PERIYAR INSTITUTE OF DISTANCE EDUCATION

(PRIDE)

PERIYAR UNIVERSITY
SALEM - 636 011.

M.B.A. LOGISTICS AND SUPPLY CHAIN MANAGEMENT

SECOND YEAR
PAPER – XV : CUSTOMER RELATIONSHIP MANAGEMENT

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Prepared by :
Dr. P. SRIRENGANAYAKI,
M.Com., M.Phil., Ph.D., MBA
Assistant Professor in Commerce
C.B.M College
Kovaipudur
Coimbatore – 641 042

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 M.B.A. LOGISTICS AND SUPPLY CHAIN MANAGEMENT
SECOND YEAR
PAPER – XV : CUSTOMER RELATIONSHIP MANAGEMENT

UNIT-I
CRM - Introduction -- Definition - Need for CRM -- Evolution
Customer Relationship Marketing -Complementary Layers of CRM - Customer
Satisfaction - Customer Loyalty - Product Marketing - Direct Marketing -
Significance and Importance of CRM in Modern Business Environment.

UNIT-II
Customer Learning Relationship - Key Stages of CRM - Forces Driving
CRM - Benefits of CRM - Growth of CRM Market in India - Principles of
CRM - Strategy for CRM - Process of segmentation - Choice of Technology -
Choice of Organizational Structure for CRM, Understanding Market
Intelligence Enterprises.

UNIT-III
CRM Program - Groundwork for Effective use of CRM - Information
Requirement for an Effective use of CRM - Components of CRM - Types of
CRM - Win Back, Prospecting, Loyalty, Cross Sell and Up Sell.

UNIT-IV
CRM Process Framework - Governance Process - Performance
Evaluation Process - Implementation of CRM : Business oriented solutions -
Project Management - Channel Management, CRM in Services. CRM in
Financial Services.

UNIT-V
Use of Technology in CRM -- Call Center Process - CRM Technology
Tools Implementation -Requirements Analysis - Selection of CRM Package -
Reasons and Failure of CRM - E Commerce in CRM

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TEXT BOOKS:
1. Customer relationship management, K.Balasubramaniyan, GIGO
publication, 2005.
2. Customer relationship management: modern Trends and perspectives.
3. S.Shanmugasundaram. Prentice Hall of India Pvt. Ltd.
4. Ramana V, Somayagulu G, Customer Relationship Management, Excel
Book 5.Govinda.K, Bhat, Customer Relation Management, Himalaya.

REFERENCE BOOKS:
1. The essentials guide to knowledge management - E-business and CRM
application. Amrit tiwana.Pearson education, 2001.
2. Kotler P, Marketing Management, Pearson Education
3. Saxena R, Marketing Management, Tata McGRaw Hill
4. E-business - Roadmap for success, Dr.Ravi Kalakota, Pearson education
asia, 2000.

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 UNIT – I

1.1 CRM - INTRODUCTION -- DEFINITION

1.2 NEED FOR CRM
1.3 EVOLUTION CUSTOMER RELATIONSHIP MARKETING
1.4 COMPLEMENTARY LAYERS OF CRM
1.5 CUSTOMER SATISFACTION
1.6 CUSTOMER LOYALTY
1.7 PRODUCT MARKETING
1.8 DIRECT MARKETING
1.9 SIGNIFICANCE AND IMPORTANCE OF CRM IN MODERN
BUSINESS ENVIRONMENT

1.1 CRM INTRODUCTION

Customer relationship management (CRM) is an approach to
managing a company’s interaction with current and future customers. It often
involves using technology to organize, automate, and
synchronize sales, marketing, customer service, and technical support.
Characteristics:
CRM is a customer-oriented feature with service response based on
customer input, one-to-one solutions to customers' requirements, direct online
communications with customer and customer service centers that are intended
to help customers solve their issues. It includes the following functions:
 Sales force automation, which implements sales promotion analysis,
automates the tracking of a client's account history for repeated sales or
future sales, and сoordinates sales, marketing, call centers, and retail
outlets.
 Data warehouse technology, used to aggregate transaction information, to
merge the information with CRM products, and to provide key performance
indicators.
 Opportunity management which helps the company to manage
unpredictable growth and demand, and implement a good forecasting
model to integrate sales history with sales projections.
 CRM systems that track and measure marketing campaigns over multiple
networks, tracking customer analysis by customer clicks and sales.

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 CRM is expanding outside of the core sales and marketing areas and
systems are available that incorporate support and finance data also into the
CRM view that a user gets, enabling a wider holistic view of a customer from
one screen for a user.
Impact on customer satisfaction:
According to Bolton, customer satisfaction has significant implications
for the economic performance of firms, because it has been found to increase
customer loyalty and usage behavior and reduce customer complaints, and the
likelihood of customer defection.
The implementation of CRM is likely to have an effect on customer
satisfaction for at least three reasons:
Firstly, firms are able to customize their offerings for each customer. By
accumulating information across customer interactions and processing this
information to discover hidden patterns, CRM applications help firms
customize their offerings to suit the individual tastes of their customers. This
customization enhances the perceived quality of products and services from a
customer's viewpoint, and because perceived quality is a determinant of
customer satisfaction, it follows that CRM applications indirectly affect
customer satisfaction.
Secondly, CRM applications enable firms to provide timely, accurate
processing of customer orders and requests and the ongoing management of
customer accounts. For example, Piccoli and Applegate (2003) discuss how
Wyndham uses IT tools to deliver a consistent service experience across its
various properties to a customer. Both an improved ability to customize and a
reduced variability of the consumption experience enhance perceived quality,
which in turn positively affects customer satisfaction.
Thirdly, CRM applications also help firms manage customer
relationships more effectively across the stages of relationship initiation,
maintenance, and termination.
Types
Call centers
As well as tracking, recording and storing customer information, CRM
systems in call centers codify the interactions between company and customers
by using analytics and key performance indicators to give the users information
on where to focus their marketing and customer service. The intention is to
maximize average revenue per user, decrease churn rate and decrease idle and
unproductive contact with the customers. CRM software can also be used to
identify and reward loyal customers over a period of time.

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 Growing in popularity is the idea of gamifying customer service
environments. The repetitive and tedious act of answering support calls all day
can be draining, even for the most enthusiastic customer service representative.
When agents are bored with their work, they become less engaged and less
motivated to do their jobs well. They are also prone to making
mistakes. Gamification tools can motivate agents by tapping into their visceral
need for reward, status, achievement, and competition.
Business-to-business
According to a Sweeney Group definition, CRM is "all the tools,
technologies and procedures to manage, improve, or facilitate sales, support
and related interactions with customers, prospects, and business partners
throughout the enterprise". It assumes that CRM is involved in
every B2B transaction.
Despite the general notion that CRM systems were created for the
customer-centric businesses, they can also be applied to B2B environments to
streamline and improve customer management conditions. For the best level of
CRM operation in a B2B environment, the software must be personalized and
delivered at individual levels.
The main differences between B2C and B2B CRM systems are as follows:[1]
 B2B companies have smaller contact databases than B2C.
 The volume of sales in B2B is relatively small.
 In B2B there are less figure propositions, but in some cases they cost a lot
more than B2C items.
 Relationships in B2B environment are built over a longer period of time.
 B2B CRM must be easily integrated with products from other companies.
Such integration enables the creation of forecasts about customer behavior
based on their buying history, bills, business success, etc.
 An application for a B2B company must have a function to connect all the
contacts, processes and deals among the customers segment and then
prepare a paper.
 Automation of sales process is an important requirement for B2B products.
It should effectively manage the deal and progress it through all the phases
towards signing.
 A crucial point is personalization. It helps the B2B company to create and
maintain strong and long-lasting relationship with the customer.

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Social media
Balaram (2010) presented evidence of a significant increase in the use
of social networking sites, especially among young people. This has caused
companies to use these sites to draw attention to their products, services and
brands, with the aim of building up customer relationships to increase demand.
Some CRM systems integrate social media sites like Twitter, LinkedIn
and Facebook to track and communicate with customers sharing their opinions
and experiences with a company, products and services.
Enterprise Feedback Management software platforms such
as Confirmit, Medallia, and Satmetrix combine internal survey data with trends
identified through social media to allow businesses to make more accurate
decisions on which products to supply.
Other types
Some CRM software is available as a software as a service (SaaS),
delivered via the internet and accessed via a web browser instead of being
installed on a local computer. Businesses using the software do not purchase it,
but typically pay a recurring subscription fee to the software vendor.
For small businesses a CRM system may consist of a contact manager
system which integrates emails, documents, jobs, faxes, and scheduling for
individual accounts.[1] CRM systems available for specific markets (legal,
finance) frequently focus on event management and relationship tracking as
opposed to financial return on investment (ROI).
Customer-centric relationship management (CCRM) is a nascent sub-
discipline that focuses on customer preferences instead of customer leverage.
CCRM aims to add value by engaging customers in individual, interactive
relationships.
Systems for non-profit and membership-based organizations help track
constituents, fund-raising, Sponsors demographics, membership levels,
membership directories, volunteering and communication with individuals.[1]
Adoption issues
In 2003, a Gartner report estimated that more than $2 billion had been
spent on software that was not being used. According to CSO Insights, less
than 40 percent of 1,275 participating companies had end-user adoption rates
above 90 percent. Many corporations only use CRM systems on a partial or
fragmented basis.
In a 2007 survey from the UK, four-fifths of senior executives reported
that their biggest challenge is getting their staff to use the systems they had
installed. 43 percent of respondents said they use less than half the functionality

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of their existing systems. Recently, it was found in a study that market research
regarding consumers' preferences may increase the adoption of CRM among
the developing countries' consumers.
CRM Paradox
The CRM Paradox, also referred to as the "Dark side of CRM", entails
favoritism and differential treatment of some customers. This may cause
perceptions of unfairness among other customers' buyers. They may opt out of
relationships, spread negative information, or engage in misbehavior that may
damage the firm. CRM fundamentally involves treating customers differently
based on the assumption that customers are different and have different needs.
Such perceived inequality may cause dissatisfaction, mistrust and result in
unfair practices. A customer shows trust when he bonds in a relationship with a
firm when he knows that the firm is acting fairly and adding value. However,
customers may not trust that firms will be fair in splitting the value
creation pie [clarify] in the first place. For example, Amazon’s test use of dynamic
pricing (different prices for different customers) was a public relations
nightmare for the company.
These days, it can be difficult to compete for your customer’s attention
when every other company in the market is doing the same thing. On top of
that, customers often expect, and are used to, receiving incentives for their
brand loyalty, whether it’s a free sample, being able to trade in points they’ve
collected, or being given discounted services. How can you build strong
customer relationships and keep their attention? The answer to maintaining
client relationships may not be simple, but it’s worthwhile! CRM, or Customer
Relationship Management, creates effective customer relations between your
company and your existing customers, and Velsoft makes it easy!
With Velsoft’s CRM: An Introduction to Customer Relationship
Management, students learn how to analyze the different components of a
CRM plan, develop a checklist for readiness and success with their customer
relationship management strategy, and learn how CRM creates value for
organizations and customers. CRM theory, varieties, the difference between in-
house creation and using an Application Service Provider, and ways to get
around the largest, most common roadblocks to successful CRM
implementation are all covered in this eLearning course! Students learn what
they need for a successful client management, and how to do it. Using Velsoft’s
web-based eLearning platform, students are free to study on their own, while
trainers can combine online CRM training with classroom instruction in
ablended learning solution.

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1.2 CRM DEFINITION
The principles, practices, and guidelines that an organization follows
when interacting with its customers. From the organization's point of view, this
entire relationship not only encompasses the direct interaction aspect, such as
sales and/or service related processes, but also in the forecasting and analysis
of customer trends and behaviors, which ultimately serve to enhance the
customer's overall experience.
1.3 NEED FOR CRM
In an organization, sales representatives have the responsibility of
creating brand awareness and making products popular among the end users.
They are the ones who interact with the customers, understand their
requirements and fulfill their needs and expectations.
The art of managing the organization’s relationship with the customers
and prospective clients refer to customer relationship management.
Customer relationship management includes various strategies and
techniques to maintain healthy relationship with the organization’s existing as
well as potential customers. Orgnaizations must ensure customers are satisfied
with their products and services for higher customer retention. Remember one
satisfied customer brings ten new customers with him where as one dissatisfied
customer takes away ten customers along with him.
In simpler words, customer relationship management refers to the study of
needs and expectations of the customers and providing them the right solution.
Need for Customer Relationship Management
Customer Relationship Management leads to satisfied customers and
eventually higher business everytime.
Customer Relationship Management goes a long way in retaining
existing customers.
Customer relationship management ensures customers return back home
with a smile.
Customer relationship management improves the relationship between
the organization and customers. Such activities strengthen the bond between the
sales representatives and customers.
Steps to Customer Relationship Management
 It is essential for the sales representatives to understand the needs,
interest as well as budget of the customers. Don’t suggest anything
which would burn a hole in their pockets.

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  Never tell lies to the customers. Convey them only what your product
offers. Don’t cook fake stories or ever try to fool them.
 It is a sin to make customers waiting. Sales professionals should reach
meetings on or before time. Make sure you are there at the venue before
the customer reaches.
 A sales professional should think from the customer’s perspective.
Don’t only think about your own targets and incentives. Suggest only
what is right for the customer. Don’t sell an expensive mobile to a
customer who earns rupees five thousand per month. He would never
come back to you and your organization would lose one of its esteemed
customers.
 Don’t oversell. Being pushy does not work in sales. It a customer needs
something; he would definitely purchase the same. Never irritate the
customer or make his life hell. Don’t call him more than twice in a
single day.
 An individual needs time to develop trust in you and your product.
Give him time to think and decide.
 Never be rude to customers. Handle the customers with patience and
care. One should never ever get hyper with the customers.
 Attend sales meeting with a cool mind. Greet the customers with a
smile and try to solve their queries at the earliest.
 Keep in touch with the customers even after the deal. Devise
customer loyalty programs for them to return to your organization. Give
them bonus points or gifts on every second purchase.
 The sales manger must provide necessary training to the sales team
to teach them how to interact with the customers. Remember
customers are the assets of every business and it is important to keep
them happy and satisfied for successful functioning of organization.
10 Reasons Why You Need a CRM
01. Your memory is not perfect
I know you may think you've got it all stored in that steel trap but I can
attest from personal experience; it doesn't always work as expected. Sure, you
might be able to keep up with 10, or 20 or even 50 clients in your head but
there comes a point when you just can't track them all and their associated tasks
and events. Do you really want to limit your business by what information you
can store in your head? If you can only manage 20 clients successfully in your
memory then you have stopped your business from growing any larger. With a
CRM you can store and manage hundreds of clients and let a computer system

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handle the task of memory and recall. Take advantage of technology and use it
for your business success. Then your business growth is never limited by the
brain that can't remember where you put the car keys.
2. Emails are decentralized
I spent many years convinced that my inbox was the perfect solution. I
mean, I could filter, I could search, and I could read past emails - what more
could I want. But I started to realize something. I was having to sync my email
on all my devices and store all my past email on all of them. This was fine at
first but my inbox was quickly growing in size and storage space and becoming
unmanageable. Finding sent mail is also a problem and makes things difficult
in tracking what has been said to various clients. And then comes that great day
when you hire employees. You'll never remember to CC or BCC the team on
every email sent. Suddenly email is not a good solution. Your team may be
spread completely apart and communications will quickly get lost, and your
clients suffer. A customer relations management system put all the pertinent
client information in one central location that was easy to update and easy to
see when other's updated. All communication can be kept in one spot, nothing
gets lost and you can now see and share with the rest of your team.
3. You need metrics
Do you know how many successful projects you've had in the past
week, month, or year? Can you quickly state your conversion ratio or explain
the best method you reach your customers with absolute certainty? Metrics are
critical to your business growth and success. You may deceive yourself into
thinking you can figure out things with common sense or with some Excel
spreadsheet formula - but is that what you want to spend your time doing? My
guess is that your time is more valuable than that, and the odds are high you'll
make a mistake in your calculations anyway. I know I do. A CRM will give
you instant metrics on dozens of aspects of your business, and you don't have to
do anything. Plus with a CRM like CRMery you can actually create custom
reports to better track metrics and reports specific to your needs. Create it once
and use it forever. Once you have these reports I guarantee you'll never look
back. Who knows, maybe you'll find out it's really not worth your time to do
cold calls after all!
4. Statuses are important
Do you know which clients are ready for a quick callback? If you knew
exactly which prospects and clients were on hold and who was slightly
interested in your services would that help your business and your sales
strategies. I think it would. A CRM at its most basic level lets you see those
statuses. Every time you make a call, send an email, or contact that customer or

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prospect you can update your CRM with their current status. Then, because
your memory's not perfect (as stated earlier) you will be able to review and see
exactly where each client is in the sales process. No more wondering, and no
more following up on cold leads instead of landing the hot ones.
5. History is important
If you've ever wanted to look back and see everything on a particular
contact, the stream of communication between you and them and other
members of your business then you need a CRM. Customer relations systems
help keep all those conversations in one place and make it easy for you to
quickly look back in time and see how things have progressed. Don't be
confused about why a particular customer is upset - see for yourself the
progression of a client and their communication as well as your company's
notes and responses. You'll be able to save more customers from leaving by
catching something you would have otherwise missed. And you can learn from
your history.
6. Competition helps business
It's never fun to feel like you're going at it alone. It's good to have
communication between your fellow employees and compare notes on things.
And competition helps a business. CRMery has leader boards and goals to help
with just such a thing. You can stage friendly inter-office competitions to see
who can close the most deals, sell the most dollars, or carry on the most
conversations. As those leader boards and competitions grow so does your
business. And everyone wins when that happens.
7. Never lose your data
If you use notepads, memo books, calendars, and other systems for
tracking your data then the odds are high that you are going to lose it at some
point. Store everything on your laptop? They can be stolen. A web-based CRM
lets you effectively protect your data from being lost. Sure, servers can crash
and hard drives fail but with the proper web host and data backups you'll never
lose your data. That's just one of the benefits of CRMery, as an Open-Source
CRM you have the complete freedom to select the absolute best web host and
service provider. And you own your data. It's not stored on some company's
server leaving you at their security and their business infrastructure. CRMery
lets you install, manage and maintain your own data on the server of your
choice.
8. Predict your future
Everyone wants to know the future. If only there was a way to know
what to expect. CRMery helps you with that. Now of course a CRM cannot

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predict the future with 100% accuracy (it's not a crystal ball), but a good CRM
can give you a reasonable expectation of the future based on past performances
and past events. If your history is stored correctly in your CRM (see History is
important) then a good CRM can extrapolate that information to give you a
good idea of what is to come. You can see your pipeline of your prospective
deals and have a pretty accurate feel for how much business you can expect to
see in the months to come. Once you realize how much information you have
access to you may start to feel like a bit like a psychic.
9. Track your tasks and events
Calendars are important, way more important then emails with dates in
them. You'll never be able to keep track of every task you need to do and event
you need to attend without a good system. A CRM will help you not only keep
track of every task and every event but also relate them to the appropriate
customer or lead. CRMery provides a calendar system that allows you to see all
of your tasks and events and also your teammates tasks. Plus, with CRMery
you have a dashboard that gives you a quick overview of upcoming tasks and
events across all your contacts. Need access on the go? CRMery provides an
amazing mobile interface to provide instant access to your immediate tasks and
events as well as allowing you to create new tasks or events immediately. Sure
there are dedicated calendar apps and task management software you can use,
but the goal is more than just managing tasks. The goal is relationships. A
CRM will relate those tasks and events to the appropriate lead, contact, deal, or
company. It all works together to form a cohesive whole - and that leads
perfectly into the final reason.
10. Be organized
You may claim that you can manage your business using email, task
management systems, and calendar systems but you'll miss the big picture.
Organizing all your information into one system gives you that big picture. A
CRM integrates emails and tasks and calendars and so much more in one easily
maintained and managed place. Access your information from anywhere in the
world and from any internet-accessible device. You'll learn things about your
business you never knew before. By being organized and storing things in a
central location you'll bring all the pieces together. The key is business
organization.
I'm obsessed with helping businesses grow and succeed. CRMery
provides an amazing platform to help businesses do just that. By using a CRM
your business will become organized and as your business becomes organized
you'll start to see success. I don't claim to have the perfect solution, we're
constantly improving things to make it better. I do claim that having a well-

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organized business will never, ever be a detriment to your success. Get
organized and let CRMery help you get there.
The better a business can manage the relationships it has with its
customers the more successful it will become. Therefore IT systems that
specifically address the problems of dealing with customers on a day-to-day
basis are growing in popularity.
Customer relationship management (CRM) is not just the application of
technology, but is a strategy to learn more about customers' needs and
behaviours in order to develop stronger relationships with them. As such it is
more of a business philosophy than a technical solution to assist in dealing with
customers effectively and efficiently. Nevertheless, successful CRM relies on
the use of technology.
This guide outlines the business benefits and the potential drawbacks of
implementing CRM. It also offers help on the types of solution you could
choose and how to implement them.
WHY CRM?
In the commercial world the importance of retaining existing customers
and expanding business is paramount. The costs associated with finding new
customers mean that every existing customer could be important.
The more opportunities that a customer has to conduct business with
your company the better, and one way of achieving this is by opening up
channels such as direct sales, online sales, franchises, use of agents, etc.
However, the more channels you have, the greater the need to manage your
interaction with your customer base.
Customer relationship management (CRM) helps businesses to gain an
insight into the behaviour of their customers and modify their business
operations to ensure that customers are served in the best possible way. In
essence, CRM helps a business to recognise the value of its customers and to
capitalise on improved customer relations. The better you understand your
customers, the more responsive you can be to their needs.
CRM can be achieved by:
 finding out about your customers' purchasing habits, opinions and
preferences
 profiling individuals and groups to market more effectively and increase
sales
 changing the way you operate to improve customer service and marketing
Benefiting from CRM is not just a question of buying the right
software. You must also adapt your business to the needs of your customers.

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Business Benefits of CRM
Implementing a customer relationship management (CRM) solution
might involve considerable time and expense. However, there are many
potential benefits.
A major benefit can be the development of better relations with your existing
customers, which can lead to:
 increased sales through better timing due to anticipating needs based on
historic trends
 identifying needs more effectively by understanding specific customer
requirements
 cross-selling of other products by highlighting and suggesting alternatives
or enhancements
 identifying which of your customers are profitable and which are not
This can lead to better marketing of your products or services by focusing on:
 effective targeted marketing communications aimed specifically at
customer needs
 a more personal approach and the development of new or improved
products and services in order to win more business in the future
Ultimately this could lead to:
 enhanced customer satisfaction and retention, ensuring that your good
reputation in the marketplace continues to grow
 increased value from your existing customers and reduced cost associated
with supporting and servicing them, increasing your overall efficiency and
reducing total cost of sales
 improved profitability by focusing on the most profitable customers and
dealing with the unprofitable in more cost effective ways
Once your business starts to look after its existing customers
effectively, efforts can be concentrated on finding new customers and
expanding your market. The more you know about your customers, the easier it
is to identify new prospects and increase your customer base.
Even with years of accumulated knowledge, there's always room for
improvement. Customer needs change over time, and technology can make it
easier to find out more about customers and ensure that everyone in an
organisation can exploit this information.
Types of CRM solution
Customer relationship management (CRM) is important in running a
successful business. The better the relationship, the easier it is to conduct

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business and generate revenue. Therefore using technology to improve CRM
makes good business sense.
CRM solutions fall into the following four broad categories.
Outsourced solutions
Application service providers can provide web-based CRM solutions
for your business. This approach is ideal if you need to implement a solution
quickly and your company does not have the in-house skills necessary to tackle
the job from scratch. It is also a good solution if you are already geared towards
online e-commerce.
Off-the-shelf solutions
Several software companies offer CRM applications that integrate with
existing packages. Cut-down versions of such software may be suitable for
smaller businesses. This approach is generally the cheapest option as you are
investing in standard software components. The downside is that the software
may not always do precisely what you want and you may have to trade off
functionality for convenience and price. The key to success is to be flexible
without compromising too much.
Custom software
For the ultimate in tailored CRM solutions, consultants and software
engineers will customise or create a CRM system and integrate it with your
existing software.
However, this can be expensive and time consuming. If you choose this
option, make sure you carefully specify exactly what you want. This will
usually be the most expensive option and costs will vary depending on what
your software designer quotes.
Managed solutions
A half-way house between custom and outsourced solutions, this
involves renting a customised suite of CRM applications as a tailored package.
This can be cost effective but it may mean that you have to compromise in
terms of functionality.
How to Implement CRM
The implementation of a customer relationship management (CRM)
solution is best treated as a six-stage process, moving from collecting
information about your customers and processing it to using that information to
improve your marketing and the customer experience.

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Stage 1 - Collecting information
The priority should be to capture the information you need to identify
your customers and categorise their behaviour. Those businesses with a website
and online customer service have an advantage as customers can enter and
maintain their own details when they buy.
Stage 2 - Storing information
The most effective way to store and manage your customer information
is in a relational database - a centralised customer database that will allow you
to run all your systems from the same source, ensuring that everyone uses up-
to-date information.
Stage 3 - Accessing information
With information collected and stored centrally, the next stage is to
make this information available to staff in the most useful format.
Stage 4 - Analysing customer behaviour
Using data mining tools in spreadsheet programs, which analyse data to
identify patterns or relationships, you can begin to profile customers and
develop sales strategies.
Stage 5 - Marketing more effectively
Many businesses find that a small percentage of their customers
generate a high percentage of their profits. Using CRM to gain a better
understanding of your customers' needs, desires and self-perception, you can
reward and target your most valuable customers.
Stage 6 - Enhancing the customer experience
Just as a small group of customers are the most profitable, a small
number of complaining customers often take up a disproportionate amount of
staff time. If their problems can be identified and resolved quickly, your staff
will have more time for other customers.
Potential Drawbacks of CRM
There are several reasons why implementing a customer relationship
management (CRM) solution might not have the desired results.
There could be a lack of commitment from people within the company
to the implementation of a CRM solution. Adapting to a customer-focused
approach may require a cultural change. There is a danger that relationships
with customers will break down somewhere along the line, unless everyone in
the business is committed to viewing their operations from the customers'
perspective. The result is customer dissatisfaction and eventual loss of revenue.

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 Poor communication can prevent buy-in. In order to make CRM work,
all the relevant people in your business must know what information you need
and how to use it.
Weak leadership could cause problems for any CRM implementation
plan. The onus is on management to lead by example and push for a customer
focus on every project. If a proposed plan isn't right for your customers, don't
do it. Send your teams back to the drawing board to come up with a solution
that will work.
Trying to implement CRM as a complete solution in one go is a
tempting but risky strategy. It is better to break your CRM project down into
manageable pieces by setting up pilot programs and short-term milestones.
Consider starting with a pilot project that incorporates all the necessary
departments and groups but is small and flexible enough to allow adjustments
along the way.
Don't underestimate how much data you will require, and make sure
that you can expand your systems if necessary. You need to carefully consider
what data is collected and stored to ensure that only useful data is kept.
You must also ensure you comply with Québec’s An Act respecting the
protection of personal information in the private sector.
Avoid adopting rigid rules which cannot be changed. Rules should be
flexible to allow the needs of individual customers to be met.
There are many aspects of CRM which were mistakenly thought to be
capable of being implemented in isolation from each other.
From the outside of the organization, a customer experiences the
business as one entity operating over extended periods of time. Thus piecemeal
CRM implementation can come across to the customer as unsynchronized
where employees and web sites and services are acting independently of one
another, yet together represent a common entity.
CRM is the philosophy, policy and coordinating strategy connecting
different players within an organization so as to coordinate their efforts in
creating an overall valuable series of experiences, products and services for the
customer.
The different players within the organization are in identifiable groups:
 Customer Facing Operations - The people and the technology support of
processes that affect a customer's experience at the frontline interface
between the customer and the organization. This can include face to
face, phone, IM, chat, email, web and combinations of all media. Self-

19
 service kiosk and web self-service are doing the job of vocals and they
belong here.
 Internal Collaborative Functional Operations - The people and
technology support of processes at the policy and back office which
ultimately affect the activities of the Customer Facing Operations
concerning the building and maintaining of customer relationships. This
can include IT, billing, invoicing, maintenance, planning, marketing,
advertising, finance, services planning and manufacturing.
 External Collaboration functions - The people and technology support
of processes supporting an organization and its cultivation of customer
relationships that are affected by the organization's own relationship
with suppliers/vendors and retail outlets/distributors. Some would also
include industry cooperative networks, e.g. lobbying groups, trade
associations. This is the external network foundation which supports the
internal Operations and Customer facing Operations.
 Customer Advocates and Experience Designers - Creative designers of
customer experience that meet customer relationship goals of delivering
value to the customer and profit to the organization (or desired
outcomes and achievement of goals for non-profit and government
organizations)
 Performance Managers and Marketing Analysts - Designers of Key
Performance Indicators and collectors of metrics and data so as to
execute/implement marketing campaigns, call campaigns, Web strategy
and keep the customer relationship activities on track. This would be the
milestones and data that allow activities to be coordinated, that
determine if the CRM strategy is working in delivering ultimate
outcomes of CRM activities: market share, numbers and types of
customers, revenue, profitability, intellectual property concerning
customers preferences.
 Customer and Employee Surveyors and Analysts - Customer
Relationships are both fact driven and impression driven - the quality of
an interaction is as important as the information and outcome achieved,
in determining whether the relationship is growing or shrinking in value
to the participants.
Technology considerations
The basic building blocks:
A database for customer lifecycle (time series) information about each
customer and prospect and their interactions with the organization, including

20
order information, support information, requests, complaints, interviews and
survey responses.
Customer Intelligence - Translating customer needs and profitability
projection into game plans for different segments or groups of customers,
captured by customer interactions (Human, automated or combinations of both)
into software that tracks whether that game plan is followed or not,and whether
the desired outcomes are obtained.
Business Modeling Customer Relationship Strategy, Goals and
outcomes: Numbers and description of whether goals were met and models of
customer segments and game plans worked as hypothesized.
Learning and Competency Management Systems - Customer Capacity
and Competency Development - Training and improving processes and
technology that enable the organization to get closer to achieving the desired
results. Complex systems require practice in order to achieve desired outcomes,
especially when humans and technology are interacting. Iteration is the key to
refining, improving and innovating to stay ahead of the competition in
Customer Relationship Management. (Successful tools, technology and
practices will be copied by the competition as soon as they are proven
successful.)
The building blocks can be implemented over time separately, but
eventually need to be dynamically coordinated. The ongoing alignment of the
basic building blocks distinguishes an elegant seamless CRM implementation
which successfully builds mutually valuable relationships.
Operational CRM
Operational CRM provides support to "front office" business processes,
including sales, marketing and service. Each interaction with a customer is
generally added to a customer's contact history, and staff can retrieve
information on customers from the database when necessary.
One of the main benefits of this contact history is that customers can
interact with different people or different contact channels in a company over
time without having to describe the history of their interaction each time.
Consequently, many call centers use some kind of CRM software to
support their call center agents.
Operational CRM processes customer data for a variety of purposes:
 Managing Campaigns
 Enterprise Marketing Automation
 Sales Force Automation

21
Analytical CRM
Analytical CRM analyzes customer data for a variety of purposes:
 Design and execution of targeted marketing campaigns to optimize
marketing effectiveness
 Design and execution of specific customer campaigns, including
customer acquisition, cross-selling, up-selling, retention
 Analysis of customer behavior to aid product and service decision
making (e.g. pricing, new product development etc.)
 Management decisions, e.g. financial forecasting and customer
profitability analysis
 Prediction of the probability of customer defection (churn analysis)
Analytical CRM generally makes heavy use of data mining.
Collaborative CRM
The function of the Customer Interaction System or Collaborative
Customer Relationship Management is to coordinate the multi-channel service
and support given to the customer by providing the infrastructure for responsive
and effective support to customer issues, questions, complaints, etc.
Collaborative CRM aims to get various departments within a business,
such as sales, technical support and marketing, to share the useful information
that they collect from interactions with customers. Feedback from a technical
support center, for example, could be used to inform marketing staffers about
specific services and features requested by customers. Collaborative CRM's
ultimate goal is to use information collected from all departments to improve
the quality of customer service.
Geographic CRM
Geographic CRM (GCRM) is a customer relation management
information system which collaborates geographic information system and
traditional CRM.
Geographic CRM combines data collected from route of movement,
types of residence, ambient trading areas and other customer and marketing
information which are matched with relevant road conditions, building
formations, and a floating population. Such data are conformed with a map and
is regionally analyzed with OLAP (On-Line Analytical Processing) for
visualization. This enables a company to examine potential customers and
manage existing customers in the region.

22
Strategy
Several commercial CRM software packages are available which vary
in their approach to CRM. However, as mentioned above, CRM is not just a
technology but rather a comprehensive customer-centric approach to an
organization's philosophy in dealing with its customers. This includes policies
and processes, front-of-house customer service, employee training, marketing,
systems and information management. Hence, it is important that any CRM
implementation considerations stretch beyond technology, towards the broader
organizational requirements.
The objectives of a CRM strategy must consider a company’s specific
situation and its customers' needs and expectations. Information gained through
CRM initiatives can support the development of marketing strategy by
developing the organization's knowledge in areas such as identifying customer
segments, improving customer retention, improving product offerings (by
better understanding customer needs), and by identifying the organization's
most profitable customers.
CRM strategies can vary in size, complexity and scope. Some
companies consider a CRM strategy to only focus on the management of a team
of salespeople. However, other CRM strategies can cover customer interaction
across the entire organization. Many commercial CRM software packages that
are available provide features that serve sales, marketing, event management,
project management and finance.
Successes
While there are numerous reports of "failed" implementations of various
types of CRM projects, these are often the result of unrealistic high
expectations and exaggerated claims by CRM vendors.
Many of these "failures" are also related to data quality and availability.
Data cleaning is a major issue. If the company CRM strategy is to track life-
cycle revenues, costs, margins and interactions between individual customers,
this must be reflected in all business processes. Data must be extracted from
multiple sources (e.g., departmental/divisional databases, including sales,
manufacturing, supply chain, logistics, finance, service, etc.), requiring an
integrated, comprehensive business processing system to be in place with
defined structures and data quality. If not, interfaces must be developed and
implemented to extract data from different systems. This creates a demand far
beyond customer satisfaction to understand the full business-to-business
relationship. For this reason, CRM is more than a sales or customer interaction
system.

23
 The experience from many companies is that a clear CRM requirement
with regard to reports (e.g., input and output requirements) is of vital
importance before starting any implementation. With a proper demand
specification, a great deal of time and money can be saved based on realistic
expectations of systems capability. A well operating CRM system can be an
extremely powerful tool for management and customer strategies.
Privacy and data security
One of the primary functions of CRM software is to collect information
about customers. When gathering data as part of a CRM solution, a company
must consider customer privacy and data security with respect to legal and
cultural environments. Some customers prefer assurance that their data is not
shared with third parties without their consent and that it cannot be illicitly
accessed by third parties.
Market structure
Given below is a list of top CRM software vendors in 2005 with figures
in millions of United States Dollars published in a Gartner study.
Vendor Global Revenue (Million US$)
SAP 1,475
Siebel 966
Oracle 368
Salesforce.com 281
Amdocs 276
Others 2,233
Total 5,698
Given below is a list of top software vendors used for CRM projects
that completed in 2006 and made use of external consultants and system
integrators, according to a 2007 Gartner study.
Vendor Percentage of implementations
Siebel (Oracle) 41%
SAP 8%
Epiphany (Infor) 3%
Oracle 3%
PeopleSoft (Oracle) 2%
salesforce.com 2%

24
 Amdocs 1%
Chordiant 1%
Microsoft 1%
SAS 1%
Others 15%
None 22%
A 2007 Datamonitor report lists Oracle (including Siebel) and SAP as
the top CRM vendors, with Chordiant, Infor, and salesforce.com as significant
smaller vendors.
1.3 EVOLUTION CUSTOMER RELATIONSHIP MARKETING
Marketing Management has evolved to become a multi faceted and all
embracing science over a period of time. Studies in Marketing do not involve
the 4Ps anymore. The markets, geographies, the consumer segments have
changed leading to multi tier and complex networks and relationships.
Marketing Managers of today are no longer following the same rules of
game that they followed two decades ago. Technology has changed the rules of
the game and competition has become more intense. Instead of concentrating
on selling the product, the marketing effort is now directed to expanding the
customer base and relationship.
By widening the customer base as well as expanding the depth of the
customer base using relationship marketing, they see the possibility to lengthen
the revenue lines. Therefore Marketing professionals to be will benefit greatly
by understanding more about Relationship Marketing as well as direct
marketing, service marketing and CRM etc.
From times immemorial including the times when trading used to
happen through the silk route, the basis of trading was the relationship
that was built on trust, loyalty and previous history of transaction.
Traditionally if you analyze the jeweler’s business, you will see that the
families have always been going to one jeweler for generations together. The
same is the case with banker who would extend loan to a well known individual
who was personally known or referred by a known person. Even while renting
out a house, the owner prefers to let out to a known person or a person referred
by a known party where there exists some kind of relationship. Therefore we
can say that relationship has always been the basis of business.
However the growth of Relationship Marketing as a discipline and
practice got an impetus post industrial era. Until this period the products and
services were always produced in smaller quality where things were in short

25
supply and were marketed in the local area. Industrialization led to mass
production as well as standardization of the products and services. The
businesses started expanding their geographic boundaries and exploring new
markets where in it became necessary for them to evolve new methods of
marketing. They understood the importance of having to reach out and build a
relationship with a customer and make efforts to retain the customer rather than
keep spending on marketing to new customers every time.
At this stage we do see significant changes that happened at an
Organizational level. Organizations realized the importance of having to put the
Customer ahead of its business. Organizational philosophy seemed to have
shifted from profits, products and markets to Customer first. Right from
product design to manufacturing as well as selling began to be designed around
what the Customer wants, his needs, his comfort and satisfaction. Customer
focus and relationship became the Organizational focus and lead to many new
trends in manufacturing methods the most significant being the concept of
TQM or Total Quality Management.
On the marketing front too, the managers had to come up with new
channels for marketing and sales for they had to reach out to bigger markets
and new customer segments. As a result we saw the emergence of Direct
Mailer or catalogue sales was born in the 1960s. Information technology further
enhanced the marketing methods whereby database marketing, direct mailing
and customer loyalty programs along with marketing services came into being.
With the advent of internet we have see several more marketing methods like e
commerce, online selling, one to one selling happening. All these marketing
channels have been built around the concept of relationship marketing. We as
consumers have now are used to being courted by the companies and given
individual attention. Most of our purchases of products and services are based
on relationships with companies that make us comfortable and valued.
Importance of relationship marketing
The recent trend seen in the Organizations across the world is that they
are faced with changing times and the changing economies and business is
forcing them to change themselves too. Organizations today have no option but
to change and evolve. The change has to do with every aspect of business and
not limited to any one aspect of its business. Those who are not able to see the
trends and change themselves are perishing. Technology has been the single
most important change agent. Technology has redefined all aspects of business.
What we see today is the definitive shift of power from the Organization into
the hands of the Customer.

26
 Customers today know their position and the power they wield.
Especially the medium of internet has brought the customers closer to the
Organisation as well as to the other Customers. Information, discussions,
feedbacks and opinions are now visible and available to one and all almost
instantaneously. Social networking is a medium that the Organizations cannot
afford to ignore. This is both a boon as well as a bane to the Organizations.
Marketing Managers are learning to use this to manage their relationship with
the customers at large. Customer redressal too is another important
phenomenon that has contributed to the Customer becoming powerful in the
market place.
The fact that the information and interaction happens on live basis and
the customer reactions can be instantaneous puts a lot of pressure on the
Organizations to be on their guard all the time. Any adverse opinion shared or
feedback from a dissatisfied customer can spearhead a word of mouth
campaign that can harm the Organisation. Therefore the internet and social
network is a double edged sword as far as the Organizations are concerned.
When used effectively this medium can help the Organization build a
relationship with the customer and strengthen that relationship. This medium
helps the Organization to reach out individually to the customer which may not
be possible otherwise.
The marketing departments are able to not only communicate and
address the customer individually, with the help of technology and data mining
techniques, they are able to understand the customer’s needs and customize
solutions as per the specific individual needs of the customer. CRM packages
and technology become the enablers to make this happen. Banks, Airlines,
Insurance as well as Services like Pizza hut, Macdonald’s are some of the
businesses that have developed effective means to recognize and communicate
with individual customers and thereby build an emotional connect with the
customers.
Product Companies have begun to use social networking sites
effectively as a platform to engage with customer on technical and product
related discussions and build a community around its products and services.
Building relationships in such situations is easier and more effective.
The dynamics in the market is changing, thanks to internet. Marketing
Managers can no longer afford to use the traditional methods of engaging and
selling to the customers. Marketing today demands a customer centric
approach. Customer is no longer an entity without a face. Today’s customer is
an informed and intelligent customer who can be reached, who is visible and
can be heard and a relationship with him matters the most to the Organization.

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 Relationship Management holds the centre stage to designing
Marketing as well as communication strategies of the organization. It is
essential for every student to understand the dynamics of Relationship
Marketing in the present context for this subject will be the key differentiator
for the Organizations in the market place.
1.4 COMPLEMENTARY LAYERS OF CRM
CRM is a term that is often referred to in marketing. However, there is
no complete agreement upon a single definition. This is because CRM can be
considered from a number of perspectives. In summary, the three perspectives
are:
1. CRM from the Information Technology Perspective.
2. CRM from the Customer Life Cycle (CLC) Perspective.3. CRM from
the Business Strategy Perspective.
1.5 CUSTOMER SATISFACTION
Customer satisfaction is a term frequently used in marketing. It is a
measure of how products and services supplied by a company meet or surpass
customer expectation. Customer satisfaction is defined as "the number of
customers, or percentage of total customers, whose reported experience with a
firm, its products, or its services (ratings) exceeds specified satisfaction goals.
"In a survey of nearly 200 senior marketing managers, 71 percent responded
that they found a customer satisfaction metric very useful in managing and
monitoring their businesses.
It is seen as a key performance indicator within business and is often
part of a Balanced Scorecard. In a competitive marketplace where businesses
compete for customers, customer satisfaction is seen as a key differentiator and
increasingly has become a key element of business strategy.
"Within organizations, customer satisfaction ratings can have powerful
effects. They focus employees on the importance of fulfilling customers'
expectations. Furthermore, when these ratings dip, they warn of problems that
can affect sales and profitability.... These metrics quantify an important
dynamic. When a brand has loyal customers, it gains positive word-of-mouth
marketing, which is both free and highly effective."
Therefore, it is essential for businesses to effectively manage customer
satisfaction. To be able do this, firms need reliable and representative measures
of satisfaction.
"In researching satisfaction, firms generally ask customers whether their
product or service has met or exceeded expectations. Thus, expectations are a
key factor behind satisfaction. When customers have high expectations and the

28
reality falls short, they will be disappointed and will likely rate their experience
as less than satisfying. For this reason, a luxury resort, for example, might
receive a lower satisfaction rating than a budget motel—even though its
facilities and service would be deemed superior in 'absolute' terms."
The importance of customer satisfaction diminishes when a firm has
increased bargaining power. For example, cell phone plan providers, such
as AT&T and Verizon, participate in an industry that is an oligopoly, where
only a few suppliers of a certain product or service exist. As such, many cell
phone plan contracts have a lot of fine print with provisions that they would
never get away if there were, say, 100 cell phone plan providers, because
customer satisfaction would be far too low, and customers would easily have
the option of leaving for a better contract offer.
There is a substantial body of empirical literature that establishes the
benefits of customer satisfaction for firms. This literature is summarized by
Mittal and Frennea (2010).They summarize the outcomes in terms of customer
behaviors, immediate financial outcomes such as sales and revenues, and long-
term outcomes based on the stock market.
Purpose

A business ideally is continually seeking feedback to improve customer

satisfaction.
"Customer satisfaction provides a leading indicator of consumer purchase
intentions and loyalty." "Customer satisfaction data are among the most
frequently collected indicators of market perceptions. Their principal use is
twofold:"

29
 1. "Within organizations, the collection, analysis and dissemination of
these data send a message about the importance of tending to customers
and ensuring that they have a positive experience with the company's
goods and services."
2. "Although sales or market share can indicate how well a firm is
performing currently, satisfaction is perhaps the best indicator of how
likely it is that the firm’s customers will make further purchases in the
future. Much research has focused on the relationship between
customer satisfaction and retention. Studies indicate that the
ramifications of satisfaction are most strongly realized at the extremes."
Research also shows that a majority of the firms invest in measuring,
monitoring, and disseminating customer satisfaction information; in fact, these
authors found that customer satisfaction research is one of the most widely
conducted marketing research activities in the firms.
On a five-point scale, "individuals who rate their satisfaction level as '5'
are likely to become return customers and might even evangelize for the firm.
(A second important metric related to satisfaction is willingness to recommend.
This metric is defined as "The percentage of surveyed customers who indicate
that they would recommend a brand to friends." When a customer is satisfied
with a product, he or she might recommend it to friends, relatives and
colleagues. This can be a powerful marketing advantage.) "Individuals who rate
their satisfaction level as '1,' by contrast, are unlikely to return. Further, they
can hurt the firm by making negative comments about it to prospective
customers. Willingness to recommend is a key metric relating to customer
satisfaction."
Theoretical Ground
"In literature antecedents of satisfaction are studied from different
aspects. The considerations extend from psychological to physical and from
normative to positive aspects. However, in most of the cases the consideration
is focused on two basic constructs as customers expectations prior to purchase
or use of a product and his relative perception of the performance of that
product after using it.
Expectations of a customer on a product tell us his anticipated
performance for that product. As it is suggested in the literature, consumers
may have various "types" of expectations when forming opinions about a
product's anticipated performance. For example, four types of expectations are
identified by Miller (1977): ideal, expected, minimum tolerable, and desirable.
While, Day (1977) indicated among expectations, the ones that are about the
costs, the product nature, the efforts in obtaining benefits and lastly

30
expectations of social values. Perceived product performance is considered as
an important construct due to its ability to allow making comparisons with the
expectations.
It is considered that customers judge products on a limited set of norms
and attributes. Olshavsky and Miller (1972) and Olson and Dover (1976)
designed their researches as to manipulate actual product performance, and
their aim was to find out how perceived performance ratings were influenced
by expectations. These studies took out the discussions about explaining the
differences between expectations and perceived performance."
In some research studies, scholars have been able to establish that customer
satisfaction has a strong emotional (i.e., affective component). Still others show
that the cognitive and affective components of customer satisfaction
reciprocally influence each other over time to determine overall satisfaction.
Especially for durable goods that are consumed over time, there is value
to taking a dynamic perspective on customer satisfaction. Within a dynamic
perspective, customer satisfaction can evolve over time as customers repeatedly
use a product or interact with a service. The satisfaction experienced with each
interaction (transactional satisfaction) can influence the overall, cumulative
satisfaction. Thus, Mittal, Kumar and Tsiros (1999) showed how the
satisfaction experienced with a vehicle and dealership service initially (e.g.,
6 months) could affect satisfaction experienced later on, e.g., several months
later. In a later study, scholars showed that it is not just overall customer
satisfaction, but also customer loyalty that evolves over time. Finally, research
shows that the relative importance of satisfaction antecedents, especially the
different attributes that affect customer satisfaction, varies significantly over
time.
The Disconfirmation Model
"The Disconfirmation Model is based on the comparison of customers’
[expectations] and their [perceived performance] ratings. Specifically, an
individual’s expectations are confirmed when a product performs as expected.
It is negatively confirmed when a product performs more poorly than expected.
The disconfirmation is positive when a product performs over the expectations
(Churchill & Suprenant 1982). There are four constructs to describe the
traditional disconfirmation paradigm mentioned as expectations, performance,
disconfirmation and satisfaction." "Satisfaction is considered as an outcome of
purchase and use, resulting from the buyers’ comparison of expected rewards
and incurred costs of the purchase in relation to the anticipated consequences.
In operation, satisfaction is somehow similar to attitude as it can be evaluated
as the sum of satisfactions with some features of product." "In the literature,

31
cognitive and affective models of satisfaction are also developed and
considered as alternatives (Pfaff, 1977). Churchill and Suprenant in 1982,
evaluated various studies in the literature and formed an overview of
Disconfirmation process in the following figure:"
Non-linear and Asymmetric Relationships in Satisfaction
Since the 1990's a rich body of research has shown that many of the
relationships of customer satisfaction with its antecedents and consequences are
asymmetric and non-linear. The basis for this research resides in the key idea
that people are usually more sensitive to negative information than to positive
information, and that losses loom larger than gains. Thus, negative events are
not only more salient to customers, but they also have a disproportionately
larger impact in the satisfaction judgment formation process, and the
consequent consumer intentions and behaviors. Much of this research is
summarized in an award winning paper by Professors Eugene Anderson and
Vikas Mittal. The general findings, as summarized in their paper show:
- Negative performance on an attribute has a larger impact on overall
satisfaction than positive performance. Thus, the deleterious impact of failing
expectations is proportionately much stronger than the beneficial impact of
exceeding expectations by the same amount. This finding has been widely
confirmed for many different industries and customer types.
- The association between overall satisfaction and repurchase intentions
as well as behaviors is also non linear.
Construction
Organizations need to retain existing customers while targeting non-
customers. Measuring customer satisfaction provides an indication of how
successful the organization is at providing products and/or services to the
marketplace.
"Customer satisfaction is measured at the individual level, but it is
almost always reported at an aggregate level. It can be, and often is, measured
along various dimensions. A hotel, for example, might ask customers to rate
their experience with its front desk and check-in service, with the room, with
the amenities in the room, with the restaurants, and so on. Additionally, in a
holistic sense, the hotel might ask about overall satisfaction 'with your stay.'"
As research on consumption experiences grows, evidence suggests that
consumers purchase goods and services for a combination of two types of
benefits: hedonic and utilitarian. Hedonic benefits are associated with the
sensory and experiential attributes of the product. Utilitarian benefits of a

32
product are associated with the more instrumental and functional attributes of
the product (Batra and Athola 1990).
Customer satisfaction is an ambiguous and abstract concept and the
actual manifestation of the state of satisfaction will vary from person to person
and product/service to product/service. The state of satisfaction depends on a
number of both psychological and physical variables which correlate with
satisfaction behaviors such as return and recommend rate. The level of
satisfaction can also vary depending on other options the customer may have
and other products against which the customer can compare the organization's
products.
Work done by Parasuraman, Zeithaml and Berry (Leonard L) between
1985 and 1988 provides the basis for the measurement of customer satisfaction
with a service by using the gap between the customer's expectation of
performance and their perceived experience of performance. This provides the
measurer with a satisfaction "gap" which is objective and quantitative in nature.
Work done by Cronin and Taylor propose the "confirmation/disconfirmation"
theory of combining the "gap" described by Parasuraman, Zeithaml and Berry
as two different measures (perception and expectation of performance) into a
single measurement of performance according to expectation.
The usual measures of customer satisfaction involve a survey using
a Likert scale. The customer is asked to evaluate each statement in terms of
their perceptions and expectations of performance of the organization being
measured.
Good quality measures need to have high satisfaction loadings, good
reliability, and low error variances. In an empirical study comparing commonly
used satisfaction measures it was found that two multi-item semantic
differential scales performed best across both hedonic and utilitarian service
consumption contexts. A study by Wirtz & Lee (2003),found that a six-item 7-
point semantic differential scale (for example, Oliver and Swan 1983), which is
a six-item 7-point bipolar scale, consistently performed best across both
hedonic and utilitarian services. It loaded most highly on satisfaction, had the
highest item reliability, and had by far the lowest error variance across both
studies. In the study, the six items asked respondents’ evaluation of their most
recent experience with ATM services and ice cream restaurant, along seven
points within these six items: “pleased meto displeased me”, “contented
with to disgusted with”, “very satisfied with to very dissatisfied with”, “did a
good job for me to did a poor job for me”, “wise choice to poor choice” and
“happy with to unhappy with”. A semantic differential (4 items) scale (e.g.,
Eroglu and Machleit 1990), which is a four-item 7-point bipolar scale, was the

33
second best performing measure, which was again consistent across both
contexts. In the study, respondents were asked to evaluate their experience with
both products, along seven points within these four items:
“satisfied to dissatisfied”, “favorable to unfavorable”, “pleasant to unpleasant”
and “I like it very much to I didn’t like it at all”. The third best scale was
single-item percentage measure, a one-item 7-point bipolar scale (e.g.,
Westbrook 1980). Again, the respondents were asked to evaluate their
experience on both ATM services and ice cream restaurants, along seven points
within “delighted to terrible”.
Finally, all measures captured both affective and cognitive aspects of
satisfaction, independent of their scale anchors. Affective measures capture a
consumer’s attitude (liking/disliking) towards a product, which can result from
any product information or experience. On the other hand, cognitive element is
defined as an appraisal or conclusion on how the product’s performance
compared against expectations (or exceeded or fell short of expectations), was
useful (or not useful), fit the situation (or did not fit), exceeded the
requirements of the situation (or did not exceed).
Recent research shows that in most commercial applications, such as
firms conducting customer surveys, a single-item overall satisfaction scale
performs just as well as a multi-item scale. Especially in larger scale studies
where a researcher needs to gather data from a large number of customers, a
single-item scale may be preferred because it can reduce total survey
error. Thus, there is an increasing trend to use a single items for measuring
overall satisfaction.
Methodologies
American Customer Satisfaction Index (ACSI) is a scientific standard of
customer satisfaction. Academic research has shown that the national ACSI
score is a strong predictor of Gross Domestic Product (GDP) growth, and an
even stronger predictor of Personal Consumption Expenditure (PCE)
growth. On the microeconomic level, academic studies have shown that ACSI
data is related to a firm's financial performance in terms of return on
investment (ROI), sales, long-term firm value (Tobin's q), cash flow, cash flow
volatility, human capital performance, portfolio returns, debt financing, risk,
and consumer spending. Increasing ACSI scores has been shown to predict
loyalty, word-of-mouth recommendations, and purchase behavior. The ACSI
measures customer satisfaction annually for more than 200 companies in 43
industries and 10 economic sectors. In addition to quarterly reports, the ACSI
methodology can be applied to private sector companies and government
agencies in order to improve loyalty and purchase intent. ASCI scores have also

34
been calculated by independent researchers, for example, for the mobile phones
sector, higher education, and electronic mail.
The Kano model is a theory of product development and customer
satisfaction developed in the 1980s by Professor Noriaki Kano that classifies
customer preferences into five categories: Attractive, One-Dimensional, Must-
Be, Indifferent, Reverse. The Kano model offers some insight into the product
attributes which are perceived to be important to customers.
SERVQUAL or RATER is a service-quality framework that has been
incorporated into customer-satisfaction surveys (e.g., the revised Norwegian
Customer Satisfaction Barometer) to indicate the gap between customer
expectations and experience.
J.D. Power and Associates provides another measure of customer
satisfaction, known for its top-box approach and automotive industry rankings.
J.D. Power and Associates' marketing research consists primarily of consumer
surveys and is publicly known for the value of its product awards.
Other research and consulting firms have customer satisfaction
solutions as well. These include A.T. Kearney's Customer Satisfaction Audit
process, which incorporates the Stages of Excellence framework and which
helps define a company’s status against eight critically identified dimensions.
For B2B customer satisfaction surveys, where there is a small customer
base, a high response rate to the survey is desirable. The American Customer
Satisfaction Index(2012) found that response rates for paper-based surveys
were around 10% and the response rates for e-surveys (web, wap and e-mail)
were averaging between 5% and 15% - which can only provide a straw poll of
the customers' opinions.
In the European Union member states, many methods for measuring
impact and satisfaction of e-government services are in use, which
the eGovMoNet project sought to compare and harmonize.
These customer satisfaction methodologies have not been independently
audited by the Marketing Accountability Standards Board (MASB) according
to MMAP (Marketing Metric Audit Protocol).
1.6 CUSTOMER LOYALTY
Definition
Customer loyalty is both an attitudinal and behavioral tendency to favor
one brand over all others, whether due to satisfaction with the product or
service, its convenience or performance, or simply familiarity and comfort with
the brand. Customer loyalty encourages consumers to shop more consistently,
spend a greater share of wallet, and feel positive about a shopping experience,

35
helping attract consumers to familiar brands in the face of a competitive
environment.
Types of Loyalty
To understand customer loyalty one must recognize there are different
types and degrees of loyalty. There is monogamous loyalty and there is
polygamous. There are also behavioral and attitudinal aspects. A look at these
concepts will clarify what “customer loyalty” really is, and this is important
because having a solid understanding of the concept is critical if one hopes to
design a reward program where loyalty enhancement is the primary objective.
Monogamous vs. Polygamous Loyalty
We live in a world of polygamous, not monogamous loyalty. For
example, a person might shop at Safeway, Thrifty Foods and Save-on-Foods
and unfailingly shop at all three. The person is then loyal to them, but not to
others, and yet 100% loyal to none. In their book Loyalty Myths, Keiningham
et al. (2005) suggest that “loyalty can in part be thought of as the probability a
customer will purchase a brand on any particular purchase occasion. For
example, a customer may tend to purchase Brand A 70 percent of the time,
Brand B 20 percent, and Brand C 10 percent of the time” (p.90). The point
here is that, in the real world, 100% loyal customers are rare. In the majority of
cases, attempting to make customers completely loyal is unrealistic. A more
realistic goal for businesses is to make customers as loyal as possible – to
maximize customer share of wallet, frequency of purchase and overall
profitability. The objective of businesses, and therefore loyalty programs as
well, should be to make the organization’s share of customer loyalty as high as
possible.
According to Dowling and Uncles (1997) from Australia, “‘polygamous
loyalty’ is a better description of actual consumer behavior than either brand
switching (a conscious once-and-for-all change of allegiance to another brand)
… or promiscuity (the butterfly tendency to flit from brand to brand without
any fixed allegiance).”
Behavioral and Attitudinal Loyalty
In the past, many scholars defined loyalty in behavioral terms. If a
person made most purchases in a given product category from one supplier,
regardless of the reason, the person was defined as loyal. As Kumar and Shah
from the University of Connecticut’s School of Business (2004) point out, “a
majority of existing loyalty programs follow these measures to reward
behavioral loyalty. That is, the more you spend with the company, the more
rewards you earn”.

