Unit 7 CRM and Service Quality: Structure

Quality in Service Industries Unit 7
Unit 7 CRM and Service Quality
Structure
7.1 Introduction
Objectives
7.2 Concept of CRM
Steps involved in maintaining CRM
Objectives and benefits of CRM
Challenges in maintaining CRM
Concept of e-CRM and service quality
7.3 Types of CRM
Operational CRM
Analytical CRM
Sales Intelligence CRM
Collaborative CRM
7.4 CRM and Service Quality
7.5 Role of CRM in Service Sector
CRM in banking sector
CRM in hospitality sector
CRM in retail sector
CRM in Business Process Outsourcing (BPO) sector
7.6 Summary
7.7 Glossary
7.8 Terminal Questions
7.9 Answers
7.10 Case Study
Sikkim Manipal University Page No. 181

7.1 Introduction
In the previous unit, you studied about how service quality helps in
delivering customer satisfaction. In this unit, let us focus on the concept of
Customer Relationship Management (CRM) and how it relates to service
quality.
In today’s competitive business scenario, customers have numerous
alternatives for a single product or service. This allows them to switch their
loyalties from one brand to another, based on factors such as quality and
price. Therefore, organisations have realised that it is important to grab
customer attention by establishing a unique brand identity and providing
excellent customer service. For this, organisations need to interact with
customers regularly to understand their needs, tastes and preferences.
An important tool in this respect is CRM. CRM may be defined as a
business strategy that focuses on customer satisfaction and retention. It is a
multi-faceted system used for storing and analysing information related to
customers such as their name, contact history, needs, preferences, and
repeat purchases. This information enables organisations to take sound
business decisions by identifying customer needs and expectations and
fulfilling them. This in turn helps strengthen relationships with customers,
improve the level of service quality, and achieve greater customer
satisfaction.
In this unit, you will study the meaning of CRM, the types of CRM, the
relationship between CRM and service quality and the role of CRM in
different sectors.
Objectives
After studying this unit, you should be able to:
 define customer relationship management

 list the different types of customer relationship management
 describe the relationship between customer relationship management
and service quality
 discuss the role of customer relationship management in the service
sector

7.2 Concept of CRM

Customers define loyalty on their terms and not as per service providers.
That is the reason why the average organisation loses half of its customers
every five years. Even the customers who continue to shop with a particular
organisation are not loyal. The need for high quality services and
maintaining good relationships with customers are a fact of life for all service
providers. This brings in the need to implement strong CRM within an
organisation.
Here are a few salient facts about CRM:
 It refers to a business strategy that enables organisations to maximise

customer loyalty and retention through:
 Better serving the needs of their customers

 Improving customer service
 Achieving a high level of customer satisfaction
 It encompasses a number of technologies used to streamline customer
interaction, which help in finding, acquiring, and retaining customers
Some of the most popular definitions of CRM are given below.
According to Gartner, “A business strategy designed to optimise profitability,

revenue, and customer satisfaction.”
According to Price Waterhouse Cooper (PWC), “A business strategy that

aims to understand/appreciate, manage, and personalise the needs of the
organisation’s current and potential customers.”
According to Jill Dyche, “The infrastructure that enables the delineation and
increase in customer value and the correct means by which to motivate
valuable customers to remain loyal and buy again.”
According to Paul Greenberg, “A philosophy and a business strategy,

supported by a system and a technology, designed to improve human
interactions in a business environment.”

Thus, CRM is a process that focuses on maintaining relationships with

customers so that organisations have a clear knowledge of their needs,
wants, and purchasing patterns. This ultimately helps organisations identify
their weak points and excel in areas like sales, marketing, training, human
resource development, customer service, and quality improvement.
Take the example of an organisation that provides quality products or

services to its customers, but fails in maintaining good relationships with
them. This would directly affect the goodwill and profitability of the
organisation. CRM is a policy, philosophy, and coordinating strategy that
helps organisations bridge the customer service gap and helps to improve
customer satisfaction level.
To summarise, CRM helps a service organisation optimise customer service

and satisfaction levels. It helps an organisation better serve the needs of
customers, improve customer service quality, and achieve a high level of
customer satisfaction. All this helps in maximising customer loyalty and
retention.
7.2.1 Steps involved in maintaining CRM

In a service organisation, CRM is maintained by following the steps shown
in Figure 7.1:
Provide
Divide the basic Monitor
necessary
service into Conduct changes in the
infrastructure
separate service periodic surveys external
and advance
activities environment
technology
Figure 7.1: Steps for Maintaining CRM

Divide the basic service into separate service activities: Each core or
supplementary service provided by the organisation should be divided into
specific service activities or tasks. This will enable the management to:
 Set standards for each service activity
 Communicate the standards to its employees
 Train employees to maintain the standards

For example, at a restaurant, the basic service is to serve good food to

customers. However, there are separate service activities that constitute this
basic service. For example, a valet parks the customer’s car, an executive
at the reception welcomes the customer, the maître d' takes orders for the
food and drinks, the chef prepares the dishes, and the waiter serves the
customer’s table.
In this case, performance standards can be set for the reception executive,
the chef, and the waiter and they can be trained to match these standards.
When all the employees of a restaurant understand their basic function or
role, they perform their jobs better.
For example, the parking valet and the reception executive should welcome
customers with a smile, the maître d' should be courteous and help
customers select food and drinks depending on their taste, the cook should
prepare dishes to suit customer preferences, and the waiter should arrange
dishes on the table efficiently and attractively and serve customers
courteously and attentively.
This helps the organisation deliver excellent overall customer service and
maintain long term customer relationships.
Conduct periodic surveys: Conducting periodic surveys of customers and
employees will help an organisation understand customer expectations
better. It will also enable the management to understand how satisfied
customers are with existing services and identify areas for improvement.
Provide necessary infrastructure and advanced technology: Good
infrastructure and technology enable employees to deliver high quality
services to customers. For example, today many courier organisations
provide express delivery services with high security and an efficient tracking
system by leveraging modern infrastructure and high-end technology.
Monitor changes in the external environment: The management should
constantly monitor changes in the external environment such as increased
competition, technology changes, and changes in customer tastes and
preferences, and should introduce required changes to the organisation’s
service delivery process.

