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Customer Relationship Management
Part One:
Multiple Choices:
1. The extenttowhichcustomersrecognize andwillingtoacceptthisvariationiscalled:
a. Zone of tolerance
b. Zone of fitness
c. Zone of acceptance
d. None of the above
2. SERVQUAL isusedto measure service quality.(T/F)
3. SWICS standsfor………………………………………………………………………………
4. Real /perceivedandmonetary/nonmonetarycostsare termedasswitchingcosts.(T/F)
5. TARP standsfor ……………………………………………………………………………….
6. If the directcost be ‘a’, overheadcostbe ‘b’and profitmarginbe ‘c’ thenthe cost basedpricing
can be calculatedby:
a. a+b+c
b. a-b+c
c. a/b*c
d. None of the above
7. If the percentage change inqualitypurchasedbe ‘a’andthe percentage change inprice be ’b’
thenelasticityisgivenby:
a. a*b
b. a/b
c. a+b
d. a-b
8. If the actual revenue be ‘a’andthe potential revenue be ‘b’thenthe yieldcanbe givenby:
a. a-b
b. a+b
c. a/b
ExaminationPaper:CustomerRelationshipManagement
8
IIBMInstitute of BusinessManagement
d. b/a
9. Reactors make adjustmentsunlessforcedtodosoby environmental pressures.(T/F)
10. Leastprofitable customersare categorizedin:
a. Platinum
b. Gold
c. Iron
d. Lead
Part Two:
1. What do you understandby“CustomerGap”?
2. Write the difference betweenperceptionsof service qualityandcustomersatisfaction.
3. Write short“SERVQUAL” survey.
4. What are differenttypesof “Complainer”?
END OF SECTION A
Caselet1
Giordanoisa retailerof casual clothesinEastAsia,South-EastAsia,andthe Middle East.In 1999, it
operatedoutletsinChina,Dubai,HongKong,Macao,Philippines,Saudi Arabia,Singapore,South
Korea, and Taiwan.Giordano’ssalesgrew fromHK$712 millionin1989 to HK$3,092 millionin1999.
Thiscase study describesthe successfactorsthatallowedGiordanotogrow rapidlyinsome Asian
countries.Itlooksat three imminentissuesthatGiordanofacedinmaintainingitssuccessinexisting
marketsand in itsplanto enternewmarketsinAsiaand beyond.The firstconcernsGiordano’s
positioning.Inwhat ways,if at all,shouldGiordanochange itscurrentpositioning?The second
concernsthe critical factors that have contributedtoGiordano’ssuccess.Wouldthesefactors
remaincritical overthe comingyears? Finally,asGiordano’sseekstoenternew markets,the third
issues,whetheritscompetitivestrengthscan be transferredtoothermarkets,needstobe
examined. BeingEntrepreneurialandAcceptingMistakesasLearningOpportunities
The willingnesstotry newwaysof doingthingsand learningfrompasterrorswasan integral partof
Lai’smanagementphilosophy.The occasional failure representedacurrentlimitationandindirectly
pointedmanagementtothe rightdecisioninthe future.Todemonstrate hiscommitmenttothis
philosophy.Lai tookthe leadbybeinga role model forhisemployees“... Like ina meeting,Isay,
look, I have made thismistake,I’msorryforthat. I hope everybodylearnsfromthis.If Ican make
mistakes, whothe hell doyouthinkyouare that youcan’t make mistakes?”He alsobelieved
stronglyin empowerment–if everyone isallowedtocontribute andparticipate,mistakescanbe
minimized. Service Giordano’scommitmenttoexcellentservice wasreflectedinthe listof service-
relatedawardsithad received.Itwasrankednumberone bythe Far EasternEconomicReview,for
beinginnovative in respondingtocustomers’needs,forthree consecutive years –1994, 1995, and
1996. Andwhenitcame to winningservice awards,Giordano’sname keptcroppingup.InSingapore,
it wonnumerousservice awardsoverthe years.Itwasgiventhe ExcellentServiceAwardforthree
consecutive years:1996, 1997, and1998. It alsoreceivedthree tourismawards:“Store of the Year”
in1991, “Retailerof the Month” in 1993, and “BestShoppingExperience –RetailerOutlet”in1996.
These were justsome of the awards won byGiordano. How didGiordanoachieve suchrecognition
for itscommitmenttocustomerservice?Itbeganwiththe CustomerServiceCampaignin 1989. In
that campaign,yellow badgesbearingthe words“Giordano MeansService”were wornbyevery
Giordanoemployee.Thisphilosophyhadthree tents:We welcome unlimitedtry-ons;we exchange –
no questionsasked;andwe serve withasmile.The yellowbadgesremindedemployeesthatthey
were there todeliverexcellentcustomerservice. Sinceitsinception,several creative,customer-
focusedcampaignsandpromotionshadbeenlaunchedto extenditsservice orientation.For
instance,inSingapore,Giordano askeditscustomerswhattheythought wouldbe the fairestprice to
charge fora pairof jeansandchargedeach customerthe price that theywere willingtopay.This
one-monthcampaignwasimmenselysuccessful,withsome 3,000 pairsof jeanssold
everydayduringthe promotion.Inanotherservice-relatedcampaign,customersweregivenafree
T-shirtforcriticizingGiordano’sservice.Over10,000 T-shirtswere givenaway.Farfromonlybeing
anotherbrand-buildingcampaign,Giordanorespondedseriouslyto the feedbackcollected.For
example,the Giordanologowasremovedfromsome of itsmerchandise,assome customersliked
the qualitybutnot the “value –for– money”image of the Giordanobrand.
Againstadvice thatit wouldbe abused,Lai alsointroduceda no-questions-askedandno-timelimit
exchange policy,Whichmade itone of the few retailersinAsiaoutside Japanwithsuchagenerous
exchange policy.Giordanoclaimedthatreturnswere lessthan0.1percentof sales.
To ensure thateverystore andindividual employeeprovidedexcellentcustomerservice,
performance evaluationswere conductedfrequentlyatthe store level,aswell asforindividual
employees.The service standardof eachstore wasevaluatedtwice everymonth,while individual
employeeswere evaluatedonce everytwomonths.Internal competitionswere designedto
motivate employeesandstore teamstodo their bestinservingcustomers.Everymonth,Giordano
awardedthe “ServicesStar”to individualemployees, basedonnominationsprovidedbe shoppers.