36
 A second element of loyalty is attitudinal loyalty. Like behavioral
loyalty, attitudinal definitions have existed for a long time. This second
element of loyalty focuses on how strong the psychological commitment or
attachment is to the brand. By itself, it too has limitations. For example, how
loyal are people who rave about a product and promote it to their friends, but
then for whatever reason fail to buy it regularly themselves?
In the opinion of many scholars, as a minimum, an adequate definition
of customer loyalty includes the history of actions plus feelings and intentions
toward the brand or commercial relationship. Loyalty action and talk (i.e.,
promotion to others) are both valuable to businesses, but in different ways.
3 ways to increase customer loyalty:
Customer loyalty is arguably the most important factor in business
today. Not only will it bring repeat business, but also translate to more
opportunities via word of mouth as well as brand mulligans for those little
hiccups that occur every now and again. Here are three tips that I’ve found
come in handy when it comes to increasing this important marketing metric.
1. Establish a personal relationship with each individual customer.
A significant aspect of customer loyalty comes down to your likability.
People will almost always remain committed to a brand if they believe they’ve
developed a genuine and mutually beneficial relationship. Take advantage of
any opportunity to get to know a client on a personal level. To be more exact,
designate a specific team of representatives to each individual client. In doing
so, you will put yourself in a situation to develop good rapport with every
customer and, more importantly, give you critical information to use during
follow-up opportunities.
Most people will not expect a customer service representative to ask
about their son’s graduation or a recent job promotion. Organize your
operations to keep a mindful eye out for information of the like that can help
build such a relationship.
2. Take content relevance into account.
Google no longer rewards those SEO bandits who claw and scratch their
way to the top of the search results by including popular keywords in meta tags
and hyperlinks to optimize their sites. Instead, the search engine is now judging
content in context with what’s being conveyed on the entire web page and
rewarding sites accordingly. With that in mind, make sure to modify your
content based on who the traffic is. For example, our company does business in
more than 22 countries worldwide and we provide personalized websites with
information drafted in a way that's culturally oriented to each nation. En route,

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we provide content relevant to each location and presented in the dialect that
that country's natives would use.
You can also take things a step further and adjust your other marketing
campaigns -- including those offline -- in similar fashion. Again from our own
experience: Our company supplies numerous CPA firms with personalized
marketing products. The major portion of business that we do with these clients
occurs throughout January as they prepare for the workload increase that comes
in mid-April. Something we do, which really resonates with our clients, is print
the equivalent of a 1040 form wrapped around a pen. It's a fun thing to do; and
it's a hit.
3. Follow the rules.
Ultimately, customer satisfaction is the deciding factor for helping to
build and maintain loyalty among your clientele. In this sense, it is essential to
adhere to the “Golden Rule” and Google’s “Platinum Rule.” The first, which
entreats us to treat others as we would like to be treated, can be reflected in
business in something as simple as a 100 percent satisfaction guarantee. The
Golden Rule might be somewhat of a given, but its signficance for retaining
customers cannot be understated.
The Platinum Rule, which can be applied in communication, advises us
to interact with people in the way they prefer. If someone contacts you through
email, follow up using email; if another reaches out via social media, reply
using social media. Furthermore, if you fall out of touch with a customer, take
the hint. Do not berate him or her with messages in the hopes of rekindling a
dying flame; chances are there's a reason for the lack of contact.
Together, these two rules go hand in hand when you set out to build a
healthy business-customer relationship. That relationship is crucial, and it will
likely be reflected in your retention rates.
1.7 PRODUCT MARKETING
Product marketing deals with the "7 P's" of marketing, which
are product, pricing, place, promotion, physical environment, process and
people.
Product marketing, as opposed to product management, deals with
more outbound marketing or customer-facing tasks (in the older sense of the
phrase). For example, product management deals with the basics of product
development within a firm, whereas product marketing deals with marketing
the product to prospects, customers, and others. Product marketing, as a job
function within a firm, also differs from other marketing jobs such as marketing
communications ("marcom"), online marketing, advertising, marketing

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strategy, and public relations, although product marketers may use channels
such as online for outbound marketing for their product.
A product market is something that is referred to when pitching a new
product to the general public. Product market definition focuses on a narrow
statement: the product type, customer needs (functional needs), customer type,
and geographic area.
Role
Product marketing in a Business addresses four important strategic questions:
 What products will be offered (i.e., the breadth and depth of the product
line)?
 Who will be the target customers (i.e., the boundaries of the market
segments to be served)?
 How will the products reach those (i.e., the distribution channel and are
there viable possibilities that create a solid business model)?
 At what price should the products be offered?
To inform these decisions, Product Marketing Managers (PMMs) act as
the Voice of the Customer to the rest of the product team and company. This
includes gaining a deep understanding of—and driving—customer engagement
with the product, throughout their lifecycle (pre-adoption, post adoption/
purchase, and after churning). PMMs collect this customer information through
customer surveys and interviews, and when available, product usage data. This
frequently informs the future product roadmap, as well as driving customer
product education to ensure improved engagement.
PMMs answer these questions and execute on the strategy using the
following tools and methods:
 Customer insights: interviews, surveys, focus groups, customer observation
 Data analysis: product marketing managers are highly quantitative,
particularly in internet companies where results of marketing attribution to
revenue is easily measured
 Product validation: particularly for internet companies, teams often use
marketing as a channel to test and validate product ideas (the minimum
viable product or rapid prototyping), before engineering resources are
committed to develop the product
 Testing: optimal prices and marketing touch points are developed through
exhaustive A/B testing of language (copy), prices, product line-ups, visuals,
and more

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Comparison with product management
Product marketing frequently differs from product management in high-
tech companies. Whereas the product manager is required to take a product's
requirements from the sales and marketing personnel and create a product
requirements document (PRD), which will be used by the engineering team to
build the product, the product marketing manager can be engaged in the task of
creating a market requirements document (MRD), which is used as source for
the product management to develop the PRD.
In other companies the product manager creates both the MRDs and the
PRDs, while the product marketing manager does outbound tasks like
giving product demonstrations in trade shows, creating marketing collateral
like hot-sheets, beat-sheets, cheat sheets, data sheets, and white papers. This
requires the product marketing manager to be skilled not only in competitor
analysis, market research, and technical writing, but also in more business
oriented activities like conducting ROI and NPV analyses on technology
investments, strategizing how the decision criteria of the prospects or customers
can be changed so that they buy the company's product vis-a-vis the
competitor's product, etc.
One issue that faces Product Marketers is that they are chartered with
developing much of the content for the various constituents (sales, marcom,
customers, blogs, etc.). Creating content tends to be given more value than the
actual research and thinking that is behind all the content.
In smaller high-tech firms or start-ups, product marketing and product
management functions can be blurred, and both tasks may be borne by one
individual. However, as the company grows someone needs to focus on
creating good requirements documents for the engineering team, whereas
someone else needs to focus on how to analyze the market, influence the
"analysts", and understand longer term market direction. When such clear
demarcation becomes visible, the former falls under the domain of product
management, and the latter, under product marketing. In Silicon Valley, in
particular, product marketing professionals have considerable domain
experience in a particular market or technology or both. Some Silicon Valley
firms have titles such as Product Marketing Engineer, who tend to be promoted
to managers in due course.
The trend that is emerging in Silicon Valley is for companies to hire a
team of a product marketing manager with a technical marketing manager.
The Technical marketing role is becoming more valuable as companies become
more competitive and seek to reduce costs and time to market. Another trend is
to have one Product Marketing Manager per group of Product Managers. This

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is the model that leads to the issue of PMMs being pressured to write content
instead of connecting with the market.
In health care marketing products are rarely purchased by the end user
and are often purchased or paid for by government, intermediaries, payors,
healthcare professionals and healthcare organizations, as a result in the
Biotech/Pharmaceutical and Medical Device markets there are "6" P's; the core
4: Price, Product, Promotion and Positioning as well as.
Qualifications
The typical education qualification for this area of business is a high
level Marketing or Business related degree, e.g. an BBA, MBA, M.A./M.S. in
Marketing, M.A./M.S. in I/O Psychology, not forgetting sufficient work
experience in related areas. As a key skill is to be able to interact with technical
staff, a background in engineering or computing is also an asset, given the
highly quantitative component of the role.
Types
 Value (marketing)
 shopper marketing
 Product management
The 10 Commandments of Product Marketing
Whether you’re a fan of Charlton Heston or Mel Brooks, you likely
understand the concept of a commandment: It is a foundational command or
directive or an essential requirement with no compromise. In the course of
managing today’s crises and worrying about tomorrow’s problems, we as
product-marketing professionals can lose focus on the essentials needed to be
an effective product marketer.
Having been at the product-marketing game for about a dozen years at
three different companies (more if you count how many times I was acquired)
and having had the distinct honor of working for a master of product marketing,
I submit to you this list of the essentials, which we call “The 10
Commandments of Product Marketing.” I hope they help guide new product
marketers or reintroduce core product-marketing fundamentals to veteran
practitioners.
The 10 commandments are built around the constituencies we as
product marketers serve: sales, product management and business, press and
analysts, competitors, partners and most importantly, customers.
1. Have an up-to-date positioning document and buyer persona for your
product. How often do you start developing product or marketing materials
without fully knowing who the target buyers are and what their pains are? It

41
happens more than it should when we are going too fast, but without this
fundamental understanding you run the risk of losing control of your message.
Never forget: YOU own the message.
2. Know the business plan for your product and have a measurable go-to-
market plan for it. Regularly perform a marketing activity analysis against
budget to measure this. You can’t manage what you can’t measure, and you
can’t achieve an objective without understanding what it takes to get there. I
recommend setting a regular cadence of operational reviews with your
functional marketing counterparts, where you can review a standard set of
results to measure what’s working and what’s not. And when marketing issues
come up during quarterly business reviews, make sure your business leader is
prepared with the numbers. It’s your responsibility as steward of the marketing
budget for the business.
3. Know how customers are using your product. Observing customers in
their native habitats need not be intimidating. Ask for a ride-along with a sales
rep, or talk to an established customer willing to give you honest feedback.
(Customer reference program members are an ideal source for this.) Use these
conversations to determine if how you’re positioning your product is real or
just hype. Be prepared for an opinion different from what you were expecting
and take it in context with other conversations. Just because you have one
conversation with one customer who says something completely divergent from
what your buyer personas say doesn’t mean you have to shift how you market
your product. Keep it real by speaking to a real customer at least once per
month. This is also a non-threatening way to gather win/loss data.
4. Know where your product’s customers and users are coming from. This
one can be tricky, especially if your business lacks the operational maturity to
have consolidated business metrics. There will be someone—likely multiple
people—who are able to tell you how many active customers you have for a
product (maintenance or support records); the sizes and industry verticals of
your customers (Hoover’s et al); average sales price, discount and margin
(bookings database from finance); and new customers vs. existing (finance).
The trick is to consolidate this information so you have the right information
when you need it. For example, wouldn’t it be great if—when your business
leader indicated you needed to focus on selling to existing customers to drive
penetration—you had that data at your fingertips and could weigh in on the
addressable market?
5. Know your product’s license and maintenance revenue targets and
progress toward those targets. As a product marketer, you are the VP of
marketing for your product. The main focus of your role as a marketer is

42
contributing to revenue. How are you influencing license bookings? Pretend for
a moment you work for a “company-is-the-product” startup. You own
marketing for that product—and therefore the company—soup to nuts. What do
you need to know to be successful? Knowing your progress toward targets
helps you move your marketing investments to meet current business
objectives.
6. Know who sells your product. Also know what their comp plans look like.
Sales reps are coin operated; their behavior follows the money. Knowing how
your reps are compensated helps you know what to focus on in sales-
enablement discussions. For example, if reps have their comp plan tied to
growth in enterprise-level accounts in their region, they’re not going to respond
to products and training that address a small- to mid-market customer. Hand-in-
hand with this is an understanding of quotas, average deal sizes, whether
they’re comped on other parts of the portfolio, professional services, etc. This
helps you better understand the folks who are taking your product to market
and how to talk their language. You can then be better positioned to influence
comp-based incentives or spiffs for your product.
7. Ensure sales, partners, field marketing and others can successfully
evangelize for your product with accurate and up-to-date sales
tools. Gather feedback from the field and provide regular updates. This seems
like a no-brainer and will likely be 75 percent of your job. Notice the nuance
here, though. Your role as a product marketer likely revolves around building
messaging, enabling the sales force and influencing campaigns to drive leads
and awareness. But turning other marketing shared-services personnel into
advocates for your product increases internal mindshare and ultimately
improves focus and results. It’s not just about the blocking and tackling of
producing sales tools and a good website, but also ensuring the folks building
those tools and that website or managing that event can tell the story well. Part
of your success will be dependent on turning others, not just sales, into
evangelists. Remember, you’re likely competing with other products for mental
shelf space across the company. Be aggressive: It’s always easier to ask for
forgiveness than permission.
8. Know your product’s top three competitors and be able to explain how
your product is different. I bet this is the No. 1 request you get from sales.
But if you’re like many companies, analyzing competitors is a tricky
undertaking. It’s frowned upon to download a competitor’s product under false
pretenses or break the law in any way, so you rely on publicly available
materials that are either authored by the competitor or from an expensive third-

43
party source. My advice is to stay above it and simply provide strengths and
advantages of your products.
9. Know who the key analysts and market influencers are and how they
position your product in the market. Don’t rely exclusively on the analyst
relations, public relations or social media teams to give you regular updates on
analyst reports or industry articles. You need to take responsibility for knowing
who your top influencers are and how they feel about your product, and you
can do that by subscribing to their blogs and Twitter feeds. Also, establish a
quarterly cadence with those influencers to talk business strategy, product
updates, etc. It doesn’t even have to be formal, and some of the best influencing
I’ve done is over coffee or standing on a tradeshow floor. Begin with the end in
mind: How do you want this conversation to end? Courting these influencers is
as critical to your success as educating your sales force. Ever had a deal go
south when a customer said that Analyst Firm X hadn’t heard about your
product before?
10. Know your product’s release schedule and roadmap and execute
product releases on time. Another “duh” moment. But seriously, how many
times have you been surprised that a product is ready to release, and you nearly
caused a delay in its release? At the company I work for, product management
owns the release to marketing/manufacturing date, but product marketing owns
the generally available (GA) date when the product is actually live and sellable.
There are typically 10 business days between these two dates (with some
flexibility on either end), which gives product marketers 10 days to shepherd
sales tool updates, marketing programs and sales training through the processes
needed to post it all live. To keep up on when the release is coming, attend your
product or program manager’s regular release meetings and be prepared with a
plan on how you will market the product.
Product Life Cycle
Like a human being, all products have certain length of life during
which they pass through certain identifiable stages. Through the conception of
the product, during its development and upto the market introduction, product
remains in pre-natal stage. It life begins with its market introduction, then goes
through a period during which its market grows, rapidly, eventually, it reaches
at maturity and then stands saturated. Afterwards its market declines and finally
its life comes to an end.
The importance stages from the viewpoint of marketing can be grouped
into six: (i) Innovation or introduction, (ii) Growth, (iii) Maturity,
(iv) Saturation, (v) Decline, and (vi) Obsolescence. This is termed as a product
life cycle.

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Definition
William J. Stanton has explained the concept of life cycle of a product,
as “From its birth to death, a product exists in different stages and in different
competitive environments. Its adjustment to these environments determines to a
great degree just successful its life will be”.
Product Life Cycle Curve
The product life cycle can be graphically represented in the form of a
curve. The curve is generally S-shaped. The curve shown in the picture given
below is the basic model of the product life cycle.

SATURATION

MATURITY DECLNE

GROWTH

ABANDONMENT

INTRODUCTION

Different Stages of Product Life Cycle

 Introduction:
It is first stage of the product life cycle. The product is first introduced
in the market. Heavy expenditure on advertisement is made to inform the
potential customers about its qualities and characteristics and it is made
popular among its users through promotional efforts. As because the
potential consumers are quite unaware of the products characteristics the
sales so not pick up much. Moreover, the product is put to the market at
every competitive price. Consequently the quantum of profits is low or
rather negligible in this stage but the risk factor is much higher.
Competitors are not in the market because the product is new for the
potential consumers. Most of the product fails in this stage due to lack of
proper innovation efforts. Thus, at this stage due to lack of proper
innovation efforts. Thus, at this stage, it is necessary to prepare and
implement the effective advertising and sales promotion programme.

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 Growth:
After the product is introduced in the market, the product enters the
second stage. Under this stage the product gains popularity among the
recognition from the customers. The demand and sale go up tremendously
due to promotional efforts. Consequently profits of the firm start going up
and up because of two primary reasons: (a) Production and sales to up
hence firm gets many internal and external economics of large scale
production and sales, and (b) Advertising and distribution cost, though go
up but per unit cost is reduced. High profits attract the competitors to enter
the field.
 Maturity:
The next is maturity stage. In this stage, competition increases. Though
sales of the product go up but with a lower speed. The advertisement and
distribution costs increase in order to make the product survive. The profit
rate begins to decline. The producer makes search for new markets. Market
and marketing research expenditure goes up. The prices came down due to
stiff competition.
This stage is challenging. The marketer must change its marketing
strategies, policies and programmes keeping in view the changing
circumstances of the market. He must have a close eye on competitors.
 Saturation:
Next comes the saturation point. At this stage the sale volume comes to
stands still despite best promotional efforts but it is at all time high. The
competition is also at its peak in this period. Competition brings the cost of
distribution and promotional efforts at new high; prices begin to fall and
therefore profits come down. Fresh efforts are made in this stage to improve
the product. New markets are tried.
 Decline:
This stage is brought out by product gradual displacement by some new
innovation or change in consumer behaviour. New products are introduced
in the market by competitors. Sales of existing product go down in spite of
all best efforts of picking it up. Cost control becomes necessary to reduce
the price in order to compete. At this stage, the marketer should explore the
possibilities of selling the product. It he finds bleak possibility, he should
divert his resources to other products.
 Abandonment or Obsolescence:
As new product are developed and introduced by the competitors, the
company’s product dies out. Its demand and sales are likely to taper off.

46
 Profits are reduced, to a negligible point. At this stage, it is advisable to
stop the production of the product and switch off to other products.
The above discussion concentrates on the life cycle of a product
beginning with its introduction upto the market and ending with its death,
but a series of processes are to be undertaken by the management even prior
to its introduction. The various expenses are made even before its
introduction in the market on research, engineering and technical
improvements, post-production and pre-marketing (test-marketing,
advertising) etc.
Advantages of Product Life Cycle Concepts
There is a great difference of opinions of scholars about the utility of the
concept of product life cycle. Some scholars are of the view that the study of
life cycle of concept is wastage of time, money and energy. They argue that
different products have different life cycle and life cycle changes from time to
time depending upon different factors. They are also of the view that it is not
easy to determine the particular stage of the life cycle of a product at a
particular time. Moreover length of a particular stage cannot be ascertained. On
the other hand, some scholars are of the view that the study of product life
cycle is very useful in marketing and also for preparing and implementing
marketing strategies and programmes. Its utility can explained as under:
 Life of a product is limited:
According to the concept, the life of a product is always limited. The
product will die out over a period of time irrespective of the fact, that the
product had made a tremendous progress during the past. Knowing this fact,
management always tries to improve its existing product or to develop a
new product.
 Estimation of profits:
The quantum and rate of profits increases or decreases with quantum of
turnover. At introductory stage, profits are negligible, then they go up and
after some time they begin to fall and gradually they move to nil. Thus, the
management can well predict the firm’s profits in different stages of the life
cycle of the product.
 Marketing programme:
Different policies, procedures, and strategies are followed in the
different stages of the life cycle of a product. So, management can prepare
the marketing programmes accordingly and may get success.

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The marketing strategies, which may be adopted during the life cycle of a
product
All products have certain length of life during which they pass through
certain identifiable stages. Once the product gains consumer acceptance the
sales generally go up in the growth stage but soon more and more competitors
enter the market. It will adversely affect the sales of the product considerable
and will likely to stop going up. The sales position is optimum in the maturity
stage. Henceforth sales begin to go down and come to an end after certain
period when its demand dies out.
Every product has to pass though these stages. The period of its stay in
the market may differ from product to product. Several factors govern the
length of product life cycle. A slight change in the ingredients leads to
obsolescence. So the management tries to make the product survive in the
market for a long period and hence. It takes up various strategies at the different
stages of life cycle of a product.
An introductory stage, the marketing strategy would involve heavy
advertising, extensive selling and introductory inducement. Thus heavy
expenditure on advertisement informing about the product and the producer and
on personal selling etc. is to be made.
The effect of advertising and extensive selling in the introductory stage
may be seen in the growth stage where sales pick up smoothly and start
attracting the competitors in the filed. In this stage, marketing strategy may
shift to price appeals and product improvement.
Again be reaching the declining stage, the organisation may merely
attempt to recover costs. In the meantime, steps should be taken to reduce the
cost and for this the research department should have been active enough to
have come foreword with a new product in time. At this stage, the following
steps may be taken:
 The utility of the product may be increased.
 New uses may be suggested.
 New attractions to the purchaser may be added such as draw of lucky
coupons or gifts etc.
 New markets may be searched out.
The above steps may be called ‘injecting new blood’ technique toward
off the obsolescence stage. However this type of injection in practice cannot be
done permanently. Therefore, the company must come out from time to time,
especially in competitive environment, with new products so that its sales line
will rise steadily. This may be termed ‘injecting new products’

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Factor affecting the life cycle of a product
Some of the important factors affecting the life cycle of a product are as
follows:
 Rate of Technical Change:
Life cycle of a product is affected by the rate of technical change in the
country. If the rate of technical change in the country is very high, the life
of the products is limited because new and improved products take place of
old and exiting products. On the other hand, if the rate of technical change
is not so high, the life of the product in that country may be longer. For
example, the life cycle of products in India is longer as compared to the life
cycle of products in developed countries.
 Rate of Man at Acceptance:
The rate of customer acceptance also affects the life cycle of products.
If the rate of market acceptance is high the life cycle of products in that
country is limited. It is because the product tomorrow and the existing
products will soon stand out of the market. Similarly, if the customers
accept the product at a slow rate, the life cycle of the products may be quit
long. For example, in India, the market acceptance is very slow, and
therefore, there life of the products is very long.
 Ease of competitive Entry:
This situation of competition in the market also affects the life cycle of
the products. If the entries of competitors are easy and unchecked, the life
of the products will be shorter as the new and new products will enter the
market. As a result the existing products will be flushed out of the market.
Contrary, if the entry of competitors not so easy the life cycle of products
will be longer.
 Risk Bearing Capacity:
The risk bearing capacity of the enterprise also decides the life cycle of
its products. If the enterprises have risk bearing capacity, they can keep
their product alive in the market for a long period as they can face the
challenges of the market very effectively. For example, they can spend
more amounts on advertising and sales promotion to meet the competition
in the market. But where the enterprises have no risk bearing capacity may
fail to face the challenges of the market. They will soon withdraw their
products from the market, if they heavy risk. In such cases, the life cycle of
their products will be shorter.

49
 Economic and Managerial Forces:
Enterprises having strong economic and managerial forces, can keep
their products standing in the market and the life cycle of their product will
be longer that of the life cycle of the products of those enterprises having
weak economic and managerial base.
 Protection of patents:
The life cycle of the products is fairly long if their patents have got
registered. On the other hand, if the products are not patented, their life is
cut short.
 Goodwill of the Enterprise:
If the goodwill of the enterprise is good in the market as the producer of
good quality products, its products will last long in the market as compared
to the products of those enterprises whose goodwill is not good or which
are not known to the public much.
New product development
The development and distribution of new products are of great current
interest among businessmen. Business firms are placing increasing reliance on
new products for the achievement of their profit objective. But most of new
products are marketing failures. Even among a group of well-managed
companies in America, the success rate for products, which reached the market,
was still only two out of three. Hence a good programme for planning and
developing new products is essential for the success of new products.
Steps in new product development process
The new product planning process, progresses from the idea stage to the
production and marketing stage. Although there may seem to be no particular
pattern, in general it includes the following six steps:
 Sources of new product ideas:
This is the first stage, in the new product planning process, new product
ideas originate from many sources. Most concerns rely solely in internal
sources such as the company’s engineers, its managers, its marketing
department, or from its workers in the form of suggestion box ideas.
Outside ideas can come form such sources as the company’s wholesale
distributors, retailers, customers, and independent inventors and outside
consultants. Sometimes, the marketing information system of the firm may
also supply the new product ideas. There seems to be no one single source
for good ideas. Each idea regardless of its source should be evaluated on its
own merits, considering both market needs and opportunities and the
company’s capabilities.

50
 Evaluation of new product ideas:
The first crucial stage of new product development process is the
screening of the new ideas. Numerous considerations enter into the
evaluation of a new product idea. Apart from consideration of market
potentials and profitability of the new product, the following factors must
be also considered.
 Existing production facilities.
 Existing marketing organization.
 Availability of using the exiting plants.
 Possibility of using the existing plants.
 Availability of finance.
 Competition.
 Image of the firm.
The basic step is to find out which of them warrant further study. All
the departments of the concern devote full attention to evaluate the new
product idea and decide whether the new product is to be produced on not.
Evaluation stage involves a through investigation of the competitive market
situation and company resources with respect to each idea. Thus evaluating
or screening new product ideas is of great importance.
 Business analysis:
Those ideas that are passed through the screening contain many
unknown. The development group must now determine if the product can
be made and sold profitably. The idea is converted into a concrete business
proposal in which the management should think about the following things:
 Products market potentials.
 Production cost and problems.
 Capital requirement.
 Distribution problems
 Investment research and development.
At this stage, the management must spend some money to get, some
fairly accurate answers to these questions.
 Product development:
At this stage, the idea on paper is converted into physical product. The
first phase of the development stage is to manufacture model products, in
small quantities so that they can be taken to the market for use testing. Use
testing is important, because products often perform differently in actual

51
 use than they do under laboratory conditions, where the operating variables
can be closely on controlled. This stage can be time consuming and costly.
Sometimes, before putting into a commercial production, a firm will have a
product in the development stage for several years. Management must take
care that at each stage throughout the new product-planning programme,
evaluation sessions are held, at which time the economic feasibility of the
product is re-evaluated in the light of what has been learned to date.
 Test marketing:
Up to this stage, potential customers have been asked to react to one or
more product features and to comment on the advertising appeals. The
reaction of potential customers can be tested by means of use testing. Test
marketing is the stage, where commercial experiments in limited
geographic areas are conducted in order to ascertain feasibility of the full
marketing programme. The test marketing is more frequently used by
consumer companies than industrial companies.
Test marketing may yield several benefits to the manufacturer. It may
determine the potential success or failure of a new product prior to full-
scale launching. During the test marketing, (1) the company may discover a
product fault that escaped its attention in the product development stage. (2)
The company may get information regarding distribution problems. (3) The
company may also gain a richer understanding of the various segments of
the market.
 Commercialization:
Once test marketing is completed, the management has to take a final
decision regarding the commercialization of the product. If the test
marketing results are favourable for the introduction of the new product,
then full-scale production and marketing programmes should be planned.
The firm must invest in new equipment and facilities to make large scale
production possible. It must arrange for promotional programmes with its
agency.
The product generally is introduced first in prime markets and regions
and then at national level. If the test marketing results are very encouraging,
the company may try to introduce the product on a full-scale basis.
In the development process, up to this stage, the management has
complete control over the product. Once product is ‘born’ the external
competitive environment becomes a major determinant of its destiny.
When a company introduces its new products swiftly or gradually it needs
to schedule its commercial introduction carefully.

52
Reasons for the new product failure
 Inadequate market analysis:
Where the product is introduced in the market without proper market
analysis or with biased and incomplete data, the product fails in achieving its
objectives. It is because the enterprise fails in (i) Understanding the consumers
needs and wants properly, (ii) making correct estimates of sales, and (iii)
meeting the standards of utility etc.
 Product Defect:
This arises out of technical flaws in the process of production. This is a
fundamental reason for product failure. Low quality of products, poor
design or packing may lead to product failure. This can be done away
through the proper product testing.
 Higher costs:
Higher final costs than anticipated at the time of product planning are
another reason for product failure. It might be partly due to wrong pricing
policies adopted by the firm. The cost estimates also often go wrong when
the products are finally introduced into the market.
 Poor Timing:
The fundamental principle to be followed in product planning is to find
out the exact time at which the product is to be introduced in the market.
Usually when and how are the two questions a manufacturer is often
finding difficult to answer. A close analysis of the market conditions and
consumer behaviour and attitudes is essential to find an answer to the two
problems.
 Distribution problems:
This includes channels of distribution; failure to train marketing
personnel for new products and new markers; failure to co-operate with
middlemen; poor physical distribution of goods.
 Promotion problems:
Inadequate advertisement, use of wrong appeals failure to cooperate
with distribution system, sales force inadequacies in training motivation or
supervision.
 Pricing problems:
This includes higher costs than anticipated. This led to higher prices,
which in turn led to lower sales volume than anticipated.

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Branding
The top management, while formulating product policies must also take
decision in the area of branding and packing, because they constitute two
important product features. In fact, branding and packaging are psychologically
tied up with the product characteristics and strongly influence unconsciously
the consumer’s evaluation of the product. They assist the producer in many
ways. They add prestige to the product, aid in creating, stimulating and
maintaining the demand and facilitate effective execution of sales promotion
techniques. It is for this reason that the top management must take policy
decision while evolving product policies.
Brand, brand name and brand mark
Before we turn to these issue, a few definitions must be noted in order
to avoid the confusion in the usage of the terms brand, brand name and brand
mark.
Brand:
“A Brand is name term, symbol or design or a combination of them,
which is untended to identify the goods or services of one seller or group of
sellers and to differentiate them from those of the competitors”.
Brand Name:
A brand name consists of words, letters and/or numbers, which may be
vocalized and refers to products. Examples are Ambassador Cars, Usha Fans,
Bata Shoes, etc.,
Brand Mark:
“A brand mark is that part of brand which appears in the form of a
symbol or design or distinctive colouring or lettering”. It is recognised by sight
but is not expressed when a person pronounce the brand name e.g., Symbol of
Maharaja of Air India, The Symbol of Butterfly of the Butterfly Appliances,
etc.
Reasons for branding the products
Successful brands have proved better income earners to many concerns.
It has also become possible to develop a steady demand by using brand as a
distinctive and reliable symbol of recognition. Through brand identification
many products are exercising maximum control over the demand for their
products and are competing or non-price basis.
G.B. Giles enlists the following arguments in a favour of branding:
 Memory recall is facilitated. This could lead to more rapid initial buying
action or greater frequency of buying and hence deeper loyalty.

54
 Advertising can be directed more effectively and linked with other
communication programmes.
 Branding leads to more ready acceptance of product by wholesalers and
retailers.
 Self selection is facilitated – a very important consideration in self service
stores.
 Display space is more easily obtained and special promotions are more
practicable.
 The importance of price differentials may be diminished.
 Brand loyalty may give a manufacturer greater control over marketing
strategy and channels of distribution.
 Other products may be introduced more readily.
 The amount of personal persuasive selling efforts may be reduced.
 Branding makes market segmentation easier. Different brands of similar
products may be developed to meet specific categories of users.
Conditions favourable to branding
It is already state that all products cannot be successfully branded, although
most producers then themselves to brand identification for their products.
McCarthy E.J. suggest the following conditions that may lead to successful
branding:
 The demand for the general product class should be large and strong
enough to support a profitable marketing plan, involving additional
promotional costs.
 The product should be easily identifiable by a brand and led itself easily
to conspicuous marketing
 The brand must carry through to the ultimate consumer.
 There must be economics of large scale production whenever additional
production is undertake as a result of expanding sales volume.
 The quality of the product should be the best and it should be easily
maintained.
 There must be consistent and wide spread supply of the product.
Characteristics of a good brand
Little field and Kiripatrick suggest the following characteristics for a good
brand name:
 Distinctive: The name should be distinctive because they are attention
compelling, have interest, impact and memory value.

55
 Suitability: The names should suit the markets, buyers and products.
 Suggestive: They should have a suggestive quality so that interest may be
aroused and the performance of the seller’s advertising may be enhanced.
 Easy to Master: They should be easy to write , read, spell, recognize and
remember.
 Short: They should be as short as possible. They should not exceed seven
letters.
 Family Suitability: All products manufactured by the same producers
must be capable of being grouped under a family brand name.
Advantages of branding
Branding brings a number of benefits to the manufacturers, dealers and
consumers. Hence, we shall discuss them under different heading as below.
I) Advantage to the Producers
 It acts as a device by which the corporate image or goodwill can be
established.
 It ensures greater stability of sales volume and price stability and thereby
ensures constant return.
 Introduction of new products is over simplified.
 Marketing cost and other promotional costs are minimised.
 The brand loyalty protects the producers from competition and gives
them greater control over the demand for the product.
 It is an insurance of merchandise comparability when the buyers user
more than one sources of supply.
II) Advantages to the Dealers
 Dealers can easily sell away branded goods. Therefore, they need not
carry more inventories.
 If the customers are satisfied with the quality of the product, they will not
only come back to the dealer for subsequent and repeat purchases but also
bring new customers. This will enhance the volume of sales of the dealer.
 Dealing in branded goods adds prestige to the dealers. They can gain
competitive advantage over others who do not handle branded articles.
III) ADVANTAGES TO THE CONSUMER
 Branded goods are generally of good quality because brand owners try to
maintain the quality in order to secure stronger market position.

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 Since branded goods are produced on mass scale and are readily
available, the customer need not face any hardship in purchasing the
products.
 Prices of branded goods are uniform throughout the country. This avoids
exploitation of the consumers in the hands of the retailer.
Disadvantages of branding
Branding however is not free from defects. The following are the
defects of branding.
 Branded goods yields only lower gross margins and so the producers and
dealers cannot reap higher profits unless there is a large turnover.
 Another severe criticism levelled against branding is that it leads to brand
monopoly. Brand monopoly enable the producers to exercise control over
the demand for the products. He can even dictate the prices for such
products.
 Establishing a brand name involves huge expenditure on advertising and
other sales promotional measures. These costs have the effect of
increasing the prices of such products.
 Quality is not assured under all circumstances. Under a glamorous brand
name, dishonest producers may place inferior goods in the markets.
Brand Equity
Brand represents goodwill of the firm, and in corporate mergers,
frequently the value offered to purchase a firm is higher than the book value of
its fixed assets, current assets and the market value of its shares. The difference
between the book value plus the market value and the price offered for the
mergers can be apportioned to intangible assets. One such intangible asset is the
firm’s brand equity. The subject of brand equity is relatively a new one and
many are carrying out research studies on it. With this introduction, we shall
now go into the various aspects of brand equity.
Meaning and definition of brand equity
A brand builds up assets and creates liabilities over a period of time.
Brand assets includes customer loyalty, perceived quality of the brand, brand
awareness, its association with objects, and other brand asset like patents, trade
marks, channel relationship, etc., David A. Aaker, in his book “Managing
Brand Equity” has defined brand equity as a “set of assets and liabilities
linked to a brand, its name and symbol that add to or subtract from the value
provided by a product, or service to a firm and or to that firm’s competitors”.
In other words, brand equity provides value to a firm in the form of
price premium or trade leverage or competitive advantage.

57
 Strong brand equity enhances the value of the brand. This in turn is
helpful for getting a fair price for the firms when they are sold. It provides
benefits to customer by enhancing customer’s confidence in purchase decision.
Brand Valuation
Valuing a brand precisely is not an easy task. It is a function of
customer’s perception, their attitude towards it and the economic value they
attaches to the brand. A brand’s price reflects customers perceived value. If the
customer perceives higher value in the brand, then he will be ready to pay a
premium to buy it and vice versa.
Approaches to brand valuation
There are different approaches to value a brand. We shall now discuss
them briefly.
I) Price Premium:
One of the effective approaches to the valuation of a brand in is the
premium, which it commands in the market. Once the price premium is
obtained, value can be determined by multiplying the premium per unit with the
total number of units sold out. There are different approaches to assess the price
premium on a brand. They are detailed below.
 Observing Price Levels Prevalent in the Market: One approaches to
assess the price premium observing price levels of different competing
brands. It involves a study of determining how these differences are
associated with different brands. Besides, a brand’s reaction to its own
prices changes as well as to the price changes made by competitors also
should be studied.
 Assessing the Preference or Purchase Likelihood of Customers at
Different Levels: Another approach to assess the price premium is
assessing the preference or purchaser likelihood of customers at different
levels. If the assessment reveals that the customer is likely to purchase a
firm’s brand at a price higher than its current price of its competitor’s
price, then the brand’s equity is higher. On the other hand, if the customer
is not likely to purchase a firm’s brand so, then the brand’s equity is low.
 Trade-Off: Another approach to assess the price premium is trade off. In
this approach, customers will be given an opportunity to make trade off
judgements regarding brand attributes. For the purpose, certain common
attributes of a brand are selected and by; combining them, different
options are formed which are to be judged by the customers. For instance,
in case of consumer durables, brand name, prompt after sales service
provided by the manufacturer and availability of the product are some of

58
 the important attributes that are normally given importance by the
customers. They all or some may be beautifully combined to know the
customers opinion for which they are ready to give price premium. Some
of such combinations may be like as below.
 Very popular and reputed brand Name & readily available all over the
country.
 Popular brand Name & available only in metropolitan cities.
 Unpopular brand Name & available in all major towns.
 Popular brand Name & available only in metropolitan cities.
It we ask a customer, of the above options, to which options you will be
ready to give a price premium, definitely his answer should be for option. 1.
This is because it enjoys popularity of brand name and national level network.
II) Movements in Stock Price:
Another approach to value any brand is movements in stock price. It is
based on the assumption that the market price of stock reflects the firm’s
intrinsic worth, which constitute brand equity as one of its constituents. In this
approach, from the firm’s value (Market value of stock X number of shares),
the replacement cost of tangible assets such as plant and machinery, stock of
materials, etc., is deducted and the balance is apportioned to intangible assets
such as R&D, human resource, brand, etc. Here as firm’s value is determined
with the market value of shares, movements in share price will have its own
influence in the market value, which in turn will affect the brand equity.
III) Future Earnings of Firm:
Another approach to brand valuation is future earnings. In this
approach, long range planning as to the brand is carried out and normally
anticipated profits in future are discounted by using discounted cash flow
method.
IV) Impact of the Brand Name on Customer Preferences:
Brand name is an important tool in the selection of goods for purchase
and has its own influence to a greater extent to decide between the alternatives.
Customers always go for the reputed brand products. In this approach, value of
brand is determined by finding out the marginal value of the extra sales that the
brand name supports.
V) Replacement Value:
Replacement value means the cost required to be spent to replace the
existing popular brand in the market. It is to be incurred by a firm to establish a
comparable name in the market. For instance, cost to be incurred by the product
“Moov” to capture the place of the product “Iodex”, cost to be incurred to

59
replace Colgate in the tooth paste market and so on. But for such replacement, a
firm has to do lot of research and development expenditure, lot of market
surveys, planning which involves high cost. So only firms, which have the
financial support, can try this type of activity.
Categories of brand’s assets
The brand’s assets can be broadly categories into five groups as shown
in Fig. They are detailed below.
I) Brand Loyalty:
Very often, repeated purchases are wrongly considered as brand loyalty.
But brand loyalty is something higher than that. This is because one may buy a
particular brand repeatedly due to many reasons like non-availability of
superior brand, cheap rate, etc. It does not mean that the customer has loyalty in
the brand. That is just habitual buying does not mean brand loyalty. To say one
is having brand loyalty in a particular brand he/she should have committed to it
i.e., if the particular brand, in which a customer has loyalty, should be ready to
visit two or three branches to get that brand though the substitute were offered
in the previous shops.
Measuring Brand Loyalty: There are two methods to measure brand loyalty.
They are:
 Observing Buyer Behaviour: One of the methods to measure brand
loyalty is observing actual buyer behaviour. It can be done in any of the
following ways:
 Percentage of Purchases Scored by different Brand: By observing
buyer behaviour, analysis as to how many times buyer purchased the
same brand, what are the different brands purchased during the last few
weeks/months? etc., can be analysed. This way of analysis will help the
marketer to find out whether the customers are stick on to a particular
brand or very often switch over to different brands, and so on.

Categories of Brand Assets

Brand Brand Name Brand’s Perceived Brand Other

Loyalty Awareness Quality Associations Brand Assets

 Forced Choice Method: In this method, particular area will be selected

for a limited period of time where only a particular brand will be made
available in all the retail outlets. This will be done, to know what
percent of customers are ready to accept the brand which is available in
the market and what percent of people goes to another locality to

60
 purchase their own brand and so on. This study will enable the marketer
to find out the loyalty of the customers towards his brand.
However, these methods are expensive and have a limited diagnostic
utility.
 Study of Psychological and Economic Barriers: Another approach is
to study the psychological and economic barriers to brand switching.
Brand switching denotes the barriers that lead the customers to switch
over from one brand to another. Psychological barriers include customer
satisfaction, customer’s preference for the brand and customer’s
commitment to a particular brand, etc. Economic barriers include high
initial investment in the equipment or the product, and risk in switching
over and so on. Due to these barriers, most of the customers are hesitant
to switch over to another brand and prefer to stick on to a particular
brand. So a study of psychological and economic barriers will enable
the marketer to find out what are various psychological and economic
barriers commonly faced by the target customers, in what way they can
be overcome, etc.
II) Brand Awareness:
Brand awareness means the ability of a potential buyer to recognise a
firm’s product in the retail outlets. If a particular brand exists at the top of the
customer’s mind, it means that the brand equity is high. This is the most desired
condition liked by all the marketers. Many researches supported the view that
highly recognised brand name is an enormous asset to the firm. In order to
achieve high awareness, the following aspects are to the considered while
formulating an advertising copy.
 Advertising copy should be made as a different and memorable one.
 It should involve slogan
 Exposure should be given to brand name.
 It should be given while sponsoring the major events.
 Advertisements should be given repeatedly as well as constantly.
 Perceived Quality: Perceived quality is one which is perceived by
customer by evaluating different brands on quality. Customer’s
perception as to quality should be of high. This is because, if the
customer’s perception as to quality is of high, then they will be willing to
pay a premium for it. The firm also will have greater trade leverage and
middlemen will have greater involvement in dealing with such brands.

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III) Brand Association:
All brands will have some association in the minds of customers. These
associations are developed on account of customer’s experience with the brand
and exposure to the brand. Based on these associations only, customers form an
image of the brand. Therefore, brand association refers to anything, which is
linked to the memory of a brand.
IV) Other Brand Assets:
Name for the brand, patent, trade mark, and their relationship with
middlemen, etc., are collectively called here as other brand assets. These assets
also have its contribution to enhance the value of any brand. However it is
worthwhile to pinpoint that a good and cordial relationship with middlemen can
enhance the brand equity. This is because such a cordial relationship will
encourage the middlemen to work for the brand with involvement and interest.
Packaging
The packing of a consumer product is an important part of marketing
plan. There are many factors to be considered while designing a package a
good
Number of companies adopts square packages in place of round
packages which save space. Lip-sticks and eye brow cosmetics are designed as
pencil to be carried in ladies purses or hand bags.
Packing
Packing means wrapping of goods before they are transported or stored
or delivered to a consumer on the other hand, packing is the sub-division of the
packing function of marketing.
Packaging
“Packaging” has been defined as “an activity which is concerned with
protection, economy convenience and promotional consideration”.
Package
Many marketers have called packaging a fifth p, along with four P’s i.e.
price, product, place and promotion thus packaging is one among the activities
of designing and producing the container or wrapper for a product. The
wrapper or the container is called package.
Definition
In the words of William J. Stanton, packaging may be defined as “the
general group of activities in product planning, which involves the designing
and producing the container to wrapper for a product”.

62
 The Indian Institute of Packaging defines it as “the embracing functions
of package selection, manufacture, filing and handling”.
Cause for the growth and importance of packaging
The advent of self-service has created a packaging revolution. Besides
the importance of gaining consumer’s attention, shelf space and display have
made packaging decisions in the field of consumer goods as importance one.
Even in the marketing of industrial goods packaging is gaining more and more
importance.
Philip Kotler enlists the following important factors for the growing
recognition of packaging as an independent and potential selling tool.
 Self Service: A large number of products are sold on self-service basis as a
result of the growth of super markets. In U.S.A for example housewife buys
approximately 90 % of her weekly purchases from the supermarkets and
self-service shops in one day. Hence, to attract the attention, to describe the
products features, to give the consumer confidence and make a favourable
overall impression, a good packaging has become necessary.
 Consumers affluence:
The steady rise of the income has caused consumer to attach increasing
importance to non-price features. Now a day, consumers are willing to pay
little more for convenience appearance, dependability and prestige.
Packaging is an important vehicle for projecting these qualities.
 Integrated marketing concept:
Companies are increasingly trying to endow their brands with
distinctive personalities. These personalities are also conveyed through the
choice of brand name and packaging.
 Innovation opportunity:
In the area of packaging there is greater scope for introducing and testing
innovations to bring mass sales.
Objectives of packaging
Philip Kotler says that packaging has four objectives. The traditional
objectives of packaging are product protection and economy, common
identification. A third objective is convenience. The fourth objective, which is
receiving recognition in these days, is the promotional function.
On the basis of the observations made by Philip Kotler the important
objectives of packaging can be outlined as follows:

63
 Protection:
If offers protection to the product while it is in transit or in the shelf of
the shop or in the house of the consumer.
 Common identification:
It supplies common identification of the various products of the
company particularly where family branding is adopted.
 Convenience:
Packing ensures greater economy and convenience in handling, opening
and storage of the products particularly in case of family branding.
 Product differentiation:
It enables to differentiate the product from those of other producers. It
also helps to build up brand image.
 Helps in selling:
It is an effective selling tool because attractive packaging induces the
consumers to buy the product.
Features of good package
Package means the container together with or without the contents
inside. Good packages are eye catching and provacating the attention of the
buyers and arousing his interest. Hence, they must be made with great caution
and good designs. I.B.Steel says that a package to be effective and good must
possess the following characteristics.
 It must attract attention.
 It must tell the product story-what is it? What size? How much?
 It must build confidence.
 It must look clean and sanitary.
 It must be convenient to handle to carry out of the store and to use.
 It must look like a fast seller.
 It must look like good value.
 It must deserve a preferred display.
 It must be convenient to stock and display.
 It must prevent spoilage during the selling period.
 It must resist soiling.