7.2.2 Objectives and benefits of CRM

The main objective of CRM is to connect to customers, understand their
tastes and preferences, and provide services accordingly. In addition, CRM
enables organisations to collect feedback from the customers, which in turn
helps organisations in improving product or service quality. The main
objectives of maintaining CRM in a service organisation are:
 Simplifying business processes

 Providing better customer service quality
 Acquiring new customers and retaining existing ones
 Improving organisational efficiency and productivity
 Reducing operational costs
Apart from this, CRM helps a service organisation in many ways. Following
are some of the benefits of CRM:
 Establishing effective communication channels that can improve overall

quality
 Creating detailed profiles of individual customers to provide customised

quality services
 Tracking new opportunities
 Enhancing customer loyalty
 Fulfilling customer requirements
7.2.3 Challenges in maintaining CRM

In today’s dynamic business scenario, CRM has become an integral part of
organisations, because customers are now more informed and aware than
they were in the past. For the same reason, they are also more demanding
now. They expect high quality service enriched with supplementary
services.
Customers desire convenience and speed of delivery at competitive prices.

For example, customers may want to use the same credit card or mobile

phone service anywhere in the world. However, it is not easy for a service
provider to maintain the same level and quality of service when a customer
is physically away from the service provider’s zone of operation.
There are a number of challenges in maintaining successful customer

relationships. Some of these challenges are shown in Figure 7.2:
Lack of guidance
Integration problem
Inaccurate data
Employee problems
Figure 7.2: Challenges in Maintaining Service Quality through CRM

Lack of guidance: It is essential for an organisation to establish clear
quality standards, which helps its employees in understanding the purpose
behind implementation of CRM. When these quality standards are not well
defined, it may lead to conflict among the employees, because they might
not be clear about their roles and responsibilities. This may further lead to
poor service quality. In such a case, CRM cannot be implemented properly
in the organisation. For example, a hotel manager instructs the staff at the
reception to answer telephones promptly. However, the manager does not
specifically say that no call should be missed or that the phone should be
picked up within three rings. This may be termed as misleading and
incomplete guidance, which could lead to poor service quality.
Integration problem: When various organisational functions and business

processes do not perform in co-ordination, they adversely affect the level of
service quality. This further affects the successful management of customer
relationships. For example, the marketing department of a retail
organisation may promise certain services that the store personnel are not
aware of. Consequently, customers do not get the promised services at the
store. In this example, poor integration of the marketing and operations

department may lead to poor service quality that may, in turn, affect
customer relationships.
Inaccurate data: This is one of the primary challenges in maintaining

customer relationships. Inaccurate data reduces the chances of high service
quality. For example, many pizza delivery organisations deliver orders
directly to customers’ addresses. For this, they ask the customer for all
necessary details such as order type, contact details, and delivery location.
Any mistake in filling data could lead the customer not only to cancel the
order but also to form a poor image of the organization’s service quality.
This may further affect the successful implementation of CRM. Inaccurate
data may lead to incorrect conclusions, which may in turn affect business
decisions negatively.
Employee problems: Sometimes employees think that CRM is not

beneficial for their success. This lack of support from employees leads to
poor service quality that ultimately becomes a hurdle in successful CRM
implementation. For example, if the sales staff at a retail store does not
attend to customers properly, it could lead to customers forming a poor
impression regarding customer service quality of the store.
7.2.4 Concept of e-CRM and service quality

In the context of e-business or transactions over an electronic medium like
websites, the concept of CRM changes to e-CRM, which essentially deals
with managing customer relationships over the Web. With the advent of the
Internet and electronic channels of communication, organisations are
increasingly adopting e-CRM as a mode of handling online customer
interactions.
The term e-CRM has been derived from e-commerce. It is all about
managing relationships with customers through Information Technology (IT).
E-CRM enables organisations to integrate their internal resources with their
external marketing strategies. This helps in identifying and fulfilling customer
needs in a better way, which, in turn, increases their overall efficiency and
the level of service quality.

According to William McKnight, “E-CRM is not just your call centre, self-
service Website, sales force automation tool, or the analysis of customer
purchasing behaviours. E-CRM is all of these initiatives working together to
enable you to more effectively respond to your customers' needs and to
market to them on a one-to-one basis. It's about the customer, not any
individual piece of technology. If we evaluate and understand how our
customers behave and how we need to respond to them, we can begin to
understand the component pieces of e-CRM.”
There have been several arguments associated with the concept of e-CRM.
Most people have the perception that e-CRM is just a marketing trick.
However, in reality, it is a way of electronically interacting with customers,
providing quality services to them and getting their feedback.
Online customer feedback enables organisations to understand the

requirements of customers and accordingly make improvements in their
products or services. Apart from this, it enables organisations to be aware of
the changing requirements of customers and reach out to target customers
through both traditional and electronic channels.
E-CRM allows customers to place online orders and make payments. For
example, if you need to buy an airplane or train ticket, you do not have to go
to the ticket counter or travel agent. Instead, you can visit the various online
ticket reservation sites, where you can book your air or train ticket and make
payments. Therefore, e-CRM enables organisations to respond to the needs
of customers more effectively.
Apart from this, application of e-CRM also helps different departments of an

organisation to perform their activities effectively. All this not only increases
the overall quality of products or services delivery, but also helps
organisations maintain good customer relationships. Some additional
benefits of e-CRM include:
Direct benefits: E-CRM helps an organisation reduce costs incurred on

manual processes, achieve optimum output, and improve business
performance, thereby improving the level of service quality. Moreover, e-

