CRM – Does theory work in practice?
There is great debate on the use of Customer Relationship Management in practice. There are two differing views and in this discussion document both points will be analysed with use of examples and the relevant theory emphasised by models and frameworks. “CRM is about having a good IT system, therefore, many firms believe they are carrying out CRM when in fact they are not” To answer the validity of this part, there needs to be investigation into the practical use of CRM. Black Horse financial services markets regulated products to the customers of Lloyds bank.
Special sales force advise more than half a million customers each year through its high street branches generating more than i?? 140million in premium income. Although there has been a huge increase in public awareness through media coverage for demand for life assurance and retirement provisions, research shows that the majority of the market prefer to interact face to face when taking out pensions. However to enable target markets to be selected and data regarding customers and their background would take days to be accessible.
The slow IT system needed to be improved and be user friendly by the marketers of the firm. After careful selection the Viper software was chosen. After a year Black Horse was happy with the system and the ability to quickly interrogate a large amount of information at a customer level. From this example we can see that the CRM software proved beneficial. But it seems that Black horse sought easier flow of information more than effective Customer relationship management. It is evident that they have only partly introduced a CRM into the business from the obvious advantages of the software.
I have a loan with Black horse and am a Lloyds customer. Although my account is updated as I grow older from a 16-19 to a student account there is very low relationship value with the bank. In this sector it is important to be effective in CRM. The Percy Loyalty model places banks and their services in the frustrated high risk section. Customers may be very dissatisfied by the lack of direct marketing like myself but have various ties with the bank which introduces a level of frustration into the situation.
Black Horse have not implemented CRM in all forms of its operations, instead only at obvious advantageous areas of business. Does this pose an area of concern? It some respects it may not be a problem. The organisation is simply introducing relationship values and market intelligence in sections where it is necessary and deriving their versions of CRM. Is it possible to simply cut and paste parts of CRM or is does it needed be wholly introduced for its true potential? Another useful example of CRM being used in the financial sector is the Royal & SunAlliance case.
They supply insurance and financial services and are highly respected due to their professionalism, teamwork and customer focus. In 1996 they identified the need for effective customer database capability (CPD). Again after careful selection the Viper software was chosen. CPD uses Viper today because of its ability to perform one-way analysis to help identify those variables that appear significant when explaining particular customer behaviour. Moreso analysis is typically focused on the individual customer but can be segmented on other grounds aswell.
This firm has been more customer orientated from the start. Royal & SunAlliance too this system once step further. Customers were split into ten groups which share similar profit per customer values. The top 10% of customers for this client are worth 38% of the total value and the bottom 10% made up minus 28% value. The diagram below shows how such a theory can be extremely advantageous in the fields of CRM. The second element of effective CRM is the need for a good quality customer database.
This system can store all sorts of data from their personal details to minute information of buying behaviour, consumption preferences and even attitudes. Database marketing has grown rapidly over years and is a significant necessity in direct marketing campaigns. Organisations will invest huge amounts to discover knowledge and information of their target markets and potential new segments. Originally Databases were basic IT systems holding basic customer information and was generally used by the operations department of firms rather than by marketers.
With the rise of loyalty cards and reward schemes companies can generate a huge degree of data about customers. This information has now been integrated into the marketing function very closely with the use of CRM. Viper software program from a company called SmartFocus is an established brand name and will be investigated later. Customer Relationship Management is therefore a fusion of these two concepts (Database marketing and relationship marketing). There are three levels in effective CRM: Strategic/organisational level
CRM mobilizes resources around customer relationships rather than product groups Management systems are organised on a customer basis Operational level Link all business processes that come into contact with the customer. Any efforts or messages sent to the customer are personalised and relevant to their needs. Continuity and consistency in all dealings with the customer. This achieves the flow of information to all company representatives of details regarding the customer’s needs and their records of interaction between the organisations.