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Types of package
 Consumer package:
A consumer package contains the required volume of a product for
ultimate of a product for ultimate consumption and is within the means of a
buying household.
 Bulk Package:
A bulk package is just opposite to consumer package. A bulk package
contains a fairly large quantity of the product either for the use of industrial
consumers or for retailing. The consumer package itself very often requires
an outside package in which it is transported and which is sometimes
referred to as a transit package or an outer container.
 Industrial package:
An industrial package can either describe a bulk package or the package
for durable consumer goods.
 Multi purpose package:
Multi purpose package has a secondary usefulness after its content have
been consumed. It is also knows as re-use packaging. This aspect enhances
the volume of sales largely.
Function of package
 Assembling and arranging the contents in the desired form.
 Identifying the contents, the brand and the manufacturer.
 Protecting the contents from production line through final use.
 Providing a suitable product mix including size weights, prices, grades and
packages.
 Facilitating retailer’s functions.
 Facilitating transporting, storing and warehouse handling.
 Enabling the display of contents.
 Encouraging repurchase.
 Facilitating the compliance of legal requirements.
 Providing opportunity and space for advertising.
 protecting the contents from various kinds of damage like damage by
mechanical handling, product loss, Pilferage, contamination by dirt or dust,
moisture gain and loss, chemical change and insect attack, etc.
 Facilitating storage convenience.
 Providing various economies both to the producers and the consumer like
providing opportunities for re-use, creating an opportunity to communicate

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 with the customers and preventing loss in quantity so as to avoid the
monetary loss.
Packaging Decisions
Factors to be considered while taking packaging decisions:
The decisions on whether to package or not depends on two factors
namely,
 Need for protection:
Firstly, the producer must decide whether there is actually a need for
protecting the product from deterioration or damage during the process of
distribution. A product hat needs no protection need not be packed.
 Product differentiation:
If a product is packed for purposes of product identification or brand
differentiation, the product must remain in the package until the consumer
buys it. In such case a consumer package is desirable. When it is needed for
mere protection of the product from pilferage, contamination by dust or dirt,
moisture, a bulk package is suitable.
 Additional factors:
Once a manufacturer decides to use packaging, he must take a number
of additional decisions with regard to package design, size and cost.
 Package design:
Package design involves decision as to its colour, size, shape of the
product etc. it must also consider convenience in product handling both by
middlemen and its consumers. The shape of the package should permit easy
display on the fixtures in the normal retail store it should make it easy for
the consumer to take the product to his home and to store it in his normal
storage cup-boards.
 Package size:
The size of the package involves the consideration of a number of
factors like the size of the consuming unit and the rate of consumption.
When the product is purchased for individual consumption a small size is
enough for e.g., toothbrushes etc. When the product is purchased for group
consumption or for the consumption of a whole family, a fairly large size is
suitable.
 Package costs:
Package cost is another factor, which requires consideration in the
packaging decisions. Reusable packages are more expensive than
throwaway packages. Reusable packages are more effective in increasing

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 the demand for the product. Such packages must be used when packaging is
more promotional than productive.
Advantage of packaging
 It protects the contents on its route form the producer to the use against
breakage, spoilage, leakage, pilferage and so on.
 It facilitates branding and advertising of products.
 It serves as a silent salesman. It includes the buyers to make reorder
 It has got a display value.
 It protects the quality of the product.
 It ensures the supply of goods in desired quantity to consumers
 Packaging gives the product prestige individuality and identity which the
goods sold in loose form do not have.
Disadvantages of Packaging
 If the consumer wants a specific quantity, he may not have that amount
when goods are sold in packages.
 During the period of rising prices, less content are packed in the same
package and actually same prices are charged.
 Packaging may create health hazards for consumers. Certain plastic food
packaging has been shown to cause cancer.
1.8 DIRECT MARKETING
Direct marketing is a channel-agnostic form of advertising which
allows businesses and nonprofit organizations to communicate straight to the
customer, with advertising techniques that can include cell phone text
messaging, email, interactive consumer websites, online display ads, database
marketing, fliers, catalog distribution, promotional letters, targeted television
commercials, response-generating newspaper/magazine advertisements, and
outdoor advertising. Amongst its practitioners, it is also referred to as direct
response.
Direct marketing messages focus on the customer, data, and
accountability. Hence, besides the actual communication, it is integral to a
direct marketing campaign to create actionable segments, use pre- and post-
campaign analytics, and measure results. Characteristics that distinguish direct
marketing from other types of marketing are:
 A database of names (prospects, customers, businesses, etc.), often with
certain other relevant information such as contact number/address,
demographic information, purchase habits/history, and company history, is
used to develop a list of targeted entities with some existing common

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 interests, traits or characteristics. Generating such a database is often
considered part of the direct marketing campaign.
 Marketing messages are addressed directly to this list of customers and/or
prospects. Direct marketing relies on being able to address the members of
a target market directly. Addressability comes in a variety of forms
including email addresses, phone numbers, fax numbers, postal addresses,
and even web browser cookies.
 Direct marketing seeks to drive a specific "call to action." For example, an
advertisement may ask the prospect to call a free phone number, mail in a
response or order, or click on a link to a website.
 Direct marketing emphasizes trackable, measurable responses, results and
costs from prospects and/or customers, regardless of medium.
Direct marketing is practiced by businesses of all sizes, from the
smallest start-up to the leaders on the Fortune 500. A well-executed direct
advertising campaign can indicate a positive return on investment by showing
how many potential customers responded to a clear call-to-action. General
advertising eschews calls-for-action in favor of messages that try to build
prospects’ emotional awareness or engagement with a brand. Even well-
designed general advertisements can rarely prove their impact on the
organization’s bottom line.
Popularity
A recent study by the Direct Marketing Association reports that in
2010, marketers—commercial and nonprofit—spent $153.3 billion on direct
marketing, which accounted for 54.2% of all ad expenditures in the United
States. Measured against total US sales, these advertising expenditures
generated approximately $1.798 trillion in incremental sales. In 2010, direct
marketing accounted for 8.3% of total US gross domestic product. In 2010,
there were 1.4 million direct marketing employees in the US. Their collective
sales efforts directly supported 8.4 million other jobs, accounting for a total of
9.8 million US jobs.
History
Mail order pioneer Aaron Montgomery Ward believed that using the
technique of selling products directly to the customer at appealing prices could,
if executed effectively and efficiently, revolutionize the market industry and
therefore be used as a model for marketing products and creating customer
loyalty. The term "direct marketing" was coined long after Montgomery Ward's
time.

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 In 1872, Ward produced the first mail-order catalog for his Montgomery
Ward mail order business. By buying goods and then reselling them directly to
customers, Ward was consequently removing the middlemen at the general
store and, to the benefit of the customer, drastically lowering the prices. The
Direct Mail Advertising Association, predecessor of the present-day Direct
Marketing Association, was first established in 1917. Third class bulk
mail postage rates were established in 1928.
In 1967, Lester Wunderman identified, named, and defined the term
"direct marketing". Wunderman—considered[by whom?] to be the father of
contemporary direct marketing—is behind the creation of the toll-free 1-800
number and numerous loyalty marketing programs including the Columbia
Record Club, the magazine subscription card, and the American Express
Customer Rewards program.
Benefits
Direct marketing is attractive to many marketers because its positive
results can be measured directly. For example, if a marketer sends out 1,000
solicitations by mail and 100 respond to the promotion, the marketer can say
with confidence that campaign led directly to 10% direct responses. This metric
is known as the 'response rate,' and it is one of many clearly quantifiable
success metrics employed by direct marketers. In contrast, general advertising
uses indirect measurements, such as awareness or engagement, since there is no
direct response from a consumer.
Measurement of results is a fundamental element in successful direct
marketing. The Internet has made it easier for marketing managers to measure
the results of a campaign. This is often achieved by using a specific website
landing page directly relating to the promotional material. A call to action will
ask the customer to visit the landing page, and the effectiveness of the
campaign can be measured by taking the number of promotional messages
distributed and dividing it into the number of responses. Another way to
measure the results is to compare the projected sales or generated leads for a
given term with the actual sales or leads after a direct advertising campaign.
Challenges and solutions
While many marketers recognize the financial benefits of increasing
targeted awareness, some direct marketing efforts using particular media have
been criticized for generating poor quality leads, either due to poor message
strategy or because of poorly compiled demographic databases. This poses a
problem for marketers and consumers alike, as advertisers do not wish to waste
money on communicating with consumers not interested in their products.

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 Success of any Direct Marketing campaign, in terms of number of times
the desired response may vary between the best vs. the worst of the following
parameters, depends on:
 List or targeting (best targeting may yield up to 6 times the response, as
compared with the worst targeting)
 Offer (best offer may yield up to 3 times the response, as compared with
the worst offer)
 Timing (best timing for the campaign may yield up to 2 times the response,
as compared with the worst timing)
 Ease of response (best/multiple ways offered to respond may yield up to
1.35 times the response, as compared with not-so-friendly response
mechanism/s)
 Creativity (most creative messaging may yield up to 1.2 times the response,
as compared to the least creative messaging)
 Media employed. The medium/media used to deliver a message can have a
significant impact on responses. It is difficult to truly personalize a DRTV
or radio message. One can even attempt to send a personalized message via
email or text message, but a high quality direct mail envelope and letter
will typically have a better chance of generated a response in this scenario.
In sum, choosing the best of all the above parameters may yield up to 58
times more response, as compared to choosing the worst of the above
parameters. Addressing these helps assuage the concerns of the marketers.
Some of these concerns have been addressed by direct marketers by the
use of individual "opt-out" lists, variable printing, and better-targeted list
practices. Additionally, in order to avoid unwanted mailings, members of the
marketing industry have established preference services that give customers
more control over the marketing communications they receive in the mail.
The term "junk mail," referring to unsolicited commercial ads delivered
via post office or directly deposited in consumers' mail boxes, can be traced
back to 1954. The term "spam," meaning "unsolicited commercial e-mail," can
be traced back to March 31, 1993, although in its first few months it merely
referred to inadvertently posting a message so many times on UseNet that the
repetitions effectively drowned out the normal flow of conversation.
To address the concerns of unwanted emails or spam, in 2003, The US
Congress enacted the Controlling the Assault of Non-Solicited Pornography
and Marketing (CAN-SPAM) Act to curb unwanted email messages. Can-
Spam gives recipients the ability to stop unwanted emails, and set out tough
penalties for violations. Additionally, ISPs and email service providers have

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developed increasingly effective Email Filtering programs. These filters can
interfere with the delivery of email marketing campaigns, even if the person has
subscribed to receive them, as legitimate email marketing can possess the same
hallmarks as spam. There are a range of email service providers that provide
services for legitimate opt-in emailers to avoid being classified as spam.
Consumers have expressed concerns about the privacy and
environmental implications of direct marketing. In response to consumer
demand and increasing business pressure to increase the effectiveness of
reaching the right customer with direct marketing, companies specialize in
targeted direct advertising to great effect, reducing advertising budget waste
and increasing the effectiveness of delivering a marketing message with better
geo-demography information, delivering the advertising message to only the
customers interested in the product, service, or event on offer. Additionally,
members of the advertising industry have been working to adopt stricter codes
regarding online targeted advertising.
Channels
Any medium that can be used to deliver a communication to a customer
can be employed in direct marketing, including:
Email marketing
Sending marketing messages through email or email marketing is one of
the most widely used direct-marketing methods. One reason for email
marketing's popularity is that it is relatively inexpensive to design, test, and
send an email message. It also allows marketers to deliver messages around the
clock, and to accurately measure responses.
Online tools
With the expansion of digital technology and tools, direct marketing is
increasingly taking place through online channels. Most online advertising is
delivered to a focused group of customers and has a trackable response.
 Display Ads are interactive ads that appear on the Web next to content on
Web pages or Web services. Formats include static banners, pop ups,
videos, and floating units. Customers can click on the ad to respond directly
to the message or to find more detailed information. According to research
by eMarketer, expenditures on online display ads rose 24.5% between 2010
and 2011.
 Search: 49% of US spending on Internet ads goes to search, in which
advertisers pay for prominent placement among listings in search engines
whenever a potential customer enters a relevant search term, allowing ads
to be delivered to customers based upon their already-indicated search

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 criteria. This paid placement industry generates more than $10 billion for
search companies. Marketers also use search engine optimization to drive
traffic to their sites.
 Social Media Sites, such as Facebook and Twitter, also provide
opportunities for direct marketers to communicate directly with customers
by creating content to which customers can respond.
Mobile
Through mobile marketing, marketers engage with prospective
customers and donors in an interactive manner through a mobile device or
network, such as a cellphone, smartphone, or tablet. Types of mobile marketing
messages include: SMS (short message service)—marketing communications
are sent in the form of text messages, also known as texting. MMS (multi-
media message service)—marketing communications are sent in the form of
media messages.
In October 2013, the Federal Telephone Consumers Protection Act
made it illegal to contact an individual via cell phone without prior express
written consent for all telephone calls using an automatic telephone dialing
system or a prerecorded voice to deliver a telemarketing message to wireless
numbers and residential lines. An existing business relationship does not
provide an exception to this requirement.
Mobile Applications: Smartphone-based mobile apps contain several
types of messages. Push Notifications are direct messages sent to a user either
automatically or as part of a campaign. They include transactional, marketing,
geo-based, and more. Rich Push Notifications are full HTML Push
Notifications. Mobile apps also contain Interactive ads that appear inside the
mobile application or app; Location-Based Marketing: marketing messages
delivered directly to a mobile device based on the user's location; QR
Codes (quick-response barcodes): This is a type of 2D barcode with an encoded
link that can be accessed from a smartphone. This technology is increasingly
being used for everything from special offers to product information. Mobile
Banner Ads: Like standard banner ads for desktop Web pages but smaller to fit
on mobile screens and run on the mobile content network
Telemarketing
Another common form of direct marketing is telemarketing, in which
marketers contact customers by phone. The primary benefit to businesses is
increased lead generation, which helps businesses increase sales volume and
customer base. The most successful telemarketing service providers focus on
generating more "qualified" leads that have a higher probability of getting
converted into actual sales.

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 In the United States, the National Do Not Call Registry was created in
2003 to offer consumers a choice whether to receive telemarketing calls at
home. The FTC created the National Do Not Call Registry after a
comprehensive review of the Telemarketing Sales Rule (TSR). The do-not-call
provisions of the TSR cover any plan, program, or campaign to sell goods or
services through interstate phone calls.
The 2012 modification, which went into effect on October 16, 2013,
stated that prior express written consent will be required for all autodialed
and/or pre-recorded calls/texts sent/made to cell phone; and for pre-recorded
calls made to residential land lines for marketing purposes.
Further, a consumer who does not wish to receive further prerecorded
telemarketing calls can "opt out" of receiving such calls by dialing a telephone
number (required to be provided in the prerecorded message) to register his or
her do-not-call request. The provisions do not cover calls from political
organizations or charities.
Canada has its own National Do Not Call List (DNCL). In other
countries it is voluntary, such as the New Zealand Name Removal Service.
Voicemail marketing
Voicemail marketing emerged from the market prevalence of personal
voice mailboxes, and business voicemail systems. Voicemail marketing
presented a cost effective means by which to reach people directly, by voice.
Abuse of consumer marketing applications of voicemail marketing resulted in
an abundance of "voice-spam," and prompted many jurisdictions to pass laws
regulating consumer voicemail marketing. More recently, businesses have
utilized guided voicemail (an application where pre-recorded voicemails are
guided by live callers) to accomplish personalized business-to-business
marketing formerly reserved for telemarketing. Because guided voicemail is
used to contact only businesses, it is exempt from Do Not Call regulations in
place for other forms of voicemail marketing.
Voice-mail courier is a similar form of voice-mail marketing with both
business-to-business and business-to-consumer applications.
Broadcast faxing
Broadcast faxing, in which faxes are sent to multiple recipients, is now
less common than in the past. This is partly due to laws in the United States and
elsewhere which regulate its use for consumer marketing. In 2005, President
Bush signed into law S.714, the Junk Fax Prevention Act of 2005 (JFPA),
which allows marketers to send commercial faxes to those with whom they
have an established business relationship (EBR), but imposes some new

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requirements. These requirements include providing an opt-out notice on the
first page of faxes and establishing a system to accept opt-outs at any time of
the day. Roughly 2% of direct marketers use fax, mostly for business-to-
business marketing campaigns.
Couponing
Couponing is used in print and digital media to elicit a response from
the reader. An example is a coupon which the reader receives through the mail
and takes to a store's check-out counter to receive a discount.
Digital Coupons: Manufacturers and retailers make coupons available
online for electronic orders that can be downloaded and printed. Digital
coupons are available on company websites, social media outlets, texts, and
email alerts. There are an increasing number of mobile phone applications
offering digital coupons for direct use.
Daily Deal Sites offer local and online deals each day, and are
becoming increasingly popular. Customers sign up to receive notice of
discounts and offers, which are sent daily by email. Purchases are often made
using a special coupon code or promotional code. The largest of these sites,
Group on, has over 83 million subscribers.
Direct response marketing
Direct Response Marketing is designed to generate an immediate
response from consumers, where each consumer response (and purchase) can
be measured, and attributed to individual advertisements. This form of
marketing is differentiated from other marketing approaches, primarily because
there are no intermediaries such as retailers between the buyer and seller, and
therefore the buyer must contact the seller directly to purchase products or
services. Direct-response marketing is delivered through a wide variety of
media, including DRTV, radio, mail, print advertising, telemarketing,
catalogues, and the Internet.
Direct response mail order
Mail order in which customers respond by mailing a completed order
form to the marketer. Mail order direct response has become more successful in
recent years due to internet exposure.
Direct response television
Direct marketing via television (commonly referred to as DRTV) has
two basic forms: long form (usually half-hour or hour-long segments that
explain a product in detail and are commonly referred to as infomercials) and
short form, which refers to typical 30-second or 60-second commercials that
ask viewers for an immediate response (typically to call a phone number on

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screen or go to a website). TV-response marketing—i.e. infomercials—can be
considered a form of direct marketing, since responses are in the form of calls
to telephone numbers given on-air. This allows marketers to reasonably
conclude that the calls are due to a particular campaign, and enables them to
obtain customers' phone numbers as targets for telemarketing. One of the most
famous DRTV commercials was for Ginsu Knives by Ginsu Products, Inc. of
RI. Several aspects of ad, such as its use of adding items to the offer and the
guarantee of satisfaction were much copied, and came to be considered part of
the formula for success with short-form direct-response TV ads (DRTV).
Forms of direct response marketing on television include standard short
form television commercials, infomercials and home shopping networks. Short-
form direct-response commercials have time lengths ranging from 30 seconds
to 2 minutes. Long form infomercials are typically 30 minutes long. An
offshoot of the infomercial is the home shopping industry. In this medium,
items can potentially be offered with reduced overhead.
Direct response radio
In direct response radio, ads contain a call to action with a specific
tracking mechanism. Often, this tracking mechanism is a "call now" prompt
with a toll-free phone number or a unique Web URL. Results of the ad can be
tracked in terms of calls, orders, customers, leads, sales, revenue, and profits
that result from the airing of those ads.
Direct response magazines and newspapers
Magazine and newspaper ads often include a direct response call-to-
action, such as a toll-free number, a coupon redeemable at a brick-and-mortar
store, or a QR code that can be scanned by a mobile device—these methods are
all forms of direct marketing, because they elicit a direct and measurable action
from the customer.
Other direct response media
Other media, such as magazines, newspapers, radio, social
media, search engine marketing and e-mail can be used to elicit the response. A
survey of large corporations found e-mail to be one of the most effective forms
of direct response.
Direct mail
The term advertising, or direct mail, is used to refer to communications
sent to potential customers or donors via the postal service and other delivery
services. Direct mail is sent to customers based on criteria such as age, income,
location, profession, buying pattern, etc. Direct mail includes advertising
circulars, catalogs, free-trial CDs, pre-approved credit card applications, and

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other unsolicited merchandising invitations delivered by mail to homes and
businesses. Bulk mailings are a particularly popular method of promotion for
businesses operating in the financial services, home computer, and travel and
tourism industries.
In many developed countries, direct mail represents such a significant
amount of the total volume of mail that special rate classes have been
established. In the United States and United Kingdom, for example, there
are bulk mail rates that enable marketers to send mail at rates that are
substantially lower than regular first-class rates. In order to qualify for these
rates, marketers must format and sort the mail in particular ways—which
reduces the handling (and therefore costs) required by the postal service. In the
US, marketers send over 90 billion pieces of direct mail per year.
Advertisers often refine direct mail practices into targeted mailing, in
which mail is sent out following database analysis to select recipients
considered most likely to respond positively. For example, a person who has
demonstrated an interest in golf may receive direct mail for golf-related
products or perhaps for goods and services that are appropriate for golfers. This
use of database analysis is a type of database marketing. The United States
Postal Service calls this form of mail "advertising mail" (admail for short).
Insert media
Another form of direct marketing, insert media are marketing materials
that are inserted into other communications, such as a catalog, newspaper,
magazine, package, or bill. Coop or shared mail, where marketing offers from
several companies are delivered via a single envelope, is also considered insert
media.
Out-of-home
Out-of-home direct marketing refers to a wide array of media designed
to reach the consumer outside the home, including billboards, transit, bus
shelters, bus benches, aerials, airports, in-flight, in-store, movies, college
campus/high schools, hotels, shopping malls, sport facilities, stadiums, taxis—
that contain a call-to-action for the customer to respond.
Direct selling
Direct selling is the sale of products by face-to-face contact with the
customer, either by having salespeople approach potential customers in person,
or through indirect means such as Tupperware parties.
Grassroots/community marketing
The door-to-door distribution

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Ethical conduct
The ICC Consolidated Code of Advertising and Marketing relates to all
direct marketing activities in their entirety, whatever their form, medium or
content. It sets the standards of ethical conduct to be followed by marketers,
practitioners or other contractors providing services for direct marketing
purposes or in the media.
The offer
The fulfilment of any obligation arising from a direct marketing activity
should be prompt and efficient.
Whenever an offer is made, all the commitments to be fulfilled by the
marketer, the operator and the consumer should be made clear to consumers,
either directly or by reference to sales conditions available to them at the time
of the offer.
Presentation
When the presentation of an offer also features products not included in
the offer, or where additional products need to be purchased to enable the
consumer to use the product on offer, this should be made clear in the original
offer.
High-pressure tactics which might be construed as harassment should be
avoided, and, marketers should ensure that they respect local culture and
tradition to avoid offensive questions.
Right of withdrawal
Where consumers have a right of withdrawal (the consumer’s right to
resend any goods to the seller, or to cancel the order for services, within a
certain time limit and thus annulling the sale), the marketer should inform them
of the existence of this right, how to obtain further information about it, and
how to exercise it. Where there is an offer to supply products to the consumer
on the basis of "free examination", "free trial", "free approval" and the like, it
should be made clear in the offer who will bear the cost of returning products
and the procedure for returning them should be as simple as possible. Any time
limit for the return should be clearly disclosed.
Identity of the marketer
The identity of the marketer and/or operator and details of where and
how they may be contacted should be given in the offer, so as to enable the
consumer to communicate directly and effectively with them. This information
should be available as a permanent reference which the consumer can keep, i.e.
via a separate document offline, an online document, email or SMS; it should
not, for example, appear only on an order form which the consumer is required

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to return. At the time of delivery of the product, the marketer’s full name,
address and telephone number should be supplied to the consumer.
Respecting consumer wishes
Where consumers have indicated the wish not to receive direct
marketing communications by signing on to a preference service, or in any
other way, this should be respected. Marketers who are communicating with
consumers internationally should, where possible ensure that they avail
themselves of the appropriate preference service in the markets to which they
are addressing their communications and respect consumers’ wishes not to
receive such communications (see also General Provisions, article 19, data
protection and privacy. Where a system exists, enabling consumers to indicate a
wish not to receive unaddressed mail (e.g. mailbox stickers), this should be
respected.
Responsibility
Overall responsibility for all aspects of direct marketing activities,
whatever their kind or content, rests with the marketer. However, responsibility
also applies to other participants in direct marketing activities and that needs to
be taken into account. As well as marketers, these may include: operators,
telemarketers or data controllers, or their subcontractors, who contribute to the
activity or communication; publishers, media-owners or contractors who
publish, transmit or distribute the offer or any other communication.
The marketer has to understand as to how the consumer actually makes
a purchase decision , who makes the decision and the type of decisions and the
steps in the buying process.
The following are the roles played by the people in consumer decision-
making process.
 Initiator: A person who first suggests the idea of purchasing
anything.
 Influencer: A person who influences the purchase decision.
 Decider: One who takes final purchase decision.
 Buyer: One who actually makes purchases.
 User: Person who uses the product.
Example: The idea to buy a new model of television might come from
college-going son or daughter. A knowledgeable neighbor or friend might
advise on the model of TV the family should buy. The husband might make the
final decision and the children will be seeing the television most.
The buying process begins with the discovery and recognition of an
unsatisfied need or want. It becomes a drive. Consumer begins a search for

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information. This search gives rise to various decisions and finally the
purchaser evaluates these alternatives and finally the purchase decision is made.
Then the buyer evaluates the purchase and decides whether he is satisfied or
not. This is described below:

Evaluation Post-
Need Information Purchase
of Purchase
Recognition Search Decision
Alternatives Decision

1.Need Recognition:
Buying process begins when a person begins to feel that a certain need
or desire has arisen. The need may be activated by internal or external factors.
The intensity of the want will indicate the speed with which a person will move
to fulfill the want. The buyer will postpone the less important motives.
Marketing management should offer appropriate cues to promote the sale of the
product.
2.Information Search:
Aroused needs can be satisfied promptly when the desired product is not
only known but also easily available. But when it is not clear what type or
brand of the product can offer the best satisfaction, the person will have to
search for information. This may relate to the brand, location and the manner of
obtaining the product. Consumers can use many sources, e.g., family, friends,
neighbours, opinion leaders and acquaintances. Marketers also provide relevant
information through salesman, advertisers, dealers, packaging, sales promotion
and window displaying. Mass media like newspapers, radio and television
provide information. Marketers are expected to provide reliable, up-to-date and
adequate information regarding their products and services. This is the pressing
demand of consumerism.
3.Evaluation Alternatives:
This is the critical stage in the process of buying. There are several
important elements in the process of evaluation:
 A product is viewed as a bundle of attributes. These attributes or
features are used for evaluating alternative brands. For Example, a
product like tea has certain common attributes such as taste, flavor,
strength, aroma, colour, number of cups per packet, and price.
 Information cues or hints about a set of characteristics of the product in
brands such as quality, price, distinctiveness availability, etc..
 Brand images and brand concepts can help in the evaluation of
alternatives.

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  In order to reduce the number of alternatives, some consumers may
consider more critical attributes and mention the level for those
attributes.
 Occasionally, consumers may use an evaluation process permitting
trade-offs among different alternatives.
4. Purchase Decision:
The purchase decision may be influenced by attitudes of spouse, friends
and relatives, cost of the product, benefits of the product, etc.. Purchase
decision includes decisions with regard to product /brand, dealer, quantity and
quality, timing, and payment.
5. Post Purchase Behaviour:
Post-purchase behaviour refers to the behaviour of the customer after
the purchase and it depends upon his experience of using the product and level
of satisfaction. A satisfied customer may make repeat purchases. If the
customer is not satisfied he may not buy the product again and may talk bad
about the product to his friends, colleagues and relatives. In the case of
consumer durables like air-conditioner, television, water purifier, after sales
service is important to active high level 0f consumer satisfaction.
 Output:
Output is the end result of the input of the consumer behaviour. It
emerges after these inputs are duly processed by the consumer. Output is
composed of purchase and post-purchase behaviour.
 Purchase:
Purchase is a consumer commitment for a product. It is the terminal
stage in the buying decision process that completes a transaction. It occurs
either as a trail and or adaption. If a consumer Is buying something for the
first time then from the behaviour viewpoint, it may be regarded as a trail.
This trail enables him to accumulate experience about the product
purchased. If this experience is positive in terms of the satisfaction derived,
then repeat purchases may offer, otherwise not. For Example: when a new
brand of bathing soap is introduced in the market, the consumer may buy it
for the first time as a trail. However, repeat purchases will occur only when
he is satisfied with its performance. But the possibility of a trail purchase is
not available in all cases. In the case of consumer durables such as scooters,
refrigerators and the like, a trial is not possible, because once a product is
purchased, it has to be adopted and repeatedly used. Adoption means a
consumer decision to commit to a full or further use of the product.

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 Role of Government:
The consumer behaviour regarding marketing decisions is influenced by
a variety of organizational and environmental factors. The government is
one of the prominent ones among these factors which have considerable
bearing on the marketing decision-making. Their role as decision-input is, at
times, so powerful that they have an overriding influence on marketing
decisions. Customers the world over have become more and more aware of
their due rights and, consequently have become very demanding and choosy.
They have started now to look for the ISI, ISO, AGMARK on the product.
These trademarks give the consumers a legal guarantee of the quality of the
products bearing them. They also help In protecting the consumers against
unfair trade practices. In order to influence the marketing decisions of
companies, the role of government has assumed one or a combination of the
following forms:
A) Participative:
On the way for the state to influence marketing decisions of companies
is to undertake actively undertake certain marketing activities by itself. It
entails active participation of the state and its agencies in the country’s
marketing operations. The major forms of state participation may be:
 The government becomes a manufacturer or a monopoly buyer and/or seller.
In developing countries like India, nationalized companies manufacture
steel, cement, fertilizer, coal, etc..so as to augment their supply. The
government procures and sells agricultural commodities such as food grains,
cotton, jute, etc..through the food corporation of India, cotton corporation of
India and jute corporation of India. The aim is to stabilize prices and protect
consumers by regulating the supply of the products concerned.
 The government distributes or directs distribution of certain goods through
specified agencies. In India, government distributes or directs foodgrains
and fertilizers through Government and co-operative institutions and thereby
influences the distributive functions of assortment and equalization.
 The Government promotes or discourages consumption of certain types of
products. For Example : the Government of India promotes the sale of
family planning devices through its own purchases and mass-communication
campaigns.
 The Government provides infrastructural and transportation facilities on
preferential basis. For Example: the state warehousing corporations and
Railways extend preferential treatment for dairy products and food items.
Thus, by itself performing marketing functions such as selling, promoting,
distributing, storing and transporting, the Government exerts a lot of
influence on the marketing decisions of companies.

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B) Institutional:
Another option available to the Government is to institutionalize certain
types of movements in the country, which exerts pressure on the marketing
decision-makers. For Example: the Government of India has institutionalized
the movement for product grading and standardization by establishing the
bureau of Indian standards. This institution has developed a large number of
product standards facilitating product identification, purchasing, selling, and
marketing procedures.
Buying Motives
We purchase, due to certain motives. Motives may refer to thought,
strong feelings, urge, motion, drive, etc., which make a buyer to react in the
form of a decision. Any urge which makes a person to take purchase decision is
called as buying motive. Motive is an inner urge which moves one to action. It
is not a mere desire to buy. According to Berelson and Steiner, A motive is the
inner state, that energises, activates or moves…….. and that directs or channels
behaviour towards goals. Prof. D.J. Duncan has defined buying motives as
those influences or considerations which provide the impulse to buy, induce
action or determine choice in the purchase of goods or services.
The term Buying Motives may refer to the feelings, thought, emotions
and instincts which arouse in the customer a desire to purchase and possess
something. Some of the buying motives are instinctive, while others are
acquired as a result of environment, education, culture, social status, age, sex,
capacity, etc., Consumers buy goods for the satisfaction of their wants. They
buy products for three reasons: 1.to satisfy their needs. 2.inner urges to
purchase, and 3.reasoning.
Buyer Behaviours Determinants
The buyer’s purchase decisions are influenced by the four major factors,
which are detailed below:
I) Cultural factors:
Culture is the most fundamental determinant of a person’s wants and
behaviour. It refers to a set of learned beliefs, attitudes, values, customs, habits
etc. and determines human wants and behaviour. Cultures are alive, and keep
on changing. Actually much of the human behaviour is determined by culture.
For each culture a separate marketing strategy can be developed and based on
culture, market can also be segmented because the patters of behaviour would
vary between different cultures like India and America, south India and North
India etc.

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II) Social factors:
It includes reference groups, family and social class.
 Reference groups:
Reference groups refer to all the groups that have an influence whether
direct or indirect on the person behaviour. People are influenced by many
groups. According to Philip Kotler, following are the various groups, which
have influence over a person’s behaviour.
 Membership groups: Membership groups are those groups to which the
person belongs and interacts. These groups have a direct influence on its
member’s behaviour.
 Primary groups: Primary groups include groups of friends, family
members, neighbors, co-staff etc. Here there is a fairly continuous
interaction.
 Secondary groups: Here there is only a less continuous interaction and
includes religious groups, professional groups etc.
 Aspirational groups: These are the groups to which person would like to
become its member. People are also influenced by such group.
 Dissociative groups: These are the groups, whose values an individual
rejects.
 Family:
Family can influence a person’s buying behaviour because most
consumers belong to a family. The family is considered, as the most
important consumer-buying organisation is society. So it has to be
researched extensively. Marketers should study the role and the relative
influence of the husband, wife and children in the purchase of products or
services. For products like grocery articles, provisions etc., this kind of
product, the housewife is the deciding authority. In the case of purchase,
which involves heavy amount, the decision is normally made by both the
husband and wife. Hence members of a family play an important role in
shaping a buyer’s behaviour.
 Social class:
Consumer behaviour is determined by the social class to which they
belong or by which they are attracted etc. There are three different social
classes in our country. They are upper class, middle-class and lower class.
All the three social classes will differ in their buyer behaviour. Low class
consumers buy usually on impulse and do not even care to read
advertisement much. Middle-class consumers purchase carefully and read
advertisements much to know and compare the prices of different producers

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 engaged in the same line of activity. Upper class consumers want high-class
goods to maintain their status in the society.
III) Personal factors:
A buyer’s behaviour is also influenced by personal factors, which
normally include age, occupation, income, life style etc.
 Age: People buy different products at their different life stage. Their taste,
preference etc., also change with change in the life stage. For instance, taste
in dress materials, recreation etc., are age related.
 Occupation: A person’s buyer behaviour is also influenced by his
occupation. For certain occupations, the purchase of certain type of
products is necessary. For example, a sales representative will buy fancy
dress, shoes, suitcase etc. to win the attention of the people. Similarly, a
chief executive of a company will buy costly suits undergo air travel etc. So
companies can even specialize their products based on various occupations.
 Income:
Income level of the people is another factor which can exert influence is
shaping the consumption pattern. Income is the main source of purchasing
power. So buying pattern of people differs with different level of income.
 Life style: The term life style refers to the person’s pattern of living in the
world. People belong to same social class; occupation may lead quite
different life styles. It reflects something beyond the person’s social class,
personality etc. Lifestyle attempts to profile a person’s way of being and
acting in the world. Therefore, marketer should find out the relationships
between his products and various life styles.
IV) Psychological factors:
A person’s buyer behaviour is also influenced by the following
psychological factors.
 Motivation:
A motive is an inner urge that moves a person to some action.
According to William J. Stanton, “A motive can be defined as a drive or an
urge for which an individual seeks satisfaction. It becomes a buying motive
when the individual seeks satisfaction through the purchase of something”.
People buy goods as a result of certain mental as well as economical forces
that create desires of buying such goods.
 Perception:
Perception shapes the human behaviour. In other words, it gives the
path to the taken by the behaviour. According to Bernand Berelson and
Gary A. Steiner “Perception is the process by which an individual selects,

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 organizes, and interprets information inputs to create a meaningful picture
of the world”. Persons at the same motivated stage may act in a quite
different manner if they perceive the situation differently.
 Learning:
People learn when they act. Learning may be defined as all changes in
an individual behaviour arising from fast experience. Most human
behaviour is of learned only. S-R model is the basis for all the theories of
buyer behaviour. Learning is the main aspect in the study of human
behaviour. Buying decisions are affected critically by the learning
experiences of buyers.
 Attitudes:
An attitude is a state of mind or feeling. It may be described as a person’s
emotional feelings, action, and tendencies towards some idea or object. People
have attitudes towards each and everything i.e Clothes, drama, food, religion,
and community etc. If a person has an attitude toward a product, it is difficult to
change his attitude because a person’s attitude settles into a consistent pattern.
Attitude made people to behave in a fairly consistent manner towards certain
object. It induces people to behave in some way. So for explaining buyer
behaviour, attitudes are very important.
Forces motivating to buy
The forces, that are motivating an individual to buy may be broadly
classified into two namely, external forces and internal forces which include
rational and emotional motivations.
1. External Forces:
External force include nationality, religion, education, occupation,
income, social status, area of residence, culture of the society in which the
consumer lives, social class to which he belongs, his friends, and his family.
2. Internal Forces:
Internal forces are those forces which have an origin in the minds of the
people. These forces may be both of physical and psychological nature. Internal
forces, which motivate the buying behaviour may be classified into two groups
namely, 1.Rational motivations, and 2. Irrational or emotional motivations.
Copeland says that rational motives include dependability in quality, durability,
happiness, healthfulness, efficiency in operation and use, economy in use,
enhancement of earnings and productivity of property and irrational motives
include pride and ambition, emulation, social achievement, proficiency,
expression of artistic taste, romantic instinct, securing personal comfort,
security from danger, securing comfort and obtaining greater leisure,

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distinctiveness, desire for recreation and entertainment, economic emulation,
cleanliness, and emotional appetites.
Important buying motives
The following are some of the important buying motives:
1. Comfort and Convenience:
The comfort and convenience motive is an important factor in
purchasing luxury articles, labour saving devices and convenience at work, at
home and in recreation. Everybody likes comfort and convenience. Human
beings always would like to do things in “easy way’’ and in “comfort”.
Therefore, this motive is an important motive for selling labour saving and
luxury articles like gas cylinders, gas stoves, pressure cookers, washing
machines, vacuum cleaners, air conditioners, fans, furniture and so on.
2. Gain and Economy motive:
Some people desire to earn and save money. Making a profit or saving
money is an universal desire. This desire induces people to go around the shopa
to purchase goods at lower prices and have monetary gain. Every consumer
desires his money’s worth. A house wife would like to go around shpos and try
to buy her needs cheaply, such as grocery or dress material because of her
desire to save money.
3. Compliments:
Person’s desires are to be complemented. He wants to be recognised as
an important persons by others. He likes to be in a higher position where he can
command others. To ensure these things, he may buy certain products.
4. Fashion:
Everybody wants to be a fashionable man. According to the change in
fashion, the buying motives also changes. Marketer can utilise this motive of
the consumer very well and should produce goods accordingly to suit change in
fashion.
5. Vanity:
Everybody whether it be women or men like to be admired by others.
They like to be important in the society, among friends and so on. So they
spend more money, time and effort on their personal appearance. Hence, vanity
as a powerful motive can be used by the marketers to design their product.
6. Sex and Romance:
This motive occurs in both the young and the old sex is a motive in the
sale of the articles likes cosmetics, fancy clothes. For instance, women incur
huge expenditure on the purchase of dress materials, hair do, etc., to attract

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men. Similarly, men also spend more on purchase of attractive two wheelers,
dress materials, etc., to attract women. Hence, the sex motive is a powerful
motive which a marketer can make use of to achieve his marketing objective.
7. To Live Longer:
Certain products like refined oil which has no cholesterol in it are
purchase by the people who have high percentage of cholesterol in their blood.
The buying motive here is to live longer.
8. Curiosity:
If any products is newly introduced into the market at the first instance,
people may have curiosity to know about its usage. This may also be one of the
buying motives.
9. Freedom from Fear and Danger:
Everybody will do anything to assure guarantee to his safety. Fear can
market almost anything. In order to get relief from fear and danger, people will
buy anything at the cost of any amount. For instance, purchase of medicine,
undergoing medical treatment and so on.
10. To get the Love of Others:
Consumer is a social animal. So the motive of affection and attachment
for others are greater in case of human beings. That is why, a mother has
affection towards her children, a brother for his sisters, husband to his wife.
Such attachment forces the members to purchase goods. Thus husband may buy
a saree for his wife, a brother may buy a saree for his sister, father may buy
toys for his kids and so on.
Buyers behaviours models
The influence of social sciences on buyer behavior has prompted
marketing experts to propound certain models for explaining buyer behavior.
Broadly, they include the economic model, the learning model, the
psychoanalytical model and the sociological model.
Economic Model
According to the economic model of buyer behavior, the buyer is a
rational man and his buying decisions are totally governed by the concept of
utility. If he has a certain amount of purchasing power, a set of needs to be met
and a set of products to choose from, he will allocate the amount over the set of
products in a very rational manner with the intention of maximizing the utility
or benefits.

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The Learning Model
According to the learning model which takes its cue from the Pavlovian
stimulus response theory, buyer behavior can be influenced by manipulating the
drives, stimuli and responses of the buyer. The model rests on man’s ability at
learning, forgetting and discriminating. The stimulus response learning theory
states that there develops a bond between behavior producing stimulus and a
behavior response on account of the conditioning of behavior and formation of
habits. This theory may be traced to Pavlov and his experiments on salivating
dogs. Pavlov’s experiments brought out associations by conditioning.
Eventually, the dog started salivating each time upon hearing the bell though no
food was served. The dog’s behavior is conditioned; it is related to behavior
producing stimulus and behavior response. The S.R. bond so established causes
a set pattern of behavior learnt by the object dog. In terms of consumer
behavior, an advertisement would be a stimulus whereas purchase would be a
response. Learning Process: According to the stimulus response theory,
learning is dependent on drive, cue, response and reinforcement.
Drive:
Drive may be defined as any strong stimulus that impels action. It
arouses an individual and keeps him prepared to respond. The drives may be
classified as primary drives and secondary drives. Primary drives are based
upon innate physiological needs such as thirst, hunger, pain avoidance, and sex.
The secondary drives are based upon learning.
Cue:
Cue or stimulus may be defined as any object in the environment
perceived by the individual. The aim of the marketing man is to find out or
create the cue of sufficient importance that it becomes the drive stimulus or
elicits other responses appropriate to his objective. Here, the objective is to find
out those conditions under which a stimulus will enhance the chances of
eliciting a particular kind of response.
Response:
Response is an answer to a given drive or cue. When a man feels thirsty,
he attempts to get water at any cost. Here attempt to get water is a response to
the primary drive of thirst. Response also includes attitudes, familiarity,
perception and other complex phenomena. Responses may be generalized or
discriminatory. Generalized response refers to a uniform response to similar
though not identical stimuli. Undifferentiated products such as cigarettes and
detergents normally elicit generalized consumer responses but by huge
advertising outlays companies try to induce consumers to perceive differences
in brands and to make discriminatory responses. Reinforcement: Reinforcement

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or reward means reduction in drive and stimulus. It has been defined as
environmental events exhibiting the property of increasing the probability of
occurrence of responses they accompany. Thus, when consumption of a
product or a brand of product leads to satisfaction of the initiating need there is
reinforcement. Each succeeding time that product or brand brings satisfaction,
further reinforcement takes place, thus, further increasing the possibility that in
future also, the same product or brand will be bought. This type of behavioral
change, increasing possibility that an act will be repeated, is called learning;
Reinforcement increases the rapidity and vigor of learning.
The Psychoanalytical Model:
The psychoanalytical model draws from Freudian Psychology.
According to this model, the individual consumer has a complex set of deep-
seated motives which drive him towards certain buying decisions. His buying
action can be influenced by appealing to these desires and longings. The
psychoanalytical theory is attributed to the work of eminent psychologist
Sigmund Freud. Freud introduced personality as a motivating force in human
behavior. According to this theory, the mental framework of a human being is
composed of three elements, namely,
The id or the instinctive, pleasure seeking element. It is the reservoir of
the instinctive impulses that a man is born with and whose processes are
entirely subconscious. It includes the aggressive, destructive and sexual
impulses of man.
The superego or the internal filter that presents to the individual the
behavioral expectations of society. It develops out of the id, dominates the ego
and represents the inhibitions of instinct which is characteristic of man. It
represents the moral and ethical elements, the conscience.
The ego or the control device that maintains a balance between the id
and the superego. It is the most superficial portion of the id. It is modified by
the influence of the outside world. The basic theme of the theory is the belief
that a person is unable to satisfy all his needs within the bounds of society.
Consequently, such unsatisfied needs create tension within an individual which
have to be repressed. Such repressed tension is always said to exist in the
subconscious and continues to influence consumer behavior.
Sociological Model
According to the sociological model, the individual buyer is influenced
by society or intimate groups as well as social classes. His buying decisions are
not totally governed by utility; he has a desire to emulate, follow and fit in with
his immediate environment.

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The Nicosia Model:
In recent years, some efforts have been made by marketing scholars to
build buyer behavior models totally from the marketing man’s standpoint. The
Nicosia model and the Howard and Sheth model are two important models in
this category. Both of them belong to the category called the systems model,
where the human being is analyzed as a system with stimuli as the input to the
system and behavior as the output of the system. Francesco Nicosia, an expert
in consumer motivation and behavior put forward his model of buyer behavior
in 1966. The messages from the firm first influence the predisposition of the
consumer towards the product. Depending on the situation, he develops a
certain attitude towards the product. It may lead to a search for the product or
an evaluation of the product. If these steps have a positive impact on him, it
may result in a decision to buy. This is the sum and substance of the activity
explanations in the Nicosia Model. The Nicosia Model groups these activities
into four basic fields. Field one has two subfields the firm’s attributes and the
consumer’s attributes. An advertising message from the firm reaches the
consumer’s attributes. Depending on the way the message is received by the
consumer, a certain attribute may develop, and this becomes the input for Field
Two. Field Two is the area of search and evaluation of the advertised product
and other alternatives.
Organisational Buying Behavour Model
organisational buyer behaviour has usefully been broken down into three
elements by
 Structure:
The ‘who’ factor – who participates in the decision-making process and
their particular roles.
 Process:
The ‘how’ factor – the pattern of information getting, analysis,
evaluation and decision-making which takes place as the purchasing
organisation moves towards a decision.
 Content:
The ‘what’ factor – the choice criteria used at different stages of the
process and by different members of the decision-making unit.
Structure
An essential point to understand in organisational buying is that the
buyer or purchasing officer is often not the only person who influences the
decision, or who actually has the authority to make the ultimate decision.
Rather, the decision is in the hands of a decision-making unit (DMU), or

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buying centre as it is sometimes called. This is not necessarily a fixed entity.
The people in the DMU may change as the decision-making process continues.
Thus a managing director may be involved in the decision that new equipment
should be purchased, but not in the decision as to which manufacturer to buy it
from. Bonoma and Webster have identified six roles in the structure of the
DMU:
The factors which influence the nature of the DMU will be examined
later. Obviously, for different types of purchase the exact formation will vary.
For very important decisions the structure of the DMU will be complex,
involving numerous people within the buying organisation. The salesperson’s
task is to identify and reach the key members in order to convince them of the
product’s worth. Often, talking only to the purchasing officer will be
insufficient, since this may be only a minor influence on which supplier is
chosen. Salespeople need to avoid two deadly sins:
 Working within their ‘comfort zone’. This is where they spend too much
time with people they like and feel comfortable with, but who are
unimportant with regard to which product to buy or which supplier to use.
 Spending too much time with ‘nay sayers’. These are people who can say
‘no’ (the power of veto) but who do not have the authority to say ‘yes’. It is
the latter group, i.e. the decision-makers, to whom most communicational
effort should be channelled.
When the problem to be solved is highly technical, suppliers may work
with engineers in the buying organisation in order to solve problems and secure
the order. An example where this approach was highly successful involved a
small US company that secured a large order from a major car company owing
to its ability to work with the company in solving the technical problems
associated with the development of an exhaust gas recirculation valve.16 In this
case, its policy was to work with company engineers and to keep the
purchasing department out of the decision until the last possible moment, by
which time it was the only company qualified to supply the part.
Where DMU members are inaccessible to salespeople, advertising may
be used as an alternative. Also, where users are an important influence and the
product is relatively inexpensive and consumable, free samples given by the
salespeople may be effective in generating preference.
Buyer’s decision-making depends very much upon the type of buying
decisions. There is a lot of difference between the purchase of tooth paste and a
new car. Simple and cheap purchase require less buyer deliberation and
participation and vice versa. Therefore, based on the degree of buyer

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involvement and the degree of differences among brands, buying behaviour can
be classified into four types, namely:
1. Complex buying behaviour
2. Dissonance – reduce buying behaviour
3. Habitual buying behaviour, and
4. Variety seeking buying behaviour
We shall now discuss them briefly.
1. Complex Buying Behaviour:
This type of buying behaviour is found when the consumers are highly
involved in a purchase and aware of significant differences among brands.
The involvement of consumers in a purchase will be high only when the
product is expensive, purchased rarely, risky and highly self-expressive. The
consumer has to learn much about the product category. He has to pass
through a learning process characterised by first developing beliefs about the
product, then attitudes, and then making a thoughtful purchase choice. The
marketer of such type of product, should understand the information
gathering and behaviour of high involvement consumers. He has to develop
strategies to enable the buyer to learn about the attributes of the product
class, their relative importance, and the high standing of the company’s
brand on the more important attributes.
2. Dissonance-reducing Buying Behaviour:
Consumer go through dissonance-reducing buyer behaviour when they
are highly involved in a purchase but sees little difference in the brands.
Here also, the high involvement is based on the fact that the purchase is
expensive, rare, and risky. The consumer purchase the product but later
experience dissonance i.e., he notices certain disquieting features of the
product or hears favourable thing about the other products. He will be alter
to the information that might justify his decision. Under this situation, the
marketer should aim at supplying beliefs and evaluations which help the
consumer feel good about his brand choice.
3. Habitual Buying Behaviour:
Consumer go through habitual buying behaviour, when the consumers
have low involvement and there is lack of significant brand differences.
Consumers will have low involvement with most low-cost, frequently
purchased products like match box, salt, etc., In such cases, consumers do
not form a strong attitude towards a brand but select it because it is familiar.
After purchase, they may not even evaluate the choice because they are not
highly involved with the product. Marketer has to convert low involvement

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 product into one of higher involvement. It can be achieved by linking the
product to some involving issue, i.e, introduction of iodized salt.
4. Variety of Seeking Buying Behaviour:
Here the consumers’ involvement is low but brand difference are
significant. Consumers are often do a lot of brand switching. Brand
switching occurs for the sake of variety rather than dissatisfaction e.g.,
drinks, talcum powders, shampoos, etc. The suitable promotional strategies
here are-offering lower prices, deals, coupons, free samples, etc.
Theories contributed by social sciences
Buying behaviour is complex and dynamic. The behavioural sciences
like economics, sociology, psychology, anthropology play a significant role as
determinants of buyer behaviour. The study of buyer behaviour is essential to
perform marketing functions successfully because success of marketing relies
mainly on the buying pattern of consumers. We shall now discuss various
theories developed in this context.
1. Economic Theories
Marshallion Model: This model was developed by classical
economists. This model describes that a consumer will buy regularly those
products at relative prices that will give him maximum satisfaction. Further, it
describes that buying decisions are made as the result of rational activities and
economic calculations. It does not explain how brand and product preferences
are formed. One of the behavioural hypothesis suggested by economic model is
“Lower the price of the product, higher the sales” may not be accepted to its
entirety because price is not the only factor which determines the volume of
sales. Something people may afraid of the quality if the price is low.
2. Psychological Theories
Psychological theories are known as Learning Theories. According to
these theories, people learn from past experience, and the results of such
experience will change their actions on future events. It explains how the
buying habits are developed through various steps viz., repetition, motivation,
conditioning and relationship. According to stimulus – response theory,
learning involves four central process – drive, cue, response and reinforcement.
Drives are desires which may be primary or secondary. Cue is a weaker stimuli.
The response is an answer to drive or cue. Reinforcement strengthens the
rewarding past experiences by repeating the purchase of the same brand
whenever the same thing is needed.
Further, psychological directs, the satisfaction of certain needs which is
popularly known as Maslow’s hierarchy of human needs. They are

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  Psychological needs i.e., basic needs viz., food, drink.
 Safety needs – Security, protection.
 Social needs i.e., love and belongingness needs – presenting gift at
various occasions.
 Esteem needs – self respect, prestige in society.
 Self actualization needs – achievement in life.
3. Psycho-analytic Theories
Psycho-analytic theory was developed by Sigmund Freud. It has three
elements namely, id, ego and super ego. Id denotes the free mechanism which
leads to strong drives. Ego weighs consequences of the act instead of rushing
blindly into the act. Super ego tries to keep the acts morally right. The buyer
behaviour relies on the relative strength of these three elements. Sometimes
there may be a conflict between the elements of id and super ego. Ego
maintains the balance between the id and the super ego.
4. Socio-cultural Theories
This theory is also known as group theories. This theory considers man
as a social animal. The person’s buying decisions are influenced by the family
and society. His wants and behaviour are largely influenced by the group to
which he belong. Other groups like cultural groups, reference groups, social
classes, family are also influence one’s buying decisions. The reason is most of
the luxurious goods are purchased by us as the people of same status bought it.
Of these groups, family plays a significant role in making buying decision
because goods involving huge money are purchased by a joint decision of
almost all the members in a family.
Maslow’s Classification of Basic Needs
Since marketing is to do with the satisfaction of human needs, attention
has been focused on the nature of the needs. The term need refers to a condition
marked by the feeling of want of something or of requiring the performance of
certain action. Hence, need is the first factor in a sequence leading to the
purchase decision. It is the need which generates the motive for the consumer
to take action with a view to relieve the tension arising from the felt need.