CRM enables organisations to reach out to the maximum number of

customers, which, in turn, increases overall organisational revenue.
Indirect benefits: E-CRM also has indirect benefits, such as reduced lead
times for ordering products, minimum risk of obsolete stock, customer
satisfaction, and effective communication. For example, achieving a high
level of customer satisfaction is not direct and cannot be attained in a single
day, but it can be experienced through an appropriate application of e-CRM.
Strategic benefits: There are long-term benefits of e-CRM that can be

achieved through close interaction with customers, suppliers, and
employees of an organisation. These benefits are often non-quantified,
unseen, and valuable. For example, e-CRM helps marketers formulate
effective marketing strategies, which may provide benefits in the long run.
Exhibit 7.1: CRM Software Packages and Influence

on Customer Experience
E-CRM has enabled organisations to reach out to a large number of
customers in a short period of time. Therefore, organisations use e-CRM
software to identify and fulfil the needs of its customers. Most vendors
provide e-CRM add-ons in CRM systems. The following are some of the
most commonly used CRM systems that have e-CRM add-ons:
Siebel: Serves the CRM needs of different industries, such as healthcare,
finance, telecommunications, insurance, and travel. Many banks prefer to
opt for Siebel for managing their e-finance operations, including
brokerage, net banking, insurance, and capital market.
Siebel also provides data warehousing solutions to organisations and

integrates itself with other software. There are a number of other
renowned organisations such as HP, MasterCard, Johnson & Johnson,
and BT, which are using Siebel’s CRM software for achieving maximum
output and developing long-term relationships with customers.

Oracle: Oracle Corporation markets a Relational Database Management

System (RDBMS). Oracle includes an e-business suite that supports
various CRM-related activities such as interaction management and
customer database management.
It has provided CRM solutions to various industries, including aerospace,

defence, transportation, and travel. Oracle CRM comes in different
business modules, which include: Oracle Marketing, Oracle Interaction
Centre, Oracle Support and Oracle Advanced Scheduler
MySAP CRM: Provides CRM solutions to various industries. SAP ERP is
another popular product from SAP. MySAP CRM SAP helps organisations
by:
 Providing useful information for interacting with customers across
various channels, such as fax, e-mail, chat, and SMS
 Supporting operational, analytical, and collaborative functions
 Fulfilling customer requirements starting from customer acquisition,
order processing, and customer support
The following table shows the capabilities of MySAP in different CRM
domains:
Table: Capabilities of MySAP in Different CRM Domains
Customer Business Order Customer Service
Engagement Transaction Fulfilment
Telemarketing E-selling Logistic Customer care
management
Lead Order Billing Field service and
management acquisition dispatch
Campaign Internet Credit E-service
management pricing management
E-marketing Internet Fulfilment Contact management
pricing analysis

PeopleSoft: Provides CRM solutions based on HTML, http, and XML. It

provides information about customer’s buying activities and helps
organisations track customer information in real time. Moreover, it reduces
operational costs by delivering maximum output.
Clarify: Refers to another CRM system that integrates the front office
operations of an organisation with its back-office operations. Clarify stores
customer information in an integrated form, so that the same information
can be traced for future references. CLARIFY eFrontOffice enables
financial organisations to have a clear view of their workflow processes.
Influence of CRM Software on Customer Experience
The implementation of CRM software can have a significant impact on

customer experience. CRM software is a business tool that an
organisation uses to collect and maintain information related to its
customers. This information can be related to the needs and preferences
of customers, customer contact history, last purchases, and
demographics. In other words, CRM software is a set of processes that an
organisation uses to establish contact with its existing and potential
customers. It helps an organisation understand the needs and
expectations of customers and fulfil their requirements. Apart from this,
CRM software enables an organisation to:
 Provide fast and error-free customer service
 Enhance customer profitability
 Build long-term relationship with its customers
 Maintain effective communication with customers
The benefits of CRM software that help an organisation gain positive
customer experience include:

Usability: Refers to the simplicity with which a CRM application can be

used. A CRM application with high usability requires less effort for
performing various tasks, be it updating the contact details of customers or
making an offer. It also creates a positive customer experience.
Flexibility: Refers to the ability of software to change easily, as per the

requirements of the user. A CRM application should not rely on specific
processes but depend on different alternatives for solving customer
queries. For example, if a customer calls an organisation’s call center for
some problem and receives a response that the process for solving the
problem is not available, then it may cause a negative customer
experience. Therefore, a CRM application should have multiple
alternatives for solving a particular problem.
High performance: Refers to one of the most important characteristics of

CRM software. The performance of a CRM system can be determined by
the integration and synchronisation of technologies. A CRM application is
said to be slow if a user needs to wait for an automatic e-mail to be
created and sent through the e-mail interface. Thus, everything should be
systematically defined.
Scalability: Refers to the ability of a CRM application to handle a large

amount of customer data in an efficient manner. An application that is
highly scalable will deliver a positive customer experience.
Thus, it is essential for an organisation to monitor the performance of its

CRM application against predefined performance goals, to ensure that the
performance remains acceptable.
Self Assessment Questions:

1. _________________ encompasses a number of technologies used
to streamline customer interaction, which helps in finding, acquiring,
and retaining customers.
2. The term e-CRM has been derived from _____________.

