It pays to call

Rukmini Priyadarshini

``Customer Relationship Management (CRM) is no more about technology any more than hospitality is about throwing a welcome mat on your front porch.'' - critique offered by an industry expert.

Despite this pronouncement, CEOs and businesses with a bad case of techno-itch have implemented CRM solutions in their organisations - at substantial cost and effort - without really understanding the whole chain.

Defined variously as getting intimate with the customer and a customer-centric business focus, CRM should be treated more as a strategy than a tool if businesses are to reap its considerable advantages. Organisations need to understand and predict the needs of current and future customers and CRM helps them do just that.

There could be various ways of getting such information, says D. Ashok of PriceWaterhouseCoopers, but the consolidation and use of that information is crucial to CRM strategy. ``CRM is all about keeping customers.''

According to Dick Lee, author of `The Customer Relationship Management Planning Guide', CRM is `a customer-centric business strategy, which drives changes in functional roles in the company, which demands re-engineering of work processes, which is supported, not driven, by CRM technology'. Of note is that the strategy comes first, the process next and the technology later. But that does not mean the technology is unimportant.

Indeed, the current state of our technology is largely responsible for all the talk of CRM. Were it not for the Internet and the tremendous power it confers, or can confer, on the customer, there would be no talk of CRM as we think of it today.

Try the attrition model

By building an attrition model, a business can predict which of its customers is likely to leave at a given time. That will enable it to take decisions on how much to spend on retaining which customer, says Gayathri Balaji, VP-CRM consulting, CustomerAsset. While the growth of CRM applications in 2000 was fuelled by technologies such as self-service, outbound mail campaign management, and site analytics, ``true CRM is when the front and back-office systems are integrated,'' she says.

The emerging aspect of CRM applications, analytics tools, enables sales-force automation, marketing, customer service and contact-centre software. The IDC expects analytics to be a foundation component of CRM applications this year.

All this is fine, but in these days of cost-cutting sparked by the IT slowdown why should anybody go for CRM when there is little talk about return on investment?

And so what if the CRM enthusiasts have got their spiel worked out all right:

That it costs seven times as much to acquire a new customer than to keep an existing customer.

That 75 per cent of your expenses in getting an Internet customer go towards getting them to your Web site;

That CRM implementation could result in revenue growth of the order of 50 per cent?

But Ashok feels the nicest thing about implementing a CRM package is that it makes business and financial sense in a down economy. ``Considering the costs of acquiring a new customer, spending a little on keeping your existing customer happy is a good return on investment''.

The beauty of CRM, Gayathri Balaji says, ``is that you can differentiate between your high-value and less valuable customers. By categorising them thus, you are able to focus your efforts on your high-end customers. That obviously makes more sense than treating all your customers alike.

This is especially true for financial services and banks, says Ashok. Since it takes the same amount of time to deal with a Rs 1,00,000 transaction as with a Rs 100 transaction, ``surely there is more sense in offering a bit more to the former customer than to the latter?'' It will take a 1,000 customers of the latter kind to offer the same value as the former. Necessarily, banks and financial entities would like to focus more on such high-value customers.

That is where CRM and the technology behind CRM come in: Once the front-end services to customers are integrated with the back-end databases and analytics, ``a business will be immediately able to differentiate between customers at the point of interaction and offer them greater value,'' Gayathri Balaji says.

Banks and telcos are especially keen to eliminate churn, and see CRM as the way to do so. Telcos have a high churn rate as do commodity products and some brands. For them, CRM can be a meaningful choice, Ashok says.

All very well. But what about the return on investment? It's good news again. For instance, by implementing an e-CRM solution, a telco was able to achieve revenue growth of 30-40 per cent and cost savings of 50-60 per cent, through a mix of call centre and data analytics, says Gayathri Balaji.

``Properly implemented, CRM can increase revenues, cut costs, add to information available about clients and enable decision-making,'' Ashok says. ``The profits, of course, depend on the products you are selling, the customers and the price points.''

In fact there have been no cutbacks on spending on CRM implementation, says Gayathri Balaji. ``CustomerAsset has found customers in the UK and the US continuing to spend on CRM solutions.'' The reason: CRM solutions offer value to businesses and, more important, can be implemented in various stages of increasing complexity and value. Each stage confers distinct benefits on the business, yet can be part of a total solution.

Businesses can start from scratch - toll-free numbers - and evaluate each subsequent investment decision, Ashok says. Then they can move on to outbound mail campaigns, research, call centre operations, and integrated operations complete with back-office analytics.

Typically, the data for decision-making could be distributed across the offices of the business or across information silos in the company or it could be centralised. To put a CRM solution in place for such organisations it should take not more than 3-5 months, Gayathri Balaji says. They can rapidly scale up collecting information and churning out analytics for an integrated CRM, she says.

However, implementing CRM projects without fairly rigorous ROI underpinnings can be a recipe for disaster, she says.

Be it to achieve a greater brand equity, larger market share or to enhance the effectiveness of a promotion, CRM solutions promise more value for every rupee spent, she says. ``in the end, that is what it is all about - the impact on the bottomline''.

CRM is not about technologies, it is about customer orientation. Yet the best way to get the most of customer orientation involves the use of CRM technologies.

Please e-mail us at eworld@thehindu.co.in if you have queries on computer usage or if you find an interesting way of using the computer.