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 A.H. Maslow has classified the human needs into five in a pyramid
form called “Hierarchy of Needs” as given below:

Self
actualis
ationo

Self esteem

Love and
belongingness

Safety and security

Physiological needs

We shall now discuss each of the needs briefly:

1. Physiological Needs:
Physiological needs refers to the basic needs and so have the first
priority. Until these needs are satisfied, other needs are of no significance.
Need for food, cloth, shelter are the examples of physiological needs.
2. Safety Needs:
Thistype of needs arises to ensure economic and social security. For eg.,
the need to protect oneself from physical harm, to obtain security and safety
from unexpected dangers like accident.
3. Social Needs:
Social needs are also known as belongingness and love needs. This is
the need for affectionate relationship with others in the society.
4. Self-Esteem Needs:
This type of need arises to achieve self-respect and prestige in the
society. Purchase of luxury items like T.V., Fridge is in majority cases made
to satisfy this need.
5. Self Actualisation Needs:
Self actualisation needs are the result of a person’s desire to achieve the
maximum of his capabilities. Fulfilment of this type of needs depends
primarily upon the satisfaction of the basic needs.

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 Maslow argued that these needs are arranged in an order of importance
i.e, the lowest order needs being physiological needs and the highest order
being self actualisation needs. According to A.H. Maslow normally, an the
basic needs, he proceeds to satisfy the safety and security needs and then to
next as shown in the picture give above. He also suggested that needs that are
satisfied do not provide motivation and that the needs at the base of the
phyramid should atleast be satisfied partially before the next higher level need
becomes important.
With the help of Maslow’s theory, it is simple and easy to perceive how
particular products and services are related to particular needs like food, shelter,
clothing to physiological category, life insurance to safety and security category
and so on. Various marketing and advertising activities can be undertaken
keeping these ideas in mind. However, Maslow’s theory is not free from
criticism because this is only a broad categorization of human needs.
Individuals, however, differ considerably in their need structure and need
decisions. The actions of individuals are guided by their nee structures and need
levels. Therefore to succeed in marketing activities, marketers should
understand the customer’s need level, foster these needs and fulfil them.

Theory of cognitive dissonance

In psychology, cognitive dissonance is the discomfort experienced
when simultaneously holding two or more conflicting cognitions: ideas, beliefs,
values or emotional reactions. In a state of dissonance, people may sometimes
feel "disequilibrium": frustration, hunger, dread, guilt, anger, embarrassment,
anxiety, etc. The phrase was coined by Leon Festinger in his 1956 book When
Prophecy Fails, which chronicled the followers of a UFO cult as reality clashed
with their fervent belief in an impending apocalypse. Festinger subsequently
(1957) published a book called A Theory of Cognitive Dissonancein which he
outlines the theory. Cognitive dissonance is one of the most influential and
extensively studied theories in social psychology.
The theory of cognitive dissonance in social psychology proposes that
people have a motivational drive to reduce dissonance by altering existing
cognitions, adding new ones to create a consistent belief system, or
alternatively by reducing the importance of any one of the dissonant elements.
Cognitive dissonance is the distressing mental state that people feel when they
"find themselves doing things that don't fit with what they know, or having
opinions that do not fit with other opinions they hold." A key assumption is that
people want their expectations to meet reality, creating a sense of

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equilibrium. Likewise, another assumption is that a person will avoid situations
or information sources that give rise to feelings of uneasiness, or dissonance.
Cognitive dissonance theory explains human behavior by positing that
people have a bias to seek consonance between their expectations and reality.
According to Festinger, people engage in a process he termed "dissonance
reduction," which can be achieved in one of three ways: lowering the
importance of one of the discordant factors, adding consonant elements, or
changing one of the dissonant factors. This bias sheds light on otherwise
puzzling, irrational, and even destructive behavior.
Research and understanding of cognitive dissonance in consumers
reveals potential for developing marketing practices. Existing literature
suggests that three main conditions exist for arousal of dissonance in purchases:
the decision involved in the purchase must be important, such as, involvement
of a lot of money or psychological cost and be personally relevant to the
consumer; the consumer has a freedom in selecting among the alternatives,
finally; the decision involvement must be irreversible.
A study performed by Lindsay Mallikin shows that when consumers
experience an unexpected price encounter they adopt three methods to reduce
dissonance. Consumers may employ the strategy of constant information, they
may have a change in attitude, or they may engage in trivialization. Consumers
employ the strategy of constant information by engaging in bias and search for
information that will support their prior beliefs. Consumers might search for
information about other retailers and substitute products consistent with their
states.
Alternatively, consumers may show change in attitude such as re-
evaluate price in relation to external reference prices or attribute high or low
prices with quality. Lastly, trivialization may occur and the importance of the
elements of the dissonant relationship is reduced and consumer tend to
trivialize importance of money, and thus, of shopping around, saving, and
receiving a better deal.
Cognitive dissonance is also useful to explain and manage post-
purchase concerns. If a consumer feels that an alternate purchase would have
been better it is likely he will not buy the product again. To counter this
marketers have to convince the buyer constantly that the product satisfies his or
her need and thereby help to reduce his cognitive dissonance and ensure
repurchase of the same brand in the future.
At times cognitive resonance is induced rather than resolved to market
products. The Hallmark Cards tag line “When you care enough to send the very
best” is an example of a marketing strategy that creates guilt in the buyer if he

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or she goes for a less expensive card. The aggressive marketing ensures that the
recipient also is aware that the product has a premium price. This encourages
the consumer to buy the expensive cards on special occasions.
1.9 SIGNIFICANCE AND IMPORTANCE OF CRM IN MODERN
BUSINESS ENVIRONMENT
Customer Relationship management is the strongest and the most
efficient approach in maintaining and creating relationships with customers.
Customer relationship management is not only pure business but also ideate
strong personal bonding within people. Development of this type of bonding
drives the business to new levels of success.
Once this personal and emotional linkage is built, it is very easy for any
organization to identify the actual needs of customer and help them to serve
them in a better way. It is a belief that more the sophisticated strategies
involved in implementing the customer relationship management, the more
strong and fruitful is the business. Most of the organizations have dedicated
world class tools for maintaining CRM systems into their workplace. Some of
the efficient tools used in most of the renowned organization are BatchBook,
Salesforce, Buzzstream, Sugar CRM etc.
Looking at some broader perspectives given as below we can easily
determine why a CRM System is always important for an organization.
1. A CRM system consists of a historical view and analysis of all the
acquired or to be acquired customers. This helps in reduced searching
and correlating customers and to foresee customer needs effectively and
increase business.
2. CRM contains each and every bit of details of a customer, hence it is
very easy for track a customer accordingly and can be used to determine
which customer can be profitable and which not.
3. In CRM system, customers are grouped according to different aspects
according to the type of business they do or according to physical
location and are allocated to different customer managers often called as
account managers. This helps in focusing and concentrating on each and
every customer separately.
4. A CRM system is not only used to deal with the existing customers but
is also useful in acquiring new customers. The process first starts with
identifying a customer and maintaining all the corresponding details
into the CRM system which is also called an ‘Opportunity of Business’.
The Sales and Field representatives then try getting business out of
these customers by sophistically following up with them and converting

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 them into a winning deal. All this is very easily and efficiently done by
an integrated CRM system.
5. The strongest aspect of Customer Relationship Management is that it is
very cost-effective. The advantage of decently implemented CRM
system is that there is very less need of paper and manual work which
requires lesser staff to manage and lesser resources to deal with. The
technologies used in implementing a CRM system are also very cheap
and smooth as compared to the traditional way of business.
6. All the details in CRM system is kept centralized which is available
anytime on fingertips. This reduces the process time and increases
productivity.
7. Efficiently dealing with all the customers and providing them what they
actually need increases the customer satisfaction. This increases the
chance of getting more business which ultimately enhances turnover
and profit.
8. If the customer is satisfied they will always be loyal to you and will
remain in business forever resulting in increasing customer base and
ultimately enhancing net growth of business.
In today’s commercial world, practice of dealing with existing
customers and thriving business by getting more customers into loop is
predominant and is mere a dilemma. Installing a CRM system can definitely
improve the situation and help in challenging the new ways of marketing and
business in an efficient manner. Hence in the era of business every organization
should be recommended to have a full-fledged CRM system to cope up with all
the business needs.

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 UNIT – II

2.1 CUSTOMER LEARNING RELATIONSHIP

2.2 KEY STAGES OF CRM
2.3 FORCES DRIVING CRM
2.4 BENEFITS OF CRM
2.5 GROWTH OF CRM MARKET IN INDIA
2.6 PRINCIPLES OF CRM
2.7 STRATEGY FOR CRM
2.8 PROCESS OF SEGMENTATION
2.9 CHOICE OF TECHNOLOGY
2.10 CHOICE OF ORGANIZATIONAL STRUCTURE FOR CRM
2.11 UNDERSTANDING MARKET INTELLIGENCE ENTERPRISES

2.1 CUSTOMER LEARNNG RELATIONSHIP

This is the essence of what we call a "Learning Relationship" -- a
relationship with a customer that gets "smarter and smarter" with every
interaction. The Learning Relationship represents the central engine of a one-
to-one enterprise strategy. A Learning Relationship is a one-to-one relationship.
It is the single unique and distinct characteristic of any CRM program.
Now think about some of the implications:
-- The traditional business organizes and measures itself on a "lateral"
basis. The business goes from quarter to quarter, year to year, measuring sales
revenue or profit laterally across different business units and the entire
enterprise. But when we engage an individual customer in a relationship, the
relationship develops longitudinally, through time, with respect to this single
customer. It is characteristically different today than it was yesterday, and it
evolves more as time goes on.
--The immediate financial goal of a traditional business is to maximize
the value of a sales period, by generating more sales or profit during that
period, across the whole enterprise. But the immediate financial goal for a
relationship manager is to increase the long-term value of the customer
relationship, through time -- that is, to maximize the customer's expected
lifetime value.
-- The long-term financial goals of the traditional business and the one-
to-one enterprise are identical -- to maximize shareholder value. But

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shareholder value is a future-oriented variable. As such, it is much more closely
related to the lifetime values of the customers being served than it is to this
year's profit, or even next year's.
-- A traditional business sees success in terms of market penetration, or
market share, within each division or product category. A one-to-one enterprise
will see success in terms of account development, or share of customer, across
all divisions and product categories.
-- A traditional marketing or sales professional will concentrate on
finding more customers who want to buy his company's product. But a one-to-
one customer relationship manager will ponder how to find more products and
services for his customer.
Martha Rogers
These are just a few of the differences between a traditional marketing
approach and a one-to-one Learning Relationship approach. To understand the
benefits of such an approach for the business, let's turn first to the benefits for
the customer.
Obviously, if the more I teach you, the more you adapt your product or
service to my needs, then with every interaction your product becomes more
valuable -- to me. The product has more economic value to me for two reasons:
First, it fits my needs better and so, therefore, it requires less accommodation or
compromise on my part. But second, my marginal cost of substitution
continues to increase. The more I teach you, the more expensive it will be for
me to substitute a competitor's product.
So the first benefit for the enterprise is that customer loyalty will
improve. But the second benefit -- really, the "flip side" of customer loyalty --
is that unit margins are likely to improve, as well. The principle reason your
margins come under pressure in the first place, even when you keep costs under
control, is that your competitors are pricing their products aggressively in order
to steal your customers. But if you could predispose a particular customer to
want to stay loyal, because his switching cost is higher, then you won't
necessarily have to match every last discount encountered in the marketplace.
As your product continues to have more value for the customer, it may even be
possible to raise your price, over time, to share the benefit of this increased
product value.
And there are other benefits to the one-to-one approach that we haven't
even factored in yet. First, obviously, there is the "human" factor -- the
probability that a customer will simply end up "liking" you more, as the
relationship improves and customer satisfaction grows. This is indeed the factor
that many CRM consultants focus on first -- delighting the customer, exceeding

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the customer's expectations, and so forth. But, while likability is certainly
something we should all work for, by itself it is neither a necessary nor a
sufficient condition to generate loyalty. The world is full of customers who
switch from one company they were happy with, to another one they are
equally happy with. And if you want an example of a company that customers
remain loyal to in spite of the fact that they think the service is bad and don't
even "like" dealing with them, you might not have to look further than the
relationship you have with your own retail bank.
Don Peppers
Another benefit of building one-to-one Learning Relationships is that it
can improve the overall efficiency of a business. It can reduce costs, mostly by
cutting out the wasted effort of producing products or services that no one
wants. Mass customization works on the basic principle modularizing the
production or service delivery process, breaking the process into components,
and then digitally combining these components to make a large variety of fully
configured products. In this way, the mass customizer can cost-efficiently
mass-produce goods and services in lot sizes of one. This means a product can
be made to order, rather than built to forecast. So mass customization reduces
inventory costs, and this single benefit is often enough to more than offset the
cost of producing digitally combinable components. Indeed, cost reduction is
one of the principle reasons manufacturing companies consider mass
customization technologies in the first place.
To think it through intuitively, what the one-to-one enterprise is really
doing is making a product only after a customer for that product has been
signed. The company is not building some number of standard products in
advance of their expected sales, and hoping that its estimate of overall market
demand is correct. Instead, first it has a customer, and then it makes the product
for that customer. Once again, therefore, a significant element of friction is
removed from the economic system, and in this case it is a cost reduction that
can often be dropped directly to the manufacturer's bottom line.
In services, the principles of mass customization usually translate to
greater asset productivity. If your company's Web site "remembers" individual
customer preferences, then those customers will be able to get what they want
more quickly. Ergo, your servers will be able to accommodate more visitors in
any given time period. Martha RogersDon PeppersExcerpted from One to One,
B2B, Customer Development Strategies for the Business-to-Business World,
by Don Peppers and Martha Rogers, PhD. Copyright 2001 by Peppers and
Rogers Group.

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 One of the golden rules of marketing has always been “know your
customer.” Historically, this required deep knowledge about a market segment.
You know the drill. It included understanding the unmet needs and wants of a
particular target market including: demographics; attitudes; consumption
patterns; media habits; lifestyle; and other dimensions that enabled you to
define a homogenous group. And then you tailored the 4-P’s of marketing
(product, price, place and promotion) based on your knowledge about this
market segment.
This approach to “target marketing” worked pretty well for decades. It
enabled marketers to develop products, value propositions, advertising creative,
and media buys that were well targeted to a particular market. But, in today’s
world of Customer Experience Management (CEM), how does this approach
stack up?
CEM: Beyond the 4-P’s and CRM
Most marketers acknowledge that today’s big challenge is managing the
customer’s experience across products and channels…and over each
customer’s lifecycle. This requires more than managing the 4-P’s of marketing.
And it’s beyond CRM which often focuses on a single product or channel
transaction—the short-term. Alternatively, CEM requires designing an
experience for each customer based upon knowledge of that customer,
delivering it across products and channels, and measuring individual outcomes
that enable improvement of future interactions. Simply stated, CEM is about
creating learning relationships—over the long-term.
But where are we on our journey towards managing CEM and creating
learning relationships? What capabilities do companies have today to manage
the customer’s experience across products and channels? Is anybody really
doing it? How are they doing it? And, if I improve my company’s capabilities,
will it really matter?
Do companies really understand the changing needs of each individual
customer if they are not updating customer profiles?
The Customer Experience Maturity Monitor (CEMM), a qualitative and
quantitative research study conducted by Peppers & Rogers Group, SAS
Institute and Jubelirer Research, addresses these questions in its first
report, “The State of Customer Experience Capabilities and Competencies.”
The research measured 58 variables in four categories: customer orientation;
customer insight; customer interaction; and improvement. The premise is that a
company must have more than the desire to manage the customer experience;
they must have enterprise capabilities that leverage customer insight to better-
manage customer interactions and continuously improve results. Importantly,

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for these capabilities to work, the company must have a customer orientation –a
culture that focuses on the customer and builds trust.
A Critical Gap
One of the big CEMM findings around customer improvement (a la
learning from customers) was the following gap:
 Over all, 60 percent of respondents agreed with the following
statement: “My company treats customers differently, based on an
understanding of the needs of each one individually.” At first glance, 60
percent seems to indicate that companies are creating learning
relationships with individual customers.
 However, only 28 percent rated there capabilities as good or excellent in
response to this statement: “Customer profiles are continuously updated
to reflect all customer activity (purchases, returns, etc.) as well as
outbound (campaigns) and inbound contact (channel visits, call center,
web, stores/branches, etc.).”
Do companies really understand the changing needs of each individual
customer if they are not updating customer profiles? To find out, you have to
look a little deeper.
Improvement: Measure and Report + Learn and Improve
For success, CEM requires your company to continuously learn from
individual customers and to demonstrate, to customers, that you are listening to
them. Here’s a quote from a CEMM research respondent: “Through research,
we have discovered that if we really want our customers to want to bring us
more business and advocate us to others, we need to demonstrate (through
practice) that we know them, look out for them and reward them. In practice,
executing on that is what builds the trust.”
Well said! But how does a company demonstrate that they know each
individual customer?
Measure and Report: It begins with measuring and reporting what
matters. The CEMM research revealed that customer metrics are on the
marketing dashboard. For example, 43 percent of respondents rate the
performance of their company as good or excellent in using customer metrics
(e.g. profitability, campaign response, channel behavior) to measure
organizational performance. Importantly, 31 percent rate their performance as
good or excellent in aligning incentive programs to customer metrics. In
addition, 30 percent rate highly their use of customer metrics to measure
individual employee performance. Wow! This is much higher than I expected.
Kudos to the 30 percent!

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 But many companies are still struggling with marketing measurement
basics. Only 41 percent rate their performance as good or excellent at
measuring campaign ROI—which is surprisingly low given all the great
marketing automation technology that easily solves this problem. Equally
surprising is only 30 percent rate their performance as good or excellent at
measuring marketing mix ROI—which is where Marketing Resource
Management (MRM) easily optimizes marketing dollars between the plethora
of advertising and promotional options.
Learn and Improve: Learning about individual customers is difficult!
CEMM research revealed that only 31 percent of companies rate their
performance as good or excellent in capturing a customer’s expressed needs
during live customer interactions. Imagine this…your customer is on the phone
with your call center rep (or on your web site …or some other touch-point) and
the customer is giving your company the information required for success and,
tragically, you are failing to capture it.
But some companies are not missing the opportunity. In fact, 21 percent
of CEMM respondents rate good or excellent their ability to change customer
interactions based on changes in a customer’s profile. So one out of every five
companies is, in fact, learning from customers and improving customer
interactions based on this knowledge. This one-to-one understanding creates
customer intimacy, loyalty and advocacy–the goal of CEM.
State of CEM Capabilities
What is the current state of CEM capabilities and managing
improvement through a learning relationship? A verbatim from one customer
summarized it best, “Customer experience management is a constant work in
progress.” … “We truly believe that the investments we make today are like
farming—we are planting seeds, but we don’t necessarily get to harvest right
away.” Indeed, CEM is a journey!
Why is the CEM journey important to your company? According to the
CEMM study, companies with mature customer experience capabilities enjoy a
two- to three-fold competitive advantage (see Customer Experience Success
Starts with Insight: Transforming Data into Action for details). In addition, you
can download the Customer Experience Maturity Monitor (CEMM) white
paper (free registration required) for a deeper discussion of all findings.
2.2 KEY STAGES OF CRM
So if you wanted to implement a CRM System that turned into a
powerful business development tool leading to more revenue being brought
into the firm and you have read my blog post on the most common reasons for
failure. What should you do?

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 I would suggest the following simple steps be included in your
implementation plan. There will be other steps but these are specifically
intended to deal with the major causes of implementation failure.
1. Draw up a requirement definition document. This will list out all the
features, capabilities and outputs the new system will need in order to meet
your business needs. It should embrace all the key stakeholders such as the IT
department, finance, marketing, business development and the users allowing
each party to include their thoughts. Warning: don’t let it turn into a wish list
(or worse a “wouldn’t it be great” list) and don’t design anything by
committee. When it is complete get each of the stakeholders to sign it off.
2. Train your users. How can you do this before you get the system I hear
you cry. Well, this is the crucial step because what you are doing is training
people how to win new clients and increase sustainable revenue streams.
Actively encourage people to use Outlook, or similar, as a pseudo-CRM system
where they can record their thin and fat CRM data (see my blog post for more
on this) and build a proper pipeline This serves two purposes: firstly it proves
what a great tool CRM is to save time and achieve more results with far less
effort and secondly it should create a hunger for a better system before it is
delivered.
3. Establish a steering committee. Make it delivery focused and not just a
talking shop or naughty chair. The idea is to identify, install and use a powerful
business development tool so this committee will need strong leadership to
keep it on course. Include the key stakeholders and invite specialists as
required.
4. Seek out your new system. This is too complicated for me to cover in its
entirety but these points are worth noting. Produce a suitability tick-list from
your requirements definition document to allow the software vendors to
indicate which of your requirements their system meets. Make sure they all fill
yours in and don’t use their own format. Comparing responses is much easier
if they are all in the same familiar format. Ask your suppliers to suggest the
strengths and weaknesses of their competitor’s products. They tend to be
lighter on the strengths but much more detailed on the weaknesses, often telling
you crucial things that you would not have ordinarily found out yourself. Do a
detailed gap analysis for each package using a weighting system if necessary.
Take the one that wins.
5. Install and train. Once the system has been successfully configured
(which may include some customisation but only that which is allowed through
the system – avoid bespoke work to the core system) and installed you can start
and conduct the Interface training; that is showing people how to use the

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system. This is usually the only training given but it is much less effective
without stage 2.
6. Load up key operational data. Extracting data from accounts systems is
usually very easy, as is loading marketing lists. My advice is to create a flat
file which can be cleansed (removed duplicates) and then imported onto the
CRM database. Get it clean before you load it. As for the rest of the data
either hire a couple of temps and get them to load it by hand or you can get the
owners of the data themselves to do it. If you have followed step 2 above they
will by now understand the importance of the data and be quite keen to get it
into the new system as quickly as possible. When the data has been fully
loaded run more duplicate detection routines based on compressed telephone
numbers, email addresses and names to identify and resolve any other possible
duplicates.
7. Go live. You may decide to stagger implementation by department or by
selecting those that were most keen during stage 2 above, or of course, you may
just go big-bang. There are pros and cons with all options and you must decide
what is best for you. I favour the second option.
CRM systems are a crucial aspect of any business development
capability. Without them people will be disorganised, wasteful and generally
ineffective and sales management will be almost impossible. Those CRM
solutions that are installed properly can expect to enable their users to deliver
more sales in less time – a worthy and noble objective and one that you are
quite capable of achieving.
2.3 FORCES DRIVING CRM
Customer Relationship Management (CRM) continues to climb
in priority for many companies in today’s hyper competitive market for
customers. A popular New Year’s resolution for many companies is
upgrading or implementing a new CRM system. In fact, Gartner indicated that
CRM was the #8 IT Priority for CIOs in 2012, up from #18 in 2011. And CRM
figures to be an even higher priority for 2013. So why are companies
prioritizing CRM? Let’s take a look at 3 driving forces behind increasing
investments in CRM…
1. Social CRM
Integrating social media with CRM has some tantalizing benefits:
 Real-time access to customers unmatched by any other channel
 Increased revenue through lower costs and greater reach to customers
 Operational efficiency gains through greater insight to your customer base

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 However, developing a Social CRM strategy can be challenging since
social media has shifted the relationship with the customer. With social media,
customers tend to have more power in the relationship because they have
networks with which the organization would like to connect and explore. In
order to tap into those networks, organizations must create experiences that will
attract customers’ interest and drive interaction. This is not an easy task as
CRM strategies focus mainly on managing the relationship with their customers
– not facilitating value added dialogue and providing intriguing customer
experiences. In social media, the phrase “the customer is king” has never been
more true.
So what helps make a Social CRM strategy successful? SEI believes it
is important to develop strategies and goals – regardless of how you plan to
engage your customers – around the integration of social media and CRM.
These should include governance of engagement policies, key performance
indicators (KPIs), and other metrics to clearly measure and monitor your
progress.
2. CRM Analytics
CRM tools today are better integrated with other systems than ever
before. These capabilities allow organizations to obtain a 360 degree view of
their customers (e.g. ability to use marketing, sales, and website usage data to
do more targeted cross-selling). Organizations can take advantage of voice of
the customer from social media and other internal systems to better identify
customer needs and expectations.
Access to analytics is crucial, but companies that use that data to drive
decisions benefit most. For example, customer experience analytics provide
the opportunity to identify your “best” customers (which may often be
surprising). You could find that your most infrequent customers have the
highest overall spend. By focusing on these critical customers, organizations
can maintain a loyal customer base for the long-term and ultimately generate
more revenue.
3. Software as a Service (SaaS) or Cloud CRM
The benefits of a SaaS solution are hard to ignore:
 No in-house hardware or software to install and maintain
 Instant global availability due to access over the internet
 Smaller upgrades on a consistent, predictable and continuous timeframe for
as long as you own the licenses
SaaS solutions are not for everyone, however. For starters, some industries
may have regulations on storing data in the cloud. The amount of interfacing

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required or the loss of flexibility of a SaaS solution may turn others away from
a cloud-based solution.
SEI knows that it is imperative to examine if the SaaS model fits your
needs before choosing one. For example, IBM announced last year that it
would be replacing its Siebel implementation with a relative newcomer to the
market, SugarCRM (not a SaaS model). IBM valued the flexibility to have the
software run on and integrate with IBM software platforms like Lotus Notes
and DB2 databases that SugarCRM provided. They also noted that the per user
license fee of the SaaS model was too costly for their large number of CRM
users. IBM clearly examined their needs before selecting SugarCRM as their
CRM vendor. With years of vendor evaluation/selection experience, SEI can
help your company do the same.
2.4 BENEFITS OF CRM
Your great-grandmother’s milkman certainly used it—the piece of
paper in his wagon that listed who bought what each day was an early
predecessor to the cloud-based CRM applications of today. While the
technology surrounding customer relationship management may have changed,
the goal of making a sale and keeping a customer has not. At its core, CRM is
all about merging marketing efforts with business processesto be able to
identify, pursue and manage valuable customer relationships. It’s about
knowing and understanding your customers’ buying habits and preferences so
that you can place yourself squarely at the point of sale—and about supporting
those same customers after the sales transaction is complete.
But what if you don’t have a formal customer relationship management
system in place? How can you build a case for one at your place of business?
While there are a wide range of reasons to implement a CRM system, we’ll
share our top five to get you started.
Improved Customer Experience
Today’s customers expect a customized, streamlined experience from
beginning to end. They want you to know who they are and to have what they
need— without transferring the call and without keeping them waiting. A
customer relationship management system will enable you to quickly identify
your customers, address their initial needs and subsequently recommend
additional products or services that match their profile. It gives your staff the
ability to recognize who they’re dealing with from the very beginning, making
them more efficient and more productive. Customers, in turn, enjoy better
customer service—with fewer hassles.
See the SalesForce vs SugarCRM vs ZohoCRM Review to learn the
best CRM for your business

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Focused Marketing Efforts
CRM solutions provide you with a complete picture of your sales
pipeline, as well as your existing customers. With that in hand, you can identify
and target individuals with the greatest potential for future sales. Rather than
taking the mass marketing approach, CRM allows you to focus and fine-tune
your marketing efforts to make those efforts more productive. That saves you
money, because you aren’t expending resources on individuals who ultimately
won’t become customers.
Automated Analytics and Reporting
Whether your business is large or small, chances are you don’t have
time to track and analyze the buying habits of every last customer. The beauty
of customer relationship management applications are that they handle that
piece of the marketing puzzle for you. Because your customer and sales
information is housed in one place, you have automatic access to a full range of
reports on which products or services are selling and who’s buying them. You
also gain a clearer picture of the sales pipeline itself: How is it working? Where
are the snags? Which staff-member is the most productive? A CRM’s
centralized information warehouse gives you powerful analytic and reporting
tools that would be hard to replicate in stand-alone systems.
Better Coordination and Cooperation
When sales, marketing and customer service share a common CRM
platform, they are able to speak the same language with one another. Rather
than being separated by systems functionality or access to key information,
departments across the organization are able to function more cohesively.
Suddenly, they have what they need to work as a single unit. They know what
the goals are and how to attain them.[pquote_right]A customer relationship
management system can manage to day-to-day administrative tasks for you,
giving your sales team the chance to get back to, well, selling.[/pquote_right]
More Administrative Support
Even in sales, there are mundane tasks that simply have to get done.
Scheduling appointments, keeping records up-to-date, tracking follow-ups—all
critical functions in any sales team, but ones that require careful (and tedious)
attention to detail.
Professionally implemented CRM systems deliver many benefits for
sales, marketing, service and other teams. Here are just 19 examples that
demonstrate how CRM solutions help organisations prosper:
 Decision making is nimble and well informed supported by real-time
CRM reporting across all business areas.

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 Effective time management as CRM prompts users to follow up on
activities and automates alerts when important events occur, or if actions
are missed.
 Higher quality lead generation from marketing activities by leveraging
CRM customer segmentation to send targeted campaigns and personalised
messages that resonate.
 Pipeline reports are trusted and are used as the basis for reliable sales and
production forecasts to predictably manage cash flow.
 Performance hotspots are quickly identified enabling timely action to be
taken to correct issues and reward outstanding achievers.
 The value of each client relationship is understood ensuring that
resources are prioritised to protect the most profitable accounts.
 Process automation replaces repetitive manual tasks by cutting admin
work and eliminating duplication so teams can focus on profitable activity.
 Improved customer experience as everyone has access to complete
relationship detail wherever they work to engage with clients and deliver
amazing service.
 Communication is a strength. Shared diaries, team calendars and service
schedules give everyone clear visibility of individual activities.
 CRM integrates with finance and other back-office applications to
connect processes and remove double handling of tasks.
 Users can instantly check order histories to understand customer buying
patterns and identify new selling opportunities.
 Email marketing actions are reported in CRM so hot prospects are
immediately identified and routed to sales teams.
 Do business anywhere by having reliable access to all the client, sales and
relationship detail you need using CRM apps in mobile and table devices.-
 Connected business processes by managing all key workflows in a single
application, including diverse processes like contracts, projects, events and
applications.
 A positive team culture as staff share information, collaborate effectively,
and gain a better understanding of other areas in your organisation.
 Sales cycles are shortened and win rates improve as teams better focus
their efforts on the opportunities that are most likely to close.
 Critical customer data is safeguarded as teams and individuals are
granted access at levels that are consistent with their role and responsibility.
 Training costs are reduced by equipping users with tools they are already
familiar with and applying guided processes that direct them to successful
outcomes.

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 Scalability that fuels your business growth by adding more CRM
functions and processes. As your requirements change CRM solutions
like Microsoft Dynamics have the scalability to grow with your business.
2.5 GROWTH OF CRM MARKET IN INDIA
Building a CRM system that will make your Sales team more effective
and your business more competitive is not just a matter of choosing the right
technology; it also requires a vision of what you want to achieve, and the ability
to get your organization to weigh in behind you on it.
At salesforce.com, we’ve learned that there are six key steps when
launching a CRM system:
1. Define your vision
2. Define your strategy
3. Define your business objectives
4. Identify the metrics
5. Prioritize your initiatives
6. Build your roadmap
You’ll notice these steps are business focused, not technology focused.
They’re related to your organization’s business priorities, rather than to how
you configure Sales force. However, by taking those steps, you clarify your
goals and make implementing and configuring Sales force much simpler.
Cindy Pogrund recently spoke to us about her experiences
implementing Sales force. Cindy is EVP of Customer Experience at If by
phone, an industry leader in voice-based marketing automation, and many of
the points she made reinforce how important this 6-step process is. In
particular, Cindy stresses the need to start early and do your prep work: think
about your sales processes, what stakeholders need to be involved, and how to
manage the rollout, before you start implementing.
1. Define Your Vision
It sounds obvious, but how can you get what you want unless you know
what it is you want? Your vision could be many things, from becoming market
leader for sales in your region, to redefining customer service within your
industry; whatever it is, it needs to be both aspirational enough to make an
impact on your business, and clear enough that the entire organization can
understand it. Executive sponsorship is vital for this, and for a successful
rollout, period. Lack of executive sponsorship is one of the top three
contributing factors to CRM failure, but having an effective executive sponsor
means the vision for your CRM project is clear and communicated to the whole
company.

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 According to Cindy, an executive sponsor should be like the coach of a
football team – someone who can be both a motivator and an enforcer, setting
goals and making sure people stick to them.
2. Define Your Strategy
Strategy is what makes your vision achievable. You want to be market
leader for sales? Well, do you do this by competing on price, or by offering
different products, or by emphasizing your great after-sales service? And if you
want to implement Salesforce, what’s your strategy for doing so?
For Cindy, there were two key elements to If by phone’s
implementation strategy: first, stakeholders at all levels of the company were
involved early. Second, she hired experts and have a partner company do the
implementation. The first decision ensured input and buy in from everyone who
would be using Salesforce, including sales reps, sales managers, marketing,
customer success, developers, and execs. The second decision made for a more
cost effective implementation, allowing If by phone’s developers to concentrate
on creating their own products.
3. Define Your Business Objectives
Business objectives is where the rubber meets the road, where vision
and strategy get translated into the day-to-day work. A common mistake when
implementing a new CRM system is to replicate in it all the old business
objectives and processes they’ve used for years, complete with their
inefficiencies. Instead, look at your implementation as an opportunity to review
and optimize how you work. That’s exactly what the If by phone team did: they
ended up redesigning their lead, sales and on boarding processes to ensure
better data quality and lead conversion, and to ensure key info was visible at all
stages of the customer lifecycle.
As Cindy puts it, you’ve got to burn the comfort blanket – if you’re
moving from an old system, leave it behind and make sure users are fully
adopting the new improved one.
4. Identify the Metrics
“You cannot manage what you cannot measure” is an adage that's been
attributed to many business thinkers. For the If by phone implementation,
metrics had to be visible to everyone, and this meant dashboards for all levels
of the organization – for sales reps, sales managers and for execs. Remember,
stakeholders had been involved early on, so Cindy was able to deliver
dashboards that helped people do their job. This helped with adoption, not just
with metrics, because it emphasized that this was a tool for business.

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5. Prioritize Your Initiatives
You’re not going to get everything done at once, so you need to decide
what’s most important to deliver first. For Cindy, dashboards and training was
the focus. Getting the dashboards done helped secure buy-in, as stakeholders
could see that the input they’d provided had been taken on board. Training
ensured everyone was ready to get started with the new system as soon as it
was available. One of Cindy’s neat initiatives was to provide individual training
from admins as a follow up to the usual online and group training – this gave
anyone who needed it a one-on-one session where they could ask questions
specific to their job.
6. Define Your Roadmap
You shouldn’t look at building an effective CRM system as a big bang
event. Yes, a successful launch is vital, but being able to deliver enhancements
and new features after go live is equally important. Plan beyond launch day and
consider what other capabilities you need to deliver for the business.
2.6 PRINCIPLES OF CRM
1. CRM is more than just software
CRM may in theory, be a piece of software, but for businesses, it can be
a crucial tool for helping them to improve. Using CRM requires strategy and
knowing what it is that you want to gain from using it, why is why it isn’t just
something you can install and hope it will do the hard work for you.
2. Effective Analysis is Crucial
CRM software will provide your business with a whole host of data
about your sales and your customers. Knowing how to analyse these figures is
crucial as well as working out what you will do with them. The data collected
from CRM can help you both in the present and in the future and help you
identify weak/strong points in your products in order to make changes or push
what sells the most.
3. Customer Focus is Important
The clue is in the title – ‘Customer Relationship Management’. Whilst
you are ultimately looking to improve your sales, you won’t be able to do so
without understanding your customers.
Businesses can benefit greatly from interacting with their customers.
Use the data gathered from CRM to give something back to your customers and
in turn you’ll get something back from them. By valuing and rewarding your
customers you’ll experience better customer loyalty which will continue to
produce pleasing results for your sales.

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4. CRM is a Continuing Process
Whilst yes, some businesses use CRM in the short term to promote
specific products and services, CRM should be used continuously in order to
see continued results. The needs and wants of customers will continue to
change and so it is important that your business continues to change and grow
as well in order to keep them loyal to your business. Setting short term and long
term goals can help you to develop CRM strategies that will continue to
produce results.
5. Use it Across Your Entire Business
Let’s say for example, you owned a clothing line. By implementing
CRM right through from the design process (by taking not of what your
customers like, colours they prefer, which prices they’re most likely to buy at
and putting this thought into your designs), right through to customer service
(using CRM data to deal with queries quicker and more efficiently), you will
have a streamlined, customer focused business which works at all levels to
improve their experience and encourage them to continue to use your business.
6. Use CRM to Establish What Your Customers Need & How You Can
Hive it to Them
Your customers will want you to be reliable, accessible, offer them
security, efficient, considerate, responsive and innovative. CRM data mining
can help you to improve on all of these points and most of all, improve the two
way communication between you both.
7. Involve all of Your Employers
Everyone from management right down to your administrative team
needs to be aware of your CRM activities and how it affects their work. You
could offer incentives based on data gathered from CRM in order to motivate
your staff, as well as identify key areas for training and development. The
better your staff know your customers, the better they can all work towards
building better relationships with them.
8. React to Your Findings
It’s all very well collecting data about your customers and their views,
but if you don’t react and respond to these finding you won’t see any
improvement in your business. A good way to get a deeper insight into your
customers’ feelings could be to engage them through social media, for example,
and actually ask them about how they use and what they would like to see from
the brand. You can also push promotions, offers and giveaways and so on as
rewards for interacting with you via your Facebook or Twitter page for
example, as many online retailers do.

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9. Choose the Right Provider
Choosing the right CRM provider is crucial for ensuring your success
with this venture. Shopping around for the right provider as well as speaking to
friends, colleagues and observing your competitor’s techniques can all help you
in choosing the most suitable provider for your company. Mae sure that you
choose a provider who understands your unique needs and ‘gets’ your business.
Expert Market UK can also help you narrow down the choices.
10. Simplicity is Key
At the end of the day, customers want their shopping experiences to be
as simple as possible (take Amazon as an example). Customers want to be able
to see all of the information that they need as well as be able to contact you
easily when needed. You can identify how to do all of this using CRM in order
to make the customer experience even better than they expect.
By following the above principles, you’ll be sure to employ successful CRM
strategies for your business and hopefully develop better relationships with
your customers as well as strengthening your business practices.
2.7 STRATEGY FOR CRM
1. Customer Acquisition – This is the process of attracting our customer for
the first their first purchase. We have acquired our customer.
Growth – Through market orientation, innovative IT and value creation we
aim to increase the number of customers that purchase from us for the first
time.
2. Customer Retention – Our customer returns to us and buys for a second
time. We keep them as a customer. This is most likely to be the purchase of a
similar product or service, or the next level of product or service.
Growth – Through market orientation, innovative IT and value creation we
aim to increase the number of customers that purchase from us regularly.
3. Customer Extension – Our customers are regularly returning to purchase
from us. We introduce products and services to our loyal customers that may
not wholly relate to their original purchase. These are additional,
supplementary purchases. Of course once our loyal customers have purchased
them, our goal is to retain them as customers for the extended products or
services.
Growth – Through market orientation, innovative IT and value creation we
aim to increase the number of customers that purchase additional or
supplementary products and services.
4. Marketing Orientation – means that the wholes organisation is focused
upon the needs of customers. Customer needs are addressed by the Three

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Levels of a Product whereby the organisations not only supplies the actual,
tangible product, but also the core product and its benefit, and also the
augmented product such as a warranty and customer service. Marketing
orientation will focus upon the needs of consumers for all three levels of a
product. (N.B. ‘market’ orientation and ‘marketing’ orientation are not the
same).
5. Value Creation – centres on the generation of shareholder value based upon
the satisfaction of customer needs (as with marketing orientation) and the
delivery of a sustainable competitive advantage.
6. Innovative IT – is exactly that – Information Technology must be up-to-
date. It should be efficient, speedy and focus upon the needs of customers.
Whilst IT and/or software are not the entire story for CRM, it is vital to its
success. CRM software collects data on consumers and their transactions. Huge
databases store data on individuals and groups of individuals. In some ways,
CRM means that an organisation is dealing with a segment of one person, since
every consumer displays different purchasing habits and preferences.
Organisations will track individuals, and try to market products and services to
them based upon similar buyer behaviour seen in other individuals (e.g. When
Amazon tells you that customers that viewed/bought the same product as you,
also bought another product).
CRM is a term that is often referred to in marketing. However, there is
no complete agreement upon a single definition. This is because CRM can be
considered from a number of perspectives. In summary, the three perspectives
are:
 Information Technology (IT) perspective
 The Customer Life Cycle (CLC) perspective
 Business Strategy perspective
Disclaimer: Our model is a hybrid of many other commonly cited models from
a number of sources. If you are undertaking higher-level academic work you
need to clarify with your tutor, the nature of his or her preferred model on the
topic

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2.8 PROCESS OF SEGMENTATION
What is Segmentation?
Segmentation refers to a process of bifurcating or dividing a large unit
into various small units which have more or less similar or related
characteristics.
Market Segmentation
 Market segmentation is a marketing concept which divides the complete
market set up into smaller subsets comprising of consumers with a
similar taste, demand and preference.
 A market segment is a small unit within a large market comprising of
like minded individuals.
 One market segment is totally distinct from the other segment.
 A market segment comprises of individuals who think on the same lines
and have similar interests.
 The individuals from the same segment respond in a similar way to the
fluctuations in the market.
Basis of Market Segmentation
 Gender
The marketers divide the market into smaller segments based on gender.
Both men and women have different interests and preferences, and thus
the need for segmentation.
Organizations need to have different marketing strategies for men which
would obviously not work in case of females.

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 A woman would not purchase a product meant for males and vice a
versa.
The segmentation of the market as per the gender is important in many
industries like cosmetics, footwear, jewellery and apparel industries.
 Age Group
Division on the basis of age group of the target audience is also one of
the ways of market segmentation.
The products and marketing strategies for teenagers would obviously be
different than kids.
Age group (0 - 10 years) - Toys, Nappies, Baby Food, Prams
Age Group (10 - 20 years) - Toys, Apparels, Books, School Bags
Age group (20 years and above) - Cosmetics, Anti-Ageing Products,
Magazines, apparels and so on
 Income
Marketers divide the consumers into small segments as per their
income. Individuals are classified into segments according to their
monthly earnings.
The three categories are:
High income Group
Mid Income Group
Low Income Group
Stores catering to the higher income group would have different range
of products and strategies as compared to stores which target the lower
income group.
Pantaloon, Carrefour, Shopper’s stop target the high income group as
compared to Vishal Retail, Reliance Retail or Big bazaar who cater to
the individuals belonging to the lower income segment.
 Marital Status
Market segmentation can also be as per the marital status of the
individuals. Travel agencies would not have similar holiday packages
for bachelors and married couples.
 Occupation
Office goers would have different needs as compared to school / college
students.
A beach house shirt or a funky T Shirt would have no takers in a Zodiac
Store as it caters specifically to the professionals.

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Types of Market Segmentation
 Psychographic segmentation
The basis of such segmentation is the lifestyle of the individuals. The
individual’s attitude, interest, value help the marketers to classify them
into small groups.
 Behaviouralistic Segmentation
The loyalties of the customers towards a particular brand help the
marketers to classify them into smaller groups, each group comprising
of individuals loyal towards a particular brand.
 Geographic Segmentation
Geographic segmentation refers to the classification of market into
various geographical areas. A marketer can’t have similar strategies for
individuals living at different places.
Nestle promotes Nescafe all through the year in cold states of the
country as compared to places which have well defined summer and
winter season.
McDonald’s in India does not sell beef products as it is strictly against
the religious beliefs of the countrymen, whereas McDonald’s in US
freely sells and promotes beef products.
A set-up where two or more parties (also called buyers and sellers) are
engaged in transaction of goods and services in exchange of money is called a
market.
At the market place the sellers sell their goods to the consumers (buyers) in
exchange of money.
Let us go through the following examples:
Nokia offers wide range of handsets for both males as well as females.
The handset for females would be sleeker and more colourful as compared to
sturdy handsets for males. Males generally do not prefer stylish handsets.
The organizations can’t have similar products for all individuals.
Perfumes and deodorants for females have a sweet fragrance whereas perfumes
for males have a strong fragrance.
A marketer can’t have similar strategies for all consumers.
The process of creating small segments comprising of like minded
individuals within a broad market refers to market segmentation. Market
segmentation helps in the division of market into small segments including
individuals who show inclination towards identical brands and have similar
interests, attitudes and perception.

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Need for Market Segmentation (Why Market Segmentation?)
Not all individuals have similar needs. A male and a female would
have varied interests and liking towards different products. A kid would not
require something which an adult needs. A school kid would have a different
requirement than an office goer. Market Segmentation helps the marketers to
bring together individuals with similar choices and interests on a common
platform.
 Market Segmentation helps the marketers to devise appropriate
marketing strategies and promotional schemes according to the tastes of
the individuals of a particular market segment. A male model would
look out of place in an advertisement promoting female products. The
marketers must be able to relate their products to the target segments.
 Market segmentation helps the marketers to understand the needs of the
target audience and adopt specific marketing plans accordingly.
Organizations can adopt a more focussed approach as a result of market
segmentation.
 Market segmentation also gives the customers a clear view of what to
buy and what not to buy. A Rado or Omega watch would have no takers
amongst the lower income group as they cater to the premium segment.
College students seldom go to a Zodiac or Van Heusen store as the
merchandise offered by these stores are meant mostly for the
professionals. Individuals from the lower income group never use a
Blackberry. In simpler words, the segmentation process goes a long way
in influencing the buying decision of the consumers.
An individual with low income would obviously prefer a Nano or Alto
instead of Mercedes or BMW.
 Market segmentation helps the organizations to target the right product
to the right customers at the right time. Geographical segmentation
classifies consumers according to their locations. A grocery store in
colder states of the country would stock coffee all through the year as
compared to places which have defined winter and summer seasons.
 Segmentation helps the organizations to know and understand their
customers better. Organizations can now reach a wider audience and
promote their products more effectively. It helps the organizations to
concentrate their hard work on the target audience and get suitable
results.
Segmentation refers to the process of creating small segments
within a broad market to select the right target market for various brands.

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Market segmentation helps the marketers to devise and implement relevant
strategies to promote their products amongst the target market.
A market segment consists of individuals who have similar choices,
interests and preferences. They generally think on the same lines and are
inclined towards similar products. Once the organizations decide on their target
market, they can easily formulate strategies and plans to make their brands
popular amongst the consumers.
Steps in Market Segmentation
1. Identify the target market
The first and foremost step is to identify the target market. The
marketers must be very clear about who all should be included in a
common segment. Make sure the individuals have something in
common. A male and a female can’t be included in one segment as they
have different needs and expectations.
Burberry stocks separate merchandise for both men and women. The
management is very clear on the target market and has separate
strategies for product promotion amongst both the segments.
A Garnier men’s deodorant would obviously not sell if the company
uses a female model to create awareness.
Segmentation helps the organizations decide on the marketing strategies
and promotional schemes.
2. Identify expectations of Target Audience
Once the target market is decided, it is essential to find out the needs of
the target audience. The product must meet the expectations of the
individuals. The marketer must interact with the target audience to
know more about their interests and demands.
Kellogg’s K special was launched specifically for the individuals who
wanted to cut down on their calorie intake.
Marketing professionals or individuals exposed to sun rays for a long
duration need something which would protect their skin from the
harmful effects of sun rays. Keeping this in mind, many organizations
came with the concept of sunscreen lotions and creams with a sun
protection factor especially for men.
3. Create Subgroups
The organizations should ensure their target market is well defined.
Create subgroups within groups for effective results.
Cosmetics for females now come in various categories.

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  Creams and Lotions for girls between 20-25 years would focus
more on fairness.
 Creams and lotions for girls between 25 to 35 years promise to
reduce the signs of ageing.
4. Review the needs of the target audience
It is essential for the marketer to review the needs and preferences of
individuals belonging to each segment and sub-segment. The consumers
of a particular segment must respond to similar fluctuations in the
market and similar marketing strategies.
5. Name your market Segment
Give an appropriate name to each segment. It makes implementation of
strategies easier.
A kids section can have various segments namely new born, infants,
toddlers and so on.
6. Marketing Strategies
Devise relevant strategies to promote brands amongst each segment.
Remember you can’t afford to have same strategies for all the segments.
Make sure there is a connect between the product and the target
audience. Advertisements promoting female toiletries can’t afford to
have a male model, else the purpose gets nullified.
A model promoting a sunscreen lotion has to be shown roaming or
working in sun for the desired impact.
7. Review the behavior
Review the behavior of the target audience frequently. It is not
necessary individuals would have the same requirement (demand) all
through the year. Demands vary, perceptions change and interests
differ. A detailed study of the target audience is essential.
8. Size of the Target Market
It is essential to know the target market size. Collect necessary data for
the same. It helps in sales planning and forecasting.
Market Segment Selection
A firm has also to make a strategic decision about the segment/segments
of the foreign market that it should enter`
The segment/segments that a firm may enter depends on a number of
factors like the firm related factors (the size and resources of the firm, its
product mix, marketing characteristics of the firm etc.) product related factors
(for example, whether it is an innovative product or a me too product)

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competitive factors (the strengths and weaknesses of the competitors, the extent
of competition in the different segments etc.) and other market-related factors
like the size and characteristics of different segments, growth prospects of
different segments etc.
A firm with an innovative product and marketing strength may choose
the most lucrative segment/segments of the market first and may then spread to
other segments. However, a small firm with a ‘me too’ product may not be in a
position to compete directly with large established firms.
Small and new firms, therefore, often look for niches for an entry into
the market. A market niche is a segment of the market which is ignored by the
major players and where there is a need gap to fill. The advantage of niche
marketing is that there would not be direct confrontation with the major the
major players. There may not also be any other powerful marketer. As exists a
gap to be filled, there would be reasonable chances of success.
After having established a position of strength in the niches, the firm
may move to other segments. This has been a strategy employed by several
now well-known Japanese companies in the foreign markets like the U.S.
Potential market niches often exits for many products in many markets.
Willard and Savara observe, on the basis of a study of the success of the foreign
firms in the U.S. market, that “in free markets, conditions frequently arise
which invite additional competition to enter. Sometimes, these conditions result
from the failure of incumbent manufacturers to adequately serve all segments
of the market. The dangers of defining one’s market too narrowly have been
recognized since Levitt’s classic article on ‘marketing myopia’ but the practice
persists. Their study reveals that first, U.S. manufacturers created a “window of
opportunity” which allowed-perhaps even invited-non-domestic manufacturers
into the U.S. market. Secondly, U.S. manufacturers were either slow to
recognize or were unable or unwilling to respond quickly and effectively to the
competitive challenge of imports. Then, having established an initial presence,
non-domestic manufacturers moved quickly to consolidate their position with
the U.S. consumers. Only after the entry position had been secured did they
move up market. In several industries this strategy has worked sufficiently well
that non-domestic competitors have established major-and in some cases
dominant- positions in the U.S.market. Several Indian companies have also
been employing similar entry strategies.
A company may tend to select a segment characterized by no or low
level of competition as the entry point. In the past, Japanese companies
intending to enter the foreign markets like the US looked for windows of
opportunity, i.e., market niches rather free of competition. After establishing a

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strong-hold in such segments, the company might enter other segments. Toyota
entered the Indian market with Quails and later introduced Corolla and Camry.
It would introduce several other models gradually. Bridgestone, in India, is
concentrating mainly on the passenger car tyre segment because this is mostly a
radial tyre segment and it is growing fast. Tyre companies from India and other
developing countries have an opportunity in advanced countries where the
MNCs stopped production of ply tyres as this segment of the market has shrunk
to very small size due to the popularity of the radial tires, whereas in India the
ply tyre is dominant segment other than the motor car.
Reasons for International market Segmentation
The goal of market segmentation is to break down the market for a
product or a service into different groups of consumers who differ in their
response to the firm’s marketing mix program. That way, the firm can tailor its
marketing mix to each individual segment, and, hence, do a better job in
satisfying the needs of the target segments. This overall objective also applies
in an international marketing context. In that sense, market segmentation is the
logical outgrowth of the marketing concept.2 The requirements for effective
market segmentation in a domestic marketing context also apply in
international market segmentation. In particular, segments ideally should
possess the following set of properties:3
1. Identifiable. The segments should be easy to define and to measure. This
criterion is easily met for ‘‘objective’’ country traits such as socioeconomic
variables (e.g., per capita income). However, the size of segments based on
values or lifestyle indicators is typically much harder to gauge.
2. Sizable. The segments should be large enough to be worth going after. Note
that modern technologies such as flexible manufacturing enable companies to
relax this criterion. In fact, many segments that might be considered too small
in a single country context become attractive once they are lumped together
across borders.
3. Accessible. The segments should also be easy to reach through promotional
and distributional efforts. Differences in the quality of the distribution (e.g.,
road conditions, storage facilities) and media infrastructure (e.g., Internet
penetration) imply that a given segment might be hard to reach in some
countries and easy to target in other marketplaces.
4. Stability. If target markets change their composition or behavior over time,
marketing efforts devised for these targets are less likely to succeed.
5. Responsive. For market segmentation to be meaningful, it is important that
the segments respond differently from each other to differentiated marketing
mixes.

