Technological advancement and globalization of markets has created new
challenges which must be met in order to remain in business.
• Increasing competition: With deregulation of economies, privatization of
government monopolies and globalization of trade through the WTO regime,
greater supply capacity is chasing every unit of purchasing power.
• Smaller margins: With increased competition, margins between production
costs and customer value are being reduced. Companies can no longer afford
the luxury of large marketing budgets and inefficient selling.
New Challenges in Business - I
• Less differentiation among competitors: With technological
advancement in production processes and automation of some service
functions, there is a less differentiation among competing products.
Thus customer interaction and service assume greater importance for
gaining and maintaining a competitive edge.
• Multiple channels of communication with customers: With the
great strides that have occurred in communication technology, there is
a reduced opportunity for face-to-face interaction with the customer.
This makes it difficult to gauge immediate customer reaction and to
adjust further interactions with the customer to ensure a positive
New Challenges in Business - II
To meet these new challenges, companies need to:
• Fully understand the needs and expectations of customers.
• Improve efficiencies not only of production processes, but also of marketing, sales and
service processes for cost competitiveness.
• Provide greater value for money and enhance customer experience in all transactions
• Concentrate on developing relationships with customers rather than making individual
• Develop customer focus throughout the organization to sustain customer loyalty.
One of the mechanisms that can be used to help achieve this, is the adoption of
CUSTOMER RELATIONSHIP MANAGEMENT (CRM).
Meeting the Challenges
Customer Relationship Management is not really a new subject. Since the
1960s management Gurus like Peter Drucker and Theodore Levitt have
been propagating a gospel which can be summarized in one sentence:
“The true business for every company is to make customers, keep
customers and maximize customer profitability.”
This remained a theoretical concept taught at business schools, due to the
lack of tools to manage information about vast numbers of often widely
Origins of CRM
• Customer Relationship Management (CRM) came into the business lexicon
in the late 1990s and is one of the newer management mantras that include
ISO 9000, TQM, Six Sigma, Business Process Re-engineering etc.
• At its core, CRM is a set of business policies and processes designed to
acquire, retain and service customers.
• The aim of CRM is to increase customer satisfaction, revenue and business
efficiency by building strong customer relationships - with the entire
organization sharing and contributing to that view.
What is CRM - I
• According to a 2001 study by the Economist Intelligence Unit and
Andersen Consulting, about 70% of large companies are expected to
implement CRM during the next five years. Market experts predict that
billions of dollars will be spent on CRM tools and services to help
businesses in managing customer relationships through different
channels. But there is still confusion about the exact nature of CRM.
• What is CRM? Why the hype? What does CRM mean for you? Is it
applicable to your business? What are the returns? These questions
are addressed in the following slides.
What is CRM - II
Peter Keen, the well-known author of Shaping the Future (1991) and The
Process Edge (1997) defines CRM as:
“Customer relationship management is the commitment of the company to
place the customer experience at the centre of its priorities, and to ensure that
incentive systems, processes and information resources leverage the
relationship by enhancing the experience”.
“In terms of technology CRM is the design, communication and use of
information to ensure that customers develop more and more confidence,
trust and sense of personal value in their relationship with the company.”
CRM Definition I
According to CRM portal, CRM Guru.com, “CRM is a business strategy
to select and manage customers to optimize long-term value. CRM
requires a customer-centric business philosophy and culture to support
effective marketing, sales and service processes”.
It must be emphasized that core of CRM is creation of a customer focus
throughout the organization. This requires committed leadership and the
development of new work culture among people - which cannot be done
by IT tools alone.
CRM Definition II
CRM Definition III
A company embracing the CRM paradigm must:
• Identify its most profitable customers.
• Align its strategy to acquiring and retaining these customers.
• Improve all aspects of the customer experience by ensuring that
all functions, not merely customer facing ones, become
customer centric – based on characteristics of the profitable
customers or segments.
• Repeat the above steps periodically.
• In the following slides, we examine this definition in more detail.
CRM Definition IV
1. conduct profitability
2. identify attributes
of most profitable
strategy to focus on
4. modify processes to
create the best possible
experience for target
5. modify organizational
compensation to align
employees to strategy
6. measure for
& success metrics