In addition,everyGiordanostarwasevaluatedeverymonth bymysteryshoppers.Basedonthe
combinedresultsof these evaluations,the “BestServicesShop”award wasgiventothe topstore.
Aggressive advertisingandPromotion Fungsaid,“Giordanospendsalarge proportionof itsturnover
on advertisingandpromotions.Noretailer of oursize spendsasmuchas us.”For the past five years,
GiordanoinSingapore hadbeenspending aboutS$1.5milliontoS$2 millionannuallyonits
advertisingand promotionalactivities.Itwonthe Top AdvertiserAwardfrom1991 to 1994. Up to
June 30, 2000, total advertisingandpromotional expenditure forthe groupamountedtoHK$41.5
million,or3 percentof the group’sretail turnover.Inadditiontoits bigbudget,Giordano’s
advertisingandpromotionalcampaignswere creative andappealing.One such campaignwasthe
“Roundthe ClockMadnessShopping”withthe Singapore radiostationFM93.3on 1
May 1994. Differentclothingitemswereofferedata20 percentdiscountfrom12 A.M. to 1 A.M.,
whereaspoloshirtsandT-shirtsandT-shirtswere givena30 percentdiscountfrom1 A.M. to 2 A.M.
and thenshortsat a 40 percentdiscountfrom2 A.M. to 3 A.M. To keeplistenersawake andexcited,
the product categoriesthatwere onsale at eachtime slotwere releasedonlyatthe specifiedhour,
so that nobodyknewthe nextitemsthatwouldbe onthisspecial sale.Listenerstothe radiostation
were cajoled intocomingtoGiordanostoresthroughoutthe night(Ang1996). In 1996, Giordano
wonthe Singapore Ear Award.Its Englishradiocommercial wasvotedbylistenerstobe one of the
best,withthe most creative Englishjingle.
Anothersuccesswasits“SimplyKhakis”promotion,launchedinApril1999, whichemphasized
basic,street-culturestyle that“mixedandmatched”andthusfittedall occasions.InSingapore,
withindaysof itslaunch,the newline soldoutandhad to be relaunchedtwoweekslater.By
October1999, overa millionpairsof khaki trousersandshortshad beensold.Thissuccesscouldbe
attributedpartlytoits
clearlydefinedcommunicationsobjectives.AsGarrettBennett,Giordano’sExecutive Directorin
charge
of merchandisingandoperations,said,“We wantto be the keyproviderof the basics:khakis,jeans,
and
the white shirt.”Elsewhere inthe region,saleswere boomingforGiordano,despite onlymoderate
recoveryexperiencedinthe retail industry.Itsstrengthinexecutinginnovative andeffective
promotional
strategieshelpedthe retailertoreduce the impactof the Asiancrisisonits salesandtake advantage
of the
slightrecoveryseeninearly1999. Aggressive advertisingandpromotionsalsoplayedasignificant
role in
the successful remarketingof itscore brandprelaunchor introductionof sisterbrands,Giordano
Ladies’,
GiordanoJunior,andBluestarExchange.
Giordano’sGrowthStrategy
As earlyasthe 1980s, Giordanorealizedthatitwasdifficulttoachieve substantial growthand
economies
of scale if itoperatedonlyinHongKong.The keywasin regional expansion.By1999, Giordanohad
opened740 storesin 23 markets,outof whichGiordanodirectlymanaged317 stores.Until 2000,
four
marketsdominateditsretail anddistributionoperations –Hong Kong,Taiwan,China,andSingapore.
By
2000, Giordanohad895 Giordanostoresin25 markets.
Giordanocast its sightsonmarketsbeyondAsia,drivenpartiallybyitsdesireforgrowthand
partiallytoreduce itsdependence onAsiainthe wake of the 1998 economicmeltdown.In
Giordano’s
firstfull yearof operationinAustralia,salesturnoverreachedHK$29million(US$3.72 million) in
December2000. The numberof retail outletsincreasedfrom4in1999 to 14 in 2000. With the
openingup
of itsfirstretail outletinSydneyinSeptember2000, Giordanooutletscouldnow be foundinboth
Melbourne andSydney.Aspartof Giordano’sglobalizationprocess,itplannedtoopenupitsfirst
shops
inGermanyand Japan duringthe firsthalf of 2001. Currently,Giordanoplannedtofocusits
globalization
effortsonnewmarketslike Germany,Japan,Australia,Indonesia,andKuwait.
Whenthe crisismade Giordanorethinkitsregional strategy,itwasstill determine toenterand
furtherpenetrate newAsianmarkets.Thisdeterminationledtothe successful expansion of
Giordanoin
MainlandChina,whichsawthe retail outletsgrow from253 storesin1999 to 357 storesin2000.
Due to
the expandedretail networkinMainlandChinaandimprovementsmade tothe productline,sales
turnoverincreasedby30.9 percentto HK$712 million(US$91.3million)in2000. Facedwiththe
imminentaccessionof MainlandChinatothe WorldTrade Organization,Giordano’smanagement
foreseesbothchallengesandopportunitiesahead.InIndonesia,Giordanoopenedup7more stores
in
2000, bringingthe total numberof retail storesto10. These storescoveredareasinJakarta,
Surabaya,and
Bali.However,withthe political andsocial instabilityinIndonesia,coupledwiththe downward
pressure
on the Rupiah,Giordanowascautiouslyoptimisticaboutfurtherexpansionandplannedtoproceed
with
caution.InMalaysia,GiordanoplannedtorefurnishitsMalaysianoutletsandintensifyitslocal
promotional campaignstoconsolidateitsleadershippositioninthe Malaysiamarket.
Giordano’ssuccessin these marketswoulddependonitsunderstandingof them, andconsumer
tastes
and preferencesforfabrics,colors,andadvertising.Inthe past,Giordanoreliedonaconsistent
strategy
across differentcountries,andelementsof thissuccessful strategyincludeditspositioningand
service
strategies,informationsystemsandlogistics,andhumanresource policies.However,tactical
implementation(e.g.,promotional campaigns) wasleftmostlytolocal managersintheirrespective
countries.A country’sperformance (e.g.,sales,contribution,servicelevels,andcustomerfeedback)
was
monitoredbyregional headquarters(e.g.,Singapore forSouth-EastAsia)andthe headoffice inHong
Kong.Weeklyperformancereportswere made accessibletoall managers.Inrecentyears,it
appearedthat
as the organizationexpandedbeyondAsia,differentstrategieshadtobe developedfordifferent
regionsor
countries.