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6. Actionable. Segments are actionable if the marketing mix necessary to
address their needs is consistent with the goals and the core competencies of the
company.
Let us consider now the major reasons why international marketers
implement international market segmentation.
 Country Screening
Companies usually do a preliminary screening of countries before
identifying attractive market opportunities for their product or service. For
preliminary screening, market analysts rely on a few indicators for which
information can easily be gathered from secondary data sources. At this stage,
the international market analyst might classify countries in two or three piles.
Countries that meet all criteria will be grouped in the ‘‘Go’’ pile for further
consideration at the next stage. Countries that fail to meet most of the criteria
will enter the ‘‘No Go’’ pile. The third set of countries meet some of the
criteria but not allow them. They may become of interest in the future but
probably not in the short term.
Companies will use different sets of criteria to screen countries,
depending on the nature of the product. Cultural similarity to the domestic
market is one criterion on which companies often rely. Other popular screening
criteria include market attractiveness in terms of economic prosperity (e.g., per
capita GNP), geographic proximity and the country’s economic infrastructure.
 Global Marketing Research
Country segmentation also plays a role in global marketing research.
Companies increasingly make an effort to design products or services that meet
the needs of customers in different countries. Certain features might need to be
added or altered, but the core product is largely common across countries.
Other aspects of the marketing mix program such as the communication
strategy might also be similar. The benefits of a standardization approach often
outweigh the possible drawbacks. Still, to successfully adopt this approach,
companies need to do sufficient market research. Given the sheer number of
countries in which many companies operate, doing market research in each one
of them is often inefficient. Especially at the early stage, companies are likely
to focus on a select few countries. The key question, then, is which countries to
choose. One approach is to start grouping prospective markets into clusters of
homogeneous countries. Out of each group, one prototypical member is chosen.
Research efforts will be concentrated on each of the key members, at least
initially. Presumably, research findings for the selected key member countries
can then be projected to other countries belonging to its cluster. For example,
Heineken chose four countries to do market research for Buckler, a non-

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alcoholic beer: the Netherlands, Spain, the United States, and France. The
Dutch brewer wanted to assess the market appeal of Buckler and the feasibility
of a pan-European marketing strategy consisting of a roughly common
targeting, positioning, and marketing mix strategy across the continent.
 Entry Decisions
When a product or service does well in one country, firms often hope to
replicate their success story in other countries. The strategic logic is to launch
the product in countries that in some regards are highly similar to the country
where the product has already been introduced.6 For example, Cadbury-
Schweppes was very confident about launching Schweppes tonic water in
Brazil, given that the beverage was well accepted in culturally similar countries
such as Mexico.
It is important, though, to realize that a host of factors make or break the
success of a new product launch. Tabasco sauce is very popular in many Asian
countries like Japan with a strong liking for spicy dishes. Hence, McIlhenny,
the Louisiana-based maker of Tabasco sauce, might view entering Vietnam and
India, two of the emerging markets in Asia with a palate for hot food, as the
logical next step for its expansion strategy in Asia. Other factors, however, such
as buying power, import restrictions, or the shoddy state of the distribution and
media infrastructure could lessen the appeal of these markets.
 Positioning Strategy
Segmentation decisions are also instrumental in setting the company’s
product positioning strategy. Once the firm has selected the target segments,
management needs to develop a positioning strategy to embrace the chosen
segments. Basically, the company must decide on how it wants to position its
products or services in the mind of the prospective target customers.
Environmental changes or shifting consumer preferences often force a firm to
rethink its positioning strategy. Cathay Pacific’s repositioning strategy in
themid-1990s is a good example. The Hong Kong-based airline carrier realized
that its product offerings failed to adequately meet the needs of its Asian
clients, who represent 80 percent of its customer base. To better satisfy this
target segment, the airline repositioned itself in the fall of 1994 to become the
preferred airline among Asian travelers. To that end, Cathay wanted to project
an Asian personality with a personal touch. Cathay now offers a wide variety of
Asian meals and entertainment. Other measures include a new logo (by some
people referred to as a shark-fin), new colors, repainted exteriors, and
redesigned cabins and ticket counters. To communicate these changes to the
public, Cathay launched a heavy advertising campaign with the slogan ‘‘The
Heart of Asia.’’

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  Resource Allocation
Market segmentation will also be useful in deciding how to allocate the
company’s scarce marketing resources across different countries.
 Marketing Mix Policy
In domestic marketing, segmentation and positioning decisions dictate a
firm’s marketing mix policy. By the same token, country segmentation guides
the global marketer’s mix decisions. A persistent problem faced by
international marketers is how to strike the balance between standardization
and customization. International market segmentation could shed some light on
this issue. Countries belonging to the same segment might lend themselves to a
standardized marketing mix strategy. The same product design, an identical
pricing policy, similar advertising messages and media, and the same
distribution channels could be used in these markets. Of course, marketers need
to be very careful when contemplating such moves. There should be a clear
linkage between the segmentation bases and the target customers’
responsiveness to any of these marketing mix instruments.
Usually, it is very difficult to establish a linkage between market
segments and all four elements of the marketing mix. For instance, countries
with an underdeveloped phone infrastructure (e.g., India, China, sub-Saharan
Africa) are typically prime candidates for mobile phone technologies. However,
many of these countries dramatically differ in terms of their price sensitivities
given the wide gaps in buying power. Therefore, treating them as one group as
far as the pricing policy goes might lead to disastrous consequences. The
marketing team behind the Johnnie Walker scotch brand developed a schema
classifying countries as ‘‘mature’’ (Western countries and Japan),
‘‘developing’’ (e.g., Spain, Portugal, Mexico, South Korea), or ‘‘emerging’’
(e.g., Brazil, Thailand, Russia, China). Each country group is characterized by
different market conditions. For instance, Johnnie Walker faces rising costs of
doing business (due to duties increases, product piracy) in ‘‘developing’’
countries and gray-channel situations in ‘‘emerging’’ markets.9 Depending on
the prevailing conditions, different marketing strategies are called for.
Bases for international market segmentation
The first step in doing international market segmentation is deciding
which criteria to use in the task. Just as in a domestic marketing context, the
marketing analyst faces an embarrassment of riches. Literally hundreds of
country characteristics could be used as inputs. In a sense, you can pick and
choose the variables that you want. However, for the segmentation to be
meaningful, the market segments and the response variable(s) the company is
interested in should have a linkage. Usually it is not a trivial exercise to figure

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out a priori which of the variables will contribute to the segmentation. Instead,
the marketing analyst will need to do some experimentation to find a proper set
of segmentation variables. Furthermore, information on several segmentation
criteria is typically missing, inaccurate, or outdated for some of the countries to
be segmented.
We now briefly discuss different types of country variables that are
most commonly used for country segmentation purposes. Most of these criteria
can be used for the two segmentation approaches that we discussed earlier. For
instance, one could use a socioeconomic variable such as per-capita income as
a segmentation base to group countries. However, one could also use the
income dimension to segment consumers within country first and then derive
regional or global segments (e.g., pan-Asian middle class).
 Demographics
Demographic variables are among the most popular segmentation
criteria. One reason for their popularity is that they are very easy to measure
(recall the ‘‘measurability’’ requirement for effective market segmentation).
Moreover, information on population variables is mostly reasonably accurate
and readily available.
 Behavior-Based Segmentation
As with domestic marketing, segments can also be formed based on
behavioral response variables. Behavioral segmentation criteria include degree
of brand/supplier loyalty, usage rate (based on per capita consumption), product
penetration (that is, the percentage of the target market that uses the product or
the brand), and benefits sought after. Just as in domestic marketing, benefit
segmentation is often used in global marketing for product positioning, product
design or product adaptation purposes. While benefit segments overlap
different countries, their relative size often differs in each market
 Lifestyle
Marketers can group consumers according to their lifestyle (i.e., their
attitudes, opinions, and core values). Lifestyle (psychographic) segmentation is
especially popular in advertising circles. Many lifestyle segmentation schemes
are very general and not related to a specific product category. Others are
derived for a specific product or service area. Distinctions can also be made
between whether a given typology was prepared for a specific country or a
given region.
International positioning strategies
Segmenting international markets is only part of the game. Once the
multinational company has segmented its foreign markets, the firm needs to

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decide which target markets to pursue and what positioning strategy to use to
appeal to the chosen segments. Some marketing scholars refer to positioning as
the fifth P in the marketing mix in addition to product, price, promotion, and
place. Developing a positioning theme involves the quest for a unique selling
proposition (USP). In the global marketing scene, the positioning question boils
down to a battle for the mind of your target customers, located not only within
a certain country but also in some cases across the globe.
The formulation of a positioning strategy—be it local or global—moves
along a sequence of steps:
1. Identify a relevant set of competing products or brands. What is the
competitive frame?
2. Determine current perceptions held by consumers about your
product/brand and the competition.
3. Develop possible positioning themes.
4. Screen the positioning alternatives and select the most appealing one.
5. Develop a marketing mix strategy that will implement the chosen
positioning strategy.
6. Over time, monitor the effectiveness of your positioning strategy. If
it is not working, check whether its failure is due to bad execution or
an ill-conceived strategy.
Uniform versus Localized Positioning Strategies
Obviously, for global marketers, a key question is to what degree a
uniform positioning strategy can be used. Clearly, one key driver here is the
target market decision. Roughly speaking, MNCs have two choices: target a
universal segment across countries or pursue different segments in the different
markets. When focusing on a uniform segment, management needs to decide
whether to use the same positioning worldwide or positioning themes that are
tailored to individual markets. If the firm decides to opt for different segments
on a country-by-country basis, the norm is to customize also the positioning
appeals.
When target customers are very similar worldwide, sharing common
core values and showing similar buying patterns, a uniform positioning strategy
will probably work. By adopting a common positioning theme, the company
can project a shared, consistent brand or corporate image worldwide. The need
to have a consistent image is especially urgent for brands that have worldwide
exposure and visibility. A few years ago, Samsung, a major South Korean
consumer electronics manufacturer, announced its intent to obtain the world
number-one position in all its main product markets by 2005. To achieve this
goal, it positioned its brand as being at the leading edge of digital technology,

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using an aggressive advertising campaign and developing a whole range of
nifty, digital products (e.g., interactive televisions, DVD players, third-
generation mobile phones).32 Having the same positioning them also enables
the firm to make use of global media. Samsung, for instance, sponsors highly
visible, global sports events such as the 2008 Summer Beijing Olympics and
teams such as Chelsea FC, a top tier English soccer team.
Product planning for export
The product is meant for consumers for whom it is produced and
therefore it must be to their satisfaction. To make the product to the satisfaction
of consumers, product planning is necessary.
Product planning means planning of the product for the consumers, that
is, to decide what type of product is to be produced or what needs or
requirements the product is to satisfy and for whom the product is meant. It
requires a regular assessment of markets and if the existing product is found
lacking in satisfying the needs of the consumers, it should be improved to the
required extent. If it cannot be improved despites best efforts, it should be
eliminated.
Product adaptation and strategies
Product adaptation:
A product that is perfectly correct and good for one market may not
necessarily be good for another market. There may be a number of reasons for
this difference. Physical conditions or functional requirements may vary from
market to market. A product may be used differently in different countries and
for different purposes. For example, a manufacturer of men’s garments must
take the fact into account that arms of a Frenchman tend to be longer than those
of Germans. Again, tastes, levels of skill and development may be different and
may dictate changes in the product.
Generally an exporter likes to sell exactly the same product in foreign
market as he sell in his home country without taking into account the various
points of difference in different markets. But one important key to success in
the international marketing is that the product should be made and sold in
overseas markets according to cultural tastes and economic characteristics of
the particular foreign market rather than to sell it as it is sold in the domestic
market. It should be adapted by the consumers of that particular country, or the
product must satisfy the needs of the people of the country.
Factors necessitated Design Changes
Robinson has identified the following thirteen environment factors why
may necessitate design changes:

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 Environmental factors Design changes
Level of technical skill Product simplification.
Level of labour cost Automation or manualisation production.
Level of literacy Remarking and simplification the product.
Level of income Quality and price changes.
Level of interest rates Quality and price changes (investment in
high quality might not be financially
desirable).
Level of maintenance Change of tolerances.
Climatic difference Product adaptation.
Isolation (heavy repair Product simplification and durability
difficult and expensive) improvement.
Differences in standards Recalibration of product and resizing.
Availability of other products Greater or lesser product integration.
Availability of materials Change in product structure and fuel.
Power availability Resizing of product.
Special conditions Product redesign and invention.
All these factors are relevant in the marketing of durable consumer
goods or machinery items. For other consumer goods, such as food and
clothing, some of these factors are not relevant. Level of income, climatic
differences, customs and creed are some factors which assume greater
importance in non-durable items adaptation. A firm will have to evaluate the
need for product adaptation on a continuing basis irrespective of the nature of
product durable or non-durable.
Global product strategies
Companies can pursue three global strategies to penetrate foreign
markets.4 Some firms simply adopt the same product or communication policy
used in their home market as an extension of their homegrown
product/communication strategies to their foreign markets. Other companies
prefer to adapt their strategy to the local marketplace. This strategy of
adaptation enables the firm to cater to the needs and wants of its foreign
customers. A third alternative is to adopt an invention strategy by which
products are designed from scratch for the global market place. Using the

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extension/ adaptation/invention framework for product and communications
decision leads to five strategic options
Strategic Option 1: Product and Communication Extension—Dual
Extension
At one extreme, a company might choose to market a standardized
product using a uniform communications strategy. Early entrants in the global
arena often opt for this approach. Also, small companies with few resources
typically prefer this option. For them, the potential payoffs of customized
products and/or advertising campaigns usually do not justify the incremental
costs of adaptation. Dual extension might also work when the company targets
a ‘‘global’’ segment with similar needs. Blistex’s marketing efforts for its
namesake product in Europe is a typical example. The product, a lip balm,
offers identical needs in each of the various European markets. Except for some
minor modifications (e.g., labeling), the same product is sold in each country.
In 1995, Blistex ran a uniform European advertising campaign, using identical
positioning (‘‘Care-to-Cure’’) and advertising themes across countries.
Generally speaking, a standardized product policy coupled with a
uniform communication strategy offers substantial savings coming from
economies of scale. This strategy is basically product-driven rather than
market-driven. The downside is that it is likely to alienate foreign customers,
who might switch to a local or another foreign competing brand that is more in
tune with their needs. In many industries, modern production processes such as
CAD/CAM manufacturing technologies obviate the need for large production
batch sizes.
Strategic Option 2: Product Extension— Communications Adaptation
Due to differences in the cultural or competitive environment, the same
product oftenz is used to offer benefits or functions that dramatically differ
from those in the home market. Such gaps between the foreign and home
market drive companies to market the same product using customized
advertising campaigns. Although it retains the scale economies on the
manufacturing side, the firm sacrifices potential savings on the advertising
front. Wrigley, the Chicago-based chewing gum company, is a typical
practitioner of this approach. Most of the brands marketed in the United States
are also sold in Wrigley’s overseas markets. Wrigley strives for a uniformly
superior quality product. To build up the chewing gum category, Wrigley sells
its products at a stable and low price. Given that chewing gum is an impulse
item, Wrigley aims for mass distribution. The company sees an opportunity to
sell its product at any place where money changes hands. Despite these
similarities in Wrigley’s product and distribution strategies, there are wide

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differences in its communication strategy. The benefits that are promoted in
Wrigley’s advertising campaigns vary from country to country. In the United
States, Wrigley has capitalized on smoking regulations by promoting chewing
gum as a substitute for smoking. In several European countries, Wrigley’s
advertising pitches the dental benefits of chewing gum. In the Far East, Wrigley
promotes the benefit of facial fitness in its advertising campaigns
Strategic Option 3: Product Adaptation— Communications Extension
Alternatively, firms might adapt their product but market it using a
standardized communications strategy. Local market circumstances often favor
the case of product adaptation. Another reason for product adaptation could be
the company’s expansion strategy. Many companies add brands to their product
portfolio via acquisitions of local companies. To leverage the existing brand
equity enjoyed by the acquired brand, the local brand is often retained.
Although these factors lead to product adaptation, similar core values and
buying behaviors among consumers using the product might present an opening
for a harmonized communications strategy. Within such a context, clever
marketing ideas can be transferred from one country to another country, despite
the product-related differences. For instance, a Taiwan-produced commercial
for P&G’s Pantene shampoo was successfully transferred with a few minor
changes to Latin America.
Strategic Option 4: Product and Communications Adaptation— Dual
Adaptation
Differences in both the cultural and physical environment across
countries call for a dual adaptation strategy. Under such circumstances,
adaptation of the company’s product and communication strategy is the most
viable option for international expansion. Slim-Fast adapts both product and
advertising to comply with varying government regulations for weight-loss
products. When Slim-Fast was first launched in Germany, its ads used a local
celebrity. In Great Britain, testimonials for diet aids were not allowed to feature
celebrities. Instead, the British introduction campaign centered around teachers,
an opera singer, a disc jockey, and others. Also the product was adapted to the
local markets. In the United Kingdom, banana became the most popular flavor
but was not available in many other countries
Strategic Option 5: Product Invention
Genuinely global marketers try to figure out how to create products with
a global scope rather than just for a single country. Instead of simply adapting
existing products or services to the local market conditions, their mindset is to
zero in on global market opportunities. The product invention strategy consists
of developing and launching products with a global mindset. Black & Decker is

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a good example of a company that adopts the product invention approach to
global market expansion. It aims to bring out new products that cater towards
common needs and opportunities around the world. To manage its global
product development process, Black & Decker set up a Worldwide Household
Board. This steering committee approves global plans, allocates resources, and
gives direction and support, among other tasks. One of the product innovations
that emerged from this global product planning approach is the SnakeLight
Flexible Flashlight. The SnakeLight was first launched in North America, and
then, six months later, in Europe, Latin America, and Australia. The product
addresses a global need for portable lighting. The SnakegtyLight proved to be
major hit around the world.
Other companies increasingly adhere to the invention strategy. In the
past, Procter& Gamble Europe was a patchwork of country-based operations,
each with its own business. These days, P&G aims to develop products that
appeal to the entire European region. Many other companies also recently
jumped on the ‘‘produce globally, market locally’’ bandwagon. Not all of these
efforts have been successful, though. The Ford Mondeo was part of the Ford
2000 project to put Ford’s product development projects on a global basis. The
car was among Ford’s first efforts toward a world-car strategy. Developed in
Europe, the car was sold in the United States as the Contour and Mercury
Mystique sedan. Although the European version sold pretty well, theAmerican
versions were major fiascos. American car buyers considered the models too
small and too expensive given their size. Ford hopes do a better job with the
new small-car Fiesta that it rolled out in Asia, Europe, and the North America.
The Fiesta was a best-selling car in Europe. The updated Fiesta has the same
size as its predecessor but is lighter through the use of lightweight, high-
strength steel. The Fiesta was developed and designed in Europe and is built in
Spain, China, Germany, Thailand, and the United States
Standardization
It is an important part of marketing process to determine the shape or
the form of product in which it should be put on the market. It is the problem of
establishing, maintaining standards and providing conformity to them.
‘Standards’ play an important part in securing efficiency and economy.
Standards are ideal or model products which provide a basis of
composition with identical products. Standards convey an idea of uniformity
and identity in respect of quality and quantity or some other matters. Thus
standard is a measure that is generally accepted as having a fixed value.

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Advantages or benefits of standardization
Following are the advantages of standardization.
 Economies in scale of production.
 Economies in product research and development.
 Economies in marketing.
 Consumer mobility.
 Projection of Image of the product.
 Impact of technology.
 Consistency in dealing with customers.
 Significant control.
Theory of international product life cycle (iplc)
The international product life cycle theory, developed and verified by
economists to explain trade in a context of comparative advantage, describes
the diffusion process of an innovation across national boundaries. The life cycle
begins when a developed country, having a new product to satisfy consumer
needs, wants to exploit its technological breakthrough by selling abroad. Other
advanced nations soon start up their own production facilities, and before long
less developed countries do the same. Efficiency/comparative advantage shifts
from developed countries to developing nations. Finally, advanced nations, no
longer cost-effective, import products from their former customers. The moral
of this process could be that an advanced nation becomes a victim of its own
creation.
IPLC theory has the potential to be a valuable framework for marketing
planning on a multinational basis. In this section, the IPLC is examined from
the marketing perspective, and marketing implications for both innovators and
initiators are discussed.5
Stages and characteristics
There are five distinct stages (Stage 0 through Stage 4) in the IPLC.
Table 10.1 shows the major characteristics of the IPLC stages, with the USA as
the developer of innovation in question. Following Figure shows three life
cycle curves for the same innovation: one for the initiating country (i.e., the
USA in this instance), one for other advanced nations, and one for LDCs (less
developed countries). For each curve, net export results when the curve is
above the horizontal line; if under the horizontal line, net import results for that
particular country. As the innovation moves through time, directions of all three
curves change. Time is relative, because the time needed for a cycle to be
completed varies from one kind of product to another. In addition, the time
interval also varies from one stage to the next.

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Stage 0 – Local innovation
Stage 0, depicted as time 0 on the left of the vertical
importing/exporting axis, represents a regular and highly familiar product life
cycle in operation within its original market. Innovations are most likely to
occur in highly developed countries because consumers in such countries are
affluent and have relatively unlimited wants. From the supply side, firms in
advanced nations have both the technological know-how and abundant capital
to develop new products.
Many of the products found in the world’s markets were originally
created in the USA before being introduced and refined in other countries. In
most instances, regardless of whether a product or not is intended for later
export, an innovation is designed initially with an eye to capture the US market,
the largest consumer nation.
Stage 1 – Overseas innovation
As soon as the new product is well developed, its original market well
cultivated, and local demands adequately supplied, the innovating firm will
look to overseas markets in order to expand its sales and profit. Thus this stage
is known as a “pioneering” or “international introduction” stage. The
technological gap is first noticed in other advanced nations because of their
similar needs and high income levels. Not surprisingly, English-speaking
countries such as the United Kingdom, Canada, and Australia account for about
half of the sales of US innovations when first introduced to overseas countries
with similar cultures, and economic conditions are often perceived by exporters

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as posing less risk and thus are approached first before proceeding to less
familiar territories.
Competition in this stage usually comes from US firms, since firms in
other countries may not have much knowledge about the innovation.
Production cost tends to be decreasing at this stage because by this time the
innovating firm will normally have improved the production process.
Supported by overseas sales, aggregate production costs tend to decline further
due to increased economies of scale. A low introductory price overseas is
usually not necessary because of the technological breakthrough; a low price is
not desirable due to the heavy and costly marketing effort needed in order to
educate consumers in other countries about the new product. In any case, as the
product penetrates the market during this stage, there will be more exports from
the USA and, correspondingly, an increase in imports by other developed
countries.
Stage 2 – Maturity
Growing demand in advanced nations provides an impetus for firms
there to commit themselves to starting local production, often with the help of
their governments’ protective measures to preserve infant industries. Thus these
firms can survive and thrive in spite of relative inefficiency. Development of
competition does not mean that the initiating country’s export level will
immediately suffer. The innovating firm’s sales and export volumes are kept
stable because LDCs are now beginning to generate a need for the product.
Introduction of the product in LDCs helps offset any reduction in export sales
to advanced countries.
Stage 3 – Worldwide imitation
This stage means tough times for the innovating nation because of its
continuous decline in exports. There is no more new demand anywhere to
cultivate. The decline will inevitably affect the US innovating firm’s economies
of scale, and its production costs thus begin to rise again. Consequently, firms
in other advanced nations use their lower prices (coupled with product
differentiation techniques) to gain more consumer acceptance abroad at the
expense of the US firm. As the product becomes more and more widely
disseminated, imitation picks up at a faster pace. Toward the end of this stage,
US export dwindles almost to nothing, and any US production still remaining is
basically for local consumption. The US automobile industry is a good example
of this phenomenon. There are about thirty different companies selling cars in
the USA, with several on the rise. Of these, only two (General Motors and
Ford) are US firms, with the rest being from Western Europe, Japan, South
Korea, and others.

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Stage 4 – Reversal
Not only must all good things end, but misfortune frequently
accompanies the end of a favorable situation. The major functional
characteristics of this stage are product standardization and comparative
disadvantage. This innovating country’s comparative advantage has
disappeared, and what is left is comparative disadvantage. This disadvantage is
brought about because the product is no longer capital-intensive or technology-
intensive but instead has become labor-intensive – a strong advantage
possessed by LDCs. Thus LDCs – the last imitators – establish sufficient
productive facilities to satisfy their own domestic needs as well as to produce
for the biggest market in the world, the USA. US firms are now undersold in
their own country. Black-and-white TV sets, for example, are no longer
manufactured in the USA because many Asian firms can produce them much
less expensively than any US firm. Likewise, the USA hardly produces color
TV sets either. Consumers’ price sensitivity exacerbates this problem for the
initiating country.
Validity of the IPLC
Several products have conformed to the characteristics described by the
IPLC. The production of semiconductors started in the USA before diffusing to
the United Kingdom, France, Germany, and Japan. Production facilities are
now set up in Hong Kong and Taiwan, as well as in other Asian countries.
Similarly, at one time, the USA used to be an exporter of typewriters, adding
machines, and cash registers. However, with the passage of time, these simple
machines (e.g., manual typewriters) are now being imported, while US firms
export only the sophisticated, electronic versions of such machines. Other
products that have gone through a complete international life cycle are
synthetic fibers, petrochemicals, leather goods, rubber products, and paper. The
electronics sector, a positive contributor to the trade balance of the USA for a
long time, turned negative for the first time ever in 1984 with a massive $6.8
billion deficit. A deficit also occurred at the same time for communications
equipment, following the trend set by semiconductors in 1982.
The IPLC is probably more applicable for products related through an
emerging technology. These newly emerging products are likely to provide
functional utility rather than aesthetic values. Furthermore, these products
likely satisfy basic needs that are universally common in most parts of the
world. Washers, for example, are much more likely to fit this theory than are
dryers. Dishwashing machines are not useful in countries where labor is
plentiful and cheap, and the diffusion of this kind of innovation as described in
IPLC is not likely to occur.

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Pricing
Pricing is a very critical decision in international marketing
management because it is a major factor influencing a firm's total revenue from
exports and its profitability. There is no science mathematical formula or a hard
and fast rule that can be applied in pricing a product correctly. No doubt, as in
the domestic market the interaction of market force like demand and supply
affect the price at which the product can be sold in the international market.
Besides, several other factors economic, social, political marketing conditions,
product attributes—influence the decision especially in international marketing.
In any given marketing, three basic factors determine the limits of
pricing decisions of a firm. These are the product costs the purchasing power of
the consumers, and demand and supply forces. The costs of the product serve as
the floor price below which the exporter shall not agree, in most of the cases, to
sell the product. The purchasing power of the consumer fixes the upper limit of
the price which the firm can charge. In reality, the prices are rarely fixed in the
market by these two factors. Actually, they are fixed by the demand and supply
forces in the market at a given time. The international marketer's task there is
compounded by the fact that not only has he to consider the above three factors
but he had also to continue which other Government pressures like taxes tariffs;
dumping regulations, price ceiling, foreign exchange regulations and rate of
inflation in different foreign markets. This makes his task difficult. It is,
therefore, necessary to adopt different pricing strategy in different foreign
markets.
Besides, the management's pricing policy should conform the basic
objectives of the firm. If the firms policy is to maximize profits, the pricing
policy would be decided accordingly. The objectives of an industrial concern
may be different from those of the trading firms. In an event, the pricing policy
may be clearly defined.
The nature of the product i.e., whether standardized or not also plays an
important role in fixing the price policy. If the product is a standardized
product, the international marketer plays a little role in determining the price. In
such cases, the market demand and supply position determine it. But where the
product is not standardized or it can be differentiated from each other, the
marketer has a very important role in price determination.
This chapter, therefore, shall focus on the price consideration that one of
particular significance in the international market place.
Price and non-price factors
In an international market, prices are fixed taking into account a
combination of various conditions and there may be other factors which put

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pressure on the pricing of a product. These factors may be termed as price
factors and non-price factors.
Price Factors in International Marketing
Pricing is like a tripod, the three factors being costs, demand and
competition. It is no more possible to say that one or another of these factors
determines price than it is to asset that one leg (factor) rather than either of the
other two supports a tripod. The significance of these factors in pricing may be
discussed as follows :
I. Role of costs.
As regards costs, it is a popular fallacy to believe that price depends
upon costs. The price cannot be fixed below costs for long. Costs determine the
floor price below which an exporter may not agree to sell the goods. But this
principle does not always hold good. An increase in costs may justify the
increase in prices yet it may not be possible to do so because of the marketing
conditions, i.e., demand and supply. On other hand, it may also be possible that
any increase in demand may lead to an increase in price without an increase in
costs.
The costs-price relationship is important; it does not support the claim
that costs determine the price. In some case, the prevalent price may determine
the costs that may be increased. The manufacturer exporter cuts the costs
according to the prices current in the market. The product is tailored according
to the needs of the target consumers and their capacity to pay for it. It explains
why declining costs often result in better quality at the same price and raising
costs lead to deterioration in quality.
The another factor that evidences that the costs do not determine the
price is that costs of each producer differ substantially because of different
internal and external factors but the price of their products are close to one
another. If cost is the determining factor, the price must also vary substantially.
Again, if costs are to determine the price, no firm would suffer a loss.
All this discussion does not purport to show that costs should be
completely ignored while setting price. Cost is one of the various factors in
setting price.
2. Demand.
Demand is another leg of the tripod. It is another factor that determines
the prices in the international markets. As regards demand in international
markets, it is also affected by a number of factors which are different from
those operating in domestic market. Customs and tastes of foreign customers
may differ widely. What is all acquired is that the product must be adopted to

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the needs of the foreign customers. If the product is adopted accordingly,
higher price may be fixed for the product as compared to competitors. Thus
demand of the product depends upon how the product has been adopted by the
supplier.
Elasticity of demand is the another factor which affects the pricing If
the demand of the product is elastic, a reduction in price may increase till sales
volume. On the other hand higher price may be fixed if the demand is inelastic
and the supply is limited.
3. Competition.
Competition in the target foreign market is also an equally important
factor. The competition increases the elasticity of demand as it would have
been otherwise. Competition in foreign market may be so severe that the
exporter has no other option except to follow the market leader. Competition
may be either brand type or functional type. Brand type refers to
competition amongst brands of a product or service which aims at satisfying the
same needs. As against this, functional competition refers the type of
competition where the manufacturer tries to differentiate the function of the
product from its competitors. Both types of competition have pressure on the
company’s pricing decisions.
Sometimes company determines a price of the product with specific
objective of discouraging competitions from entering a given foreign market.
Non-price factors in pricing decisions
Whatever price has been fixed by exporter of his product, the importer
does not consider only the price of the product. There are many other non-price
factors that are considered by the importer. They play rather important roles in
creating demand in foreign countries. Such factors are :
I. Confidence.
Most often, the importers of developed countries do not have much
confidence in the quality of products manufactured in developing countries
irrespective of the fact that the quality of their product is much better. Indians
and exporters of other developing countries have to see their products at a
lower price than their competitors. Indians had to sell their storage batteries 10
per cent lower in Saudi Arabia than U-S. and European batteries though the
quality was comparable. Fixing lower price is inevitable to make our product
acceptable in foreign markets.
2. Brand image.
If products are well-differentiated and they have built up a brand image
in the minds of foreign custorners, the manufacturers of such products may

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charge higher prices for their products. Brand names like Bita, GKW, Dunlop,
HMT have already earned a good brand image and are able to see their
products at higher prices.
3. Frequency of purchase
If consumers purchase the goods very often price is not the material
consideration. People may be willing to pay very high price if the particular
product appeals them.
4. Association of price and quality
There appears to be a close association between the price and the
quality of product. The lower priced gods do not carry adequate value. The
higher priced goods carry a much greater conviction about quality than the low
priced goods.
5. Comprehensive knowledge of the product
In case of industrial goods, the importer has a good knowledge of the
quality of brands available in the world market. Therefore apart from the
quality he considers other factors like technical soundness of the product,
steady availability at reasonable price and comprehensive after sale service
offered by the manufacturer.
6. Before and after sale service:
In case of valuable industrial and engineering products both before and
after sale service count much more than a lower price.
7. Continuity of supply:
Regular supply of the original product and its ancilliary products
assumes great importance in foreign trade. If regular supplies of the product or
ancilliary products are not maintained the country has all the chance to lose the
markets. The development of substitutes for a number of products exported by
developing countries is also due to the failure of these countries to maintain
regular supplies. An uninterrupted supply of the product may assure better
prices.
8. Prompt deliveries.
Prompt deliveries may attract the foreign buyers to pay even more. This
is a point where most developing countries fail. Delayed deliveries affect
India's exports to Sri Lanka, Burma and Arab countries as well. While foreign
importers like deliveries within three months from the date of order, Indian
exporters of machine tools are not in a position to deliver the goods before 6
months. Studies made about Generalized System of preferences reveal that the
reliability of product quality, and delivery dates appear to be more important
factors than price.

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9. Settlement of claims.
In foreign trade, the exporter and importer are not close to each other. In
most cases, they even do not know each other. The importer will not hesitate to
pay somewhat higher if there is an arrangement between them for prompt
acceptance and settlement of claims, if it is found correct during the course of
inquiry. It is also an important consideration.
10. .Supply of complete range of product.
In certain cases, the price of the product depends upon the fact that the
producer (exporter) is in a position to supply complete range of the products
and in large quantities. Here also, Indian exporters fail to come up to
expectations. Generally, in developing countries, the exporters could not supply
the products in huge quantities because of lack of resources. Moreover, in
developing countries, one manufacturer does not manufacture the complete
range of products. They produce only one or two items of the range. For
example, cycle manufacturers in India do not produce a complete of cycle
components.
11. Terms of credit.
In case of exports of capital goods, i.e., machinery and equipment,
availability of finance and terms of credit are very often the determining
factors. In this respect, developed countries dominate. They supply goods on
credit while exporters from developing countries, including India, could not do
so because of their limited resources. However, in India, the Export Import
Bank of India offer such credit to importers and the EC GC also offer guarantee
cover for the credit given to importers.
We can conclude from the above discussion that there are a number of
non-price factors which help maintain the differential prices in the international
markets. However, their influence varies from product to product and market to
market. The price factors, i.e., cost, demand and competition also affect the
prices and play important roles in determining the price strategy. But their roles
are limited. Moreover, taking advantage of these non-price factors would also
involve some costs. But if proper efforts are made, the returns are likely to be
higher than costs. Thus, non-price factors are more influential in pricing than
price factors.
Methods of Pricing
The export price structure, like the domestic price structure, begins on
the factory floor. But there is no similarity in the costs included in the two
strictures. The pricing of the products for domestic and export purposes shall be
calculated in a somewhat different manner. The export price structure is the

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basis of all export price quotations, discount and commissions. There are
various methods of pricing the product in the foreign markets. The methods
may be grouped into two i.e. cost oriented export pricing methods and market-
oriented export pricing methods.
A. Cost-oriented Export Pricing Methods
The cost-oriented export pricing methods are based on costs incurred in
the production of the articles. Total costs include fixed costs and variable costs.
Thus export pricing may be based on full cost (fixed and variable) or only on
variable costs. A reasonable profit will be added to the base-cost to arrive at the
export pricing. Thus cost-oriented export pricing methods may be—(i) Full cost
method, and (ii) Variable cost or marginal cost method.
1. Full cost method or cost-plus method.
The most frequently used pricing method in exports is cost-plus
method. This method is based on the full cost or total cost approach. In arriving
at the export pricing under this method, the total cost of production of the
article (fixed and variable) is taken into account. Over and above the fixed and
variable costs incurred in the production of exportable articles, all direct and
indirect expenses incurred for the development of product such as R & D
expenses and other expenses necessary for the export of the articles such as
transportation cost, freight, customs duties, risk costs etc. are included. Then a
reasonable profit allowance is added to the costs and the value of all assistance
received from any authority is deducted. The net result is the total export price
for the commodities produced. Price per unit may be calculated by dividing the
total price, thus arrived, by the number of units manufactured. The various
elements of cost, forming part of the total cost are :
(1) Direct Cost
(a) Variable costs :
 Direct materials,
 Direct labour,
 Variable production overheads,
 Variable administrative overheads.
(b) Other costs directly related to exports :
 Selling costs—advertising support to importers abroad,
 Special packing, labelling, etc.
 Commission to overseas agent,
 Export credit insurance,
 Bank charges,
 Inland freight,

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  Forward charges,
 Inland insurance,
 Port charges,
 Export duties (if any),
 Warehousing at port (if required),
 Documentation and incidentals,
 Interest on funds involved or cost of deferred credit. Cost of aftersale
service, including free parts supply, consular fees,
 Preshipment inspection and loss on rejects.
Total direct cost (a +b)
(2) Fixed Costs or Common Costs
 Production overheads,
 Administration overheads,
 Publicity and advertising (general) Travel abroad,
 Aftersale service
f.o.b. cost (l +2)
Less—compensatory assistance, duty drawback and import replenishment
benefits.
(3) Freight and Insurance
c.z.f. cost.
Evaluation
The main advantage of this approach is that the exporter realizes the full
cost (fixed and variable) in marketing the product in a foreign market. The
another advantage may be its simplicity but it may be its main weakness
because if the reorder is for smaller number of units to be supplied, it would not
be possible for the exporter to supply the product at the same rate due to its
high cost of production per unit on account of fixed costs.
Again the approach suffers from a number of disadvantages apart from its
simplicity :—
(i) This method completely ignores the demand and the competitive
conditions in the foreign target markets,
(ii) It is often based on distorted measurement of cost appraisal as discussed
above, implied in its simplicity.
(iii) It is based on circular reasoning, i.e , price influences cost through their
effect on sales volume.
The justification of this pricing method is only if the cost of information
about demand and the administrative cost of applying a demand based pricing
policy exceed the profit contribution obtained by applying these approaches.

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2. Marginal cost pricing.
The another common method of pricing in international trade is to
determine the price on the basis of variable cost or, direct cost. Fixed cost
element in the total cost of production is totally ignored and the firm is
concerned here only with the marginal or incremental cost of producing the
goods which are sold in foreign markets. As we know, the fixed cost remains
fixed up to a certain level of output irrespective of the volume of output.
Variable costs, on the other hand, vary in proportion to the volume of
production. Thus, it is the variable or direct or marginal costs that set the price
after a certain level of output is achieved, that is, output at Break-Even Point
(BEP).
This method is based on the assumption that the export sales are bonus
sales and any return over the variable costs contributes to the net profit. It has
been assumed under this system that the firm has been producing the goods for
home consumption and the fixed costs have already been met or in other words,
Break-Even Point has been achieved. Thus, if the manufacturers are able to
realize the direct costs, including those involved in export operations
specifically, they would not affect the profitability of their firms. The
profitability of firms should be assessed with reference to marginal cost which
should normally constitute the basis for export pricing. Direct costs have
already been given above under cost-plus method. Other elements in
calculating price will remain the same.
Advantages.
There are a number of advantages by the use of this method—
1. Export sales are additional sales hence these should not be burdened with
overhead costs which are ordinarily met from the domestic trade.
2. This approach is advocated for firms from developing countries who are
not well-known in foreign markets as compared to their competitors from
developed countries, and, therefore, lower prices based on variable costs
may help them enter a market. Price may be used as a technique for
securing market acceptance for products newly introduced into the
market.
3. Since the buyers of products from developing countries usually are in
countries with low national income. It is, therefore, advisable for the firm
to serve a large segment of the market at low prices. Low prices may
serve to widen and create markets. In such countries, price is still the
decisive factor and quality is comparatively less important.

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Disadvantages of marginal cost pricing.
Marginal cost pricing is not free from limitations. Important among them are :
1. Developing countries might be charged of dumping their products in
foreign markets because they would be selling their products below
net prices and attract anti-dumping provisions which take away their
competitive advantage.
2. The use of this approach may give rise to cut-throat competition
among exporting firms from developing countries resulting in loss in
valuable foreign exchange to the exporting countries.
3. Marginal cost pricing is not advisable in the following cases:
(a) If the importers are regularly purchasing the product at a low
price, it will be difficult for exporters to increase the price of the
commodities later on. It may lose their market.
(b) This policy is not useful or of limited use to industries which are
mainly dependent upon export markets and where overheads or
fixed costs are insignificant.
Feasibility.
The system of marginal cost pricing is feasible in-the following
circumstances :
(i) There must be a large domestic market of the product so that the
overheads may be charged from products manufactured for domestic
market.
(ii) Mass production techniques must have been adopted so that the gap
between the full and marginal costs may be reduced.
(iii) The home market has a capacity to bear the higher prices.
(iv) Additional production for exports is without increasing overhead costs
and within permissible production capacity.
Marginal cost sets the lower limit.
It is generally advocated that marginal cost should be the basis for
export pricing. It should be understood here well that in advocating the system,
our emphasis is not that direct cost only should be charged in every case. This
method based on marginal cost only sets the lower limit up to which a firm can
sell its product without affecting its overall profitability. It does not follow one
should invariably charge the variable cost. The situation in different markets
may be different and in many a case, contribution towards fixed cost might be
possible and all efforts should be made to take advantage of this possibility.
Even in cases where only marginal cost is possible to realize, the long-term
objective of the firm should be to recover direct costs plus some contribution
towards overhead costs as well.

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B. Market-oriented export pricing.
Both the above approaches are based on cost considerations only. The
costs are, no doubt, important but the competitive prices should also be
considered before fixing the export price, competitive prices mean the prices
that are charged by the competitions for the same product or for the substitute
of the product in the target market. Once this price level is established, the base
price, or what the buyer can afford, should be determined. The base price can
be determined by following the three basic steps :
a) First, relevant demand schedules (quantities to he bought) at various
prices should be estimated over the planning period;
(b) then, relevant casts (total and incremental) of production and marketing
costs should be estimated to achieve the target sales volume as per
demand schedules prepared ; and
(c) lastly, the price that offers the highest profit contribution, i.e., sales
revenues minus all fixed and variable costs.
The final determination of base price should be made after considering
all other elements of marketing mix within these elements, the nature and
length of channel of distribution is the most important factor affecting the final
cost of the product. Besides, product adaptation costs should also be considered
in fixing the base price.
The above three steps, though appear to be very simple, but it is not so
because there are various other factors that should be looked into. The most
appropriate method to estimate the demand of the product shall be the
judgemental analysis of company and trade executives. One other way may be
the extrapolation of demand estimates for target markets from actual sales in
identical markets in terms of basic factors.
International Price Quotations
A quotation is the basis of any export transaction and may be made in
any of the following four ways.
(a) A proforma invoice prepared by the exporter at the request of the
importer. It indicates the price as well as other charges as per terms of
contract incurred in shipment. This is an exact duplicate of the invoice
which will be sent to the importer just after the export of goods.
Proforma invoice is required by the importer to obtain the license or
allotment of foreign exchange. It should therefore, be very accurate.
(b) The offer may be made in response to a public global tender floated by a
buyer. Such offers should be comprehensive, covering all the conditions

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 of the tender and listing out the price together with other charges such
as freight, insurance etc. and should also include escalation clause.
(c) An offer may also be in the form of printed price list where the goods
have a standard export price. The other terms and conditions, to which
the prices are subjected, may be either included in the price list itself or
stated specifically in the accompanying letter.
(d) An offer can be given in the form of a letter indicating the price, terms
of payment and the delivery period.
Whatever may be the mode of offer, it should be written in a simple and
easily understandable style. Care should be taken to ensure that there is no
scope for any different interpretation or for misunderstanding. It should clearly
state the price and other terms and conditions to which the price is subjected.
Base of Export Price Quotation
1NCOTERMS have given some uniform export terms for delivery and
are used all over the world. They indicate :
(a) The charge and expenses which must be paid by the seller.
(b) The place of delivery of goods.
(c) The point in time when the goods and their transit risks are transferred.
Export price quotations can be made with reference to the above terms.
The common ones in use are—
1. Ex-works. Under ex-works quotation, packing costs are paid by the
exporter and the delivery takes place at the works or a warehouse of the
exporter. All other expenses thereafter and transit risks are borne by the
importer. Ex-works price quotations are rarely used in international
transactions. However, for products which are heavy and shipping freight and
transportation charges cannot be estimated in advance. Ex-works quotations are
usually accepted.
2. F.A.S. (Free Alongside Ship) price. Under FAS quotations the
exporter pays all the charges upto putting the goods alongside the ship, while
putting them on the ship is a buyer's expense. Where shipping companies
accept goods 'on steam' and where goods have to be moved by barges to the
side or vessel, an FAS quotation should include barge charges as well. The
goods and the transit risks are transferred when ship is able to load.
3. F O.B. (Free on Board) Price. This is one of the most common
terms used in export pricing. FOB would mean that the exporter has the
obligation to put the goods on board the ship. Exporter pays port-trust charges
and other charges necessary for completing the documentation and loading the
goods on a ship. Delivery of goods takes place as soon as the goods have been

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loaded on the ship and the goods and the transit risks are transferred when the
goods go on ship's rail.
For Indian exporters F.O.B. price is significant because all assistance
provided by the Government of India to exporters are related to f.o.b. price of a
contract.
4. C & F (Cost and Freight) price. Under this price, all responsibilities
and expenses to be incurred as in f.o.b. pricing, the exporter has to pay certain
freight.
5. C.I.F. (Cost, Insurance and Freight) price. It would mean that all
the costs as in C & F above plus the marine insurance are included in the
quotation and are paid by the exporter. Thus, it means f.o.b. price plus freight
plus insurance charges.
The importers in most of the cases insist on the C & F or 'C.I.F. prices.
The exporter will have to prepare their price quotation on such basis. The
implications of such insistence are two-fold— (a) the exporter will have to
arrange for the shipping space, and (b) he will have to bear all transit costs and
risks till the goods are off loaded at the port of destination. Thus, any change in
the transportation costs subsequent to date of contract will have to borne by the
exporter. Since transportation cost in a substantial proportion of total C & F or
C.I.F. costs, any increase in freight will affect his profitability on the safe side,
it may be possible to specify in the contract and C & F or C.I.F. quotations is
prepared on the basis of present rates of freight and any subsequent change will
have to be borne by the buyer.
6. Ex-ship price. It includes all the costs till the goods are reached at
the importer's port in the price quotations. The property in goods and all risks
are transferred as soon as the goods are off-loaded at the importer's port.
7. Franco price. In its broadest sense, franco price includes all costs up
to the godown or warehouse of the importer. In other words, all the expenses up
to the importer's godown in foreign country are paid by the exporter. Property
in goods and all risks will be transferred when the delivery is made to the buyer
at his godown or warehouse.
Thus any of these prices may be the base price as per the terms of
contract between the importer and the exporter. The price thus quoted will also
decide the point where the risks and the property in goods (i.e. title of goods)
will be transferred.
Factors affecting pricing strategies
There are three main factors which affect the export price strategy to be
adopted by an exporter in the foreign markets, viz., the characteristics of the

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product and the nature of its demand, the philosophy of Management, and the
market characteristics. The pricing strategy is a short term tool to make fit the
prices in the changing competitive situations in the short run with its pricing
policy decisions.
1. Characteristics of the product and the nature of its demand: It is
a major factor in fixing the price of the product at a particular time. In other
words, improvement in quality of the product and product adaptation according
to the changing competitive conditions in the foreign market should be taken as
a continuous process. Elasticity of demand is another factor which influences
the price. If the demand of a product is inelastic, the price reduction will not
help increase the revenue. In such a case, higher prices may be fixed taking in
view the competitive position in the market. If, on the other hand, product is
highly elastic, the sales revenue can be appreciably increased by slightly
reducing the price. Thus pricing strategy i.e., whether to fix higher price or a
lower price as compared to the competitor's prices very much depends upon the
elasticity of demand and the competitive position.
2. The philosophy of the management.
The philosophy or the objectives of the management in exporting goods
is another important factor of pricing strategy. As we know that the main
objective of the management of every concern is to maximize profits. There is
an adverse relationship between the price and the demand. The management
can earn more profits at increased revenue by reducing the price if the demand
is more elastic. On other hand, if the objective of the management is to export a
committed value of merchandise, the price may be even lower than the
marginal cost. In case where a new product is introduced in a competitive
market, the management may sell it even below cost. In order to bar the new
entrants in the market discounts may be increased or prices may be reduced.
Thus, the strategy of pricing would depend upon the philosophy of
management 3. Market characteristics.
Market characteristics such as number of competitors and degree of
competition, supply position quality of the product, substitutes available in the
market etc. also determine the pricing strategy of the firm.
Various Price Strategies
The export price quotations may not be the same for all the markets.
Prices may differ from market to market due to various reasons, viz., political
influence, buying capacity, financial and import facilities, total market turnover
and other pricing and non pricing factors etc. in order to make the local price of
the product competitive. The profitability will also be affected to a great extent
and may be different in different markets. However, the nothing wrong in

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making higher margins in small export markets and lower ones in the others
provided there is an overall profit in export business.
Thus, different strategies may be used in different markets. In some
markets, prices may be higher, in some others, they may be around the cost
price or in many others, and they may be even less than cost price. Ordinarily,
the following pricing strategies are used in the export market:
1. Market penetration strategy.
Under this strategy exporter offers a very low introductory price to
speed up his sales and, therefore, widening the market base. It aims at capturing
the market. This strategy may be necessary for establishing one’s product in the
market, specially, if the quality of the product has to be proved before its wide
acceptance.
2. Probe pricing strategy.
Fixing low price for its product may have an adverse effect on the
image of the firm and of the product. It may raise doubts in the minds of the
buyer about the quality of the product if it is lower than the price of competitors
or it is reduced subsequently.
When no information is available on the extent of competition or the
likely preferences of the buyers, sufficiently higher prices may be quoted on the
first few offers. No business is really expected except feedback information.
The prices may be adjusted accordingly. This is called probe pricing, i.e., fixing
high prices only to probe the export markets.
3. Follow the leader pricing strategy.
In a competitive market or where adequate market information is not
available, it may be useful to follow the leader in the market comparing its
product with that of the leader, the exporter may fix the price of his product. In
such cases, the price of the product is lower than the leader's product. However,
this policy has no rational or scientific base for fixing the price.
4. Skim— the cream pricing strategy.
Under this strategy a very high introductory price is fixed to skim the
cream of demand at the very outset. This policy is generally useful when there
is no competition in the market. Such prices continue to be high till the
competitors begin to enter the foreign market. As soon as competitors enter the
market, the exporter reduces the price.
5. Differential trade margins strategy.
Variations in trade margins may be adopted by the exporter as the
pricing strategy in the foreign market. This strategy allows various types of
discounts on the list price. Quantity discounts encourage to procure huge

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orders. It may be based on the rupee value or on the quantity purchased or the
size of packages purchased. Special discounts may be allowed while
introducing the product. These are given on all purchases. Seasonal discount
aims at shifting the storing function in the channel. The approach is 'buy sooner
or more.' Cash discount attracts prompt payments. It ensures quick payback.
Trade discount is a reduction in list price given to channel members in
anticipation of a job they are going to per-form.
6. Standard export pricing strategy.
In some cases, exporter quotes the standard price or list price, i.e., one
price for all. But still, there should be some margins for negotiations as in many
markets, especially in underdeveloped countries, bargaining over prices is a
part of life. In such cases, fixed prices may serve as starting point for
negotiation. Hence, it is desirable to keep a certain margin for negotiations.
This strategy is generally adopted in case of export of capital equipment, i.e.,
plant and machinery.
7. Cheaper price for original equipment and higher price for spare parts.
In certain cases, it might be useful to quote lower prices for the original
equipment and charging higher prices for the spare and replacement parts to be
exported later on when required. This strategy is useful where standard spare
parts can be supplied only by the supplier of original equipment. This strategy
could be used for tractors, telephone equipment, and railway equipment.
Thus different pricing strategies may be adopted in different markets
taking into account the level of competition, the marketing characteristics and
the philosophy of the management. Profitability, anyhow, cannot be ignored
completely in the long run. However, exports may be continued in the short
run, even below the marginal cost.
Information for pricing decisions
An important prerequisite for taking scientific export pricing decisions
is regular availability of the authentic basic data regarding the export product,
foreign market and other relevant marketing information. The details of
information required may vary from product to product, market to market and
firm to firm.
In general, the following informations may be sufficient for taking
pricing decisions:
A. Product Information
1. Production cost details. They include detailed information about the
elements of costs such as

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 (a) Cost of production: (i) Prime cost, (ii) Factory overhead, (iii)
General and administrative overheads.
(b) Cost of distribution: (i) Cost of packing, (ii) Cost of selling, (iii)
Cost of transportation, including risk element, (iv) Distribution cost at the
importing end.
(c) Cost of promotion: (i) Advertising cost, (ii) Sales promotion cost,
and (iii) Printing and distribution of technical literature.
The above data is required for India for competing countries and for
consuming countries.
2. Nature of product. It includes:
(a) If product is consumer or industrial product,
(b) If consumer—whether it is necessary, comforts or luxury,
c) Whether it is seasonal or non-seasonal,
(d) Range of products available for consumption,
(e) Can demand be pushed up by promotion, and
(f) Elasticity of supply of the product.
3. Nature of the demand. Quantities that can be sold over a range of prices at
some specific point of time. : (a) Elasticity of demand—elastic, inelastic or
unitary elastic. (b) Strength of the demand—weak or strong. (c) Importance
given to the price—quality mix.
4. International levies and taxes. Customs duties, ex-port duties and other
levies.
5. Export Incentives.(a) Cash assistance, (b) drawback, (e) tax concessions etc.
6. Floor price and ceiling price regulations, if any.
7. Specifications. if any that are generally required either by importers or
mandatory.
8. Product design
9. For turnkey jobs. (a) Local labour rates, (b) labour regulations, and
(c) availability of construction equipments.
10. Product guarantees.
11. Installation and after sale service requirements.
12. Percentage incidence of rejects.
B. Market Information
The following market information will help the exporter-
1. Market structure. High competition, low competition or little competition.