Activity 1:
Write an e-mail to an online shopping organisation regarding any product
or service related information. Analyse how their customer service
department replies to your e-mail. Note the major e-CRM techniques that
the organisation uses to maintain a high level of customer relationship.
7.3 Types of CRM

CRM is a powerful tool that helps organisations take sound business
decisions. However, the usage of CRM differs across organisations. For
example, some organisations may use CRM to enhance their sales
productivity, while other organisations may use it to improve the quality of
customer service. Based on its different applications, CRM can be classified
into four main categories, which are shown in Figure 7.3:
Types of
CRM
Operational Sales
Analytical Collaborativ
Intelligence
CRM CRM E-CRM
CRM
Figure 7.3: Types of CRM

Let us discuss these different types of CRM (as shown in Figure 7.3) in
detail in the next sections.
7.3.1 Operational CRM

Operational CRM provides support to the front-office operations of an
organisation, such as sales and marketing. Every interaction with customers
provides information about them, for example, the customer contact history.
This information is stored in the customer database for future reference.
Operational CRM helps organisations track information related to
customers. It can be further divided into two types, which are shown in
Figure 7.4:

Enterprise
Sales Force
Marketing
Automation
Automation
(SFA)
(EMA)
Figure 7.4: Types of Operational CRM

Enterprise Marketing Automation (EMA): This is a type of operational
CRM that helps an organisation perform various marketing activities such as
customer segmentation and event-based marketing. For example, EMA
enables an organisation to segment its customers, based on various factors
such as their income level, age, and tastes, and place its products
accordingly. Apart from this, it is used to create a database of existing and
potential customers and conduct marketing campaigns. This helps an
organisation improve its marketing efficiency.
Sales Force Automation (SFA): Refers to another type of operational
CRM that is designed to automate sales-related activities such as lead
generation and lead qualification. It helps an organisation prepare a list of
leads (potential customers) and assign these leads to salespeople. SFA
enables salespeople to then contact these leads, track their response, and
generate reports.
7.3.2 Analytical CRM

In the previous section, you studied that operational CRM is used to collect
information related to customers. Analytical CRM helps an organisation
analyse the information that has been collected and take various product-
related decisions. Customer information may be analysed for:
 Conducting marketing campaigns to improve marketing efficiency
 Executing customer campaigns such as customer acquisition and cross
selling
 Analysing customer behaviour to make service-related decisions
 Making various management decisions, such as financial forecasting
and customer profitability analysis

7.3.3 Sales Intelligence CRM

Sales intelligence CRM is a tool used by organisations to optimise and
evaluate key sales processes. It helps salespeople analyse information
related to customers and take various sales decisions. Apart from this, sales
intelligence CRM enables an organisation to track available sales
opportunities, enhance sales productivity, and provide better customer
service. This helps organisations maximise revenue.
Sales intelligence CRM is primarily designed for organisations involved in

the wholesale, distribution, and manufacturing segments. In today’s market
scenario, it helps organisations to track, cross-sell, switch-sell, and up-sell
opportunities by analysing customer buying trends.
7.3.4 Collaborative CRM

Collaborative CRM is an approach to managing customer relationships, in
which the various departments of an organisation such as sales, marketing,
and operations, share information that they collect while dealing with
customers. For example, the customer support department of an
organisation may share customer feedback with the marketing department
to determine the demand for products and services in the market. The main
aim of this collaboration is to improve the quality of customer service, which
helps in achieving a higher level of customer satisfaction.
Another function of collaborative CRM is that it integrates various channels

used for interacting with customers such as telephones, e-mail, voice chat,
application sharing, desktop sharing, file transfer, and collaborative
browsing. Generally, collaborative CRM is customised according to the
requirements of customers. It covers a wide area of operations such as the
consolidation of sales force, field service, help desk, and marketing
automation applications. The three main objectives of collaborative CRM
are:
 Facilitating effective customer interaction
 Reducing customer service costs

 Gathering information related to customers
The main drawback of collaborative CRM is that it is a time consuming

process, because coordination among different departments is required.
Exhibit 7.2: CRM, Business Intelligence, and Business Analytics

CRM includes services offered by the company to its customers. A
successful business depends on identifying the needs of customers and
fulfils these needs through superior products and services.
Organisations conduct market research to collect data regarding the
demographics, needs, and purchase habits of customers. After analysing
such data, organisations can identify the needs of customers. This helps
organisations achieve a competitive advantage and create customer
satisfaction.
Most of the current generation CRM software used for sales and
customer services are primitive and need to be upgraded with new
technologies. There is a requirement for deeper integration and an
intelligent customer service system that is much more than stitching
together of the modules. The following points depict how CRM is linked to
BI:
Guidance: BI often gives advice to the CRM department. For example, if
a sales manager needs to determine how to sell a specific product to a
particular customer, he/she can make use of BI as a tool to revise CRM
guidelines and provide assistance to sale representatives in
communicating with the customers.
Documentation: Sales managers document CRM data and combine it
with their BI data. For example, a sales manager can collect data about
the kinds of customers who purchased certain products and services. In
addition, he/she can analyse this data to understand the best practice of
selling products or services to similar customers in the future.
Inter-dependence: BI and CRM are dependent on one another, because
sales professionals demand information based on many inter-
departmental activities. For example, while working with a new customer,
the salesperson might discover that there is no past information to assist

in determining the most appropriate selling point with respect to that

customer. Owing to this, the sales professional is required to use BI to
understand how to approach the customer on the basis of data related to
other customers, who are from a similar industry, background, income
bracket, or region.
Launch of advertising and marketing campaigns: The association
between CRM and BI is useful in facilitating the advertising and marketing
departments in launching successful campaigns. Marketing professionals
can use CRM data to understand which products or services might
appeal to a particular kind of customer.
Generate new intelligence: CRM data can be used to generate new
intelligence. For example, a sales manager may identify a particular
product that can be sold successfully to people of a certain demographic.
In such a situation, he or she envisions that this data is valuable for BI. In
future, the sales manager might use this new BI insight to direct sales and
marketing more effectively.
Business Analytics
BI is not possible without Business Analytics (BA). BA covers the
business aspect of BI, which is to get the most value out of available data.
BI focuses on the IT aspect, with respect to how information should be
implemented and presented, and how it changes with time. BA enables
organisations to delve deep into their data and effectively utilise the data
in driving the business. BI is an umbrella term that covers data
warehousing, data mining, data integration, BA, enterprise
information/performance management, risk, and compliance.
BA utilises different tools and strategies to enhance the performance of
an organisation. These form a part of the management system and
represent the approaches that the organisation adopts. Business analysts
must be well aware of the techniques in BI to enable appropriate use of
the techniques in solving current organisational problems.. The major
benefits of BA are as follows:
 It simplifies performance management and thus, is adopted across
the entire organisation.