Questions:
1. How do youthinkGiordanohad/wouldhave toadaptitsmarketingandoperationsstrategiesand
tactics whenenteringandpenetratingyourcountry?
2. What general lessonscanbe learnedfromGiordanoforothermajorclothingretailersinyour
country?
Caselet2
In 2003, Jyske Bank Group’sprimaryoperationsconsistedof Jyske Bank,whichwasthe thirdlargest
bankin DenmarkafterDenDanske Bank and Nordea’sDanishoperations.JyskeBankwascreatedin
1967 throughthe mergerof fourDanishbankshavingtheiroperationsinJutland,Jyske beingDanish
for
“Jutlandish.”Jutlandwasthe large portion of Denmarkattachedtothe Europeanmainlandtothe
north of
Germany.Until the late 1990s, Jyske Bankwascharacterizedasa typical Danishbank:prudent,
conservative,well-managed,generallyunremarkable,andlargelyundifferentiated.
Beginninginthe mid-1990s,Jyske Bankembarkedona change processthat ledtoits nolongerbeing
characterizedaseitherunremarkableorundifferentiated.By2003 itsunique “flavor”of service
made it a
leaderincustomersatisfactionamongDanishbanks.Atthe heartof these changeswasthe bank’s
determinationtobe,inthe wordsof one executive,“the mostcustomer-orientedbankinDenmark.”
The
bankachieveditsgoal byfocusingonwhat itcalledJyske Forskelle,orJyske Differences.
Jyske Differences
Jyske DifferencesstemmedfromJyske Bank’score values.Thesestoodascentral tents,guiding
virtually
all aspectsof the organization’slife.Asone managerpointedout,the valueswere consistentwith
the
bank’sJyske heritage:“Really,whenwe startedtalkingabout ourcore values,andtheirJyskeness,
we
justbecame overtaboutvalueswe hadlongheld.”Jyske Bank’score values,publishedfor
employees,
customers,andshareholders,were thatthe bankshouls(1) have commonsense;(2) be openand
honest;
(3) be differentandunpretentious;(4) have genuine interestandequal respectforpeople;and(5)
be
efficientandpersevering.
The core valuesledmanagementtoreevaluate how the bankdidbusinesswithitscustomers.
Managers determinedthatif the bankwere tobe true to itsvalues,itwouldhave todeliverservice
differentlyfrombothhowithadinthe past,and how otherbanksdeliveredservice.Jyske
Differences
were thusoperational zedasspecificpracticesthatdistinguishedJyske Bank.
Competitive Positioning
Managers lookedtoJyske valuesanddifferencesforthe bank’scompetitive positioning.Thisprocess
was
aidedbya Dutch consultant,whose marketresearchindicatedthatJyske bank’score targetmarket
of
Danishfamiliesandsmall-to-mediumsizedDanishcompanies(earningswere 40% commercial,60%
retail) generallylikedthe ideaof a bankthat wasjyske.Additional researchsuggestedthatwhat
managers
describedasthe “hard factors” of price,product,and locationhadbecome sine quanoninthe eye s
of
customers.Incontrast,“soft factors”relatingtoan individual customer’srelationshipwithher
service
providersservedasthe basicfordifferentiation,specially,“beingnice,”“marketingtimeforthe
customer,”and“caring about the customerand hisfamily.”
Managers feltthatthe “genuine interest”componentof the bank’svaluesdictatedashiftfrom
traditional productfocusedsellingtoa customer-solutionapproach.Theycharacterizedthe new
approach
by contrastingthe statement,“Letme tell youaboutourdemand-depositaccount,”withthe
question,
“What you need?”
Althoughhe bank’score financial productsremainedessentiallysimilartothose of otherDanish
banks,3the waytheywere deliveredchanged.Thisrequiredsignificantchangesinthe branches,
both
ExaminationPaper:CustomerRelationshipManagement
12
IIBMInstitute of BusinessManagement
tangible andintangible,andhowtheywere supported.Toolsweredevelopedtosupportsolution-
based
service delivery.Forexample,newITsystemshelpedemployeestake customersthroughprocesses
to
determine theirneedsandfinal appropriate solutions.Inone,the customerandherbankerfilledout
an
on-line investorprofiletodetermine whatstyle of investmentproductswere mostappropriate for
her
basedon riskaversion,time frame,andreturngoals,amongotherfactors.A managercommented
that,
“The toolsthemselvesaren’tproprietary.We’ve seenotherfinancial serviceswithsimilarprograms
– it’s
howour people use themthatmakesthe difference.”Anotherstated,“Ourtoolsare designedeither
to
enhance ourabilitytodeliversolutions,ortoreduce administrative tasksandincrease the amount
of time
our people canspendwithcustomers –deliveringsolutions.”
Finally,beingovertlyJyske meantthatthe bankwouldnolongerbe a goodplace for anycustomer
meetingitsdemographiccriteriafortworeasons.First,deliveringthistype of servicewasexpensive.
As a
result,the bankchargeda slightpremium, andtargetedonlythose customers whowere lesslikelyto
representacreditrisk.Second,the bankwouldhave apersonality.Accordingtoone manager,“The
dangerinhavinga personalityis,someone,inevitably,won’tlike you.”Seniormanagement
considered
thisthe price of beingcandid,andwelcomedthe effectithadonsome customers.Forexample,
Jyske
Bank’scash/debitcardhad a picture of a blackgrouse on it,blackgrousesbeingfoundinJutland’s
rural
countryside.Whenafewcustomerscomplainedthatthe birddidn’tseemverybusiness-like,or
wasn’thip
(one was“embarrassedtopull itout at the disco”) managerswere happytoinvite themtoopen
accounts
at competitorinstitution.A managernoted:
Actually,if noone reactsto our materials,they’re notstrongenough.Some peopleshould
dislike us.Afterall,we’re onlyabout6%of the market.I don’twanteveryone tolike us –
We’re notfor everyone anddon’twanttobe.
Tangible Differences
AccountTeams:
Deliveringonthe bankscompetitive positioningrequiredanumberof tangible changesinitsservice
deliverysystem.Thesebeganwithassigningeachcustomerabranchemployee toserve asprimary
point
of contact.Overtime,managersdiscoveredthatthiscreatedproblems,becausecustomersoften
arrivedat
a branch whentheirservice providerwasbusywithothercustomersorotherwise unavailable.