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2. Peculiarities of the market. (a) Developed or developing countries. (b)
Characteristics of different segments in the developed and developing
countries. A particular segment in a developed country may be interested in low
priced goods.
3. Ruling price. Ruling price of the product, including the ruling prices of
substitutes.
4. Terms of payment, offered by different competitors and demanded by the
importers, i.e. cash or credit and if credit, the period of credit.
5. Import duties, border fiscal charges and quota restrictions.
6. Sources of supply. Major sources of supply of products in the importing
countries, i.e., local or foreign and their share.
7. Consumption pattern. Seasonal or non-seasonal and seasonal variations, if
any.
8. Publicity. (a) Need (b) Media and (c) Cost of advertising.
9. Channels of Distribution. (a). Intermediaries involved (b) Margins allowed
to different inter
10. Charges incidental to export. Shipping, freight, insurance, packing,
banking, transportation and other charges incidental to export.
11. Government regulations.(a) Documentation and invoicing requirements,
(b) Health and sanitary regulations, and (c) other governmental regulations such
as packing and labelling etc.
12. Trade preference and/or trade agreements, if any.
13. Extent of G.S.P. concessions, if any.
14. Brand image, brand loyalty and consumer preferences.
15. The Nature of market segmentation, if any.
C. Other Information
(a) Whether goods have to be sold by tender.
(b) Frequency of available shipping services.
(c) Warehousing facilities and costs.
(d) Existence of bilateral agreements, if any, and
(e) Political embargo on trade.
D. Information Required at Micro Level
1. Some of the strategic points of information necessary for pricing decisions at
micro level cover the following aspects :
(a) Production capacity of the firm—installed as well as utilized.

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(b) Ratio of supplies of home market and export markets or proportion of
total production supplied to home market and export markets.
(c) Demand and supply position of the product in the home market.
(d) Domestic price structure.
(e) Intense competition of domestic firms in the export field
(f) Additional export possibilities.
2. As regards the supplies for additional exports, the essential information
required is :
(a) Whether it would involve curtailment of home supplies, or
(b) It would lead to idle capacity utilization, or
(c) It would require commissioning of new capacity,
Information for Making a Quotation
The following information are necessary to make a quotation for the
product :
1. Currency in which quotation is to be made.
2. Discounts, if any— (a) Trade discount, (b) Cash discount, (c) Quantity
discount.
3. Types of Quotation—(a) whether F.O.B. quotation, (b).breakdown of costs
at each stage.
4. Terms of payment—DIP or D/A, or against confirm or unconfirmed letters
of credit.
Other terms of sale
1. Person to pay for export pricing.
2. Whether commission of intermediary includes in prices.
3. Shipment required in one or more lots.
4. Freight paid or to pay
5. Who is to pay for shipping insurance and space.
6. The date of delivery and penalties, if any for late delivery or non
fulfillment.
Different sources of information
There are a number of sources, national or international, where we can
get the relevant information. The following are the main sources:
1. International organizations.
2. National organizations.
3. Trade fairs.
4. Taxes and levies.

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2.9 CHOICE OF TECHNOLOGY
Many of today's most effective CRM processes and strategies are so
successful because of the underlying technologies that enable and support them.
In our dynamic, evolving industry new technologies continue to allow us to
interact with customers in ways we never imagined. This is not to say that
technology is the end-all in CRM--we still need engaged people, relevant
processes, and quality data. But when properly implemented, technology can
take that powerful threesome even farther. Consider the already heady impact
and potential of the following 10 technologies.
Technology: VoIP
Why You Need to Know About It: Cuts costs and erases location
barriers while improving customer service.
Few technologies have been generating a louder buzz than VoIP,
particularly among contact centers. "If there is a major driver in the call center
space it's VoIP and it's finally come into its own," says Rich Jaso, Northern
American managing partner, CRM practice, at Unisys.
The ability to augment the traditional contact center with remote, home-
based, and outsourced agents adds to VoIP's flavor. "You begin to transcend
the idea of location or geographic handcuffs," says Ross Daniels, manager of
product marketing at Cisco, in the customer contact business unit.
Reducing costs and converging channels like voice, email, and Web
chat may also help to extend VoIP's growth curve. "Voice over IP allows the
contact center manager to manage all of these interaction types over one
network," says Sean O'Connell, manager of product marketing for Cisco.
Yet its growth doesn't come without concerns. Some analysts argue that
VoIP falls short in certain arenas when stacked up against time division
multiplexing (TDM). According to Daniel Hong, CRM analyst for
Datamonitor, VoIP is hyped as being as reliable as TDM. "When you [have a]
power shortage, essentially your whole network will be down, but the phones
are still working. So for business continuity measures TDM is still the number
one choice," Hong says. "That's why they offer hybrid IP solutions. But
eventually all the companies will make the jump to pure IP."
And although VoIP reduces toll, network, equipment, and
administration costs, according to Hong, it is not yet widely deployed. "It is
becoming mainstream, but a lot of that is...in the beginnings of being deployed
right now."
Over the next two or three years "you're going to have massive and
radical adoption of VoIP infrastructure," Jaso says.

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Technology: Web Services and Services Oriented Architecture
Why You Need to Know About It: Provides an increased span of flexibility.
Flexibility is one of the prime reasons Web services and services
oriented architectures are technology platforms to watch, as are open standards
like Speech Application Language Tags (SALT), Simple Object Access
Protocol (SOAP), and Extensible Markup Language (XML).
Web services and services oriented architectures "provide more
adaptable and flexible applications so the applications can change more
dynamically in context to a business process," says Sheryl Kingstone, The
Yankee Group CRM program manager. "It also helps for standardization, so
now you can share information across heterogeneous platforms easier."
The industry is already beginning to see how Web services can
positively affect the way applications work together, according to Denis
Pombriant, managing principal at Beagle Research Group. "Many major
vendors...have programs in place to help them extend their own application
functionality by incorporating other third-party applications through Web
services into their suites," he says. "We're going to see that approach becoming
increasingly important."
However, although Web services can allow organizations to work
across applications, the hype around it now is massive, says Liz Roche, CRM
vice president and practice lead at META. "On a scale from one to ten, the
hype factor is, like, twenty-seven," Roche says. "The reality is, every
organization has to start preparing [itself] to consume Web services and Web
services oriented technology."
Technology: Speech Applications
Why You Need to Know About It: Properly done they can reduce costs
while boosting amount of transactions a company can process without
increasing head count.
Self-service applications, with the aid of VoiceXML, can help
organizations--especially contact centers--strike that happy medium between
slicing costs and satisfying customers.
VoiceXML uses open standards for building telephone and speech
applications, says Ken Rehor, vice chair of the VoiceXML Forum. "What
having a standard like this does for you is enable a choice of vendors and
technologies that best fit a particular solution."
VoiceXML is just one pixel, albeit large, that helps create the speech
technology picture. "Touchtone technology in the past, whether we loved it or
hated it, could handle a certain range of transactions. But there was a whole

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other range that touchtone just didn't quite work well for," says Art Schoeller,
Yankee Group senior analyst. "VoiceXML helps move it along by giving us a
pretty solid standard upon which to do speech technology applications."
Agents still handle about 80 percent of calls coming in to the contact
center and touchtone IVR systems handle only 10 to 20 percent. But with
speech applications gaining ground, that IVR percentage is poised for growth,
according to Steve Tran, cofounder and vice president of marketing and client
solutions at BeVocal, which provides hosted speech solutions. "I see the next
ten years really shifting that balance on its head," he says.
Technology:Outsourced Application Delivery
Why You Need to Know About It: Lets end-user companies quickly
deploy CRM.
Organizations that want a quick launch of their CRM initiative are
increasingly looking to the ASP model, including hosted and on-demand CRM.
The benefits, vendors will be quick to tell prospects, can include lower cost-of-
acquisition, faster deployment, and costs savings from not having to install or
maintain software on the user's system.
But "it's not a panacea," Unisys's Jaso says. "On-demand by definition
will never give you the type of access to data, the type of mining, the type of
integration that you need in order to truly do world-class CRM. But over the
next couple of years you're going to see huge increases in on-demand types of
services."
Whether businesses use an ASP to test CRM before deploying in-house
or as a long-term solution, the popularity of the model has propelled such
companies as Salesforce.com and RightNow Technologies to IPOs this year.
"There are still many IT organizations that believe in doing it themselves and
will continue to create their business case that says we can do it better
ourselves," Schoeller says. "But I do see good growth and probably the
outsourced ASP-type model will take some share over the next few years from
the premise equipment."
Technology: Social Networking
Why You Need to Know About It: Helps employees uncover possible
relationships that may increase chances of completing sales transactions.
Sealing a sales deal is often about who you know, and that is why social
networking earns a slot on our list.
"Social networking provides a new source of data on committee-based
sales deals," says Laura Preslan, research director at AMR Research. Social

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networking tools help salespeople to figure out who knows whom at a customer
or prospect's organization.
Lynda Radosevich, vice president of communications at social
networking application provider Visible Path, says that social network
technology allows enterprises to search for relationships to accounts and
contacts in their CRM system. "The impact of leveraging these trusted
relationships results is tracked in the CRM system and creates a rigorous means
of measuring a company's relationship capital," she says.
Although he sees the possible potential for social networking, Chris
Selland, vice president of sell side research at Aberdeen Group, says the
business case is still "fuzzy." Adds Preslan: "It continues to grow slowly, but
those who use it, mostly financial services firms, are creating loyal fans."
Technology: Wireless Connectivity and Applications
Why You Need to Know About It: Allows mobile professionals to stay
better connected, improve productivity, and even close deals.
Remember the days when firms first imagined how the portable
computer could completely revolutionize the way we do business? Those same
organizations are now abuzz with the possibilities of wireless connectivity and
applications.
"People do not have the time or the wherewithal to go and get
information at a particular place," says Peter Semmelhack, founder and CTO of
Antenna Software. "What wireless is doing for CRM is, it's creating that kind
of convenience. The data they want and need to get their job done more
efficiently, more productively, and more profitably is available at their
fingertips when they need it."
And the potential increases with every mobile technology improvement-
-and new cell tower. "The explosion of wireless connectivity and what it's
allowing the mobile professional [to do]--how often they can connect as they
move around in their business day; the connection speeds and the coverage--
just continues to increase every day," says Tom Johnson, BearingPoint
managing director responsible for CRM solutions for consumer companies.
Fred Landis, program leader of CRM growth opportunities service at
Frost & Sullivan, says that although wireless, particularly within field service
and sales, could have a major impact, for it "to become more pervasive,
coverage issues must be overcome, as well as the ubiquity of 3G performance
and reduced costs."

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Technology: Presence Technologies (RFID, POS)
Why You Need to Know About It: Can locate customers and personally
tailor messages that may help to extend the business relationship.
Is Big Brother watching you shop? According to BearingPoint's
Johnson, the top technology changing the landscape today is RFID or radio
frequency ID tags. With major businesses like Wal-Mart, Target, and FedEx
behind it, he says, 2005 will be a huge growth year for RFID applications and
2006 should see the arrival of these applications into the mainstream. "The term
I see commonly is explosion and I think no one can disagree," he says.
Alan Melling, senior director of business development for Symbol
Technologies, says RFID allows things and people to be self-identifying: bar
codes taken to the next level. "When push comes to shove, CRM comes down
to one thing, the ability to identify that customer, identify the transactions you
had with that customer, and relate all of that to provide a more positive
experience for that customer," he says. But, he adds, as with any new
technology, "you have to work through the kinks."
According to AMR's Preslan, the presence technologies that have the
greatest potential for impact within CRM are point-of-sale data synchronization
and management systems--tools that provide a real view into sales activity in
the retail sector. "These tools are gaining adoption rapidly across consumer
products and retail companies," she says, citing a caveat: "The tools are sixty
percent of the way to an out-of-the-box solution, so the reality lags what
companies really want."
How will consumers feel about see-all, know-all technology? Unisys's
Jaso says it can become "a little Big Brotherish, yet for very specific types of
applications there [are] some intriguing possibilities." So although he doesn't
see massive adoption soon, "with a little brainstorming that technology is
becoming ready for prime time."
Technology: Open Source CRM
Why You Need to Know About It: Shared source code allows for
flexibility and faster product evolution.
Some CRM vendor executives consider open source software a direct
flight to financial disaster, but others are not only trying their hand at it, they're
seeing faster-than-expected adoption.
Open source CRM will have a major impact on the industry, as it has in
other areas, Preslan says. "For industries like financial services, open source is
the first stop before looking at other solutions."

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 The Yankee Group's Schoeller, however, says there hasn't been much
movement with open source CRM, likely because of the financial implications.
"You're not going to be making money on software license fees anymore, or if
you do, that license fee is basically a support contract," he says. "How much
can we drive these things to zero and still have the ability to pay people to take
care of all of it?"
The Yankee Group's Kingstone is concerned that open source is simply
putting the build-versus-buy scenario back on the table. "I can see how
companies might want to...potentially take a look at some of the open source
out there--it's really about driving down IT costs," she says. "To me CRM is
bigger than that."
To John Roberts, cofounder and CEO of SugarCRM, CRM is about
giving customers flexibility. "We provide source code to our software so that
you have complete flexibility," he says. "No one else in the industry really
wants to give you source code, because that's how they lock you in to make you
dependent on them as a company."
Although some vendors and analysts are not too fond of open source
CRM, companies like E.piphany and Siebel Systems are starting to give the
idea serious consideration, which could make 2005 an interesting year for open
source.
Technology: Embedded Analytics and Business Intelligence
Why You Need to Know About It: Line-of-business users get faster,
easier access to meaningful information.
CRM users love data, but hate to wait for analyst- or IT-generated
reports. Getting information into the hands of customer-facing staff has the
potential to substantially affect CRM results.
"We've always had analytics, but we haven't necessarily given it to the
people that really needed it: the front-line business managers," Kingstone says.
"They can start really seeing the impact...their decisions are having. It's really
taking analytics and embedding [it] into CRM, and making it easier for the line-
of-business person."
Although the benefits are potentially large, buyer beware. According to
Kingstone, embedded analytics is being hyped as a magic bullet. "The hype has
really been that [analytics] needs to get it into the hands of the line-of-
business," she says. "It's just not this turnkey solution. Analytics is only as good
as your plan and your process."
The hype is so big because embedded, prescriptive analytics can affect
decision-making by suggesting actions, rather than just running multiple

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reports. The catch is that "the tools are more advanced than many companies'
ability to use the functionality," Preslan says, adding that "a cultural shift
towards trusting the systems' recommendations must occur before this
technology will take off."
Technology: Queue Management
Why You Need to Know About It: Can improve the customer
experience, which may spur sales.
Any technology that can improve the quality of experience for the
customer has a chance to make a serious impact on the market, and that's why
queue management deserves examination.
Increasing first-call resolution rates can both reduce costs and increase
customer satisfaction, and boosting those rates may start with how contact
centers handle queues. "You can't manage a relationship until you've managed
the customer. You manage the call, you manage the customer experience," says
Paul Stockford, chief analyst at Saddletree Research. "A lot of that comes with
how the customer is treated when that first contact is made."
There are now technologies that allow a caller to have a placeholder in
the queue as if they were waiting on the phone, but they instead can hang up
and wait for a return call. There are also technologies that allow people to
return-schedule a call at whatever time they deem convenient.
"You don't risk losing a customer," Stockford says. "Scheduling when
you want a call or knowing that you're place in the line is going to be held...is a
real plus. It could change the industry in a small way, but change it to the point
where queue management becomes not an option but a requirement for any
successful contact center."
2.10 CHOICE OF ORGANIZATIONAL STRUCTURE FOR CRM
An organizational structure defines how activities such as task
allocation, coordination and supervision are directed towards the achievement
of organizational aims. It can also be considered as the viewing glass or
perspective through which individuals see their organization and its
environment.
Organizations are a variant of clustered entities.
An organization can be structured in many different ways, depending on
their objectives. The structure of an organization will determine the modes in
which it operates and performs.
Organizational structure allows the expressed allocation of
responsibilities for different functions and processes to different entities such as
the branch, department, workgroup and individual.

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Organizational structure affects organizational action in two big ways :
 First, it provides the foundation on which standard operating procedures
and routines rest.
 Second, it determines which individuals get to participate in which
decision-making processes, and thus to what extent their views shape the
organization’s actions.
History
Organizational structures developed from the ancient times of hunters
and collectors in tribal organizations through highly royal and clerical power
structures to industrial structures and today's post-industrial structures.
As pointed out by Lawrence B. Mohr, the early theorists of
organizational structure, Taylor, Fayol, and Weber "saw the importance of
structure for effectiveness and efficiency and assumed without the slightest
question that whatever structure was needed, people could fashion accordingly.
Organizational structure was considered a matter of choice... When in the
1930s, the rebellion began that came to be known as human relations theory,
there was still not a denial of the idea of structure as an artifact, but rather an
advocacy of the creation of a different sort of structure, one in which the needs,
knowledge, and opinions of employees might be given greater recognition."
However, a different view arose in the 1960s, suggesting that the organizational
structure is "an externally caused phenomenon, an outcome rather than an
artifact."
In the 21st century, organizational theorists such as Lim, Griffiths, and
Sambrook (2010) are once again proposing that organizational structure
development is very much dependent on the expression of the strategies and
behavior of the management and the workers as constrained by the power
distribution between them, and influenced by their environment and the
outcome.
Operational organizations and informal organizations
The set organizational structure may not coincide with facts, evolving in
operational action. Such divergence decreases performance, when growing.
E.g., a wrong organizational structure may hamper cooperation and thus hinder
the completion of orders in due time and within limits of resources and budgets.
Organizational structures shall be adaptive to process requirements, aiming to
optimize the ratio of effort and input to output.

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Types
Pre-bureaucratic structures
Pre-bureaucratic (entrepreneurial) structures lack standardization of
tasks. This structure is most common in smaller organizations and is best used
to solve simple tasks. The structure is totally centralized. The strategic leader
makes all key decisions and most communication is done by one on one
conversations. It is particularly useful for new (entrepreneurial) business as it
enables the founder to control growth and development.
They are usually based on traditional domination or charismatic
domination in the sense of Max Weber's tripartite classification of authority.
Bureaucratic structures
Weber (1948, p. 214) gives the analogy that “the fully developed
bureaucratic mechanism compares with other organizations exactly as does the
machine compare with the non-mechanical modes of production. Precision,
speed, unambiguity, … strict subordination, reduction of friction and of
material and personal costs- these are raised to the optimum point in the strictly
bureaucratic administration.” Bureaucratic structures have a certain degree of
standardization. They are better suited for more complex or larger scale
organizations, usually adopting a tall structure. The tension between
bureaucratic structures and non-bureaucratic is echoed in Burns and
Stalker's distinction between mechanistic and organic structures.
The Weberian characteristics of bureaucracy are:
 Clear defined roles and responsibilities
 A hierarchical structure
 Respect for merit
Bureaucratic structures have many levels of management ranging from
senior executives to regional managers, all the way to department store
managers. Since there are many levels, decision-making authority has to pass
through more layers than flatter organizations. Bureaucratic organization has
rigid and tight procedures, policies and constraints. These kind of structure is
reluctant to adapt or change what they have been doing since the company
started. Organizational charts exist for every department, and everyone
understands who is in charge and what their responsibilities are for every
situation. Decisions are made through an organized process, and a strict
command and control structure is present at all times.In bureaucratic structures,
the authority is at the top and information is then flowed from top to bottom.
This causes for more rules and standards for the company which operational
process is watched with close supervision. Some advantages for bureaucratic

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structures for top-level managers are they have a tremendous control over
organizational structure decisions. This works best for managers who have a
command and control style of managing. Strategic decision-making is also
faster because there are fewer people it has to go through to approve. Some
disadvantages in bureaucratic structures are it can discourage creativity and
innovation in the organization. This can make it hard for a company to adapt to
changing conditions in the marketplace.
Post-bureaucratic
The term of post bureaucratic is used in two senses in the organizational
literature: one generic and one much more specific. In the generic sense the
term post bureaucratic is often used to describe a range of ideas developed
since the 1980s that specifically contrast themselves with Weber's ideal
type bureaucracy. This may include total quality management, culture
management and matrix management, amongst others. None of these however
has left behind the core tenets of Bureaucracy. Hierarchies still exist, authority
is still Weber's rational, legal type, and the organization is still rule bound.
Heckscher, arguing along these lines, describes them as cleaned up
bureaucracies, rather than a fundamental shift away from bureaucracy. Gideon
Kunda, in his classic study of culture management at 'Tech' argued that 'the
essence of bureaucratic control - the formalisation, codification and
enforcement of rules and regulations - does not change in principle.....it shifts
focus from organizational structure to the organization's culture'.
Another smaller group of theorists have developed the theory of the
Post-Bureaucratic Organization., provide a detailed discussion which attempts
to describe an organization that is fundamentally not bureaucratic. Charles
Heckscher has developed an ideal type, the post-bureaucratic organization, in
which decisions are based on dialogue and consensus rather than authority and
command, the organization is a network rather than a hierarchy, open at the
boundaries (in direct contrast to culture management); there is an emphasis on
meta-decision-making rules rather than decision-making rules. This sort of
horizontal decision-making by consensus model is often used in housing
cooperatives, other cooperatives and when running a non-profit or community
organization. It is used in order to encourage participation and help to empower
people who normally experience oppression in groups.
Still other theorists are developing a resurgence of interest
in complexity theory and organizations, and have focused on how simple
structures can be used to engender organizational adaptations. For instance,
Miner et al. (2000) studied how simple structures could be used to generate
improvisational outcomes in product development. Their study makes links to

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simple structures and improviser learning. Other scholars such as Jan Rivkin
and Sigglekow, and Nelson Repenning revive an older interest in how structure
and strategy relate in dynamic environments.
Functional structure
A functional organizational structure is a structure that consists of
activities such as coordination, supervision and task allocation. The
organizational structure determines how the organization performs or operates.
The term organizational structure refers to how the people in an organization
are grouped and to whom they report. One traditional way of organizing people
is by function. Some common functions within an organization include
production, marketing, human resources, and accounting.
This organizing of specialization leads to operational efficiency where
employees become specialists within their own realm of expertise. The most
typical problem with a functional organizational structure is however that
communication within the company can be rather rigid, making the
organization slow and inflexible. Therefore, lateral communication between
functions become very important, so that information is disseminated, not only
vertically, but also horizontally within the organization. Communication in
organizations with functional organizational structures can be rigid because of
the standardized ways of operation and the high degree of formalization.
As a whole, a functional organization is best suited as a producer of
standardized goods and services at large volume and low cost. Coordination
and specialization of tasks are centralized in a functional structure, which
makes producing a limited amount of products or services efficient and
predictable. Moreover, efficiencies can further be realized as functional
organizations integrate their activities vertically so that products are sold and
distributed quickly and at low cost. For instance, a small business could make
components used in production of its products instead of buying them.
Even though functional units often perform with a high level of
efficiency, their level of cooperation with each other is sometimes
compromised. Such groups may have difficulty working well with each other
as they may be territorial and unwilling to cooperate. The occurrence of
infighting among units may cause delays, reduced commitment due to
competing interests, and wasted time, making projects fall behind schedule.
This ultimately can bring down production levels overall, and the company-
wide employee commitment toward meeting organizational goals.
Divisional structure
The divisional structure or product structure consists of self-contained
divisions. A division is a collection of functions which produce a product. It

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also utilizes a plan to compete and operate as a separate business or profit
center. According to Zainbooks.com, divisional structure in America is seen as
the second most common structure for organization today.
Employees who are responsible for certain market services or types of
products are placed in divisional structure in order to increase their flexibility.
Examples of divisions include regional (a U.S Division and an EU division),
consumer type (a division for companies and one for households), and product
type (a division for trucks, another for SUVS, and another for cars). The
divisions may also have their own departments such as marketing, sales, and
engineering.
The advantage of divisional structure is that it uses delegated authority
so the performance can be directly measured with each group. This results in
managers performing better and high employee morale. Another advantage of
using divisional structure is that it is more efficient in coordinating work
between different divisions, and there is more flexibility to respond when there
is a change in the market. Also, a company will have a simpler process if they
need to change the size of the business by either adding or removing divisions.
When divisional structure is utilized more specialization can occur within the
groups. When divisional structure is organized by product, the customer has
their own advantages especially when only a few services or products are
offered which differ greatly. When using divisional structures that are
organized by either markets or geographic areas they generally have similar
function and are located in different regions or markets. This allows business
decisions and activities coordinated locally.
The disadvantages of the divisional structure is that it can support
unhealthy rivalries among divisions. This type of structure may increase costs
by requiring more qualified managers for each division. Also, there is usually
an over-emphasis on divisional more than organizational goals which results in
duplication of resources and efforts like staff services, facilities, and personnel.
Matrix structure
The matrix structure groups employees by both function and product.
This structure can combine the best of both separate structures. A matrix
organization frequently uses teams of employees to accomplish work, in order
to take advantage of the strengths, as well as make up for the weaknesses, of
functional and decentralized forms. An example would be a company that
produces two products, "product a" and "product b". Using the matrix structure,
this company would organize functions within the company as follows:
"product a" sales department, "product a" customer service department,

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"product a" accounting, "product b" sales department, "product b" customer
service department, "product b" accounting department.
 Weak/Functional Matrix: A project manager with only limited authority
is assigned to oversee the cross- functional aspects of the project. The
functional managers maintain control over their resources and project areas.
 Balanced/Functional Matrix: A project manager is assigned to oversee
the project. Power is shared equally between the project manager and
the functional managers. It brings the best aspects of functional and
projectized organizations. However, this is the most difficult system to
maintain as the sharing of power is a delicate proposition.
 Strong/Project Matrix: A project manager is primarily responsible for the
project. Functional managers provide technical expertise and assign
resources as needed.
Matrix structure is only one of the three major structures. The other two
are Functional and Project structure. Matrix management is more dynamic than
functional management in that it is a combination of all the other structures and
allows team members to share information more readily across task boundaries.
It also allows for specialization that can increase depth of knowledge in a
specific sector or segment.
There are both advantages and disadvantages of the matrix structure;
some of the disadvantages are an increase in the complexity of the chain of
command. This occurs because of the differentiation between functional
managers and project managers, which can be confusing for employees to
understand who is next in the chain of command. An additional disadvantage of
the matrix structure is higher manager to worker ratio that results in conflicting
loyalties of employees. However the matrix structure also has significant
advantages that make it valuable for companies to use. The matrix structure
improves upon the “silo” critique of functional management in that it
diminishes the vertical structure of functional and creates a more horizontal
structure which allows the spread of information across task boundaries to
happen much quicker. Moreover, matrix structure allows for specialization that
can increase depth of knowledge & allows individuals to be chosen according
to project needs. This correlation between individuals and project needs is what
produces the concept of maximizing strengths and minimizing weaknesses.
Organizational circle: moving back to flat
The flat structure is common in small companies (entrepreneurial start-
ups, university spin offs). As companies grow they tend to become more
complex and hierarchical, which leads to an expanded structure, with more
levels and departments.

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 However, in rare cases, such as the examples of Valve
Corporation, GitHub, Inc. and 37signals, the organization remains very flat as it
grows, eschewing middle managers. All of the aforementioned organizations
operate in the field of technology, which may be significant, as software
developers are highly skilled professionals, much like lawyers. Senior lawyers
also enjoy a relatively high degree of autonomy within a typical law firm,
which is typically structured as a partnership rather than a hierarchical
bureaucracy. Some other types of professional organisations are also commonly
structured as partnerships, such as accountancy companies and GP surgeries.
Often, growth would result in bureaucracy, the most prevalent structure
in the past. It is still, however, relevant in former Soviet Republics, China, and
most governmental organizations all over the world. Shell Group used to
represent the typical bureaucracy: top-heavy and hierarchical. It featured
multiple levels of command and duplicate service companies existing in
different regions. All this made Shell apprehensive to market changes, leading
to its incapacity to grow and develop further. The failure of this structure
became the main reason for the company restructuring into a matrix.
Starbucks is one of the numerous large organizations that successfully
developed the matrix structure supporting their focused strategy. Its design
combines functional and product based divisions, with employees reporting to
two heads. Creating a team spirit, the company empowers employees to make
their own decisions and trains them to develop both hard and soft skills.
Some experts also mention the multinational design, common in global
companies, such as Procter & Gamble, Toyota and Unilever. This structure can
be seen as a complex form of the matrix, as it maintains coordination among
products, functions and geographic areas.
With the growth of the internet, and the associated access that gives all
levels of an organization to information and communication via digital means,
power structures have begun to align more as a wirearchy, enabling the flow of
power and authority to be based not on hierarchical levels, but on information,
trust, credibility, and a focus on results.
In general, over the last decade, it has become increasingly clear that
through the forces of globalization, competition and more demanding
customers, the structure of many companies has become flatter, less
hierarchical, more fluid and even virtual.
Team
One of the newest organizational structures developed in the 20th
century is team and the related concept of team development or team building.
In small businesses, the team structure can define the entire

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organization. Teams can be both horizontal and vertical. While an organization
is constituted as a set of people who synergize individual competencies to
achieve newer dimensions, the quality of organizational structure revolves
around the competencies of teams in totality. For example, every one of
the Whole Foods Market stores, the largest natural-foods grocer in the US
developing a focused strategy, is an autonomous profit centre composed of an
average of 10 self-managed teams, while team leaders in each store and each
region are also a team. Larger bureaucratic organizations can benefit from the
flexibility of teams as well. Xerox, Motorola, andDaimlerChrysler are all
among the companies that actively use teams to perform tasks.
Network
Another modern structure is network. While business giants risk
becoming too clumsy to proact (such as), act and react efficiently, the new
network organizations contract out any business function, that can be done
better or more cheaply. In essence, managers in network structures spend most
of their time coordinating and controlling external relations, usually by
electronic means. H&M is outsourcing its clothing to a network of 700
suppliers, more than two-thirds of which are based in low-cost Asian countries.
Not owning any factories, H&M can be more flexible than many other retailers
in lowering its costs, which aligns with its low-cost strategy. The potential
management opportunities offered by recent advances in complex networks
theory have been demonstrated including applications to product design and
development, and innovation problem in markets and industries.
Virtual
Virtual organization is defined as being closely coupled upstream with
its suppliers and downstream with its customers such that where one begins and
the other ends means little to those who manage the business processes within
the entire organization. A special form of boundaryless organization is virtual.
Hedberg, Dahlgren, Hansson, and Olve (1999) consider the virtual organization
as not physically existing as such, but enabled by software to exist. The virtual
organization exists within a network of alliances, using the Internet. This means
while the core of the organization can be small but still the company can
operate globally be a market leader in its niche. According to Anderson,
because of the unlimited shelf space of the Web, the cost of reaching niche
goods is falling dramatically. Although none sell in huge numbers, there are so
many niche products that collectively they make a significant profit, and that is
what made highly innovative Amazon.com so successful.

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Hierarchy-Community Phenotype Model of Organizational Structure
In the 21st century, even though most, if not all, organizations are not of
a pure hierarchical structure, many managers are still blind to the existence of
the flat community structure within their organizations.
The business is no longer just a place where people come to work. For
most of the employees, the firm confers on them that sense of belonging and
identity –– the firm has become their “village”, their community. The firm of
the 21st century is not just a hierarchy which ensures maximum efficiency and
profit; it is also the community where people belong to and grow together,
where their affective and innovative needs are met.
Lim, Griffiths, and Sambrook (2010) developed the Hierarchy-
Community Phenotype Model of Organizational Structure borrowing from the
concept of Phenotype from genetics. "A phenotype refers to the observable
characteristics of an organism. It results from the expression of an organism’s
genes and the influence of the environment. The expression of an organism’s
genes is usually determined by pairs of alleles. Alleles are different forms of a
gene. In our model, each employee’s formal, hierarchical participation and
informal, community participation within the organization, as influenced by his
or her environment, contributes to the overall observable characteristics
(phenotype) of the organization. In other words, just as all the pair of alleles
within the genetic material of an organism determines the physical
characteristics of the organism, the combined expressions of all the employees’
formal hierarchical and informal community participation within an
organization give rise to the organizational structure. Due to the vast potentially
different combination of the employees’ formal hierarchical and informal
community participation, each organization is therefore a unique phenotype
along a spectrum between a pure hierarchy and a pure community (flat)
organizational structure."
Organizational structure in CRM
A lot of suppliers of software packs often claim that they will provide
and innovate a manner by which all needed are responded but in the society –
wide it will never have the application of software and responding to all needed
sets of trade in simultaneous renewal of CRM. In the more applied level, CRM
is reminded as a unification confrontation. a commercial model of
comprehensive CRM is formed of main and key combinations creates
considerable meeting to give and divided the experiences by which substantial
value can be constructed in relation between customer. Via the model, team
will determine a strategy for treatment level with customer, and illustrates this
word in such a way that how customer treatment and its efficacy is in the

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special behavioral segment and each one of its sections what goal will follow.
Individuals of team perform a special coding via analytical information
environment and treatment rules to definite customer strategies and in this stage
will use the strategies tools substantially. Execution tools also better can use the
stored and essayed information and special design decisions can contribute
individuals to protect the mutual relations with customer.
2.11 UNDERSTANDING MARKET INTELLIGENCY ENTERPRISES.
Market intelligence is the information relevant to a company’s
markets, gathered and analyzed specifically for the purpose of accurate and
confident decision-making in determining strategy in areas such as market
opportunity, market penetration strategy, and market development.
Market intelligence includes gathering of data from the company’s
external environment, whereas the Business intelligence process primarily is
based on internal recorded events – such as sales, shipments and purchases. The
purpose of incorporating Market Information or intelligence into the Business
Intelligence process is to provide decision makers with a more “complete
picture” of ongoing corporate performance in a set of given market conditions.
At M-Brain, we speak with many successful, global enterprises about
their greatest market intelligence challenges and successes. We find it
fascinating and a privilege to be able to study the global MI markets from
micro and macro viewpoints and understand developing trends before and as
they evolve.
If there is one challenge that we see customers facing more than others,
it is this: How to turn information into insights to deliver greatest business
impact.
Of course, a subject as complex as this carries hundreds, possibly
thousands, of intricate facets, each unique and specific to both team and
organisation. If the answer to this question was simple enough to write in a
blog post, or even a book, or even a chapter of books, then no doubt every MI
team would be delivering ultimate impact to their organisation every day.
Which, of course, is unlikely to happen any time soon.
We all know the key function of market intelligence impact is in
accurately defining needs, correctly understanding insights from intelligence
and delivering those insights to key people, at the right time and in the right
manner.
Sounds so simple when written in a single sentence.
I was fortunate to be present in M-Brain’s webinar last week and
witnessed Lee West and Joost Drieman explore the key success factors that

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make the crucial difference in building world class market intelligence
programs. Of particular significance for my own development and in answering
the above question was the key success factors that Joost touched on.
He explained 6 key areas that make all the difference in building world
class intelligence:
– Scope (broadly defined as breadth, depth, strategy & stakeholder alignment,
and forward looking approach)
– Processes (Integration with decision making)
– Deliverables (Services areas and product types)
– Tools (with over 150 to select from)
– Organization (Intelligence methods and resources)
– Culture (MI internal awareness, acceptance and assistance)
Arranging these 6 success factors within a framework and monitoring
each area in terms of performance and impact has enabled M-Brain to identify
the organisations delivering world class market intelligence impact and the
processes those organisations do differently to achieve superior results.
The framework has also supported the creation of a valuable model that
offers a benchmarking self-assessment tool to organisations, enabling
participants to identify for themselves the gaps within their MI processes and
what they need to do to reach next-level results.
'Marketing intelligence (MI) is the everyday information relevant to a
company’s markets, gathered and analyzed specifically for the purpose of
accurate and confident decision-making in determining market opportunity,
market penetration strategy, and market development metrics. Marketing
intelligence is necessary when entering a foreign market.
Marketing intelligence determines the intelligence needed, collects it by
searching environment and delivers it to marketing managers who need it.
Marketing intelligence software can be deployed using an on-premises
or software as a service (SaaS, or cloud-based) model. These systems take data
from disparate data sources, like web analytics,business intelligence, call center
and sales data, which often come separate reports, and put them into a single
environment. In order to collect marketing intelligence, marketing managers
must be in constant touch with relevant books, newspapers and trade
publications. They must talk to various stakeholders like customers, distributors
and suppliers. In addition to this they must also monitor social media and carry
out online discussions. Marketing managers can design reports that correlate
and visualize data coming from a variety of departments and sources (even, in
some cases, external data.) This allows them to see current key performance

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indicators in real time (or as quickly as sources provide data) and analyze
trends, rather than wait for analysts to deliver periodic reports.
Marketing intelligence systems are designed to be used by marketing
managers and often viewed by employees throughout an organization. They
may have user interfaces that closer resemble consumer software than the
software around individual data sources, which are designed for use by
analysts. Business intelligence for example, can collect highly accurate, timely,
granular data, but often requires IT support to build and edit custom reports.
Organizationally, marketing intelligence can be the name of the
department that performs both the market intelligence and competitor analysis
roles. Business intelligence of any kind may also be their responsibility, in
tandem with (or solely performed by) the Finance department, for measuring
market share and setting growth targets, the mergers and acquisitions group for
exploring acquisition opportunities, the legal department to protect the
organization's assets or research and development for cross-company
comparison of innovation trends and the discovery of opportunities through
innovative differentiation.
Steps to be taken by a Company to improve its Marketing Intelligence
(1) Train and Motivate Sales Force: A company's sales force can be an
excellent source of information about the current trends in the market. They are
the "intelligence gatherers" for the company. The acquired facts can be
regarding the company's market offerings, whether any improvements are
required or not or is there any opportunity for new products, etc. It can also
provide credible source to know about competitor activities, consumers,
distributors and retailers.
(2) Motivate Distributors, retailers, and other intermediaries to pass along
important intelligence: Specialists are hired by companies to gather marketing
intelligence. In order to measure the quality of production, the way the
employees are behaving with customers, quality of facilities being provided;
retailers and service providers send mystery shoppers. Firms can also assess the
quality of customer experience with the shops with the use of mystery
shoppers.
(3) Network Externally: Every firm must keep a tab on its
competitors. Competitive intelligence describes the broader discipline of
researching, analyzing and formulating data and information from the entire
competitive environment of any organization. This can be done by purchasing
the competitor's products, checking the advertising campaigns, the press media
coverage, reading their published reports, etc. Competitive intelligence must be
legal and ethical.

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(4) Set up a customer advisory panel: Companies can set up panels consisting
of customers. They can be the company's largest customers or representatives
of customers or the most outspoken customers. Many business schools set up
panels consisting of alumni who provide their knowledge and expertise and
help in constituting the course curriculum.
(5) Optimal usage of Government data resources: Governments of almost all
countries publish reports regarding the population trends, demographic
characteristics, agricultural production and a lot of other such data. All this data
must be or can be referred to as base data. It can help in planning and
formulating policies for the companies.
(6) Information bought from external suppliers: Certain agencies sell data that
can be useful to other companies. For example, television channels will require
information on the number of viewership, ratings of TV programs, etc. An
agency which calculates this information and generates this data will provide it
to companies that need it.
(7) Collect Competitive Intelligence through online customer feedback:
Customer's view about a product is most essential for any company. Ultimately
it's the customer who's buying the product. Hence customer feedback must be
taken. Online platforms like chat rooms, blogs, discussion forums, customer
review boards can be used to generate customer feedback. This enables the firm
to understand customer experiences and impressions. It becomes easier for
companies to apply a structured system to do so as it can then scan out the
relevant messages without much of a trouble.
With the above steps being applied, a company's marketing intelligence
system will prove to be beneficial to its effective functioning.

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 UNIT – III

3.1 CRM PROGRAM

3.2 GROUNDWORK FOR EFFECTIVE USE OF CRM
3.3 INFORMATION REQUIREMENT FOR AN EFFECTIVE USE OF CRM
3.4 COMPONENTS OF CRM
3.5 TYPES OF CRM
3.6 WIN BACK
3.7 PROSPECTING
3.8 LOYALTY
3.9 CROSS SELL AND UP SELL

3.1 CRM PROGRAM

In the quest to implement a successful CRM initiative, executives
should incorporate a product development philosophy for customers. However,
this requires a change in thinking and a willingness to take a lifecycle view that
incorporates five stages.
In the quest to implement a successful CRM initiative, executives can
learn a lesson from the cradle-to-grave product development philosophy. But it
requires a change in thinking and a willingness to take a lifecycle view of
CRM-one that incorporates the following five stages: Putting the customer at
the center of the universe The key to implementing a successful CRM
initiative is to first understand exactly what CRM is. Often, businesses begin
with an initial understanding, right or wrong, that motivates them to pursue a
CRM initiative. Several misconceptions emerge once they attempt to apply
CRM to their business. The most common is believing that CRM is the new
cure-all for customer management evils that, if implemented, will result in
almost immediate benefit. Unfortunately, CRM by itself is no guarantee of
customer retention. Companies at the forefront of CRM think of it as an
integrated business strategy that places the customer at the center of a
business's consciousness. CRM provides a holistic view of the customer across
all of an organization's products and channels. At its best, CRM should address
the following business goals:
 Increased customer acquisition and retention, as well as greater loyalty
 Expansion of profitable, long-lasting customer relationships
 Delivery of a consistent, relevant, high quality customer experience

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  Continuous learning about customers (both business and consumer) and
communication of that knowledge across the organization
 Delivery of the right products and services tailored to meet customers'
needs
 Increased customer equity
 Improved cost management
To properly implement CRM, executives must first uncover the root
cause of the business problem (or problems) hampering success, and then
determine how customer management or integrated treatment of customers can
help solve the problem. starting with a strategy The next stage of the lifecycle
is to develop a strategy for implementing CRM. Traditionally, software
suppliers have been a major source of information about CRM and most CRM
initiatives have been born in IT departments. So it is little wonder that
executives think that all good CRM initiatives begin with the installation of a
tool. Yet tools do not create lasting customer relationships-at least not by
themselves. Companies must begin with a clear understanding of the
requirements for winning customers and then determine the best strategies to
help them reach their goals. The scope of a CRM strategy must be broad,
consider a wide range of variables and have a business impact that affects a
company's revenue performance. Successful CRM efforts are integrated
enterprise wide and span all business units. This is not to say that it is all or
nothing. In fact, specific initiatives should be started to build momentum and
can then serve as pilots of success once the overall strategy is developed. This
way, the company avoids a simultaneous global implementation. Building a
case on revenues, not cost cutting The third stage of a CRM lifecycle is
building the case for CRM. Some organizations focus on cost savings as the
sole justification for pursuing a CRM initiative. They have a logical reason:
Cost savings are easier to measure than potential revenues and executives are
leery of investments without incontrovertible returns. In the case of CRM,
however, focusing on cost cutting rather than revenues can result in several
problems, not the least of which is a pursuit of the wrong initiatives. The most
successful CRM initiatives are those that spell out how CRM will improve the
quantity and quality of a company's revenue. The key is to not only use
performance measurement to track important revenue metrics, but also to look
closely at what is measured and how it is measured. In other words, before
beginning an initiative to track CRM performance, it is a good idea to fully
understand the drivers that produce customer satisfaction and those that deliver
customer value. Contrary to popular belief, customer satisfaction is not the key
measure to gauge whether a company has delivered customer value; customer

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loyalty is. In fact, companies with loyal customers can have profits up to 60
percent higher than competitors. Yet less than 10 percent of companies have a
single, integrated view of the customer-which is a prerequisite for winning
customer loyalty. With this in mind, performance metrics should include:
 Customer profitability
 Customer loyalty
 Customer lifetime value
 Return on CRM investment
Also, when a company implements a performance-metric program, the
goal should be to measure the value of each customer and each customer
contact in real time or near real time. The organization must be able to see a
multi-period income statement by customer, showing acquisition costs, types of
transactions, profitability of transactions and retention costs-ultimately building
up to what is called a "total customer lifetime value view." Clearly, it is
difficult to build a case on increased revenue because it is difficult to quantify
increased revenue. So many other factors affect it-competitors that go out of
business, price elasticity and quality problems, to name a few. Yet isolating the
effects of a CRM program to show a return on the investment is often the only
way to get such a project funded. Creating a customer-focused
organization The fourth stage of a CRM lifecycle is to embed change
throughout the organization-convincing everyone to share a single focus on the
customer. In my experience, the top companies-those that boast the most
successful, cost-effective CRM initiatives-embed change by building an
integrated CRM architecture. In other words, they align and incorporate all
relevant aspects of organizational change. The following are three fundamental
rules of a CRM architecture: Align channels and business processes. By
aligning all channels and business processes against target customers based on
their value to the business, a company establishes an enterprisewide means for
capturing, analyzing and shaping customer behavior. The goal is to create a
consistent customer experience that is relevant to a specific customer or
customer group. Align the organization to provide ongoing value to the
customer. Because the business process drives the organizational structure, a
key ingredient of a CRM architecture is defining and establishing roles and
responsibilities to better meet customers' needs. It is critical that the employees
have a horizontal rather than a vertical view of the customer. The vertical, or
silo, view of a customer has natural walls that inhibit the company's view of
what a customer wants, needs and expects. Leading organizations foster this
new approach through customer-focused business metrics and incentives.
Integrate technology. When technology and business processes are integrated,

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companies gain a better understanding of their customers throughout their
lifecycle and how they interact with the business. General Motors, for example,
combines technology and CRM to offer customers one-on-one service levels-
the kind of service normally attributed to good salespeople who really know
their customers. With an integrated customer database, GM employees-
regardless of business unit or division-are able to recognize all GM customers
regardless of their entry point. What happens to companies that fail to integrate
customer-related functions and channels? For one thing, they miss
opportunities for building greater enthusiasm and customer loyalty, which often
translates into lost revenues. Generally speaking, the more solid the CRM
architecture, the better a company can meet its customer expectations and gain
customer loyalty to improve sales and revenue. Tailoring service levels to
tweak profitability The final stage of a CRM lifecycle is reaping CRM's
benefits. Today, the concept of delighting the customer has created a perception
that businesses should exceed customer expectations at every point of contact
and then just sit back and watch the rewards flow in. In most cases, however,
this is neither necessary nor economical. In a good CRM implementation, every
customer receives the appropriate level of service. After all, not all customers
are created equal. They have different needs, expectations and behaviors, and
offer different value to a business. Treating them as equals by providing all
customers with top-tier service may delight them all, but in many cases, it is not
profitable. Likewise, not all customer interactions are created equal. Some
require "high-touch" experiences, while for others, self-service may be more
appropriate. The challenge for businesses is achieving the right balance
between the needs and value of each customer interaction and the cost to
service that transaction. Remember, consistency often defines and sets the tone
for customer interaction for the future-especially loyalty. An evolution As
markets continue to mature, the pace of technological change accelerates and
customers become increasingly demanding (and confused), customer
relationship management must evolve as well. CRM is a conceptual product
and must move along a similar lifecycle. And, like any other product, it must be
considered an organizational responsibility.
3.2 GROUNDWORK FOR EFFECTIVE USE OF CRM
Customer Relationship Survey Design:
The amount of work it takes to design and develop an effective survey
is often an inhibiting factor that prevents many organizations from more
aggressively finding out what exactly their customers are thinking.

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Graphical design tools:
Sophisticated surveys are used by dragging and dropping elements in
place. Questions include multiple choice, numerical scale and unstructured text.
Branching logic:
Surveys designed and executed can incorporate branching logic to
dynamically present customers with different questions in real-time, based on
their answers to previous questions.
Customer satisfaction Survey Design:
A customized CRM Customer Satisfaction Survey is designed for the
organization or taking an existing survey and altering it to be administered via
the Internet, telephone, fax or newspaper. All customer satisfaction survey
instruments reviewed to assure validity, reliability and bias reduction. Relevant
survey instruments should be composed that will yield sound and valid
conclusions while achieving the maximum survey response rate possible.
Customer Satisfaction Surveys should cover nearly every facet of
customer satisfaction including:
 Overall satisfaction
 Product –level satisfaction
 Importance Vs Satisfaction
 Timeliness of delivery
 Customer service process satisfaction
 Returns and Exchange process satisfaction
 Interest in new potential products and services.
For online CRM customer satisfaction surveys, send a personalized
email invitation to each customer with simple directions explaining how to
access and complete the survey
The organization should offer a number of unique services designed to
help the clients achieve maximum survey response rate possible including
personalizes email reminders to incomplete respondents.
Customer Loyalty Survey:
A Customer loyalty survey is ultimately a reflection of the company’s
desire for customer feedback, as well as an expression of the organization to
potential respondents. As such, whether one is starting from scratch or
modifying an existing survey instrument, there are some key areas of
consideration that should be taken into account. First, start with the overview of
the content areas of the typical loyalty survey:
 Overall perception of quality ,cost and value

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 Measurement of how customers perceive our corporate image
 Detailed questions about the areas where customers interact with you on
day-to-day basis.
Gaining Higher Customer Survey Co-operation:
The following are the steps for higher customer survey participations-
1. Communicating the purpose by explaining what the survey means to
maintain business relationship
2. Asking personal permission to participate in the survey
3. Reminding the customers tactfully
4. Sharing the findings-In some cases, consider an immediate gift of small
value, and/or the chance to win a larger prize by entry to a draw. Online
services are increasingly being used in the distribution of such
incentives such as coupons.
3.3 INFORMATION REQUIREMENT FOR AN EFFECTIVE USE OF
CRM
The employees of a firm employing CRM would require rich information about
their firm and customer base including:
• Information about the market
• Information about the firm
• The current segment
• Demographic Distribution (by age, sex, education, income, marital status,
etc)
• The firm’s best customers and the segment they belong to, products they
buy, preferences, habits and tastes of each segment.
• Individual level information consisting of:
 Customer personal details such as name, address, family details, education,
etc
 The customer group /segment to which the individual belongs
 History of present and past behavior
 Likes, dislikes, habits and preferences
 Events coming up in their personal life etc.
3.4 COMPONENTS OF CRM
Sales Force Automation
Sales force automation automates business tasks such as inventory
control, sales processing, and tracking of customer interactions, as well as
analyzing sales forecasts and performance. Please review the following

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components of sales force automation to gain some insight as to how CRM can
benefit your organization.
Lead Management
CRM assures the leads acquired from your marketing initiatives are
distributed and handled immediately, with the system providing alerts; follow
up tasks and territory assignment through lead workflow guaranteeing your
prospects do no fall through the cracks.
Account Management
CRM maintains a company summary page, allowing you to quickly and
easily review basic client, prospect or partner information This allows you and
others within your organization can quickly view the latest communications,
sales opportunities and support activities. The CRM system allows for easy
reviewing and sharing data across the enterprise with comprehensive account
management by tracking the unique communication, marketing, opportunity,
support cases and detailed company information, even tracking all contact
specific documents in the company level library.
Opportunity Management
CRM enables the tracking of sales from lead acquisition to post-sales
care and every stage in between. A well developed CRM System can be
customized to fit internal sales procedures and processes, making it easier to
monitor sales pipelines. 21CRM has implemented systems with built in Quote,
Order Entry, and Product inventory capabilities - making it easy for sales
professionals to create, contain, and progress opportunities within CRM. With
standard templates all proposals and quotes can be delivered to prospects in
your preferred corporate format.
Forecasting
CRM allows for Sales Forecasting which helps sales users to provide
forecasts to their managers on an as-needed basis. Forecasts roll up throughout
the organization and managers have the ability to add their own assessments to
the forecasts of their direct reports.
Pipeline Analysis
CRM provides users the ability to view, filter and analyze individual
sales at each stage of the sales cycle.
Real-time sales statistics such as Weighted Forecast, Average Certainty
to Close and Value are available on the fly. This allows for the ability to assign
a probability of closing the sale at each stage of the business cycle; providing
management with real-time rolling forecasts and pipeline analysis.