 It permits every employee to quickly understand targets, identify

problems, and find solutions that could help in making informed
decisions in a collaborative manner.
 It is a quick and easy approach to deliver desired performance
management throughout the organisation.

3. ______________ CRM provides support to the front-office operations
of an organisation such as sales and marketing.
(a) Sales intelligence, (b) Collaborative, (c) Operational, (d) Analytical
4. _______________ helps salespeople analyse information related to
customers and take various sales decisions.
5. Collaborative CRM is generally customised according to the
requirements of customers. (True/False)
Activity 2:
Form a group with your fellow participants and discuss the applicability of
various types of CRM in different service organisations. Use a few real-life
examples. Prepare a report based on your discussion.
7.4 CRM and Service Quality

Good quality services improve the chances of maintaining a high level of
customer relationship. Good customer relationships, in turn, help service
organisations get timely feedback and improve their service quality level.
Therefore, CRM and service quality are directly related.
Today, many customer-focused organisations judge the customer
expectations about service quality by focusing on the efficiency of
operations. Efficient service operations not only provide high quality
services but also help in maintaining good customer relationships by
providing them maximum satisfaction.
Customers usually evaluate the quality of services based on operational
criteria as shown in Figure 7.5:

Speed
Certainty
Ease
Personal
recognition
Figure 7.5: Operational Criteria for Evaluating

Quality of Services
Speed: Quality of services is often evaluated on the basis of speed. This
includes not only the time spent by a customer in defining, selecting,
ordering, and purchasing the desired service but also the time taken by the
service provider in delivering the service to the customer.
Certainty: Customers subconsciously compare the reliability of a service

with the information provided to them by the service provider about the
services. For example, when you courier a package, you expect it to reach
the destination within the timeframe promised by the courier service centre.
Ease: Customers also assess service quality based on the ease with which
the service transaction is carried out. For example, customers may prefer a
theatre that provides online or telephonic ticket booking, as it saves them
the effort of waiting in queue.
Personal recognition: People like to be recognised as unique individuals.

Customers like it if a service provider delivers services keeping in mind the
customer’s unique needs and wants. Such gestures from the service
provider generate customer delight and make them evaluate the service in a
positive light. For example, a customer who requested an extra pillow during
his first stay in hotel would be delighted when the service manager arranges
for the extra pillow on his next visit, without his asking for it.
Measures to manage Customer relationship:
In addition to increasing the effectiveness of the operational criteria

mentioned above, service organisations should learn to manage customer

expectations in order to improve service quality and maintain customer

relationships. Figure 7.6 shows a few measures that can help service
providers manage customer relationship:
Managing promises
Maintaining reliability
Maintaining effective communication
Figure 7.6: Measures to Manage Customer Relationship

Managing promises: The first step in managing customer relationships is
to manage the promises made by a service provider. In order to
successfully meet the service expectations of customers, service
organisations should promise only what they are confident of delivering,
rather than making promises that are difficult for them to fulfil. For example,
if a retailer promises to make a home delivery within 24 hours knowing that
it is not possible for them to deliver within that time, it could lead to losing
the customer and creating a negative impression about the service quality.
Maintaining reliability: Managing customer relationships depends largely

upon the reliability of service providers. Organisations that are considered
reliable can manage customer relationships with more ease than
organisations that fail to deliver promised services.
Service organisations should, therefore, ensure that they deliver on the

promises made to the customer. Further, they should emphasise and design
their service operations in a way that reflects reliability during the customer’s
service encounter.
Maintaining effective communication: Service organisations should

communicate effectively with customers to keep track of their expectations
and views about service quality. Communication can be initiated in two
ways, either from the organisation or from the customer.

A service organisation can initiate proactive communication to inform

customers about the latest developments in the organisation, which will help
it serve them better. For example, a hotel has introduced an online-booking
facility, enabling customers to reserve a room through the Internet. The
hotel can use its customer database to communicate the information
regarding the new facility to all its customers, irrespective of the number of
times they have stayed at the hotel. This action would delight the customers
that have stayed at the hotel only once or twice and increase the trust of
their regular visitors. Service organisations can also manage customer
relationships by asking for their suggestions or complaints about the
service.
To summarise, service quality and CRM are directly related. The higher the
service quality, the easier it would be to maintain a customer relationship.
With increasing competition and globalisation, the expectations of
customers are also increasing. This factor is causing service organisations
to improve their service quality level on the basis of operational criteria such
as speed, certainty, ease, and personal recognition.

6. Customers subconsciously compare the __________ of a service
quality with the information provided by the service provider.
7. Personal recognition by the service provider generates customer
delight and makes customers view the service in a positive light.
(True/False)
8. Many customer-centric organisations judge customer expectations
about service quality by focusing on the efficiency of business
operations. (True/ False)
Activity 3:
Visit two well-known restaurants in your vicinity and compare their CRM
and customer retention strategies. Prepare a bulleted list of your
observations in the chart given:

7.5 Role of CRM in the Service Sector

You are now acquainted with the relationship between service quality and
CRM. Let us now discuss how CRM helps various service sectors in
maintaining high quality services and customer relationships.
The service sector deals with the selling of intangibles such as trading,
transportation, communication, banking, finance, real estate, and business
consultancy services. It is a challenging task for service organisations to
create a positive experience for their customers. Therefore, most service
organisations such as banks, insurance providers, and hotels, have realised
the importance of CRM to maintain their service quality, acquire new
customers, retain the existing ones, and sustain long-term relationships with
them.
7.5.1 CRM in banking sector