Nevertheless,managerswerecommittedtoprovidingindividualizedservice.Accordingtoone,“How
can
we be honestinsayingwe care aboutcustomersas individualsif we don’tgetto know themas
individuals?Andwithoutknowingthem, we can’tidentifyandsolve theirproblems.”The solution
was
foundinaccount teams:eachcustomerwas assignedtoa small teamof branch bankers.These
employees
workedtogethertoknowandserve their customers,sittinginclose physical proximitywithinthe
branch.
Branch Design:
Jyske BankplannedtospendapproximatelyDKK750 milliontophysicallyredesignitsbranches
(most
of thishadbeenspentby2003). Danishobserversdescribedthe new branchesaslooking“likean
advertisingagency”or“a smart hotel.”These effectswere accomplishedthroughthe use of modern,
upscale
materialssuchas lightwood,warmcolors,andoriginal art.Branch redesignalsoincludedchanges
inthe waycustomersinteractedwiththeirbankers,made possiblebyarchitectural anddesign
changes.
For example,customerswaitingfortheirbankercouldhelpthemselvestofreshcoffeeinasmall part
of
the branch resemblingacafé.A customercommentedonthe café,“Itmeansmore than youinitially
think
– itmakesyoufeel welcome,itsaysthey’re reallyinterestedinme.”Fruitjuice wasavailable for
children,whocouldamuse themselveswithtoysinthe playcenter.Bankers’deskswere now round
tables,signifyingequally.A teamof three orfour bankerssatat a single large roundtable,with
customers
makingthemselvescomfortablebetweenthe bankers’workstations.Customerscouldsee bankers’
computerscreens,reinforcingopenness.Customers’abilitytoview the screensalsofacilitatedthe
use of
IT programs designedtostructure interactionsbetweenaccountteammembersandcustomers.As
equals,
bankersandcustomerssat inthe same type of chairs,and bankersnolongersat on a raiseddais,the
originsof whichwentbackto feudal timeswhenthe headsof certainpeople were supposedtobe
higher
than those of others.If a conversationrequiredmore discretion,speciallydesignedmeetingrooms
giving
the feelingof “home”were available.
ExaminationPaper:CustomerRelationshipManagement
13
IIBMInstitute of BusinessManagement
Intangible Differences
Deliveringthe bank’snewcompetitive positioningalsorequirednumerousintangible changesand
other
changesnot immediatelyvisibletothe customer.Managersstatedthatthe mostimportantof these
involvedtrainingandempoweringthose employeesclosesttothe customertoserve the customer.
Training
Before a branchwas remodeled,all staff tookpartinspecial trainingsessions.Theseincluded
teambuildingandcustomerservice,drawingonbestpracticesfromthe “traditional”retailsector.
ManagementStyle
A seniormanagercommented:
You can train andeducate all day long,butunlessyourmanagersandemployeesare committedto
Jyske
Differences,theyjustwon’thappen.Gettingthemrequiredagreatdeal of myeffort.
Whenwe startedthisprocessthere were timeswhenitwashard – reallyhard.The branch managers
didn’tthinkstrategically –theysat intheirofficesandfocusedontheirday-to-daywork.Iwanted
the
branch managerto getup on a hill andlookaround,to geta biggerpicture.Togetthemto change I
asked
themquestions:What’sthe market?Where –and who– are yourcompetitors?Whatare your
strengths
and weaknesses,howdotheytie toJyske Differences?Now,contrastwhatyouneedwithwhatyou
have.
Are the teamsin yourbranch livingupto the demands?Whatdo youneedtodo to ensure thatthey
will?
There will be resistance;understandwhere itiscomingfrom.One wayto deal withitisto make
agreementswithindividualsonhowtheywill developnew skills.If there isacomplete mismatchyou
may neednewteammembers,butforthe mostpart,you can coach your people throughthiskindof
change – youcan leadthem.
Accordingto anotherexecutive:
The branch managershave to be able to motivate employeestoworka little harder,anddifferently.
The
mostsuccessful give theiremployeesalotof latitude fordecisionmaking.Theydoalotof training,
80%
of whichison the job.Whenitisn’t,it’smostly role playing.There aren’tanyhigh-powered
incentivesto
offer,butthere are reallygoodtoolscomingoutof IT. it’smore how the branch managersdo itthan
what
employeestoshare the valuesandact on them.
A thirdnoted:
WhenI have a difficultsituationIlookforwhatI call a “culture carrier.”I try put thatpersonintothe
middle of it,because theyliveourvalues.WhatIusuallysee isthatthe otheremployeeswhoare on
the
fence aboutthe valuesstartto come over – theysee the example andtheylike whattheysee.This
leaves
the fewpeople whoreallydon’twanttobe Jyske on the outside,andtheytendnotto lastlong.
Most
people are willingtochange,butthey’ve gottobe supportedinthe process.
Conclusion
The bank’sleadershipbelievedthatJyske valuesanddifferences,andthe bank’svalue chain,
provided
waysto achieve the balance theywantedamongtheirthree stakeholders:employees,customers,
and
shareholders.Severalleaderscommentedthatwiththe large capital investmentsbehindthemasof
2003,
netincome wouldincrease considerablyinthe comingyears,assumingthe recessionof 2001 and
2002
was over.Shareholdershadreceiveda17.8% annual return ontheirinvestmentforthe tenyears
priorto
year-end2002. AndersDam’s2002-2003 goal for shareholderswastoincrease the bank’sstock
multiple
approximately40%to the level of Danske Bank’s,the largestandmostrichly-pricedbankin
Denmark.
Thiswas achievedinJuly2003.6 While the bank’sleadershipwaspleasedwiththe bank’ssuccess,
they
were more interestedindetermininghow the bankwouldremaininapositionof leadershipwhile
still
keepingthe interestsof itskeystakeholdersinbalance.
Questions:
1. What did Jyske Bankchange to enable ittodeliveritsnew competitive positioning?
2. How didJyske Bankimplementthosechanges?
END OF SECTION B
SectionC:AppliedTheory(30marks)
Thissectionconsistsof AppliedTheoryQuestions.•
Answerall the questions.•
Each questioncarries15 marks.•
Detailedinformationshouldformthe partof your answer(Wordlimit200 to 250 words).•
1. Choose a firmyou are familiarwith.Describe how youwoulddesignanideal service recovery
strategyfor thatorganization.