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Contact Management
CRM provides comprehensive contact management by tracking the
unique communication, marketing, opportunity, support cases, and detailed
contact information and related documents.
Activity Management
CRM provides users comprehensive calendaring capabilities to track all
tasks and appointments. With Sage CRM , the calendar conveniently integrates
to your Microsoft Outlook calendars. Which allows tasks, meetings and
appointments to be easy to schedule and monitor throughout the company. This
allows users to set appointments and centralize all company communications
and employee interactions with every one of your customers.
Email Management
Enhanced Outbound e-mail processing allows users to send e-mails
from multiple areas in Sage CRM and create standard, re-usable e-mail
templates. These e-mails can be sent using Sage CRM's built-in email manager,
using Microsoft Outlook or other SMTP email clients and are stored for
reference within the CRM system.
Outlook Integration
Bi-directional synchronization of contacts, tasks, and appointments
between your Sage CRM and Microsoft Outlook ensures that the information
you need is always close at hand. You choose which contacts and calendar
items flow between applications, allowing you to work the way you want to.
Reporting
A well built CRM system will have a multitude of standard and custom
reports reports, along with an easy to use report writer. The ability to drill down
on sales wins and losses, marketing efforts or customer care issues is critical for
analyzing a company's sales successes and failures. With CRM sales reporting,
sales users can focus on the business most likely to close, and therefore shorten
sales cycles.
Marketing Automation
Marketing automation is the use of software to automate marketing
processes such as customer segmentation, customer data integration, CDI and
campaign management. The use of marketing automation makes processes that
would otherwise have been performed manually much more efficient, and
makes some new processes possible. Marketing automation is an integral
component of customer relationship management. Some aspects of Markeing
automation include:

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List Management
Our CRM includes an advanced target lists feature: The ability to create
and update company, person and lead contact lists to any marketing
department. Sage CRM can help accomplish this quickly and easily through
simple point-and-click list management.
Campaign Management
Use CRM to design, budget, modify, track and analyze your marketing
activities. Sage CRM provides the groundwork for an easy-to-use marketing
automation system that helps you track the effectiveness of all of your
marketing programs.
Activity Management
Sage CRM supports multi-media, multi-phase, marketing campaign
management. Mailers, e-mail, telemarketing, tradeshows, advertising, press
releases and more can be organized, tracked and delivered through Sage CRM
Campaign Activity management
Document Management
The Sage CRM document library stores far more than just documents. It
can be used to link all the files your company must maintain within a
transaction to make your audit trail complete. Any materials (.doc, .cad, .pdf,
.wav, .xls and more) you need to store internally as part of communications,
tasks, companies, persons, opportunities and support cases are conveniently
maintained within the Sage CRM Library and are available to whomever may
need access to them.
The Sage CRM Global Library provides a repository for all documents
that CRM users need day to day, such as sales templates, price guides, and
more. This ensures that everyone has access to the 'right version of the right
documents' every time.
Custom Data
There are many reasons that you may need to track additional data in
your CRM system. Client surveys, extended customer profiles, or outbound call
activities may require additional data capture. In Sage CRM, Key Attribute
Data can be gathered and subsequently reported on.
Key Attribute Profiling includes supporting screens for data capture and
easy set up and maintenance. This information is maintained in the CRM
system, allowing your company to analyze historical data on many past
profiles

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Call Management
Telemarketing or conducting follow-up calls in sales or support is easy.
Target lists of prospects or customers can be allocated in such a way that calls
are scheduled as a telesales or support representatives become available.
Sage CRM even integrates with your TAPI compliant phone system to
manage the routing of inbound calls and auto-dialing for outbound calls.
Mass Emails
Sage CRM supports targeted e-mail marketing campaigns by providing
an easy way to create and manage target lists as well as the ability to create e-
mail templates, send HTML e-mail, or e-mail attachments for bulk distribution
Reporting
Budget vs. cost analysis can easily be created through Sage CRM's
built-in reporting engine.
You can view the sales produced from particular marketing activities in
real-time to easily monitor the effectiveness of all your marketing initiatives.
Customer Care
CRM allows your organization to offer the best customer care possible.
Incident Tracking
CRM helps you to improve each and every customer service
interaction. Create, track and analyze customer support issues, enhancement
requests, product questions and more with CRM.
SLA Management
Improve customer service and increase customer loyalty with Sage
CRM. Escalation Management ensures that customer SLA’s are met by
notifying the right people to address customer issues at the right time.
Sage CRM provides companies the ability to set unique service level
agreements (SLAs) for each organization. With Sage CRM, support cases now
have a new "traffic light" monitoring system, which indicates how close a case
is to exceeding a customer's specific SLA. Sage CRM triggers predefined
escalation events at predefined times as part of the case resolution process.
Knowledgebase
Sage CRM includes a Knowledgebase to store solutions to common
support cases. Solutions can be linked to multiple support cases and can be
automatically e-mailed to customers or users.
The Sage CRM Knowledgebase can be made available to customers via
the Customer Web-Self Service Area to provide 24x7 customer self-service.

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Inbound Email Mgmt
Sage CRM included Advanced E-mail management capabilities that can
be used to set custom rules for monitoring and processing inbound e-mails. It
can have different sets of business rules for different mailboxes.
For example, an e-mail that come to a general "technical support" e-
mail address can result in a support case being automatically logged and
rerouted to an appropriate staff member based on customer type, profile and
Service Level Agreement.
Executive Reporting
Sage CRM comes with a robust set of sales, marketing, and customer
care reports that provide company executives visibility into their day to day
operations.
With a built-in report writer and integration to Crystal Enterprise
Reporting software, custom reports can easily be written to meet all of your
reporting needs
Sage CRM includes a CRM Dashboard that gives end users the ability
to create one or more custom dashboards that contains the CRM information
most relevant to their day-to-day work.
For example:
 A snapshot of companies you most often work with
 A list of recently created leads
 A list of high priority customer support cases
 Embedded charts and reports to monitor key performance metrics
 My favorite reports, and more!
Back Office Integration
Sage CRM integration to ACCPAC Advantage Series (Sage ACCPAC
CRM) provides the ability to convert a front-office prospect to a customer in
the back-office system with the click of a button.
Reduce the time and cost of re-entering the customer into the Accounts
Receivable system and protect against human error.
The ability to view a customer's credit limit, balance, hold status and
recent communications allows sales and financial staff to work together. The
integration with AccPac and Sage CRM dramatically streamlines sales order
and collection processes
The ability for sales and customer support to access to Accounts
Receivable invoice history improves account information sharing which, in
turn, improves each and every customer interaction.

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 Sage ACCPAC CRM creates a central finance and CRM data repository
for a holistic view of client information. Now sales and support have visibility
into who their most valuable customers are from all perspectives.
Sage ACCPAC CRM lets users enter quotes and orders directly into
ACCPAC Advantage Series back office through a Web browser.
This reduces order errors, administrative costs, and ensures real-time
inventory status for each and every order.
System Administration
With Sage CRM, workflow is quickly and easily designed to automate
your company's unique business processes.
 Alert Sales staff when opportunities reach a certain stage
 Create “thank you” letters for customers who purchase your products
 Send e-mails when marketing activities reach a pre-defined response rate
 Send SMS or page customer service staff when your best customers call
 Sage CRM's flexible customization engine allows you to easily edit and
extend your system fields, screens, lists and tabs.
 User profiles enable Sage CRM administrators to design the system’s
overall security model, allowing users access to only the information that is
pertinent to them in their organizational roles (customer care, sales,
marketing, and more).
 And much, much more…
Sage CRM grows with you as your company grows and your business
processes change.
Sage CRM has an open architecture that permits integration with
multiple legacy systems. This empowers companies to leverage their existing
systems while taking advantage of a fully integrated CRM solution.
3.5 TYPES OF CRM
Several CRM systems assist the company in its daily activities. They include:
1. Operational CRM
It concentrates on three areas of business processes: the
computerization, enhancement and improvement of services. These areas are
based on offering customer support mostly. There are major automation
applications, which support the CRM systems that aid in the computerization of
marketing, selling and services process.

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These automation applications are:
Marketing automation:
It concentrates on automating the marketing processes. Marketing
campaigns management consists of the use of the actual information of a
specific customer in determining, evaluating and developing communications
aiming at customers in multilevel, multichannel or individual environment. The
campaigns are usually simple and use unique and straightforward
communications. At multichannel environmental level, the strategies used are a
bit hard and pose a challenge to many. The implementation and integration of a
communication strategy is tricky. The performance evaluation and campaign’s
quality should be computerized and be clear to each channel.
Sales force automation:
CRM systems are used in acquiring new customers and dealing with
existing customers. The system identifies a customer and maintains all the data.
The data can be distributed to various stages, which consist of lead generation
for more prospects.
Service automation:
This application deals with managing. Examples of the operational
CRM are the actual interactions with customers like websites, data aggregation
systems, direct sales, call centers and blogs. It enables anyone around the
organization to access customer information and gives actual views of customer
needs.
2. Analytical CRM
This is a CRM type that maintains the analysis and operations of an
organizational back-office. Here, the sales are not done directly to the
customers. This type is made in a mode to analyze critically the information,
the demographics and anything else relating to the customers. The sole aim of
analytical CRM towards the organization is developing, supporting and
enhancing the decision-making in the organization. It establishes the powerful
patterns and forecasts in the clients’ information and data collected from
different operational CRM systems.
Features of analytical CRM
 Deploying and implementing the outcome to improve the effectiveness
of CRM systems and processes, and enhance relationships and customer
interaction.
 Analyzing, determining and developing comprehensive rules and methods
to level and optimize the customer relationship.

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 Getting the entire important customer’s information from different channels
and sources.
3. Strategic CRM
The role of this CRM type is to focus and improve the knowledge of the
customer and utilize it in enhancing and customizing the customers’
interactions in sustaining a strong relationship with them. Developing CRM
strategies uses various steps:
Amplifying commitment:
Strategic CRM is experienced in all business departments of the
organization like distribution, marketing, finance and sales. It is very important
to have the customer support and feedback to help them in determining the
strategies.
Building a valuable project team:
After securing the organizational commitment, the next thing is to
develop the strategies and build an established and valuable project team. The
project team members are always experts and professionals and they are
involved in the decision-making of the company.
Requirement analysis:
The strategy concentrates and focuses on the actual requirements of
business. It involves questionnaires and surveys with high-level sales, financial
managers and marketing to correct all the information and expectations of the
customers in bettering the company. This activity is very important in
developing successful CRM systems that help in business goal achievement.
3.6 WIN BACK
Today’s consumers are smart. Not only will they desert a brand, but
they will also voice their grievances to friends, relatives and acquaintances,
costing more patrons than a brand will ever know. Whether it’s due to failed
customer service or simply a case of “normal is boring,” when customers leave
a brand, it is worth every penny to try and win them back. Here are five
strategies for doing just that:
1. Do a Reality Check: Have They Really Deserted?
Before embarking on a strategy to entice customers back, stop and ask:
Have they really said goodbye? Or are they simply lying dormant in between
purchases? Loyal customers in a “no-shopping” phase require very different
reactivation strategies, while win-back campaigns should reach only customers
who have truly abandoned the brand.
A robust CRM process that studies customer purchase histories can help
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2. Get Up-Close and Personal
Bulk email or text campaigns will be wasted on brand walkouts. They
leave for a reason and winning their hearts (and wallets) back requires extra
effort in creating opportunities that are both personalized and highly relevant to
individual—often opinionated—shoppers. Good strategies include custom
product recommendations or exclusive new product previews based on prior
purchase choices and indicated preferences.
Leverage geographic, demographic and historic purchase behavioral
data to provide lost customers with relevant and timely information on new
product launches, discount offers and seasonal sales.
3. Look Beyond Cookie-Cutter Marketing
Consumers do not come shop for products alone. It is the total shopping
experience coupled with love for your brand that makes or breaks sales. More
importantly, customers’ moods change with each passing day and shopping
trip. Reach out with innovative multichannel communications and programs
that will get you noticed. Whether you send email, texts or snail mail; tag
customers in posts on Facebook or have call center associates contact them
personally—the goal is to stay on customers’ radar screens without driving
them crazy.
View customers as explorers on exhilarating shopping sprees. Show
new facets of your brand with each interaction. Who does not love old wine in
a new bottle?
4. Loyalty Fetches Royalty
Loyalty management is not just about persuading customers to sign up
for programs with tangible benefits. Rather, it’s about getting into their shoes,
walking with them and making their shopping journeys pleasurable. Engage
proactively with loyal customers, help them to climb the loyalty ladder and
obtain increasingly beneficial rewards and bring them closer to the brand by
focusing on their personal choices and preferences. Use customer intelligence
data to derive pertinent insights and empower store associates to provide
superior and enriched shopping experiences.
Deeper brand-to-customer engagement engenders heightened loyalty,
leading eventually to brand royalty.
5. Social Is the New Stratagem
Love social media or hate it; just don’t ignore it. Customers are present
on social media at all times, lavishing praise, voicing concerns, and crucifying
products and services if they feel disappointed or mistreated. Social media has
become the new haven for brand- and feedback-conscious consumers. By

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listening in on digital conversations about a brand—bouquets and brickbats
alike—one can devise powerful marketing programs that pleasantly surprise
and engage loyal customers, inspiring referrals and recommendations to the
brand’s advantage.
3.7 PROSPECTING
The CRM, Prospecting and Sales Management module is designed to
help a sales team to be proactive; an easy method to actively market services to
customers based on past experience. In addition records can be maintained of
potential customers (prospects) and these contacts can also be actively
cultivated. Reports are available that can greatly enhance the efficiency of the
sales team. Customer report cards are available, which show past performance
and future follow-up required. This, together with a call report, helps the sales
representative plan their calls, visits, demonstrations, etc. to maximum
efficiency. It also means that the contact activity is logged centrally and is
therefore available for others to view and understand the activity for a
customer/prospect.
This module integrates with much of the customer activity within the
Gold databases. This interaction, along with the ability to generate customer
attributes specific to the dealership, means that a potential customer can be
approached by mail-shot, invitations to open days, or with specific contact
about wholegoods/vehicles, parts and workshop services. Customer attributes
tend to relate to the individual industry sector, so for agriculture this might
include:
 Farm size
 Main income source – cereals, livestock, forestry, leisure etc
 Buying group member
 Combine brand – Claas, John Deere, New Holland, Massey Ferguson
These selections can be from a drop down list, like farm size or
combine brand, or yes/no like main income from cereals. These attributes can
also be set electronically from information in Gold e.g. bought a baler, now
mark to market for bale wrap, net and twine
It is also possible to store multiple contact details within each business,
e.g. the Managing Director, the Farm Manager and the Owner. Every contact
name, within an existing or potential client, can be held in full detail. Contact
made with a customer can be recorded using tracking and the information is
then readily available to the whole business.
There is a filtering and export tool, which can extract information from
various aspects of the business. For example a service reminder letter could

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include specific information, such as make and model, sales date, serial
number, date last serviced, and warranty end date, that relate to the individual
customer. By using this tool to filter the data you need, and then using mail
merge facilities with Microsoft Office, you can create really attractive and
highly targeted marketing pieces.
The module has the ability to store competitive equipment being used
and this information can be used to create future opportunities. For example;
the Sales Manager could generate a list of all the customers using competitive
equipment that is due for replacement within a given date range. This list can
then be used to automatically create a required action for the relevant sales
person to follow up the potential deal.
The reporting is very powerful too, the system analyses customer spend
by department over 4 periods and then compares the volume of sales. This
report can also set customer attributes based on the results of the report e.g.
increasing/declining spend, active/inactive/at risk/lapsed. The results can be
filtered to show customers who buy new capital items but then do not use after
sales departments etc. This is very powerful customer analysis to help your
sales team actively target this potential spend.
Key features are:
 Integrated with the accounting system so:
o Only one customer/prospect database to maintain
o Ability to look at individual customer spend by department
o Data stored centrally so available to all users
o Secure data, highly sensitive data is safe from tampering
o Filtering ability for customer list based on all departmental
transactions
 Customer attributes – customers/prospects can be analysed/grouped by
business type, turnover, territory/location, size and much more
 Competitive capital items can be recorded for marketing purposes with
replacement due date, end of finance date etc
 Comprehensive extract and filtering tool drives mail merge links to
Microsoft Office Suite – plus ability to create follow-up action
 Future action dates can be set and then fed back to drive sales team call
planning, forming a “to do list”
 Sales team activity and contact can be logged against individual
customers – this is the basis for powerful sales team activity reporting
and sales management task

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  Based on activity you can extract all customers/prospects who have
NOT had adequate sales contact
 Integration with MapPoint to see visual results of report information –
contact made, items sold, potential sales, competitive items due for
replacement etc. The only limit is your imagination!
 New enhancements in development will make this fully web enabled
3.8 LOYALTY
Loyalty programs have been used in commerce for many years,
originating in Germany where price based competition was disallowed by
governmental restrictions in certain industries. In the 1950s, S&H Green
Stamps rewarded grocery store and gas station customers with stamps
redeemable for appliances and other merchandise. The modern day loyalty
program was launched in 1981 by American Airlines, and was quickly
duplicated by other airlines and other hospitality industries including hotels, car
rental companies, and credit card organizations.
Retail loyalty programs evolved when progressive retailers recognized
that without a "customer identification tool," they were unable to recognize
individual customers and reward them for desired behavior. This was in
obvious contrast to banking and telecommunications industries, among others,
that have a customer database as part of their regular service offering.
Both businesses and consumers have recognized the value of loyalty
programs. Only 12% - 15% of customers are loyal to a single retailer, according
to the Center for Retail Management at Northwestern University. But that small
cadre of shoppers generate between 55% - 70% of company sales. Some food
retailers find that as much as 65% - 95% of their sales go to members of loyalty
programs (53% of food retailers offer loyalty programs with 3/4 of program
customers using their loyalty cards at least weekly and 88% at least once a
month).
In general, loyalty programs are often developed with good intentions
but unclear objectives. While retail loyalty programs have many purposes, the
greatest value that is created for retailers is the ability to identify individual
customers and to measure and understand their individual behaviors. This
consumer behavior data far outweighs the "currency" value of providing
consumers the opportunity to build a reward opportunity by shopping at one
particular retail banner. This opportunity is often misunderstood by retailers
and consumers alike.
The basic benefits of using a loyalty program to obtain customer
information are summarized below:

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- Shift - Acquire new customers
- Lift - Increase the spending of existing customers
- Retention - Improve the natural churn rate of customers
- Profit mix - Shift spending to higher margin products
These loyalty program benefits form the basis for all loyalty program
initiatives.
Fundamentals of Loyalty Marketing
For loyalty programs, communications used to focus on tangible
benefits - what we call the "ER" words. That is to say, "Our program is..."
'bigger,' 'better,' 'faster,' 'easier.' These words have ceased to have meaning.
Everything works now. These are the table stakes. As such, the market has
changed in that consumers are demanding more. Rewards have evolved in the
marketplace from being a nice little extra for one's loyalty to being perceived as
an entitlement (partly the result of the commoditzation of loyalty programs).
Concurrently, consumers have shifted, to some extent, away from a desire for
possessions to a desire for experiences - partly due to changing demographics.
Overall, consumers are looking for the meaningful (which includes value and
relevance).
The rising tide of expectations necessitates that loyalty marketers
develop truly innovative loyalty programs, utilizing loyalty marketing best
practices. In reading through this page, and this website for that matter, keep in
the back of your mind the question of how your program can tap into not only
changing lifestyles, but changing attitudes. The answer is not just in the
rewards catalog, but in understanding the fundamentals of loyalty marketing.
It is estimated by Colloquy (2015) that there are over three billion
loyalty program memberships in the US (a 26% increase from their 2013
census) - with the average US household participating in 29 programs.
Approximately 58% of those memberships were inactive(defined as no
engagement within a 12 month period), bringing the average household active
participation to 12 programs. That is a lot to compete with.
Program Positioning
Program differentiation starts with the positioning of your program.
Most programs don't have one - hence why so many programs look and act the
same. Examples of program positionings are:
 Air Miles: "Help Collectors enjoy life more, everyday"
 Citi: "Thank You"
 Tesco: "Every Little Helps"

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 Hilton HHonors: "Rewarding Experience"
Your program's positioning affects everything you do from how you
communicate, to what you offer, to how you want to be perceived. We can't
emphasize this enough. Develop a vision or positioning for your program,
before you even begin developing the mechanics. What do you stand for?
Building a Winning Loyalty Program Strategy
Regardless of how you develop your loyalty program - based on hard
benefits (e.g. a currency) or soft benefits (e.g. access, special privileges,
exclusive partner benefits and offers) - make sure there is alignment between
your customer and the loyalty program i.e. the program supports the customer
experience and not the other way around.
There truly is a sequence you need to go through in developing a loyalty
program. Too many program designers take short cuts and jump to platform
selection or program execution and don't do the basics:
3.9 CROSS SELL AND UP SELL
Cross Selling (selling the customer additional, related, products) and Up
Selling (selling the customer a more expensive version of the product) are keys
to profitability for the seller and are (or should be) an advantage to the
customer.
Fundamentally Cross Selling and Up Selling is a win-win situation. The
customer's needs are better met and your profit is increased. However this only
works if the Cross Sale Up Sell strategy is correct. And that's where CRM
comes in.
One of the advantages of cross selling from the seller's point of view is
that the items which are cross-sold often have higher margins than the main
sell. This is especially true of less expensive items. In fact it's not unusual to
make more of the profit on the sale from cross-selling.
Warranties are an excellent example of this. The total profit margin on a
warranty on consumer goods is 70 percent, split between the seller and the
warranty organization.
Perhaps the most important factor in successful Cross Selling and Up
Selling is the customer needs. Cross Selling and Up Selling works because it
meets the customer's needs at that specific time. A warranty to protect the main
purchase is a very good example of this. On the other hand, offering the
customers merchandise they aren't interested in doesn't do anything except
possibly irritate the customers.
One well-known chain of book stores violated this principle when it
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sinking profits. Unfortunately the chain ordered their clerks to try to cross sell a
different best seller each week. Book buyers, of course, tend to have rather
specific interests and most of them weren't interested in the book being offered,
best seller or no. The result was irritated customers, depressed clerks (who
knew this perfectly well) and very few sales of the offered items.
With that kind of clunky management, it's not surprising the chain went
out of business a few months later.
So how do you know what the customer needs? That's where CRM
comes in. A properly implemented CRM system gives the sales person or
Customer Service Representative (CSR) a 360 degree view of the customer
based on all the contacts the customer has had with the enterprise. By analyzing
that information and using the results intelligently, you'll know what you can
offer your customers that they are likely to purchase.
The information in your CRM system will include things like purchase
history. That can be used to generate recommendations for additional
purchases. If the customer has purchased dog food at the same time they bought
tennis balls, you're probably not going to sell the customer a tennis racket, but
you might well we able to sell that customer an upscale dog collar.
Remember that not all Cross Selling and Up Selling take place at the
time of purchase. You can analyze the information later and provide timely
follow-up offers by email or regular mail. The trick here, in addition to
targeting, is to strike while the iron is hot. Your sales or marketing team should
follow up quickly while the purchase is still fresh in the customer's mind.
Another use for CRM is to develop highly targeted campaigns aimed at
specific customer segments. This is a very successful technique – if you have
correctly identified your target market and their interests. The downside of such
campaigns is that they will miss utterly if you haven't correctly identified the
market segment. With CRM you can analyze the sales patterns. A customer
who purchases high-end synthetic motor oil by the case isn't likely to be
interested in your cheapest brand of tires. Neither is the customer from a high-
income zip code who buys off-road accessories.
Another advantage of a successful Cross Selling and Up Selling strategy
is that is can improve customer relations and cement customer loyalty. A
properly conducted offer of Cross Selling and Up Selling is taken by the
customer as an expression of interest in the customer and builds a sense of
loyalty.
Cross Selling and Up Selling means reaching the customer at the right
time. If the customer has made a purchase, his or her mind is focused on your
product. Now is an ideal time to suggest additional, related, items for purchase.

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 It's important to recognize that the Up Sell Cross Sell is not a shotgun
approach to selling. Rather it is a carefully targeted offer of additional, or
substitute products to particular customers.
However Up Selling Cross Selling faces barriers that have to be
overcome. Some of the barriers are internal. Everything from corporate culture
or commission structure can work against cross selling and upselling. It's
important to tear those barriers down.
Ignorance is another problem. Everyone has heard of cross selling and
up selling, but a lot of sales reps and CSRs don't know how to go about it. Here
the answer is training. There are many programs today that will teach your
people the art of Cross Selling and Up Selling.
Another difficulty is the state of your database. According to recent
surveys, as much as 17 percent of the customer data in a corporate database is
duplicated, corrupt or just plain wrong. This may have been good enough in the
pre-CRM era, but it is no longer acceptable. CRM works your customer
information harder and accuracy becomes more important.
One direct mail organization found it had massive problems with
incorrect data when it tried to make use of its customer information to upsell.
Among other things, the company discovered it had no less than 18 different
ways of spelling McDonald's, the hamburger chain, and that a large portion of
the prospect base consisted of duplicates.
You can find out if you have a problem with database integrity by
auditing your customer information. Pull a sample and cross check it for
accuracy. If you find a lot of problems, you need to consider how to clean up
the data.
Drive cross-selling and up-selling with CRM, by thinking people – not
software. It’s six times easier to win business from an existing client than win a
new one. While CRM is a great toolbox for the complete sales cycle – cold
prospect to red-hot lead – Customer Relationship Management needs to be
looked at from another perspective: cross-selling and up-selling. In today’s
market, concentrating on the customers who know you best can increase
turnover and margins faster than any headline-grabbing push into new sales
territories. You should still be chasing fresh custom of course, but retaining the
customers you already have is just as important.
A panoramic view across your existing customer data can uncover
opportunities for cross-selling and up-selling that deliver greater value to your
customers, as well as your bottom line. Communicating those insights to the
sales and marketing teams is important if they are to make appropriate use of

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them. These practices and processes can be embedded into a self-sustaining
cycle of continuous improvement.
Successful CRM: Far From The Normal
Between 60-70% of CRM implementations fail to meet expectations. A
further 10-25% of CRM projects just about meet expectations, but don’t deliver
the terrific upswings in sales and conversions customers expect. The rest
deliver great ROI, strong user adoption and a more complete view of customer
relationships. A successful CRM implementation will benefit your business in a
variety of ways, so here is a guide that will show you how to do it.
CRM Is Not The Product, It’s The People
It doesn’t matter how innovative the application or how elegant its code,
CRM isn’t about software. It’s about the people who use it. Understanding their
needs, answering their motivations, encouraging their hopes and dreams. More
than half of CRM projects fail due to lack of customer insight (53%). Every
organisation adopting Customer Relationship Management that understands
this stands a great chance of escaping that mediocre 95%, and getting into that
5% for whom CRM is delivering payback.
Cross-Selling Is Turnover, Up-Selling Is Margin
But I believe you can go beyond even that. Not just into the top 5%, but
that 0.3% beyond the third Standard Deviation. The three in a thousand for
whom CRM truly defines success. These three steps – each with three actions –
suggest how.
Cross-selling is the art of selling your customers different but related
products and services. If you sell cars, sell servicing plans. In financial terms,
cross-selling is about increasing turnover: your topline sales. However much it
adds to turnover, if those extras carry low margins, cross-selling doesn’t do
much for your profit. That’s the job of up-selling. Persuading customers to buy
bigger and better.The 3.2L V6 instead of the 1.6.The free-range organic egg
instead of the battery barn one. Up-selling increases margin: your bottom line
profit.
So together, cross-selling and up-selling boost two important metrics:
sales and margins. Let’s explore both – starting with the people.
Step 1: Identify opportunities by looking for patterns
The standard dashboard of any CRM application creates charts and
graphs across your entire database. But an average is just that: average. What
do averages do? They hide all the interesting traits and factors that show up
when you slice your total dataset into smaller parts.

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1a: Ask your people for war stories… and list them
Averages aren’t people-shaped. So that’s the first step to exciting your
staff towards using CRM effectively: show them the potential among your
existing customers. Get your team together, even if you have to take an
awayday. Ask them to describe what tips and tricks they find most useful
before approaching a customer.
Do they have a sense that repeat orders happen best in the first week of
the quarter? Do up-selling orders rise in sales territories where the local team’s
just won a big sports event? Such anecdotes and tacit knowledge are a lot more
than lore: they’re secret weapons. Human cognitive biases are fairly standard
across populations. Many of these tips and tricks can be hardened into reusable
cross-selling and up-selling techniques.
Imagine how great your people would feel if they knew their little
insights could benefit themselves, their colleagues and most importantly, their
customers.
1b: Segment to unite, not to divide
Out of the box, a CRM application will segment your database by
standard factors: sector, company size, turnover. To make your people fanatical
about CRM marketing, segment differently. These different approaches can
include ways in which your staff are united by their own tacit knowledge about
customers.
The trick is to test their hunches! If they believe there are always easier
conversions in the first week of the quarter, test that assumption against actual
data. If it checks out, you’ve got a smarter sales plan and resource allocation
plan in the making. More importantly, you’ve turned salespeople on to the
concept that CRM is the path to personal success. Customers don’t divide
themselves into sectors and sizes: databases do. Start looking at your data in
terms of human factors and you’ll be on your way to success.
1c: Imagine your ideal database
When you’ve found hunches that check out – actions that result in the
shortest sales cycles, the smoothest nurturing pathways, the highest sales
volumes – imagine what you’d need to duplicate that performance across your
roster.
Are those great customers all under 100 employees but growing? All
just received a round of funding? All in the same region? Instead of gathering
leads semi-randomly, you can actively develop prospects who share the factors
you’ve identified as common to your best customers. If you’re already known
in a developing industrial cluster, the whole of that cluster can be yours.

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 Imagine what the sales funnel could look like if you woke up all the
cold leads in your database who happen to share those non-standard
characteristics. Share that revised funnel with your sales team and calculate
how much those opportunities are worth. Fish where the big fish are. This fires
up your sales people and makes them feel the CRM system is on their side.
Step 2: Communicate methods, by sharing models
Once you’ve turned a few anecdotes into evidence-based customer
journeys, share your findings. You don’t need many to start – this is about
getting your team on board with the concept of CRM, not rolling out a new
strategy. Over a third of CRM vendors provide poor user training.
2a: Motivate your sales guys, by showing them what’s worked
Especially if they’re the ones who came up with the idea! Share the
story of how Mike in London’s idea led to a 12% uplift in the annual fee from
Customer X. Or how Sharon in Newcastle’s anecdote about one customer
turned into a £500,000 up-sell opportunity for her team. For a newly-minted
sales person whose normal career progression would be one-dimensional
(making his targets), CRM can help him become a respected mentor within the
company, adding to his job satisfaction and value.
2b: Show how value is added if everyone’s on board
This is the right point in the adoption process to demonstrate these
benefits come when everyone uses CRM – no exceptions. Ideas gain value
when they’re tested against data – all data, not a subset. If people aren’t putting
their numbers into CRM, those findings get distorted and everyone’s
opportunity is smaller. When people’s ideas can be verified and given weight
by CRM, there’s a huge incentive for sales people to use it.
2c: Demonstrate what it does to their commission
Lastly, think about making such findings from CRM part of your
incentive programme. With concrete commissions attached, their ideas are
proven and lead to success in other regions. You’ve then conquered the
common problem of salespeople keeping their best information to themselves –
because they can profit from helping colleagues outside their own sales
territory.
Step 3: Execute with an eye on continuous improvement
Of course, best practice means little without repeat execution. So your
third task is to embed the business processes that consistently deliver these
opportunities and information to everyone involved. And that’s where CRM
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3a: Automate your best practices
What worked in one sector can work in another. So if a sales person’s
anecdote turned into a productive contact strategy, roll out that CS to all
customers united by the same criteria. CRM applications let you set trigger
events, channel choices, tickle dates. Imagine the power of a memo stating
“20% of Tier-3 customers become Tier-2 within 90 days if these offers are
made to them on this schedule. There are 200 Tier-3 customers in your
territory”.
3b: Give them lists that match criteria
There’s nothing a sales executive loves more than an annotated list of
contacts ready to add to their monthly purchase volume today. A well-set-up
CRM system can not only build those lists, but deliver them – complete with
tested sales scripts and preferred contact channels. Of course, you get even
greater internal buy-in if those call lists include the size of each opportunity and
its probability of closing. Just make sure every projection is based on actual
data, because if it’s accurate, it’ll be trusted. Keeping your sales team on-side.
3c: Spread the word across social media
A last word. It’s not strictly cross-selling or up-selling. It’s even better –
cross-marketing and up-marketing. The best CRM applications work with more
than a single database: they see connections outside that database. They can
look at news feeds and flag when a name appears. They can track social media
and alert you when a follower in your database ‘likes’ you. All are signs that
prospect is moving down the sales funnel.
Cross-selling and up-selling opportunities aren’t limited to your existing
roster. Maybe your key accountant’s at his budget limit for this annual… but
his key account isn’t. His customers are also in the market for your products
and services. The right CRM system can flag up such opportunities when they
happen. You’ll know your CRM rollout has succeeded when your sales team
start crediting it for their successes… and start encouraging everybody new to
use it, without pressure from the Sales Director.
Increase Customer Conversions, Starting With Your Existing Customers
A lot has been said about the value of cross-selling and upselling when
it comes to the bottom line. It's Marketing 101. It is easier and a lot less
expensive to cross-sell to existing customers than it is to find and woo new
clients. In "Marketing Metrics – The Definitive Guide to Measuring Marketing
Performance," written by Paul W. Farris, research has shown that it is 50
percent easier to sell to an existing client than to someone who has not bought

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from you before. If you get it right, you can really add value for your client and
further cement the relationship.
Cross-Selling & Upselling
You cross-sell when you identify a different product that will suit your
client’s needs. The products should be in some way related to your product. An
example of this would be selling a client who has just bought a Web hosting
package additional website building software as well.
The term upselling refers to the offering of additional features or a more
costly version of what a client is considering buying. An extended warranty is
one such example of upselling.
Getting It Right
The key here is to try and create a win-win situation. You have already
developed some kind of bond and trust with the client, so you are in a good
position. You do not, however, want to turn into a pushy sales person, that will
ruin the relationship.
If the client feels that you are just trying to make money, they will no
longer trust you and they will be less likely to return in future. According to a
study conducted by McKinsey, 70 percent of buying decisions are based on
how the client feels at that very moment.
If the client feels that you are looking out for their best interests, that
will strengthen the bond of trust already created. You need to identify a need
that the client needs fulfilled and match the product accordingly. Remember, at
the end of the day, everyone wants to feel as though they have been properly
listened to.
According to a study conducted by Bain and Co., around 80 percent of
companies surveyed believed that they were offering superior service.
According to the clients surveyed, only 8 percent actually did deliver superior
service.
80% of companies believe they offer superior service; only 8% actually do.
-Bain and Co.
Let’s look at an example. Say that you sell a client a laptop, it would
make sense to sell them software and possibly a laptop case as well. It is
important here to listen to the client properly and identify cues from them as to
what software they would find useful. If the computer is for home use, for
example, it would not make sense to try and sell them an accounting program.
However, photo editing or anti-virus software would be likely to be well-
received.

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 It is all about reading the cues properly. You need to gauge whether or
not the client would be receptive to the upsell or cross-sell and be prepared to
back off if they really do not seem interested. Put your value proposal forward
and then leave it up to the client. If they are interested, all is good and well. If
they are not, let it go.
Even if they do not take you up on the offer, the seed will be planted
and there is a possibility that they will come back at a later stage. By not trying
to push the sale, you are letting the client know that the relationship with them
is more important than making that last sale.
This enhances the customer’s experience and creates a positive
connotation with you and your company. The same McKinsey study also found
that 85 percent of clients who had positive experiences with the company
would in turn, return and buy more products or services. On the other hand,
after a bad experience, 70 percent would actually decrease their commitment to
the company.
Positive client experience is worth a lot more than simply making
another sale. That client will reward excellent customer service with increased
loyalty and will certainly recommend your company to their friends.
Communication is Key
Key to this process is providing enough information to the client prior
to the sale and to also give them after-sales support. Your client wants to be
able to contact you when necessary and you need to make this as simple as
possible.
Not everyone is happy to send in questions via email or online contact
forms. Sometimes clients feel that real-time communication is essential. You
can facilitate this by offering multi-channel communication. Give your client
choices when it comes to being able to communicate with you. This could
include a help line, live chat, email or contact forms allowing the client to
choose the format that they are most comfortable with.
70% of buying decisions are based on how a client feels at that very
moment. -McKinsey
The upside of enabling them to contact a call center directly, whether
through live chat or via phone, is that the consultant is better able to understand
what the client’s needs are. This increases the chances of creating a favorable
client experience and also increases the chances of being able to upsell or cross-
sell products.
That is where a service like Zipwire becomes invaluable. The cloud-
based contact service can coordinate inbound and outbound communication on

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your behalf leaving you free to concentrate on the day to day running of the
business.
The system can be set to assign calls to consultants based on the skills
necessary to achieve resolution. This is an important process in the customer
service game. For excellent client service to be a reality, the client’s contact
with your company has to be dealt with as efficiently as possible. As far as
possible, this should mean resolution at the first point of contact.
The efficient management of calls will also lead to an increase in
employee productivity. If you allow your consultants to stick to the areas that
they know best, there will be less time wasted overall and more time that can be
spent on furthering the client relationship.

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 UNIT – IV

4.1 CRM PROCESS FRAMEWORK

4.2 GOVERNANCE PROCESS
4.3 PERFORMANCE EVALUATION PROCESS
4.4 IMPLEMENTATION OF CRM
4.5 BUSINESS ORIENTED SOLUTIONS
4.6 PROJECT MANAGEMENT
4.7 CHANNEL MANAGEMENT
4.8 CRM IN SERVICES.
4.9 CRM IN FINANCIAL SERVICES.

4.1 CRM PROCESS FRAMEWORK

A four stage relationship marketing process was developed by Atul
Parvathiyar and Jagdish. N. Sheth. The model suggests that relationship
marketing process comprises of
Four sub processes:
 Formation Process
 Management and Governance process
 Performance Evaluation process
 Relationship Evolution or enhancement process.
The generic model is shown in the figure.

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Relationship Marketing Process Framework

I. Formation Process of Relationship Marketing:

The formation process of relationship marketing involves the decisions
that must be made regarding the initiation of relationship marketing activities
for a firm with respect to a specific group of customers or an individual
customer with whom the customer wishes to engage in a cooperative and
collaborative relationship. In the formation process, three important decision
areas relate to defining the purpose (objectives) of engaging in relationship
marketing, selecting parties (customer partners) for relationship marketing and
developing programs (relation activity schemes) for relationship marketing
engagement.
II. Management and Governance Process:
Once a relationship marketing program is developed, the program as
well as the individual relationship within it must be managed and governed. For
mass market customers, the degree to which there is symmetry in the primary
responsibility in deciding whether the customer or the program sponsoring
company will be managing the relationship values with the size of the market.
However, the programs directed at distributors and business customers, the
management of the relationship require the involvement of both the parties. The
degree to which these governance responsibilities are shared or managed
independently depends on the perception of norms of governance processes
among rational partners given the nature of their marketing program and the

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purpose of engaging in the relationship. Not all relationships are managed alike.
However, several researchers have suggested appropriate governance norms for
different hybrid relationships.
Irrespective of whether relational partners undertake management and
governance responsibilities independently or jointly, they must address several
issues. These include decisions regarding role specification, communication,
and common bonds, planning process, process alignment, employee motivation
and monitoring procedures.
III. Performance Evaluation Process:
Companies need to undertake periodic assessment of the results of
relationship marketing in order to evaluate whether or not programs are
meeting expectations or whether or not they are sustainable in the long run.
Performance evaluation is also useful because it allows firms to take corrective
areas of relationship governance regarding continuation, modification or
termination of relationship marketing programs.
IV. Evolution Process of Relationship Marketing:
Individual relationships and relationship marketing programs are likely
to undergo change as they mature. Some evolution paths may be planned,
where as others will evolve naturally. In any case, the partners involved have to
make several decisions about the evolution of their relationship marketing
programs .These include the decisions regarding the continuation, termination,
enhancement and modification of the relationship engagement. Several factors
could affect any of these decisions. Among these factors, relationship
performance and relationship satisfaction are likely to have the greatest impact
in the evolution of relationship marketing programs. When performance is
satisfactory, partners would be motivated to continue or enhance their
relationship marketing program. When performance does not meet
expectations, partners may consider terminating or modifying their relationship.
When companies can chart out their relationship, they can engage in relatively
systematic relationship marketing programs.
4.2 GOVERNANCE PROCESS
When Process Solutions Complement CRM
Make a solid first step by understanding and defining what user groups
need support and how that support will be delivered across the enterprise and
presented to customers. Be aware of the degrees of cross-system coordination,
find places to cut manual work, acknowledge the role of the knowledge worker,
and characterize applications access and customization.

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Determine Goals and Operating Frameworks
Because business process projects are iterative and center on improving
business objective performance, the projects often sidestep a fixed work
schedule. To that end, Forrester reports more enterprises adopting a target
operating model (TOM), an abstract representation of how an enterprise
operates across process, organization and tech domains to deliver on its scope.
Adopt an Agile Implementation Philosophy
Keep BPM methodologies in mind, especially with the skills required to
use business process solutions. With those ideas factored in, IT and business
can stay on the same page of the new CRM process with cross-functional team
planning and “bite-sized” phases.
Track Process Change Management Closely
Sea changes in the business process practice offer an optimum time to
frame a change management initiative. To truly move the enterprise toward a
new process-centric mentality, Forrester recommends putting in place a change
vision that includes a detailed change plan, governance structure, change
management methodology, execution plan, performance incentives and
continuous assessments.
4 Best Practices for Process-Centric CRM
To access the full report by Forrester researcher/analyst William Band,
which includes pitfalls the avoid along the process path,
4.3 PERFORMANCE EVALUATION PROCESS
In order to realize the investment toward any CRM initiative, it is
crucial for businesses to have a CRM evaluation method (or CRM metrics) in
place. The prime concern of a CRM system is to improve relationships with
customers and generate higher revenue. Therefore, it is necessary to identify if
your CRM is intended to track the efficiency of the sales and marketing team,
or is it to build a strong relationship with your customers? The answers to
questions like this will help determine the focus of CRM performance. Once
the objective of CRM implementation is clearly defined, you can go ahead
evaluating the best CRM for your business.
Here are a few major points that can guide you in evaluating a CRM
system at its face.
CRM ROI
Depending on the type of implementation and the strength of
organization, CRM initiative can be a complex and costly venture. Thus your
selected CRM should:
 Provide tangible and measurable ROI

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 Help calculate the real business benefits
 Enable accurate budgeting and reduced resources
Ease of Use
Implementing a CRM system should:
 Simplify customer relationship and business processes
 Provide a user-friendly interface
 Allow ease of CRM navigation
Simplified Workflow
A CRM system in place, should help:
 Perform the various tasks easily
 Present simplified workflow logics
 Encourage easy adoption by users
Customization
The real efficiency of any CRM implementation lies in:
 Flexibility to change the default CRM setup
 Provision to mould the CRM to your business process
 Provision to rollback to the default CRM setup
Integration
The drive to maximize the value of your customer relationship necessarily
demands the CRM system:
 Provide well-defined integration architecture
 Enable cross-application business process
 Reduce implementation time for custom integration
Post-Sales Support
No CRM system is complete without the end user help files. Besides the
tips and tricks to efficient performance, your CRM implementation should
have:
 Reference documentation for users
 Ready on-line support
 Notes and tutorials to complement documentation
Evaluate Employee Performance with CRM
If you’re a sales manager, at some point you’ve probably run into
challenges assessing the performance of your employees. That’s because it’s
not an exact science. Without a system in place, how do you really know how
well your employees are performing? For example, let’s say you give each of

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your sales reps a lead to follow-up on. Rep 1 ends up making the sale while
Rep 2 does not. Does this mean Rep 2’s performance is suffering? Maybe,
maybe not. Sure, it is possible Rep 2 dropped the ball, forgot to follow-up with
the lead or didn’t do a good job explaining the benefits of your product. But it’s
also possible he was diligent in his follow-ups, cultivated the relationship and
did a stellar job answering questions and explaining the product. He just didn’t
land the sale because it wasn’t a good lead. In this instance, without a set of
metrics in place, how will you analyze employee performance?
That’s where CRM can help. CRM solutions present managers with the
tools they need to evaluate employee performance. They enable managers to
measure the effectiveness of internal processes, examine the activities of their
sales force and explore customer service transactions. It’s like giving you X-
Ray vision into all the activities in your department.
With a CRM software solution in place, you can easily determine how
many calls your sales reps are making, how often they’re following-up with
customers, how they are contacting them, what stage of the sales cycle they are
in, and so forth. You can run reports to study CRM performance metrics such
as close rates, conversion rates, sales by contact method, average purchase
value, and so forth. These CRM performance metrics can also be evaluated by
individual, group or region, giving you a lot of flexibility in your analysis.
Once you have a solid system in place for evaluating employee
performance, you can begin addressing how to improve it. Most salespeople
know what their strengths and weaknesses are, so begin by asking them to
assess their own performance. This process ensures critical buy-in and allows
you to build on your self-appraisal.
Once your employees have given you their own assessments, relate their
feedback with your CRM performance metrics. Don’t pile on too many areas
for improvement. Rather, pick the needs with the greatest potential for payoff
and leave the smaller challenges for a later time. End session with an action
plan, including provisions for follow-up in CRM. If you’re serious about
helping your team develop their skills and use CRM, coaching needs to be a
continuous loop, not a series of random, unconnected events.
Put these practices into action and watch the performance of your sales
team take off.
4.4 IMPLEMENTATION OF CRM
In my last blog I gave you some tips on how to structure your workday
(8 Ways CRM Software Can Help Reduce Cost for Your Business). These tips
refer to what you as an individual could do. This time I will focus on
organizational structure.

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Whether you have chosen a CRM vendor or not, it is a good idea to prepare for
the organizational challenges you may meet:
 What does it involve of resources?
 Do you need to make organizational changes?
 What are the goals or benefits you expect to get out of the CRM system?
 Do you want a cloud or a server solution?
When you implement a new IT system, the whole organization needs to
be in sync. It has to be a combination of a set of official guidelines and personal
involvement. A good project manager is essential and the way to success lies in
good internal communication. A CRM system is not just technology; it is a
strategy and a philosophy. Here are 7 tips of things to consider when
implementing a CRM system:
1. Anchorage in the top management
It may sound obvious that a project that involvers all parts of an
organization needs top management involvement, but in order to inspire and
build credibility, top management is crucial. They drive the opinion and culture
in the organization and their early adaption gives a synergy effect on the whole
organization. So get them involved!
2. Project manager
When you are implementing a new CRM system the most important
person is the one that has the overall management and the mandate to run the
project. The selected person should drive the project so that the steps get done
and the goals are met. It does not have to be someone from the management,
but a do-er with enthusiasm, passion and focus on details.
3. Super-user
A super-user or a CRM responsible is not the same as a project
manager. This is the person in your organization which is assigned as the super-
user of your new system. He or she just loves the new system and wants to
learn everything about. When others in your organization have problems or
need support, this is the internal person to go to, the “know-it-all”. This person
is also often the contact point towards the vendor, and will be the first to get
information about new version etc.
4. Launch with a BANG!
The mantra for real estate agents is location – location – location. For
the project manager it should be motivation – motivation – motivation. Sell it!
Internal marketing is sometimes underestimated, but when implementing a new
CRM system you need to sell it to your colleagues. Make a cool article on your
intranet, a poster, a special launch t-shirt, internal launch party etc. It doesn’t

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have to cost a lot of money, but something to mark the launch and create
enthusiasm. But unfortunately you can’t rest on your laurels, now the lobbing
starts. Walk around, ask people how it’s going and help them along.
5. Internal guidelines
As mentioned before in other blog posts on this site, a CRM system is
only as good as the data put into it. It is essential that some common guidelines
are set. For example how to include new company data or register a sale. If
Trine, Steven and Marie all register their sales in the CRM system, but Michael
doesn’t, then it is difficult for the sales manager to take out correct sales
statistics. The guidelines should be written down and can be published for
example on your intranet. Or if you start with Super Office CRM, use our
collaboration tool Audience.
6. Training
We are all different; some people get a kick out of a new system and
start to use it right away. Others may be skeptical to a new way of working.
The project manager should have strategies to handle both user groups. You
can choose classroom training from a vendor, or if you have assigned an
internal super-user he or she can do the training in your office. You should also
include an introduction to your CRM system in the internal training program
for new employees. New employees will then, form the start, get on the right
track.
7. Strategy
CRM is, as mentioned earlier, not just technology but a philosophy.
When you implement a CRM system your whole organization needs to re-think
all routines and each individual needs to change their work pattern. This is a
challenge and requires a strategy to cope with negative attitude on all levels.
Despite the fact that it over the last 10 years have been written a lot about
CRM, clarifying the shift from only a sales perspective to a 3600 view, many
people still look at CRM as only a sales tool. You might encounter attitudes
like “in Finance we work in a different way, and have no need for a CRM
system” or “I have all my emails saved in folders in Outlook, so I know how to
find them”. Prepare yourself! I can give you a lot of good arguments for
implementing a CRM system, but in my book the no. 1 argument is: When in a
workplace the company owns your production, and a CRM system ensures that
all documentation is stored in one common database owned by the company.

