Times of India, December 19, 2011, has revealed that about seven reasons why bank’s customers would change / defect to competitor bank:

Unsuitable timings

Inadequate products

High Charges

Inefficient Service

Inconvenient location Moderate

Lower rates of interest Low

Weak financial situation High

Customers change the bank 7 Reasons (Times of India, 19, Dec. 2011)

The CRM strategies would be effective if the strategies deliver positive output. The companies may say that they are customer focus, but they need to be core of their operations. The CRM case studies that uses customer knowledge base to deliver relevant products and services discusses about the effective delivery of CRM strategies. (Refer CRM Case studies). CRM strategies could be displayed to improve profitability, then the organization essentially would be on right path and succeed. The Companies in this right path need to be have sufficient resources and time to CRM and learn by heart that the effective CRM strategies are iterative and continuous evolvement process.

CONCLUSIONS Generally CRM implementation involves business process change and the introduction or up gradation to new information technologies. The Senior Management of Indian Industries need to set the company’s vision for CRM and direction of strategies for CRM initiatives. These Senior Management leaders need to have authority and control of expenditure, setting and monitoring of performance of CRM initiatives. As CRM reaches all functional areas of business, the company/organization has to view and adopt holistic approach and integrate the customer oriented business processes and the integration of CRM systems. Holistic approaches to CRM help the company coordinate and effectively maintain the growth of various customer contact points (customer touch points) or channels of

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communication. The problems of channel conflict have to be identified where customer experiences differ depending on the sales channels.

Most of Indian companies do not have in-house capabilities to develop CRM solutions for its own use, even if the company wants to develop its CRM solution, it takes long-time to develop and later to implement which results in high costs and also technical skill set / technical personnel required for the development of customized CRM system may not be available as there is high attrition of technical people. CRM software development could be lengthy process and there may be positive aspects if the responses are received fast & appropriately from both internal & external environment of the company.

CRM could be facilitating the outsourcing of more business operations directly to the customers such as self-tracking systems through internet which could make impact on enabling the “customer convenience” and huge annual cost savings for the company.

REFERENCES 1.

CRM at the Speed of Light - Management Essential Customer Strategies for the 21st Century – Paul Greenberg; Tata McGraw Hill

2.

Customer Relationship Management A Strategic Perspective – G Shainesh and Jagdish N Sheth

3.

Case study, After the Sale is over ….– Theodore Levitt, Harvard Business Review, Sept-Oct 1983

4.

Customer Relationship Management - Ed Peelen; Pearson Education.