2. Discussthe customer’srole asa productive resource forthe firm.Describe atime whenyou
playedthisrole.Whatdidyoudo and how feel?Didthe firmhelpyouperformyourrole
effectively?How?

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Customer relationship management

  • 1. Customer Relationship Management Part One: Multiple Choices: 1. The extenttowhichcustomersrecognize andwillingtoacceptthisvariationiscalled: a. Zone of tolerance b. Zone of fitness c. Zone of acceptance d. None of the above 2. SERVQUAL isusedto measure service quality.(T/F) 3. SWICS standsfor……………………………………………………………………………… 4. Real /perceivedandmonetary/nonmonetarycostsare termedasswitchingcosts.(T/F) 5. TARP standsfor ………………………………………………………………………………. 6. If the directcost be ‘a’, overheadcostbe ‘b’and profitmarginbe ‘c’ thenthe cost basedpricing can be calculatedby: a. a+b+c b. a-b+c c. a/b*c d. None of the above 7. If the percentage change inqualitypurchasedbe ‘a’andthe percentage change inprice be ’b’ thenelasticityisgivenby: a. a*b b. a/b c. a+b d. a-b 8. If the actual revenue be ‘a’andthe potential revenue be ‘b’thenthe yieldcanbe givenby: a. a-b b. a+b c. a/b ExaminationPaper:CustomerRelationshipManagement 8 IIBMInstitute of BusinessManagement d. b/a 9. Reactors make adjustmentsunlessforcedtodosoby environmental pressures.(T/F) 10. Leastprofitable customersare categorizedin: a. Platinum b. Gold c. Iron d. Lead Part Two: 1. What do you understandby“CustomerGap”? 2. Write the difference betweenperceptionsof service qualityandcustomersatisfaction. 3. Write short“SERVQUAL” survey. 4. What are differenttypesof “Complainer”?
  • 2. END OF SECTION A Caselet1 Giordanoisa retailerof casual clothesinEastAsia,South-EastAsia,andthe Middle East.In 1999, it operatedoutletsinChina,Dubai,HongKong,Macao,Philippines,Saudi Arabia,Singapore,South Korea, and Taiwan.Giordano’ssalesgrew fromHK$712 millionin1989 to HK$3,092 millionin1999. Thiscase study describesthe successfactorsthatallowedGiordanotogrow rapidlyinsome Asian countries.Itlooksat three imminentissuesthatGiordanofacedinmaintainingitssuccessinexisting marketsand in itsplanto enternewmarketsinAsiaand beyond.The firstconcernsGiordano’s positioning.Inwhat ways,if at all,shouldGiordanochange itscurrentpositioning?The second concernsthe critical factors that have contributedtoGiordano’ssuccess.Wouldthesefactors remaincritical overthe comingyears? Finally,asGiordano’sseekstoenternew markets,the third issues,whetheritscompetitivestrengthscan be transferredtoothermarkets,needstobe examined. BeingEntrepreneurialandAcceptingMistakesasLearningOpportunities The willingnesstotry newwaysof doingthingsand learningfrompasterrorswasan integral partof Lai’smanagementphilosophy.The occasional failure representedacurrentlimitationandindirectly pointedmanagementtothe rightdecisioninthe future.Todemonstrate hiscommitmenttothis philosophy.Lai tookthe leadbybeinga role model forhisemployees“... Like ina meeting,Isay, look, I have made thismistake,I’msorryforthat. I hope everybodylearnsfromthis.If Ican make mistakes, whothe hell doyouthinkyouare that youcan’t make mistakes?”He alsobelieved stronglyin empowerment–if everyone isallowedtocontribute andparticipate,mistakescanbe minimized. Service Giordano’scommitmenttoexcellentservice wasreflectedinthe listof service- relatedawardsithad received.Itwasrankednumberone bythe Far EasternEconomicReview,for beinginnovative in respondingtocustomers’needs,forthree consecutive years –1994, 1995, and 1996. Andwhenitcame to winningservice awards,Giordano’sname keptcroppingup.InSingapore, it wonnumerousservice awardsoverthe years.Itwasgiventhe ExcellentServiceAwardforthree consecutive years:1996, 1997, and1998. It alsoreceivedthree tourismawards:“Store of the Year” in1991, “Retailerof the Month” in 1993, and “BestShoppingExperience –RetailerOutlet”in1996. These were justsome of the awards won byGiordano. How didGiordanoachieve suchrecognition for itscommitmenttocustomerservice?Itbeganwiththe CustomerServiceCampaignin 1989. In that campaign,yellow badgesbearingthe words“Giordano MeansService”were wornbyevery Giordanoemployee.Thisphilosophyhadthree tents:We welcome unlimitedtry-ons;we exchange – no questionsasked;andwe serve withasmile.The yellowbadgesremindedemployeesthatthey were there todeliverexcellentcustomerservice. Sinceitsinception,several creative,customer- focusedcampaignsandpromotionshadbeenlaunchedto extenditsservice orientation.For instance,inSingapore,Giordano askeditscustomerswhattheythought wouldbe the fairestprice to charge fora pairof jeansandchargedeach customerthe price that theywere willingtopay.This one-monthcampaignwasimmenselysuccessful,withsome 3,000 pairsof jeanssold everydayduringthe promotion.Inanotherservice-relatedcampaign,customersweregivenafree T-shirtforcriticizingGiordano’sservice.Over10,000 T-shirtswere givenaway.Farfromonlybeing anotherbrand-buildingcampaign,Giordanorespondedseriouslyto the feedbackcollected.For example,the Giordanologowasremovedfromsome of itsmerchandise,assome customersliked the qualitybutnot the “value –for– money”image of the Giordanobrand. Againstadvice thatit wouldbe abused,Lai alsointroduceda no-questions-askedandno-timelimit exchange policy,Whichmade itone of the few retailersinAsiaoutside Japanwithsuchagenerous