In the past few decades, globalisation of banking services has increased
competition in the banking industry. Therefore, the banking industry has
experienced a shift from a profit-centric business model to a customer-
centric business model. In such a scenario, it is essential for banking
organisations to find innovative ways to attract and retain customers. CRM
is considered a powerful tool in the banking industry to acquire new
customers, retain existing ones, and maximise their lifetime value. CRM has
a wide array of applications in the banking industry.
A bank is a financial institution that is engaged in borrowing and lending

activities such as issuance of checks and debit and credit cards,
disbursement of bank statements, and online banking support. CRM
implementation not only helps a bank execute its borrowing and lending
activities, but also expand its customer base. Apart from this, CRM helps a
bank in storing, managing, and retrieving customer information. It also

enables a bank to sort its customers on the basis of their net worth,
creditworthiness, needs, and financial behaviour.
CRM enables a bank to manage seamless communication with its

customers. In addition, it helps a bank to perform its functions smoothly by:
 Accessing a complete profile of customers
 Identifying and coordinating all customer touch points
 Analysing customer data and transactions
 Increasing the response rate of customers
 Reverting to queries and addressing grievances
 Receiving customer instructions
The application of CRM in the banking industry is significantly different from

its application in other industries. This is because the banking industry deals
in money. Therefore, it needs to build a high level of trust among its
customers. Banks should assure customers that their money is safe.
For this, banks need to emphasise on quality customer service. In addition,

they have to make customers aware about the availability of different
services such as e-banking, net banking, and phone banking. So far, Indian
banking organisations, especially private banks, have been more successful
in adopting the CRM approach than public sector banks.
7.5.2 CRM in hospitality sector

CRM is a business strategy used by an organisation to better serve its
customers. In the hospitality sector, the reputation of organisations depends
on the way they serve their customers. For example, if customers visit a
hotel and receive excellent customer service in a pleasant ambience, they
may recommend the hotel to their friends and associates. Moreover, the
customer may turn into a loyal customer. Therefore, CRM plays a vital role
in the hospitality industry. Figure 7.7 shows the functions of CRM in the
hospitality industry:

Delivering quick and

personalised services
Incorporating
problem solving approach
Increasing customer
satisfaction and brand
image
Increasing service value
Boosting revenue
Figure 7.7: Functions of CRM in Hospitality Industry

Delivering quick and personalised services: CRM helps in generating a
positive customer response by providing fast and quality service. When
customers place an order at a restaurant, they expect to have quality food
served quickly. Each customer has a different set of preferences. Therefore,
it is important for the hospitality industry to deliver increasingly personalised
services to its customers. CRM helps the hospitality industry to understand
the requirements of individual customers and serve them accordingly.
Incorporating problem solving approach: CRM enables the front-office

staff to handle customer complaints effectively and resolve them in the best
possible way. For example, CRM helps a hotel keep tabs on all available
facilities given to customers.
Increasing customer satisfaction and brand image: CRM helps the

hospitality industry understand the needs of customers and serve them
accordingly. Moreover, it enables the hospitality industry to take customer

feedback on a regular basis, which increases the level of customer

satisfaction and enhances the brand image of an organisation.
Increasing service value: CRM helps the hospitality industry to

differentiate one service from another in the same category. It also helps the
hospitality industry make its services tangible. Customers generally want to
spend their money for services that are worth spending on. For example,
every restaurant offers food to its customers, but some restaurants may be
favoured by customers because of value added services such as ambience,
music, and LED television screens.
Boosting revenue: CRM helps the hospitality industry earn high revenue in
the form of increased sales, goodwill, customer retention, and word-of-
mouth publicity.
7.5.3 CRM in the retail sector

The retail sector deals in a large number of products depending on the
requirements of customers. CRM enables retailers to understand the needs
of customers and place their products appropriately. This helps in creating a
better customer experience. The importance of CRM in major retailing
decisions is covered in the following points:
Defining the target market: This is one of the most important retailing
decisions. CRM helps retailers identify the most valuable prospects,
understand their needs, and place their products accordingly. The decision
related to defining the target market is dependent on other retailing
decisions. For example, a retailer cannot make decisions such as product
assortment, store décor, and advertising, without defining the target market.
Assorting products: Assorting products means deciding on the product

breadth and depth. Product breadth is the variety of product lines offered,
whereas product depth is the number of each item or particular style of a
product. CRM helps retailers maintain strong customer relationships by
understanding the needs of customers and providing required product
attributes to them.

Deciding the prices: This acts as an important decision for attracting

customers. Customers can be sensitive to pricing decisions. Thus, prices
must be decided in relation to target markets and competition. Retailers
adopt different pricing strategies such as charging high mark-up, low mark-
up, and discounted pricing. CRM enables retailers to maintain strong
customer relationships, which further helps them track the level of customer
income and decide the prices of products accordingly.
Deciding the services mix: This is an important tool for differentiating one
retail store from another. It is the most important decision in building strong
customer relationships. Providing good quality service may help in attracting
and retaining a larger number of customers. Through maintaining good
customer relationships, CRM helps retailers keep tabs on customer service
requirements and manage pre-purchase, during purchase and post-
purchase activities.
Selecting communication channels: This plays an important role in

attracting customers. CRM helps retailers select effective communication
channels to reach out to the target customers on time.
7.5.4 CRM in Business Process Outsourcing (BPO) sector

Today, one of the world’s largest service sectors are BPOs. In recent years,
with rapid advancements in the fields of information and communication
technologies, there has been a radical change in business practices. Today,
organisations located in different parts of the world are able to
communicate, hold meetings, and conduct their business in real time,
without the barrier of distance coming in the way. They use a combination of
software, the Internet, and other sophisticated communication technologies,
to discuss and exchange business decisions. These strides in technology
have enabled organisations to source high-quality services affordably from
any other organisation located anywhere in the world. This process is
known as outsourcing.