  • 3. exchange policy.Giordanoclaimedthatreturnswere lessthan0.1percentof sales. To ensure thateverystore andindividual employeeprovidedexcellentcustomerservice, performance evaluationswere conductedfrequentlyatthe store level,aswell asforindividual employees.The service standardof eachstore wasevaluatedtwice everymonth,while individual employeeswere evaluatedonce everytwomonths.Internal competitionswere designedto motivate employeesandstore teamstodo their bestinservingcustomers.Everymonth,Giordano awardedthe “ServicesStar”to individualemployees, basedonnominationsprovidedbe shoppers. In addition,everyGiordanostarwasevaluatedeverymonth bymysteryshoppers.Basedonthe combinedresultsof these evaluations,the “BestServicesShop”award wasgiventothe topstore. Aggressive advertisingandPromotion Fungsaid,“Giordanospendsalarge proportionof itsturnover on advertisingandpromotions.Noretailer of oursize spendsasmuchas us.”For the past five years, GiordanoinSingapore hadbeenspending aboutS$1.5milliontoS$2 millionannuallyonits advertisingand promotionalactivities.Itwonthe Top AdvertiserAwardfrom1991 to 1994. Up to June 30, 2000, total advertisingandpromotional expenditure forthe groupamountedtoHK$41.5 million,or3 percentof the group’sretail turnover.Inadditiontoits bigbudget,Giordano’s advertisingandpromotionalcampaignswere creative andappealing.One such campaignwasthe “Roundthe ClockMadnessShopping”withthe Singapore radiostationFM93.3on 1 May 1994. Differentclothingitemswereofferedata20 percentdiscountfrom12 A.M. to 1 A.M., whereaspoloshirtsandT-shirtsandT-shirtswere givena30 percentdiscountfrom1 A.M. to 2 A.M. and thenshortsat a 40 percentdiscountfrom2 A.M. to 3 A.M. To keeplistenersawake andexcited, the product categoriesthatwere onsale at eachtime slotwere releasedonlyatthe specifiedhour, so that nobodyknewthe nextitemsthatwouldbe onthisspecial sale.Listenerstothe radiostation were cajoled intocomingtoGiordanostoresthroughoutthe night(Ang1996). In 1996, Giordano wonthe Singapore Ear Award.Its Englishradiocommercial wasvotedbylistenerstobe one of the best,withthe most creative Englishjingle. Anothersuccesswasits“SimplyKhakis”promotion,launchedinApril1999, whichemphasized basic,street-culturestyle that“mixedandmatched”andthusfittedall occasions.InSingapore, withindaysof itslaunch,the newline soldoutandhad to be relaunchedtwoweekslater.By October1999, overa millionpairsof khaki trousersandshortshad beensold.Thissuccesscouldbe attributedpartlytoits clearlydefinedcommunicationsobjectives.AsGarrettBennett,Giordano’sExecutive Directorin charge of merchandisingandoperations,said,“We wantto be the keyproviderof the basics:khakis,jeans, and the white shirt.”Elsewhere inthe region,saleswere boomingforGiordano,despite onlymoderate recoveryexperiencedinthe retail industry.Itsstrengthinexecutinginnovative andeffective promotional strategieshelpedthe retailertoreduce the impactof the Asiancrisisonits salesandtake advantage of the slightrecoveryseeninearly1999. Aggressive advertisingandpromotionsalsoplayedasignificant role in the successful remarketingof itscore brandprelaunchor introductionof sisterbrands,Giordano Ladies’, GiordanoJunior,andBluestarExchange. Giordano’sGrowthStrategy
  • 4. As earlyasthe 1980s, Giordanorealizedthatitwasdifficulttoachieve substantial growthand economies of scale if itoperatedonlyinHongKong.The keywasin regional expansion.By1999, Giordanohad opened740 storesin 23 markets,outof whichGiordanodirectlymanaged317 stores.Until 2000, four marketsdominateditsretail anddistributionoperations –Hong Kong,Taiwan,China,andSingapore. By 2000, Giordanohad895 Giordanostoresin25 markets. Giordanocast its sightsonmarketsbeyondAsia,drivenpartiallybyitsdesireforgrowthand partiallytoreduce itsdependence onAsiainthe wake of the 1998 economicmeltdown.In Giordano’s firstfull yearof operationinAustralia,salesturnoverreachedHK$29million(US$3.72 million) in December2000. The numberof retail outletsincreasedfrom4in1999 to 14 in 2000. With the openingup of itsfirstretail outletinSydneyinSeptember2000, Giordanooutletscouldnow be foundinboth Melbourne andSydney.Aspartof Giordano’sglobalizationprocess,itplannedtoopenupitsfirst shops inGermanyand Japan duringthe firsthalf of 2001. Currently,Giordanoplannedtofocusits globalization effortsonnewmarketslike Germany,Japan,Australia,Indonesia,andKuwait. Whenthe crisismade Giordanorethinkitsregional strategy,itwasstill determine toenterand furtherpenetrate newAsianmarkets.Thisdeterminationledtothe successful expansion of Giordanoin MainlandChina,whichsawthe retail outletsgrow from253 storesin1999 to 357 storesin2000. Due to the expandedretail networkinMainlandChinaandimprovementsmade tothe productline,sales turnoverincreasedby30.9 percentto HK$712 million(US$91.3million)in2000. Facedwiththe imminentaccessionof MainlandChinatothe WorldTrade Organization,Giordano’smanagement foreseesbothchallengesandopportunitiesahead.InIndonesia,Giordanoopenedup7more stores in 2000, bringingthe total numberof retail storesto10. These storescoveredareasinJakarta, Surabaya,and Bali.However,withthe political andsocial instabilityinIndonesia,coupledwiththe downward pressure on the Rupiah,Giordanowascautiouslyoptimisticaboutfurtherexpansionandplannedtoproceed with caution.InMalaysia,GiordanoplannedtorefurnishitsMalaysianoutletsandintensifyitslocal promotional campaignstoconsolidateitsleadershippositioninthe Malaysiamarket. Giordano’ssuccessin these marketswoulddependonitsunderstandingof them, andconsumer tastes and preferencesforfabrics,colors,andadvertising.Inthe past,Giordanoreliedonaconsistent strategy across differentcountries,andelementsof thissuccessful strategyincludeditspositioningand service strategies,informationsystemsandlogistics,andhumanresource policies.However,tactical
  • 5. implementation(e.g.,promotional campaigns) wasleftmostlytolocal managersintheirrespective countries.A country’sperformance (e.g.,sales,contribution,servicelevels,andcustomerfeedback) was monitoredbyregional headquarters(e.g.,Singapore forSouth-EastAsia)andthe headoffice inHong Kong.Weeklyperformancereportswere made accessibletoall managers.Inrecentyears,it appearedthat as the organizationexpandedbeyondAsia,differentstrategieshadtobe developedfordifferent regionsor countries. Questions: 1. How do youthinkGiordanohad/wouldhave toadaptitsmarketingandoperationsstrategiesand tactics whenenteringandpenetratingyourcountry? 2. What general lessonscanbe learnedfromGiordanoforothermajorclothingretailersinyour country? Caselet2 In 2003, Jyske Bank Group’sprimaryoperationsconsistedof Jyske Bank,whichwasthe thirdlargest bankin DenmarkafterDenDanske Bank and Nordea’sDanishoperations.JyskeBankwascreatedin 1967 throughthe mergerof fourDanishbankshavingtheiroperationsinJutland,Jyske beingDanish for “Jutlandish.”Jutlandwasthe large portion of Denmarkattachedtothe Europeanmainlandtothe north of Germany.Until the late 1990s, Jyske Bankwascharacterizedasa typical Danishbank:prudent, conservative,well-managed,generallyunremarkable,andlargelyundifferentiated. Beginninginthe mid-1990s,Jyske Bankembarkedona change processthat ledtoits nolongerbeing characterizedaseitherunremarkableorundifferentiated.By2003 itsunique “flavor”of service made it a leaderincustomersatisfactionamongDanishbanks.Atthe heartof these changeswasthe bank’s determinationtobe,inthe wordsof one executive,“the mostcustomer-orientedbankinDenmark.” The bankachieveditsgoal byfocusingonwhat itcalledJyske Forskelle,orJyske Differences. Jyske Differences Jyske DifferencesstemmedfromJyske Bank’score values.Thesestoodascentral tents,guiding virtually all aspectsof the organization’slife.Asone managerpointedout,the valueswere consistentwith the bank’sJyske heritage:“Really,whenwe startedtalkingabout ourcore values,andtheirJyskeness, we justbecame overtaboutvalueswe hadlongheld.”Jyske Bank’score values,publishedfor employees, customers,andshareholders,were thatthe bankshouls(1) have commonsense;(2) be openand honest; (3) be differentandunpretentious;(4) have genuine interestandequal respectforpeople;and(5)
  • 6. be efficientandpersevering. The core valuesledmanagementtoreevaluate how the bankdidbusinesswithitscustomers. Managers determinedthatif the bankwere tobe true to itsvalues,itwouldhave todeliverservice differentlyfrombothhowithadinthe past,and how otherbanksdeliveredservice.Jyske Differences were thusoperational zedasspecificpracticesthatdistinguishedJyske Bank. Competitive Positioning Managers lookedtoJyske valuesanddifferencesforthe bank’scompetitive positioning.Thisprocess was aidedbya Dutch consultant,whose marketresearchindicatedthatJyske bank’score targetmarket of Danishfamiliesandsmall-to-mediumsizedDanishcompanies(earningswere 40% commercial,60% retail) generallylikedthe ideaof a bankthat wasjyske.Additional researchsuggestedthatwhat managers describedasthe “hard factors” of price,product,and locationhadbecome sine quanoninthe eye s of customers.Incontrast,“soft factors”relatingtoan individual customer’srelationshipwithher service providersservedasthe basicfordifferentiation,specially,“beingnice,”“marketingtimeforthe customer,”and“caring about the customerand hisfamily.” Managers feltthatthe “genuine interest”componentof the bank’svaluesdictatedashiftfrom traditional productfocusedsellingtoa customer-solutionapproach.Theycharacterizedthe new approach by contrastingthe statement,“Letme tell youaboutourdemand-depositaccount,”withthe question, “What you need?” Althoughhe bank’score financial productsremainedessentiallysimilartothose of otherDanish banks,3the waytheywere deliveredchanged.Thisrequiredsignificantchangesinthe branches, both ExaminationPaper:CustomerRelationshipManagement 12 IIBMInstitute of BusinessManagement tangible andintangible,andhowtheywere supported.Toolsweredevelopedtosupportsolution- based service delivery.Forexample,newITsystemshelpedemployeestake customersthroughprocesses to determine theirneedsandfinal appropriate solutions.Inone,the customerandherbankerfilledout an on-line investorprofiletodetermine whatstyle of investmentproductswere mostappropriate for her basedon riskaversion,time frame,andreturngoals,amongotherfactors.A managercommented that, “The toolsthemselvesaren’tproprietary.We’ve seenotherfinancial serviceswithsimilarprograms – it’s
  • 7. howour people use themthatmakesthe difference.”Anotherstated,“Ourtoolsare designedeither to enhance ourabilitytodeliversolutions,ortoreduce administrative tasksandincrease the amount of time our people canspendwithcustomers –deliveringsolutions.” Finally,beingovertlyJyske meantthatthe bankwouldnolongerbe a goodplace for anycustomer meetingitsdemographiccriteriafortworeasons.First,deliveringthistype of servicewasexpensive. As a result,the bankchargeda slightpremium, andtargetedonlythose customers whowere lesslikelyto representacreditrisk.Second,the bankwouldhave apersonality.Accordingtoone manager,“The dangerinhavinga personalityis,someone,inevitably,won’tlike you.”Seniormanagement considered thisthe price of beingcandid,andwelcomedthe effectithadonsome customers.Forexample, Jyske Bank’scash/debitcardhad a picture of a blackgrouse on it,blackgrousesbeingfoundinJutland’s rural countryside.Whenafewcustomerscomplainedthatthe birddidn’tseemverybusiness-like,or wasn’thip (one was“embarrassedtopull itout at the disco”) managerswere happytoinvite themtoopen accounts at competitorinstitution.A managernoted: Actually,if noone reactsto our materials,they’re notstrongenough.Some peopleshould dislike us.Afterall,we’re onlyabout6%of the market.I don’twanteveryone tolike us – We’re notfor everyone anddon’twanttobe. Tangible Differences AccountTeams: Deliveringonthe bankscompetitive positioningrequiredanumberof tangible changesinitsservice deliverysystem.Thesebeganwithassigningeachcustomerabranchemployee toserve asprimary point of contact.Overtime,managersdiscoveredthatthiscreatedproblems,becausecustomersoften arrivedat a branch whentheirservice providerwasbusywithothercustomersorotherwise unavailable. Nevertheless,managerswerecommittedtoprovidingindividualizedservice.Accordingtoone,“How can we be honestinsayingwe care aboutcustomersas individualsif we don’tgetto know themas individuals?Andwithoutknowingthem, we can’tidentifyandsolve theirproblems.”The solution was foundinaccount teams:eachcustomerwas assignedtoa small teamof branch bankers.These employees workedtogethertoknowandserve their customers,sittinginclose physical proximitywithinthe branch. Branch Design: Jyske BankplannedtospendapproximatelyDKK750 milliontophysicallyredesignitsbranches (most of thishadbeenspentby2003). Danishobserversdescribedthe new branchesaslooking“likean