Outsourcing involves contracting the responsibilities and operations of a

particular business process or function of one organisation to another
organisation. Businesses or organisations that offer these services from
outside are called business process outsourcing organisations or simply
BPOs. These BPOs provide a wide range of services, such as sales and
marketing, human resource management, IT, and financial accounting.
It is important for BPOs to build a rapport with customers, identify their

needs and expectations, and fulfil them. Maintaining successful
relationships with customers helps BPOs attract new prospects and gain
market share. In BPOs, CRM helps in:
 Collecting and analysing data related to customers
 Promoting sales by using the collected data
 Providing information related to previous deals with customers
 Interacting with customers and solving their queries
 Providing a quick response to the target audience
 Achieving a high level of customer satisfaction
 Reducing operational costs

9. CRM helps to differentiate one service from another in the same
category. (True/False)
10. _____________ involves contracting the responsibilities and
operations of a particular business process or function of one
organisation to another organisation.
11. In BPOs, CRM helps in providing quick response to the target
audience. (True/False)

7.6 Summary
Let us recapitulate the main points discussed in the unit.
 CRM is a tool or business strategy that helps an organisation to

strengthen relationships with its customers.
 The steps involved in maintaining CRM include dividing the basic

service into separate service activities, conducting periodic surveys,
providing necessary infrastructure and advanced technology, and
tracking changes in the external environment.
 The main objective of CRM is to connect to customers, understand their

tastes and preferences, and provide services accordingly.
 The major challenges in maintaining service quality through CRM

include lack of guidance, integration problems, inaccurate data, and
employee problems.
 The various types of CRM consist of operational CRM, analytical CRM,

sales intelligence CRM, and collaborative CRM.
 CRM and service quality are directly connected, because good quality
services improve the chances of maintaining a high level of customer
relationship.
 Customers evaluate the quality of services based on operational criteria,

which include speed, certainty, ease, and personal recognition.
 A few measures that can help service providers manage customer

relationships include managing promises, maintaining reliability, and
maintaining effective communication.
 CRM plays a significant role in different service sectors such as banking,

hospitality, retail, and BPO.

7.7 Glossary
Analytical CRM: A type of CRM that helps in analysing customer
information and taking business decisions.
Collaborative CRM: A type of CRM that deals with sharing of customer

information among different departments of an organisation.
CRM: A process that focuses on maintaining relationship with customers, so

that the organisations can get a clear picture of their needs, wants, and
purchasing patterns.
Operational CRM: A type of CRM that deals with the automation of

business processes.
Sales Intelligence CRM: A type of CRM that helps in evaluating the key
sales processes of an organisation and improving its sales productivity
7.8 Terminal Questions

1. Explain the concept of CRM.
2. Explain the steps involved in maintaining CRM in a service
organisation.
3. What are the major objectives of maintaining CRM in a service
organisation?
4. What are the various challenges in maintaining CRM?
5. What is operational CRM?
6. Write a short note on collaborative CRM.
7.9 Answers
Self Assessment Questions

1. Customer relationship management (CRM)
2. e-commerce
3. (c) Operational

4. Sales intelligence CRM

5. True
6. reliability
7. True
8. True
9. True
10. Outsourcing
11. True
Terminal Questions
1. CRM is a process that focuses on maintaining relationships with
customers, so that organisations have a clear knowledge of their needs,
wants, and purchasing patterns. Refer to Section 7.2 Concept of CRM,
which explains the concept of CRM.
2. The steps involved in maintaining CRM include dividing the basic

service into separate service activities, conducting periodic surveys,
providing necessary infrastructure and advanced technology, and
tracking changes in the external environment. Refer Section 7.2
Concept of CRM, which discusses the steps, involved in maintaining
CRM in a service organisation.
3. The main objective of CRM is to connect to customers, understand their

tastes and preferences, and provide services accordingly. Refer to
Section 7.2 Concept of CRM, which describes the major objectives of
maintaining CRM in a service organisation.
4. The major challenges in maintaining service quality through CRM

include lack of guidance, integration problem, inaccurate data, and
employee problems. Refer to Section 7.2 Concept of CRM, which
explains the various challenges in maintaining CRM.

5. Operational CRM provides support to the front-office operations of an

organisation. Refer to Section 7.3 Types of CRM, which elaborates on
the concept of operational CRM.
6. Collaborative CRM integrates various channels used for interacting with

customers and customises according to the requirements of customers.
Refer to Section 7.3 Types of CRM, which describes collaborative
CRM.
7.10 Case Study: Quality Aftersales Services at Titan: A CRM

Initiative
When the Tata group entered the market with Titan watches, they were
considered novice in the field. At that time, HMT was the leader with
automatic mechanical movement watches. The market segment for HMT
used to be the upper middle class and higher classes of the society. HMT’s
selling strategy was based on the assumption that they are not meant for
lower classes because quartz watches were perceived as costly at the time
when Titan was entering the Indian market. Titan adopted the concept of
classy show rooms and fashionable franchises by targeting all classes of
the public. Within a short period of time, Titan emerged as a leader.
The mission of Titan’s customer service is to: Provide superior values to

customers, Build healthy customer relationships
 Increase trust
 Build a stable brand value

The service philosophy of Titan (for after-sales services) is based on ‘3R’s,

which are shown in the following Figure:
Repair the hurt feelings of customers
Repair the watch
Repair the damage caused to Titan's reputation
Figure: Service Philosophy of Titan

Repair the hurt feelings of customers: The organisation treats customer
complaints on a high priority and treats each complaint with utmost care,
through quality interaction. For this, the organisation ensures that the
following aspects are taken care of:
 Recruiting the right frontline personnel and training them to provide

excellent customer service.
 Providing an excellent buying experience to the customers through a

customer friendly ambience. For this, Titan has opened a chain of
‘Watch Care Centres’ all over the country. When customers come to the
watch care centre, they get a similar ambience to what they received in
the showrooms. The centre provides facilities such as good seating,
magazines, AC, and clean drinking water, during their waiting time.
Repair the watch: To ensure a high quality of customer service, Titan

provides a fully equipped service centre with highly trained and experienced
service engineers. Every service engineer gets training in a training program
at the service headquarter. This training covers technical skills, product
knowledge, and complaint handling techniques. Titan service is ISO 9001
certified, which ensures that all the repair activities follow a systematic
process, measured through the ISO audit system.
There are certain key performance measures, such as:

 A watch that is 60% faulty should get repaired in less than 20 minutes.
 A watch that is 95% faulty should get repaired in less than 4 days.
Repair the damage caused to Titan’s reputation: Titan tries to repair any
damage caused to its reputation by handling the first two repairs to the
customer’s satisfaction.
Here are some additional measures Titan takes as part of customer

relationship management:
Measuring customer satisfaction: Customer satisfaction is measured

through a proper feedback process at service centres. The feedback is
reviewed and necessary corrective measures are taken. To motivate
customers for giving feedback, a reward system is also introduced, where
the best suggestions are displayed across the service network.
Educating customers about how to get quality services: Titan tries to

educate customers about product maintenance. They do it by ensuring the
availability of colourful leaflets at all service centres, for customers to pick
up. Apart from this, an illustrative description is provided in the operating
manual. To remain transparent, service charges for each type of repair are
displayed at all service centres.
Making service readily available: Titan tries to serve customers according

to their convenience. The Titan service centres are kept open till 7:00 pm.
For after-hour use, they provide an Interactive Voice Recording (IVR) facility
to their customers, where they can log their problems.
Acknowledging customer complaints: At Titan, they believe that a

complaint is a favour to the organisation because it provides an opportunity
to learn and improve. Thus, they give a thank you card to every service
customer, at all the Watch Care Centres, for giving the opportunity of
serving them. During festive seasons, additional greeting cards are given to
the customers for building relationships.

Keeping track of the service performance level: The organisation

contacts 10 percent of the total served customers after one month of their
service experience, to check the performance of the product and customer’s
satisfaction level. Free watch weeks are also conducted to provide service
access and build customer awareness on Titan services.
Questions:
1. With reference to the given case study, explain how high service quality
improves customer satisfaction.
2. How does Titan maintain CRM by providing high quality after-sales
services?
References
 Gronroos, C. (2007) Service management and marketing. Chichester,
West Sussex, England: J. Wiley & Sons.
 Mohanty, R. and Lakhe, R. (2006) TQM in the service sector. Mumbai:

Jaico Pub. House.
 Zeithaml, V. and Bitner, M., et al. (2013) Services marketing. New York:
McGraw-Hill Irwin.
E-references
 Administrator (n.d.). What is CRM - Basic Concepts of CRM Solutions.
[online] Retrieved from: http://goo.gl/GA981F [Accessed: 23 May 2013].
 Crmapp.com (2005). CRM: CRM Definition. [online] Retrieved from:

http://www.crmapp.com/crm.html [Accessed: 23 May 2013].
 Emeraldinsight.com (1991). Emerald | Service quality and customer

relationship management: interrelationships and implications. [online]
Retrieved from:
http://www.emeraldinsight.com/journals.htm?articleid=1742529&show=h
tml [Accessed: 23 May 2013].

 Gallopercrm.com (2012). The CRM Concept. [online] Retrieved from:

http://www.gallopercrm.com/en/galloper/concept.php [Accessed: 23 May
2013].
 Helium.com (2008). The concept of customer relationship management -

by Terry H Hill - Helium. [online] Retrieved from: http://goo.gl/X845Oq
[Accessed: 23 May 2013].
 Slideshare.net (n.d.). CRM - An introduction to the concept of CRM and

its .... [online] Retrieved from: http://www.slideshare.net/Tommy96/crm-
an-introduction-to-the-concept-of-crm-and-its [Accessed: 23 May 2013].

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Quality in Service Industries Unit 7

Unit 7 CRM and Service Quality

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 define customer relationship management

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7.2 Concept of CRM

Here are a few salient facts about CRM:

 It refers to a business strategy that enables organisations to maximise

 Better serving the needs of their customers

Some of the most popular definitions of CRM are given below.

According to Gartner, “A business strategy designed to optimise profitability,

According to Price Waterhouse Cooper (PWC), “A business strategy that

According to Paul Greenberg, “A philosophy and a business strategy,

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Thus, CRM is a process that focuses on maintaining relationships with

Take the example of an organisation that provides quality products or

To summarise, CRM helps a service organisation optimise customer service

7.2.1 Steps involved in maintaining CRM

Figure 7.1: Steps for Maintaining CRM

 Set standards for each service activity

 Communicate the standards to its employees

 Train employees to maintain the standards

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For example, at a restaurant, the basic service is to serve good food to

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7.2.2 Objectives and benefits of CRM

 Simplifying business processes

 Establishing effective communication channels that can improve overall

 Creating detailed profiles of individual customers to provide customised

 Tracking new opportunities

 Enhancing customer loyalty

 Fulfilling customer requirements

7.2.3 Challenges in maintaining CRM

Customers desire convenience and speed of delivery at competitive prices.

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There are a number of challenges in maintaining successful customer

Figure 7.2: Challenges in Maintaining Service Quality through CRM

Integration problem: When various organisational functions and business

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Inaccurate data: This is one of the primary challenges in maintaining

Employee problems: Sometimes employees think that CRM is not

7.2.4 Concept of e-CRM and service quality

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Online customer feedback enables organisations to understand the

Apart from this, application of e-CRM also helps different departments of an

Direct benefits: E-CRM helps an organisation reduce costs incurred on

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CRM enables organisations to reach out to the maximum number of

Strategic benefits: There are long-term benefits of e-CRM that can be

Exhibit 7.1: CRM Software Packages and Influence

Siebel also provides data warehousing solutions to organisations and

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Oracle: Oracle Corporation markets a Relational Database Management

It has provided CRM solutions to various industries, including aerospace,

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PeopleSoft: Provides CRM solutions based on HTML, http, and XML. It

Influence of CRM Software on Customer Experience

The implementation of CRM software can have a significant impact on

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Usability: Refers to the simplicity with which a CRM application can be

Flexibility: Refers to the ability of software to change easily, as per the

High performance: Refers to one of the most important characteristics of