  • 8. advertisingagency”or“a smart hotel.”These effectswere accomplishedthroughthe use of modern, upscale materialssuchas lightwood,warmcolors,andoriginal art.Branch redesignalsoincludedchanges inthe waycustomersinteractedwiththeirbankers,made possiblebyarchitectural anddesign changes. For example,customerswaitingfortheirbankercouldhelpthemselvestofreshcoffeeinasmall part of the branch resemblingacafé.A customercommentedonthe café,“Itmeansmore than youinitially think – itmakesyoufeel welcome,itsaysthey’re reallyinterestedinme.”Fruitjuice wasavailable for children,whocouldamuse themselveswithtoysinthe playcenter.Bankers’deskswere now round tables,signifyingequally.A teamof three orfour bankerssatat a single large roundtable,with customers makingthemselvescomfortablebetweenthe bankers’workstations.Customerscouldsee bankers’ computerscreens,reinforcingopenness.Customers’abilitytoview the screensalsofacilitatedthe use of IT programs designedtostructure interactionsbetweenaccountteammembersandcustomers.As equals, bankersandcustomerssat inthe same type of chairs,and bankersnolongersat on a raiseddais,the originsof whichwentbackto feudal timeswhenthe headsof certainpeople were supposedtobe higher than those of others.If a conversationrequiredmore discretion,speciallydesignedmeetingrooms giving the feelingof “home”were available. ExaminationPaper:CustomerRelationshipManagement 13 IIBMInstitute of BusinessManagement Intangible Differences Deliveringthe bank’snewcompetitive positioningalsorequirednumerousintangible changesand other changesnot immediatelyvisibletothe customer.Managersstatedthatthe mostimportantof these involvedtrainingandempoweringthose employeesclosesttothe customertoserve the customer. Training Before a branchwas remodeled,all staff tookpartinspecial trainingsessions.Theseincluded teambuildingandcustomerservice,drawingonbestpracticesfromthe “traditional”retailsector. ManagementStyle A seniormanagercommented: You can train andeducate all day long,butunlessyourmanagersandemployeesare committedto Jyske Differences,theyjustwon’thappen.Gettingthemrequiredagreatdeal of myeffort. Whenwe startedthisprocessthere were timeswhenitwashard – reallyhard.The branch managers didn’tthinkstrategically –theysat intheirofficesandfocusedontheirday-to-daywork.Iwanted the branch managerto getup on a hill andlookaround,to geta biggerpicture.Togetthemto change I asked
  • 9. themquestions:What’sthe market?Where –and who– are yourcompetitors?Whatare your strengths and weaknesses,howdotheytie toJyske Differences?Now,contrastwhatyouneedwithwhatyou have. Are the teamsin yourbranch livingupto the demands?Whatdo youneedtodo to ensure thatthey will? There will be resistance;understandwhere itiscomingfrom.One wayto deal withitisto make agreementswithindividualsonhowtheywill developnew skills.If there isacomplete mismatchyou may neednewteammembers,butforthe mostpart,you can coach your people throughthiskindof change – youcan leadthem. Accordingto anotherexecutive: The branch managershave to be able to motivate employeestoworka little harder,anddifferently. The mostsuccessful give theiremployeesalotof latitude fordecisionmaking.Theydoalotof training, 80% of whichison the job.Whenitisn’t,it’smostly role playing.There aren’tanyhigh-powered incentivesto offer,butthere are reallygoodtoolscomingoutof IT. it’smore how the branch managersdo itthan what employeestoshare the valuesandact on them. A thirdnoted: WhenI have a difficultsituationIlookforwhatI call a “culture carrier.”I try put thatpersonintothe middle of it,because theyliveourvalues.WhatIusuallysee isthatthe otheremployeeswhoare on the fence aboutthe valuesstartto come over – theysee the example andtheylike whattheysee.This leaves the fewpeople whoreallydon’twanttobe Jyske on the outside,andtheytendnotto lastlong. Most people are willingtochange,butthey’ve gottobe supportedinthe process. Conclusion The bank’sleadershipbelievedthatJyske valuesanddifferences,andthe bank’svalue chain, provided waysto achieve the balance theywantedamongtheirthree stakeholders:employees,customers, and shareholders.Severalleaderscommentedthatwiththe large capital investmentsbehindthemasof 2003, netincome wouldincrease considerablyinthe comingyears,assumingthe recessionof 2001 and 2002 was over.Shareholdershadreceiveda17.8% annual return ontheirinvestmentforthe tenyears priorto year-end2002. AndersDam’s2002-2003 goal for shareholderswastoincrease the bank’sstock multiple approximately40%to the level of Danske Bank’s,the largestandmostrichly-pricedbankin Denmark. Thiswas achievedinJuly2003.6 While the bank’sleadershipwaspleasedwiththe bank’ssuccess,
  • 10. they were more interestedindetermininghow the bankwouldremaininapositionof leadershipwhile still keepingthe interestsof itskeystakeholdersinbalance. Questions: 1. What did Jyske Bankchange to enable ittodeliveritsnew competitive positioning? 2. How didJyske Bankimplementthosechanges? END OF SECTION B SectionC:AppliedTheory(30marks) Thissectionconsistsof AppliedTheoryQuestions.• Answerall the questions.• Each questioncarries15 marks.• Detailedinformationshouldformthe partof your answer(Wordlimit200 to 250 words).• 1. Choose a firmyou are familiarwith.Describe how youwoulddesignanideal service recovery strategyfor thatorganization. 2. Discussthe customer’srole asa productive resource forthe firm.Describe atime whenyou playedthisrole.Whatdidyoudo and how feel?Didthe firmhelpyouperformyourrole effectively?How?