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 I would say that the Achilles heel to all IT systems is user-friendliness.
The author of “Stupid bloody system!”, Jonas Söderström, addresses the
problems of poor data systems in a work environment perspective. He claims
that the problem with too many data systems has become so imperative that it
has to be addressed before it ruins the work environment. Strange reference
from a software vendor you may say? But he addresses a very important point –
you need to put in the time and effort to evaluate before you choose a new IT
system. Not only the technology should be in place but also design and user-
friendliness are important to ensure that the users will love it, and that you can
see results from your investment.
Implementing a Customer Relationship Management System in Your
Organisation
There are many Customer Relationship Management systems available.
But CRM is not just software or automation of business processes. It is really a
culture: a way of thinking within an organisation which is focused on the
provision of top quality customer/client service through intelligent
communications and a holistic, person-centric view of your clients.
Choosing and successfully implementing one requires multiple processes:
Understanding the benefits of CRM to your organisation
 Build and strengthen the relationships with your clients
 identify and provide value-added services to meet the needs of your clients
 improve your ability to identify and respond to needs
 increase staff awareness of client needs
 Resolve client issues more quickly and efficiently
 make beter decisions through a single view of the client

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Understanding the requirements and processes of your organisation
Analyise your business processes. Document who does what and when,
tracking how information (probably paper documents) move from desk to desk
and department to department. Draw diagrams and look at where there is
duplication, dual entry and movement of paper. You should begin to see how
information moves about the organisation and where efficiencies can be made.
Agreeing shared goals and vision for the CRM in the organisation
Ask everyone in the organisation what they want. Compare this to your
analysis and then ask them again what they actually really need. Concentrate
firstly on the outreach staff: those who are frequently out of the office and
interacting with people. Whilst support staff are generally quite comfortable
with automation and systems, outreach staff often do not see their roles
involving any such thing, so you cannot take their cooperation for granted. A
truly successful CRM system will have to meet the needs of the outreach staff.
It will have to be useful to them and easy to use. Office staff will be able to fit
in around that. Remember that the office staff are the prime beneficiaries of
CRM, but the outreach staff make it a success.
Articulating the benefits of CRM to key individuals in your organisation
The strength of CRM is that anyone in an organisation can access the
history of a given client at any time to review the status and update it. When a
client calls, they then get the "VIP feeling" because the client feels that every
employee in the organisation is aware of them and their issues.
But CRM is not just software or automation of business processes. It is really a
culture - a way of thinking.
Get senior management to embrace the idea of CRM first. They need to
champion the adoption of it if the organisation is to engage in the cultural shift
necessary for successful implementation and reap the rewards. Work similarly
with someone from the outreach staff and someone from the office staff, each
of whom is respected in the organisation. Their opinions count, so the system
will need to make them happy. Once they have been convinced of the benefits
of CRM, they will influence the opinion of and ultimately the adoption of the
system by other within the organisation. These key stakeholders must be seen
to use the system as their prime information source when it is being
implemented. These influential people will influence the behavior of everyone
else.
Engineering a culture of CRM within your organisation
Internal systems need to be sold to staff. Without their buy-in, you are
throwing money away. The implementation of CRM needs to be planned and

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rolled out in a managed fashion. With the support of senior managers and key
staff of influence, you can begin to demonstrate the effects and benefits of
CRM, but it is necessary to stay supportive and encouraging in order to win the
hearts of the staff team. Concentrate on what is in it for the staff, just as much
as why it is good for the organisation as motivation is as important as
understanding. Training is absolutely necessary, and a training session is an
ideal time to sell the benefits of the system to all concerned. People need to
have their fears and reservations abated , so that they do not become barriers to
adoption.
CRM is a tool with huge potential for any organisation, and its
successful implementation is a serious challenge. It combines the technicalities
of business process analysis with process automation, change management with
selling a concept and training and support with an ongoing commitment to
ensuring that the right data goes in so that the correct decisions come out.
Good practice needs to come from the top. Only if the whole
management team jointly agree that the CRM system is a key part of meeting
the organisation's objectives, and then use it and be seen to use it themselves,
will the full benefits be realised.
4.5 BUSINESS ORIENTED SOLUTIONS
Paraflow has specialization and expertise implementing business-
oriented solutions from Microsoft, which consist of Microsoft Dynamics AX
and Microsoft Dynamics CRM.
These solutions cover all business areas with their business processes.
They cover resource management (ERP) and customer relationships
management (CRM) in organizations and enterprises. They are versatile and are
organized as a set of functional modules, which functionality covers the most
specific needs of companies high demands about financial, commercial,
logistics, manufacturing activities and relationships with customers and
partners. These solutions are suitable for both national and multinational
companies with international business and distributed holding structures and
for smaller enterprises of medium type.
Microsoft Dynamics AX is a complete solution for managing
production, logistic and sales.
The system can be implemented in stages, starting with functionalities like:
 Finance and Accounting
 production
 distribution (sales and warehouse)
 purchases (Supply Chain Management)

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 At a later stage it is possible to add additional functionality like
management of customer relationships (CRM) and human resource
management.
Microsoft Dynamics CRM is a versatile modular system with high-end
functionality for customer relations management.
The system covers all areas of business activities and all business
processes within the organization.
It is suitable for both national and multinational companies with
international business and distributed holding structures. Meet the needs of
those companies that have high requirements for financial, commercial,
logistics and manufacturing activities.
Distinctive features and advantages of the system are:
Modularity. allows implementation of the solutions per stages
according to the needs and capabilities of organization.
Each module of the solution covers a variety of business processes and
with little efforts can fit exactly in organizational structure of the company. The
company decision makers can choose where to begin and how many modules
to start with. Adding modules can be staggered, without compromising system
performance.
Flexibility. Microsoft Dynamics AX has a high flexibility in technical
terms, which allows individual modules to be adapted to the specific
requirements of each organization according the needs of the business.
Familiar interface. Microsoft Dynamics AX works with well-known
graphical environment, an intuitive interface, which significantly reduces the
stress on the end users through the process of implementation of the solution
and initial operation.
Integration. Microsoft Dynamics AX easily integrates with Microsoft
Office (Word, Excel, Outlook) and many other software systems and solutions.
BI solutions
The solution offered by Paraflow for BI, based on QlikView offers
business customers to respond to business issues in real time through easy
access to data at the right time and the ability of users to work with easy and
affordable product.
It offers a unique elegant and simple way to obtain independent
business reply with just one click of the mouse. With its associative search, data
are analyzed both as summary as in detailed level, without requiring time-
consuming and expenses to build multidimensional OLAP (OnLine Analitical
Processing) cubes. In addition, associations between different data are done

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automatically and instantly reflected to user requests. This solution allows to be
presented thousands of quantities. Each value of evry variable or parameter
may serve as a starting point for analysis. Customer advantage is that data have
no need to be aggregated. Users can analyze the entire dataset to a transaction
level.
One thing is certain - the amount of data is steadily increasing. A
business requires reducing the waiting time between receipt of data and
decision making. Therefore BI systems must meet stringent requirements for
speed of loading and updating data. In-memory data model allows data to be
analyzed immediately.
The solution works on mobile clients like Smart Phones, iPhone, iPad
and others and customers can access data and make their BI analysis at any
time and any place.
Solutions for information portals
Proposed solutions may have a modular architecture and can perform
various business functions such as: B2E, B2C, B2B and more.
Key benefits:
 single location for shared work
 opportunity to work on shared documents, task assignment, creation of
knowledge bases
 easy management of services and policies set in portal solution
 traceability of the processes
 automation in processing of structured or unstructured documents
 ability to automatically post information by specific criteria
 ability to integrate different systems and applications as single environment
from user perspective
 portal provides a single solution and constantly updatable database in
corporation and other relevant information as required by organizational
structure
 Quick Search - indexing the data by keywords and external resources (files,
other information systems)
 creating informational sites (news, forums, links, RSS Feeds, knowledge
bases, spreadsheets, Web (Excel Server)
 collaboration - documents, versions, approval of content, workspaces, task
tracking, document flow and Records (content management, versions,
electronic signatures, approval, subscriptions, notification of changes,
backup, access reports)

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 Application Development - Project Management and Service Desk
 automation of business processes
 Business Analysis - reports of business data analysis, graphs, KPI and other
business data from different systems that give insights into the processes
and trends - helps making strategic decisions
 improving the quality of management in organization and the ability to
reduce costs of administration and user support
 centralized monitoring and management
 creating and working with news sites (news, forums, links, RSS Feeds,
knowledge bases, spreadsheets, Web (Excel Server))
 collaboration - documents, versions, approval of content, workspaces, task
tracking, both within the organization and in partnership with organizations
and customers
 document flow and Records (content management, versions, electronic
signatures, approval, subscriptions, notification of changes, backup, access
reports)
4.6 PROJECT MANAGEMENT
Insightly uniquely offers CRM and Project Management in one so
you can make sure you’re on top of your customer relationship at every stage.
With the project overview screen you can see the recent activity on any project,
and track project performance against milestones over time. With Insightly
project management you can:
 Create Milestones, Pipelines and Tasks for Projects
 Get Automatic Email Reminders
 Specify Roles for Contacts
 Track All Email Correspondence
 View Completed Tasks and Events by Project
 Include Any Files Associated with the Project
 View Task and Event Reports
Powerful Customer Relationship Management
Insightly is a great tool to help small businesses deal with the vital task
of managing your leads, contacts, organizations, partners, vendors and
suppliers. Using CRM best practices, you can see everything about a lead or a
contact — from background, email history and important dates, to any projects
or opportunities in which they have participated. With Insightly’s web-based
customer relationship management features you won’t miss a beat:

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 Lead Management
 Contact Management
 Calendaring and Events
 Automatic Address Book
 Notes and Comments
 Lightning Fast Search
 Custom Fields and Filters
 File Sharing
 Web to Lead & Web to Contact
 Tags, Notification, and Following
 Linking (Direct Relationships Between Contacts, Organizations,
Opportunities, Projects)
 Mass Email and Email Templates
Integrated Project Management
Insightly uniquely offers CRM and Project Management in one so you
can make sure you’re on top of your customer relationship at every stage. With
the project overview screen you can see the recent activity on any project, and
track project performance against milestones over time. With Insightly project
management you can:
 Create Milestones, Pipelines and Tasks for Projects
 Get Automatic Email Reminders
 Specify Roles for Contacts
 Track All Email Correspondence
 View Completed Tasks and Events by Project
 Include Any Files Associated with the Project
 View Task and Event Reports

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4.7 CHANNEL MANAGEMENT

In order to deliver a full channel solution, PCM capabilities leverage

following core strengths of core SAP CRM:
 Web Channel
 web channel capabilities are extended to partners
 Traditional CRM
o CRM module, i.e. Sales, Service and Marketing, capabilities are
extended to partners while being tightly integrated with direct processes
 PRM
o enables relationship management
o enables collaboration between brand owners and their channel partners

 For many organizations indirect partners are playing key role in driving or
influencing growth in percentage of revenue.
 A channel partner network have greater influence by market segment and
geographically

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 Companies can sell to partners or collaborate with partners.
 By leveraging channel partners companies can drastically lower their cost of
sales and services.
PCM Functionalities involved:
 Partner Management
 Collaborative Showroom
o Open Catalog Interface: Transferring Data to the Partner Shop
o Generating Leads in the Collaborative Showroom
 Access Control Rules
SAP PCM is divided into following main business areas:

Structure of Indirect Channels:

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Portals and Roles in SAP CRM PCM
 PCM provides following portals:

 PCM includes following roles:

 The channel manager portal enables your organization to:

o manage partner relationships
o collaborate with channel partners
o optimize channel operations
 Channel Manager Role:
o used by brand owner employees
o has access to the Channel Manager Portal
o used to manage channel partner relationships & channel partners
o creates leads
o collaborate with channel partners
o optimize channel operations
o monitor and analyze channel sales, service and marketing
o dispatches leads to partners
 Channel Manager:
 The partner manager portal enables your organization to:

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 o perform effective selling
o effective end-customer interaction
 Partner Manager:
o has access to Partner Portal
o responsible for more effectively selling
o can perform end-customer interaction
o accepts and qualify leads
o starts the lead-to-order process
 In general, Partner Portal is accessed by two groups of employee:
o Partner Manager
o Partner Employee
 Partner Manager is responsible for marketing, sales and service of the brand
owner products and services at the partner company.
 Responsibilities of Partner Manager includes:
o marketing, sales and service of the brand owner products
o services at the partner company
o managing leads and orders
o has access to up-to-date information and analyses
o manages the customer relationship together with the brand owner
 Responsibilities of Partner Employee includes:
o reports to the partner manager
o focuses on daily business processes
o qualifying leads
o accepting stock replenishment orders for customers
o providing order statuses to customers
o finding solution or logging service requirements problems that customer
encountered
Marketing Development Funds
 In order to generate the customer demand marketing development funds
(MDF) is used in an indirect sales model.
 These are the resources that you provide to your channel partners for
marketing your brands and products.
 MDFs is integrated to:
o SAP CRM Marketing

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 o SAP CRM Partner Channel Management
o SAP CRM Funds Management
o SAP CRM Claims Management
o SAP CRM Billing
o SAP BI
o SAP ERP (FI/CO)
 Thus by efficiently allocating the market development budgets to the
channel partner and their marketing attribute it enables you as brand
owners to increase the effectiveness of the channel marketing
expenditures.
Partner Channel Management
SAP Customer Relationship Management (SAP CRM) provides Web-
based support for managing partner relationships and for enabling channel
partners to sell more effectively. Personalized portals help organizations
manage their partner relationships, collaborate with channel partners, optimize
channel operations, and give channel partners all the information they need to
sell to and interact with end customers.
Integration
If your business model includes selling or servicing products primarily
through indirect channels, you can use partner channel management to manage
your partner network.
For example, you could implement the partner database and partner
management solution, so you have a complete profile and history of all your
channel partners and interactions with them. Or for instance, the channel
business warehouse solution, to be able to execute channel analytics and
business planning, to keep track of how your customers are performing in real
time.
The other functions used for partner channel management include:
 Partner Management
 Collaborative Showroom
o Open Catalog Interface: Transferring Data to the Partner Shop
o Generating Leads in the Collaborative Showroom
 Access Control Rules
For information about functions for partner channel management in
the SAP NetWeaver Portal component, seeBusiness Package.

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Features
SAP CRM supports business processes in the following areas:
Partner Management
This area enables you to manage the relationship you have with your
channel partners throughout the partner lifecycle.
It ensures consistent processes with all your channel partners from
recruitment as a channel partner, through to approval and ramp-up, to ensure
channel partners are prepared to effectively represent your products.
You have a holistic view of your channel partners and can see who your
channel partners are and how long they have been a partner. You also see the
status each partner has, the branch of industry in which they specialize, which
products your channel partners sell, and who your channel partners’ customers
are.
You can plan and execute your sales strategies using different sales
channels. You can set annual goals, objectives, and measurements, as well as
track and measure partner progress against those goals.
You can provide your channel partners with online access to training
courses, the curriculum, and registration forms.
Channel Marketing
This area enables you to increase the demand for your products using
channel partners. Channel marketing provides the relevant information for the
channel partners and ensures consistent branding and incentives. This helps to
motivate your channel partners to put sales of your products and services before
those of your competitors. Channel marketing enables close cooperation in
marketing and generates demand at your channel partners.
Market Development Funds
Market development funds (MDF) are resources that you make
available to channel partners for cooperative marketing. A variety of features
enable you to more efficiently manage the MDF process, from planning,
through enrollment of channel partners, to settlement of claims in SAP ERP.
For more information, see Market Development Funds.
Channel Sales
This area makes it possible for your channel partners to sell your
products more frequently and effectively. You give your channel partners the
same information, tools, and expert knowledge as your own sales staff. You
have an insight into product demand through the different sales channels, which
enables you to forecast your future sales figures more accurately.

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 You can integrate the information from your end customer accounts into
your sales processes. Both you and your channel partners have an insight into
the end customer accounts and joint activities.
Your channel partners can obtain online quotations for your products
and services and also order online. Additionally, your channel partners can
order products on behalf of their end customers (Order–on–Behalf). This area
fully supports the order processing – from order entry to delivery and invoicing.
Partner Order Management
This area enables you to involve your channel partners in your e-
commerce strategy, thus making online sales possible without system
limitations. You can forward sales orders to your channel partners for order
processing. You can provide your channel partners with a hosted order
management system, where they receive, process and complete sales orders.
Channel Service
This area enables you to ensure consistent and on time services for your
customers by supporting your channel partners in their service and problem
solving work. Your channel partners receive the tools and subject knowledge
required to manage ongoing service relationships with your customers.
Partner and Channel Analytics
Support is provided to all areas of partner channel management, in the
form of series of reports.
4.8 CRM IN SERCVICES
Customer Relationship Management (CRM): A Process
implemented by a company to handle its contact with its customers by storing
information on current and prospective customers. Used by business to improve
services provided directly to customers and to use the information in the system
for targeted marketing and sales purposes.
What is detailed & achieved through CRM:
 All sales or service related interaction a company has with each
individual customer.
 Track and detail personal customization for company and online
experience to improve the relationship.
 Work flow automation and a well documented service history for
customer support.
Issues and areas addressed:
 Front office department support to areas such as sales, service, and
marketing.

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  Readily accessible and available customer information.
 Save customer from having to repeat contact and previous history with
company helping to improve the customer to company relationship.
 Creating a customer-centric approach for a company.
 Because of the company-wide size and scope of many CRM
implementations, significant pre-planning is essential for a smooth roll-
out of the CRM software as well as an equally important role of
employee adoption and training of the system.
How SME Handles CRM:
 Customizable field labels
 Unlimited note taking ability
 Auto text entry for redundant or common services
 Automated email statements, invoices, notices, and marketing collateral
 Stored documents, service history, maintenance contracts, sales history,
past and current billing, installation notes, system notes
 Synchronize with customers and contacts within your QuickBooks
records
 Enable recurring tasks for account maintenance or services for easy task
management
Most CRM solutions include all of that functionality, though cheaper
options may only offer bits and pieces. Some software runs on-premises, while
other systems operate as cloud-based services and might even run on your
phone or tablet.
Sure, CRM isn’t the sexiest software market, but it’s an extremely
valuable one: Gartner predicts it’ll be worth $36.5 billion worldwide by 2017.
And it’s important that companies know which CRM solution to choose; a
system with a million and one features that nobody can figure out or wants to
use is useless. That’s why we’ve put together this top 10 index of CRM
offerings. Services on this list should be:
 Innovative
 Accessible
 Validated by the market
Our intention is to point to the players with the most momentum in
CRM today. As part of this effort, VentureBeat is researching cloud platforms,
specifically marketing automation. Help us by filling out a survey, and you’ll
get the full report when it’s complete.

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Salesforce
When it comes to CRM, Salesforce is the undisputed leader. The $37
billion company basically invented cloud-based CRM and has come to
dominate the CRM landscape. It has about 14 percent of the CRM market with
an estimated $2.5 billion in 2012 sales, according to Gartner. Customers from
tiny businesses to massive enterprises generally seem to like its sales-,
marketing-, and service-management capabilities, which are only available in
the cloud.
Salesforce CRM integrates with some of its other services like Chatter
(its enterprise social network) and works across iOS and Android
devices. Mobile has historically been a weak point for the company, but
Salesforce is hoping to change that with Salesforce1, its third major mobile
effort, which it unveiled at the Dreamforce 2013 user and developer
conference.
The Salesforce CRM package ranges in price from $5 to $300 per
month per user, depending on the features you want (the widely used enterprise
edition costs $125 per month per user). If you run a small business that’s just
looking to automate a few processes, you might want to look for a cheaper, less
cumbersome option. But otherwise, it’s a powerful system with plenty of
custom add-ons that enhance its core functionality.
Microsoft Dynamics CRM
Microsoft (like everyone else) trails Salesforce in CRM market share
and sales, with 6.3 percent and $1.1 billion in 2012 respectively, according to
Gartner. Still, the Redmond giant is serious about its Dynamics CRM platform,
which has been growing quickly over the last few years. Dynamics CRM is
available either on-premise (roughly $5,000 for the server software and around
$1,100 per named user) or in the cloud for $65 per month per user.
The big draw for Dynamics CRM is integration with the rest of the
Microsoft ecosystem, from Outlook and Office to enterprise resource planning
apps like Dynamics GP. And in November, Microsoft finally added mobile
support for Dynamics CRM, which now works across iOS devices, Android
phones, Windows Phones, and Windows 8 tablets.
Businesses that use Outlook should definitely consider Dynamics CRM,
which makes it simple to track email for an account, contact, or opportunity.
But some dislike the user interface — particularly for the browser version —
because it can be difficult to navigate.

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Oracle Sales Cloud
Oracle has a sizable slice of the CRM market — around 11.1 percent,
with just over $2 billion in 2012 sales, says Gartner. But its On Demand CRM
platform hasn’t been particularly well received. Its newer Sales Cloud,
however, seems to be a significant step forward. Based on open standards, the
service sports an intuitive interface, Android and iOS apps, and support for
Oracle’s enterprise social network. It’s quite pricey, though: Oracle Sales
Cloud costs between $100 and $200 per user per month, depending on which
edition you choose (standard, enterprise, or premium).
Oracle has so much going on across so many products that it’s a bit hard
to grasp the overall direction the company is taking, even in just the CRM
space. But the company’s recent cloud acquisitions (marketing platform
Compendium and CPQ provider BigMachines, among others) will soon
manifest themselves as powerful features across its CRM portfolio — a good
move as the company tries to catch up to Salesforce.
SugarCRM
Founded in 2004, SugarCRM offers an open-source, lightweight CRM
platform that’s proven popular among small to medium-sized businesses. It has
both onsite and cloud-based versions that range from $35 to $150 per user, per
month, or you can just buy it outright.
SugarCRM has mobile apps for iOS, Android, and BlackBerry. The
desktop version integrates with several email, calendar, and file-management
apps, including Outlook, Gmail, Lotus Notes, Google Apps, and Box. And
since it’s open-source, developers can easily customize it out of the box. Before
you build a feature, however, make sure it doesn’t already exist on the Suga
rExchange, a marketplace for SugarCRM module extensions, themes, and
language packs. SugarCRM also offers a number of industry-specific editions.
SugarCRM is not as feature-rich as Salesforce, but not every company
needs a Salesforce-style solution, and SugarCRM is certainly a more affordable
offering.
Workbooks CRM
Founded in 2007, Workbooks Online employs a freemium strategy for
its web-based CRM software, which is only available as a cloud-based service.
Two users can use the basic Workbooks functionality for free, while CRM and
Business editions cost £19 ($31.19) and £39 ($64.03) per user per month,
respectively. Workbooks CRM is targeted specifically at small to mid-size
businesses, who really seem to love it.

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 It features a clean user interface, so it’s easy to pick up without
training. The Workbooks API enables developers to integrate third-party
applications like Outlook, and it has mobile apps for iPhone, Android, and
BlackBerry phones. Customers criticized Workbooks’ reporting features, but a
September 2013 update overhauled its reporting system. But the main draw
here is price: Workbooks is not feature-rich, but it’s quite inexpensive.
Insightly
Founded in 2009, Insightly offers a freemium, cloud-based CRM
solution for small businesses. Insightly has more than 350,000 users
worldwide, according to the company, but an investor told us only tens of
thousands pay for the service. It’s probably the cheapest service on this
list: The free plan supports up to three users, while the starter ($29 per month),
advanced ($49 per month), and pro ($99 per month) plans cost just a few
dollars per user.
Tight integration with Google Apps, Gmail, and Google Drive drove
Insightly’s early growth. Support for those Google services remain its defining
feature, but it now integrates with Evernote, Office 365, Outlook, and
MailChimp, too. Its mobile app works with iOS and Android devices.
Insightly isn’t powerful enough for enterprises, but it’s an appealing,
affordable CRM option for startups.
Nimble
Nimble is another relative newcomer to CRM. The company, which got
its start in 2009, offers a web-based CRM app that features integration with
social media services like Facebook, Twitter, LinkedIn, and Google+. It links
all your customers’ social accounts to provide a (so-called) better picture of
their relationship with your business. It also has a mobile app for iOS. And at a
flat $15 per month per user, it’s an inexpensive CRM option.
Zoho CRM
Zoho CRM is a freemium offering from Zoho Corp., which was
founded in 2005 and launched its web-based CRM offering the following year.
It’s free for up to three users and costs between $12 and $35 per user for
monthly across its three tiers (standard, professional, and enterprise). It
integrates with the expected social networks, Google Apps, Outlook, and
QuickBooks. It also has an API for developers who want to build custom
integrations. Zoho CRM has mobile apps for iOS, Android, and Blackberry
devices.

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NetSuite CRM
NetSuite, which has been making cloud-based business management
software since 2007, has a CRM solution targeted at companies of all sizes, but
it probably works best for small to medium-sized businesses. NetSuite isn’t
very forthcoming about prices, but it’s a fairly costly solution: The basic
package starts at $79 per month per user, while Netsuite CRM+ starts at $129
per month per user. That’ll get you some useful, highly customizable options
for sales force automation, marketing automation, order management, sales
forecasting, and more. It’s lacking in mobile options, though, as NetSuite only
offers an iPhone app so far.
Veeva CRM
Veeva differs from all the other CRM solutions on this list because it’s
built specifically for the life sciences industry (pharmaceuticals and medical
devices), which has a unique set of regulatory requirements and sales
challenges. Veeva’s cloud-based software can track prescribing habits and
complies with industry regulations. It’s built on Force.com, but doesn’t
resemble Salesforce’s CRM. The company recently had a successful IPO on the
New York Stock Exchange, which might prompt others to begin thinking about
industry-specific CRM solutions.
4.9 CRM IN FINANCIAL SERVICES
Financial services are the economic services provided by the finance
industry, which encompasses a broad range of businesses that manage money,
including credit unions, banks, credit-card companies, insurance companies,
accountancy companies, consumer-finance companies, stock brokerages,
investment funds and some government-sponsored enterprises.
The history of financial services
The term "financial services" became more prevalent in the United
States partly as a result of the Gramm-Leach-Bliley Act of the late 1990s,
which enabled different types of companies operating in the U.S. financial
services industry at that time to merge.
Companies usually have two distinct approaches to this new type of
business. One approach would be a bank which simply buys an insurance
company or an investment bank, keeps the original brands of the acquired firm,
and adds the acquisition to its holding company simply to diversify its earnings.
Outside the U.S. (e.g., in Japan), non-financial services companies are
permitted within the holding company. In this scenario, each company still
looks independent, and has its own customers, etc. In the other style, a bank
would simply create its own brokerage division or insurance division and

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attempt to sell those products to its own existing customers, with incentives for
combining all things with one company.
Banks
Commercial banking services
A "commercial bank" is what is commonly referred to as simply a bank.
The term "commercial" is used to distinguish it from an "investment bank," a
type of financial services entity which, instead of lending money directly to a
business, helps businesses raise money from other firms in the form
of bonds (debt) or stock (equity).
The primary operations of banks include:
 Keeping money safe while also allowing withdrawals when needed
 Issuance of chequebooks so that bills can be paid and other kinds of
payments can be delivered by post
 Provide personal loans, commercial loans, and mortgage loans (typically
loans to purchase a home, property or business)
 Issuance of credit cards and processing of credit card transactions and
billing
 Issuance of debit cards for use as a substitute for cheques
 Allow financial transactions at branches or by using Automatic Teller
Machines (ATMs)
 Provide wire transfers of funds and Electronic fund transfers between banks
 Facilitation of standing orders and direct debits, so payments for bills can
be made automatically
 Provide overdraft agreements for the temporary advancement of the bank's
own money to meet monthly spending commitments of a customer in their
current account.
 Provide internet banking system to facilitate the customers to view and
operate their respective accounts through internet.
 Provide charge card advances of the bank's own money for customers
wishing to settle credit advances monthly.
 Provide a check guaranteed by the bank itself and prepaid by the customer,
such as a cashier's check or certified check.
 Notary service for financial and other documents
 Accepting the deposits from customer and provide the credit facilities to
them.
 Sell investment products like mutual funds etc.

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Investment banking services
 Capital markets services - underwriting debt and equity, assist company
deals (advisory services, underwriting, mergers and acquisitions and
advisory fees), and restructure debt into structured finance products.
 Private banking - Private banks provide banking services exclusively
to high-net-worth individuals. Many financial services firms require a
person or family to have a certain minimum net worth to qualify for private
banking services. Private banks often provide more personal services, such
as wealth management and tax planning, than normal retail banks.
 Brokerage services - facilitating the buying and selling of financial
securities between a buyer and a seller. In today's (2014) stock brokers,
brokerages services are offered online to self trading investors throughout
the world who have the option of trading with 'tied' online trading
platforms offered by a banking institution or with online trading
platforms sometimes offered in a group by so-called online trading portals.
Foreign exchange services
Foreign exchange services are provided by many banks and
specialist foreign exchange brokers around the world. Foreign exchange
services include:
 Currency exchange - where clients can purchase and sell foreign currency
banknotes.
 Wire transfer - where clients can send funds to international banks abroad.
 Remittance - where clients that are migrant workers send money back to
their home country.
Investment services
 Investment management - the term usually given to describe companies
which run collective investment funds. Also refers to services provided by
others, generally registered with the Securities and Exchange Commission
as Registered Investment Advisors. Investment banking financial services
focus on creating capital through client investments.
 Hedge fund management - Hedge funds often employ the services of
"prime brokerage" divisions at major investment banks to execute their
trades.
 Custody services - the safe-keeping and processing of the world's securities
trades and servicing the associated portfolios. Assets under custody in the
world are approximately US$100 trillion.

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Insurance
 Insurance brokerage - Insurance brokers shop for insurance (generally
corporate property and casualty insurance) on behalf of customers.
Recently a number of websites have been created to give consumers basic
price comparisons for services such as insurance, causing controversy
within the industry.
 Insurance underwriting - Personal lines insurance underwriters actually
underwrite insurance for individuals, a service still offered primarily
through agents, insurance brokers, and stock brokers. Underwriters may
also offer similar commercial lines of coverage for businesses. Activities
include insurance and annuities, life insurance, retirement insurance, health
insurance, and property & casualty insurance.
 F&I - Finance & Insurance, a service still offered primarily at asset
dealerships. The F&I manager encompasses the financing and insuring of
the asset which is sold by the dealer. F&I is often called "the second gross"
in dealerships who have adopted the model
 Reinsurance - Reinsurance is insurance sold to insurers themselves, to
protect them from catastrophic losses.
Other financial services
 Bank cards - include both credit cards and debit cards. According to the
Nilson Report, Bank Of America is the largest issuer of bank cards.
 Credit card machine services and networks - Companies which provide
credit card machine and payment networks call themselves "merchant card
providers".
 Intermediation or advisory services - These services involve stock brokers
(private client services) and discount brokers. Stock brokers assist investors
in buying or selling shares. Primarily internet-based companies are often
referred to as discount brokerages, although many now have branch offices
to assist clients. These brokerages primarily target individual investors. Full
service and private client firms primarily assist and execute trades for
clients with large amounts of capital to invest, such as large companies,
wealthy individuals, and investment management funds.
 Private equity - Private equity funds are typically closed-end funds, which
usually take controlling equity stakes in businesses that are either private,
or taken private once acquired. Private equity funds often use leveraged
buyouts (LBOs) to acquire the firms in which they invest. The most
successful private equity funds can generate returns significantly higher
than provided by the equity markets

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 Venture capital is a type of private equity capital typically provided by
professional, outside investors to new, high-growth-potential companies in
the interest of taking the company to an IPO or trade sale of the business.
 Angel investment - An angel investor or angel (known as a business angel
or informal investor in Europe), is an affluent individual who provides
capital for a business start-up, usually in exchange for convertible debt or
ownership equity. A small but increasing number of angel investors
organize themselves into angel groups or angel networks to share resources
and pool their investment capital.
 Conglomerates - A financial services company, such as a universal bank,
that is active in more than one sector of the financial services market e.g.
life insurance, general insurance, health insurance, asset management, retail
banking, wholesale banking, investment banking, etc. A key rationale for
the existence of such businesses is the existence of diversification benefits
that are present when different types of businesses are aggregated i.e. bad
things don't always happen at the same time. As a consequence, economic
capital for a conglomerate is usually substantially less than economic
capital is for the sum of its parts.
 Financial market utilities - Organisations that are part of the infrastructure
of financial services, such as stock exchanges, clearing houses, derivative
and commodity exchanges and payment systems such as real-time gross
settlement systems or interbank networks.
 Debt resolution is a consumer service that assists individuals that have too
much debt to pay off as requested, but do not want to file bankruptcy and
wish to pay off their debts owed. This debt can be accrued in various ways
including but not limited to personal loans, credit cards or in some cases
merchant accounts.
 Factoring
Financial exports
A financial export is a financial service provided by a domestic firm
(regardless of ownership) to a foreign firm or individual. While financial
services such as banking, insurance and investment management are often seen
as a domestic service, an increasing proportion of financial services are now
being handled abroad, in other financial centres, for a variety of reasons. Some
smaller financial centres, such as Bermuda, Luxembourg, and the Cayman
Islands, lack sufficient size for a domestic financial services sector and have
developed a role providing services to non-residents as offshore financial
centres. The increasing competitiveness of financial services has meant that

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some countries, such as Japan, which were self-sufficient have increasingly
imported financial services.
The leading financial exporter, in terms of exports less imports, is
the United Kingdom, which had $95 billion of financial exports in 2014. The
UK's position is helped by both unique institutions (such as Lloyd's of
London for insurance, the Baltic Exchange for shipping etc.) and an
environment that attracts foreign firms; many international corporations have
global or regional headquarters in the London and are listed on the London
Stock Exchange, and many banks and other financial institutions operate there
or in Edinburgh.
Financial crime
Fraud within the financial industry costs the UK (regulated by the FSA)
an estimated £14bn a year and it is believed a further £25bn is laundered by
British institutions.
CRM for financial services is like CRM in no other industry.
Financial services CRM is all about KYC (Know Your Customer),
onboarding, householding, AML, FATCA and other processes that have no
similar comparisons in other industries. I'm going to use this blog post to show
how managing and automating these financial services industry processes
within CRM software satisfies users, increases productivity, contributes to a
360 degree customer view and lowers overall IT cost.
KYC and Onboarding
KYC is predominantly a risk mitigation technique designed to prevent
financial services firms from being used, intentionally or unintentionally, for
illicit or illegal activities.
Know Your Customer processes are designed to verify client identity,
adhere to banking regulations and comply with a plethora of compliance
measures such as anti-bribery, identity theft, money laundering and terrorist
financing. The most common KYC processes focus on client onboarding (i.e.
client identity), new policy onboarding and monitoring of client financial
transactions.
From an operational perspective, using onboarding process guides in
the CRM software increases ease of use, ensures compliance steps (both the
sequence and completeness of steps) and provides a visual queue of where a
client's process stands at any point in time. The CRM system can also then be
used for client or KYC alerts, notifications and reporting, such as the
Incomplete KYC report I create for pretty much every financial services client.
Below are two sample illustrations of onboarding process guides that are part

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of the client contact record in the CRM system. The first is a 5 stage KYC new
customer onboarding and the second is a 4 step new Life Insurance policy.
Fortunately, when KYC processes are part of the CRM system,
financial services companies can achieve a two-fold objective of risk
mitigation while at the same time repurposing the data for client account
management purposes. More on this opportunity later in this post.
Householding
Few financial services firms fully recognize the household relationships
among their customers – which results in a significant lost opportunity for up-
sell, cross-sell and growing client relationships. The householding process I've
implemented using CRM software can start simple. For example, use a query
to show all customers that have the same home telephone number or the same
home address, and then apply a workflow or business rule to link those
accounts using a Relationship field. When an Advisor recognizes that a credit
card holder is the 16 year old daughter of portfolio customer who is her father,
he can use that information to suggest auto insurance policies, college
financing options or getting the daughter started in an early savings plan or
even a portfolio plan that matches some of the father's plan elements.
Compliance
Compliance in the financial services industry is a lot like safety in the
airline industry. Its non-conditional and even small deviations can produce
devastating effects. Fortunately, compliance mandates can be facilitated with
CRM applications. In fact when client compliance requirements are embedded
within the client management system the processes can be automated using the
data captured in the KYC and onboarding processes. This greatly accelerates
cycle times, decreases manual activities and reduces the number of applications
that then have to be integrated and managed. For a video example, you can
check out how CRM can achieve FATCA compliance.
By including compliance as additional steps in the CRM system, as
opposed to using separate applications, users get a real-time view of the
complete customer relationship. This also provides a single location to apply
workflow automation and get client reporting.
Client Account Management
It's important to remember that while compliance is mandatory, the
business purpose is to acquire and grow customer relationships. Fortunately,
when designed in a holistic way, compliance measures can actually feed
business development processes.

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 Financial services client account management techniques are many and
varied. However, an approach somewhat popular in North America and the
Caribbean is the FORM technique. FORM stands for Family, Occupation,
Recreation and Monetary and seeks to capture data in these categories in order
to understand what's important to each client and leverage this information for
relationship building.
Below are some partial sample FORM categories and fields I've
appended to CRM software contact records (also note the Household
relationship field link).
A Holistic Solution
Financial services companies often struggle with a slew of legacy
systems, disparate data siloes, system integration headaches, complex reporting
and manual efforts that frustrate users and increase business process cycles.
Fortunately, it doesn't need to be this way. Some forward thinking design of an
enterprise-wide customer management system that includes the many
compliance requirements along with business development objectives will
result in fewer systems, more automation and greatly improved user
satisfaction.`
Maintain compliance, acquire new business, stay secure
Financial services firms have a lot to take into account when
implementing CRM. The standard benefits of CRM (client acquisition, client
management and client retention) clearly apply, but there are other factors that
need to be addressed as well; from legislative requirements (Know Your
Customer, Anti-Money Laundering etc.), through compliance (enforcing
Chinese Walls), to being able to access your data from a mobile/tablet/laptop
from any location and at any time. Any Client Relationship Management
system must gel with the unique ways in which the industry and your firm
operates.
Traditional CRM was very much a “one size fits all” affair, where a list
of features were expected to be bent into the right shape to meet the users’
needs. But since the market turmoil began, financial service firms have had to
adopt new ways of doing things and require faster, cheaper, and just plain better
CRM systems. The more agile approach that is offered by modern financial
services CRM systems does exactly this.
This faster, cheaper, better approach to CRM resonates particularly for
smaller firms such as hedge funds and private equity firms, where costs need to
be kept low, without sacrificing functionality. A smaller team may come to
depend even more on the performance of its CRM system.

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 Before we go much further into the specifics of financial services CRM,
let’s make sure we’re on the same page about what CRM means. The team at
Collier Pickard produce a number of free, educational resources designed to act
as a solid introduction to the core concepts surrounding CRM. We recommend
that you start by downloading your free copy of The CRM eBook (a guide to
what works and what doesn’t in CRM). The eBook should give you a good
grounding in the pros and cons of implementing CRM. Then, let’s look at some
specifics for financial services firms.

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 UNIT – V

5.1 USE OF TECHNOLOGY IN CRM

5.2 CALL CENTER PROCESS
5.3 CRM TECHNOLOGY TOOLS IMPLEMENTATION
5.4 REQUIREMENTS ANALYSIS
5.5 SELECTION OF CRM PACKAGE
5.6 REASONS AND FAILURE OF CRM
5.7 E COMMERCE IN CRM

5.1 USE OF TECHNOLOGY IN CRM

There's no denying the fact that customer service is important to a
small or mid-sized business. The quality of that service will either enhance or
degrade customer loyalty to your brand and your business. With the economy
in recession, customers have more alternatives than ever. The business that
proves to be responsive to customer questions, complaints, or other needs can
gain a clear competitive advantage. That's why it's so important to understand
how new technologies can help you anticipate customer needs, tailor business
processes to best serve customers, and ultimately improve the efficiency of
your business – the latter of which can keep costs down.
Customer Service Technology
There are a few major areas in which technology now is able to help
provide key advantages to businesses in engendering customer loyalty by
improving customer service:
 Websites. Providing areas on your website where customers can answer
their own questions or seek answers from others.
 E-mail. Using e-mail as a way to improve customer service and more
quickly respond to certain needs or help requests.
 Communications. Unifying communications so that you know that the
customer who left a voice mail also sent an e-mail with the same request a
few days ago.
 Software. Better managing customer relationships with more sophisticated
data-gathering tools, such as customer relationship management software.
Giving Customers What They Want, When They Want It
The goal of your business in terms of its customer interactions is the
generate loyalty. There's no better way to do that than to offer quality products

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and services and to be responsive to your customers. But as new technologies
have come to market to make it easier for businesses to provide customer
service, they may also be increasing the number of channels through which you
interact with customers and the complexity of those interactions. Accenture, the
technology consulting firm, suggests that businesses that want to use
technology to raise the quality of their customer service focus on the following:
 Data management and analytics. Using data collected from customer to
analyze their preferences.
 Insight-driven marketing. Gaining insights into your business from
customer data so you can more effectively target marketing.
 Marketing automation. Streamlining and automating business processes
to improve efficiency and keep costs low.
 Self-service optimization. Finding ways for customers to interact with
your business when they want.
 Workforce effectiveness. Encouraging your staff to embrace new ways
improving customer treatment by providing tools and training to deliver
better service.
The following articles will provide an overview of the ways you can use
technologies to better serve your customers and, in the process, better serve
your business goals.
5.2 CALL CENTER PROCESS
Within a call centre the main process is handling the telephone call. If
an Agent is able to give the customer all the information they require during the
call without passing it to someone else, then this is usually known as ‘one and
done’. The more calls that can be handled as ‘one and done’ the more efficient
the process can be. In some centres, this is monitored as a way of measuring
efficiency.
The call handling can be broken down into three steps – the first is the
answering of the call by the ACD; the second is the time that an agent spends
talking to the customer, and thirdly, the wrap time which is anything that the
agent has to do with the call after the customer hangs up. An agent will be
measured on their talk time and their wrap time. Combined together this will
give an average call duration, which is a key statistic in the centre.
There are many factors which can impact the talk and wrap times. Here
are some of the typical ones:

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Talk time
 Ability to control a conversation with a customer i.e. not letting them
ramble on or being clear on how you explain things so you don’t have to
repeat yourself
 Complexity of the customer requests
 Level of knowledge or understanding of the customer
 Efficiency in finding information on the computer
 Efficiency in handling the process
Wrap time
 Ability to talk or listen and type information into the computer at the same
time
 Efficiency of the process
 Keyboard or PC skills
 Efficiency of the system
Of the above, the Agent’s own skills may be the determining factor –
which ones might they be? Some people make the mistake that believing a long
call makes customers happy and short calls don’t. This is not usually true. A
customer wants several things, firstly that their call will be handled efficiently;
secondly, that whatever it is that has been agreed will be done and thirdly that
they will be spoken to in a polite and courteous way. All Agents have to ensure,
is that they deliver each of these things to ensure that the customer will be
satisfied. At the end of the day it is the customer who by buying the goods or
service, are bringing money into the organisation, which enables them to
employ the Agents. In some situations, the Agents will have to deal with
unhappy or difficult customers. This can be for a variety of reasons but the
Agent will still be expected to provide the right customer service even in a
difficult situation. Most centres do have a process to deal with any rude or
abusive customers, and it is critical to always follow this process and never to
engage in reacting to the abuse no matter how hard it might be!
Multi-skilling
Multi-skilling is a term that you may hear in the centre. It relates to an
Agent who is capable of undertaking many different types of call whether they
are inbound or outbound, sales and service etc. It takes a lot of training to
develop an agent to be multi-skilled, but in some centres where this happens,
they may be rewarded or be of a different grade. Some centres do have a
progression plan to develop Agents to be multi-skilled as it provides them with
a more flexible and rounded resource. It also provides the Agents with a more
interesting and challenging role!

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Call Center Training Process at Outsource2india
What is the technical/customer support training process for employees?
Technical/customer support agents in India are:
 Certified
 Experienced
 Trained and motivated
 Save expertise in multiple technologies
 Skills in communication and etiquette
 Customer friendly
There is a technical/customer support training process that all agents go
through which covers the various aspects of providing solutions.
 The technical /customer support training process starts with customer care
& etiquette, language and accent, and technical knowledge (Generic &
Client Specific).
 The next level encompasses effective communication and team building
skills.
 Only after this training is completed can the agent begin the customer
support process.
What is the technical/customer support process?
The staffing model at technical /customer support centers is based on the
process a query has to go through.
 At the first level, the minimum eligibility for agents is a college
education. At this level voice training and/or experience is necessary.
 The second level has senior contact engineers. Internal voice training and
two years of work experience are compulsory. These agents handle entry
level calls.
 The third level is comprised of team leads who must have at least 4 years
of relevant work experience and be 3rd party certified professionals. Calls
that need to be sent to the 1st level of escalation are handled by them.
 At the highest level comprises Support Manager. They handle calls which
reach the 2nd level of escalation. Support Managers require at least 6
years of relevant work experience and must be 3rd party certified
professionals.
What is the Technical /Customer Help Desk Model?
The technical/customer help desk model is designed to provide support
through various channels.

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  Technical Support Services - support and customer care services delivered
through voice.
 Integrated Delivery - Through a toll free number, chat, or e mail. Remote
technical support services and customer care services delivered through
the Internet/Intranet (LAN)
 Knowledge - Searchable databases, FAQs, etc.
Additional features of this model are:
Process
 Mature process
 Customer ownership
 Metrics and SLA oriented
 Periodic Audits
 ISO process
Transaction
 Integrated
 Email/Voice/Chat
 Personalized
 Remote Diagnostic tools
 Onsite and Remote
 Web Support portal
Knowledge
 Customer Information
 Product information
 Knowledge creation
 Searchable Database
 FAQs
 Agent
What do these components lead to?
 Rapid Set up
 Scalability
 High Quality
 Predictability
 Higher Customer Satisfaction
 Flexibility to expand scope

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 Greater operational efficiencies
 Cost savings
Other features to ensure a seamless process:
 Created in Customer's look and feel
 Personalized page for every user
 All channels of support are accessible
 Provides user with complete contact information to reach Support
 Provides user with case history of previous cases
More user friendly features:
 Web-based
 Username and password is given to client
 Client can login anytime, and view data
 Updating of reports is almost simultaneous and defined by the customer
 Reports can be viewed across different time intervals (Daily/ Monthly/Date
Duration)
 Feedback is updated on a regular basis
 Allows a drill-down to individual case-transcripts
What infrastructure support does an Indian inbound call center offer?
 Support center which operates 24x7
 Automatic call distributor
 Handset connected to all digital ports for superior voice quality
 Facsimile devices connected to all analog devices
 Fully functioning 1024 kbps IPLC connection terminating at the US with
redundant parts
 Nortel IVR platform (integration and hosting)
 Comprehensive Nortel eCRM tool
 Voice comprehension technology
 Technology for remote multiplex management
 Interactive training rooms and simulation labs
 Highly reliable desktops by global giants like Dell and IBM
 Redundancy Provided at every point of failure
 LAN based on advanced technology, firewall and secure VPN for remote
access. All these are sufficiently backed by backend support agreement
 100% UPS and full generator back up power redundancy

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 Complete disaster recovery procedure in place
 CCTV and entry restriction at all points via swipe cards
 Facility for discrete client quality monitoring
5.3 CRM TECHNOLOGY TOOLS IMPLEMENTATION
One of The National B2B Centre’s primary roles is to ensure that both
clients and their IT suppliers can work together to ensure that the maximum
value is generated from technology investments.
In a recent article my colleague Martin King-Turner encapsulated our
approach to making this co-operative effort work in practice. Technology is
still an important part of the proceedings but successful system
implementations also require an understanding of the people issues involved
(from both a client and supplier perspective) and an appreciation of the impact
on business processes.
What I would like to do is reflect on how this approach has helped us
work with a range of clients involved in the implementation of CRM (Customer
Relationship Management) systems.
What is CRM?
CRM systems are intended to help businesses to work more effectively
with customers and sales prospects. They are in essence databases with
functionality that allow people to identify potential new customers, manage the
process of marketing to both prospects and existing clients, support the sales
process and then maintain an on-going relationship.
Done properly CRM systems can offer dramatic improvements in
business efficiency and enable fast business growth. However CRM systems
have a reputation for being difficult to get right. This is where the” People,
Process, Technology” approach comes in because CRM is an archetypical
example of where too much focus on the technology can cause problems.
The key point is that CRM was never intended to just be a software application.
 Gartner Group describes CRM as: “a business strategy whose outcomes
optimise profitability, revenue and customer satisfaction.”
 The overall philosophy of CRM is to rationalise and improve business
processes.
 CRM is very people-centric. It is intended to deliver better service to
customers and it is operated by your staff.
Given these circumstances it doesn’t require a great mental leap to see
how taking a “People, Process and, Technology” perspective might be of use in
looking at what benefits CRM could bring to a business, which solution and
supplier to choose and how to actually implement CRM.

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 I would like to share some of my thoughts and experiences across these
different areas.
People
As we have explored in previous articles one of the biggest reasons for
IT project problems is a failure to recognise and involve all of the stakeholders.
Project teams often forget that there are all manner of users, project friends and
project enemies out there. CRM projects amplify this issue because they reach
into lots of different corners of the business and not simply a single function or
department.
Manage change
My experience is that this means that CRM projects must have a board
level sponsor who can deal with the management team and project manager,
liaise with the board and provide a figurehead to instil confidence in the rest of
the company. In smaller companies that board level sponsor’s role might also
include being the day to day evangelist for the project and the project manager.
CRM is about change and most people don’t like the idea of change when it is
first presented to them. This means there really does need to be a “mover and
shaker” who will continually espouse the benefits of adopting the system and
deal with the inevitable moans and groans. A key role is to educate staff into
why CRM is important to the business – this is not the role of the supplier.
User involvement
What really helps to win support is to involve the people who will have
to use the system or be impacted by it (not quite the same thing) in the
requirements definition process. Apart from getting rid of the “not invented
here syndrome” it is likely that this group will have a far better understanding
of how customer oriented systems work in reality. Involve the best person from
each area (not the one you can most afford to lose) and you will benefit from
getting their buy-in to the project and maybe even from adopting their
“unofficial” workarounds into the new system.
Suppliers are people too
A final tip on the “People” side is to make sure that your suppliers are
more closely integrated into the project. Keeping them at arm’s length or
restricting them to working with the core project team means that they won’t be
able to develop a complete understanding of the way the business works. It also
gives them less opportunity to build working relationships around the
organisation, which is a problem when you need to solve problems at
implementation time, for instance.

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Processes
If you are researching CRM systems and to suppliers and you don’t hear
the word process then you are in the wrong place.
Map those business processes
Effective implementation of CRM requires an upfront evaluation of
existing processes. Somebody (you, the system supplier or a separate service
provide) needs to be able to analyse, capture and document what’s going on.
What does this give you? Well I have conducted business process
mapping sessions with a variety of companies across different sectors and never
run a session where the outputs didn’t cause surprise, concern or wonderment.
Most of the ways you work will be fine, but turning on the process spotlight
will highlight poor service, bottlenecks and lack of compliance – things which
usually cost money.
Identify improvements
The great thing about understanding business processes is it provides an
immediate opportunity to make improvements using existing manual or IT
systems. It also makes it easier to define the selection criteria for choosing a
CRM system because you will now have a clearer idea of the scope of the
system and exactly what areas of the business it needs to cover or where
interfaces to other systems are needed. CRM may be focused on sales,
marketing and customer service but the processes associated with those
functions reach into finance, purchasing, stock control and production even in
relatively small businesses.
Processes need people
Of course the big payoff comes from using the functionality that your
chosen CRM system provides to automate the most mundane activities, to
remove bottlenecks and to enforce workflow rules. What’s important to
remember at this point is that while the CRM application itself will simply
reflect the business process steps that you plug into it, real people are going to
have to enter operational information and follow on-screen instructions.
That’s why I stressed the need to get buy-in in the People section and
why activities like training are so important. I have seen CRM projects fail
because staff simply stop using the system and revert to the old ways of doing
things.
Technology
I heard somebody say recently that “technology is the least important
part of an IT investment.”

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Look for an overall solution
While I might argue about demoting it to the absolute bottom of the
pile, it is true that you must not choose your solution until you understand your
requirements by listening to your people and understanding your processes. The
right CRM solution is one that combines technology with the support services
and approach that I have described above, in a package that meets business
requirements and fits your budget.
Is "The Cloud" the key?
The big technology questions to consider right now centre on what type
of platform to use as much as which specific system. Buying a complete
software application to run on hardware sited on your premises or facilities is
probably still the most popular choice (certainly for larger companies).
However as we have been highlighting over the past couple of years “Cloud”
based CRM systems are now a genuinely competitive choice.
Cloud CRM may be offered as a complete service for which you pay a
monthly fee per user or in a format where you still purchase a standard
application but it’s then run on your behalf in the Cloud and you access the
application via the web.
The Cloud offers tremendous flexibility because you can add or remove
capacity very quickly, and it may offer financial benefits because there is no
capital outlay. Some providers claim that Cloud CRM is a cheaper option in an
absolute sense too. I remain to be convinced about that because it is hard to
compare like with like. To me the most important factor remains that the
technology element of your CRM project won’t be the biggest area of focus or
cost anyway.
For those of our clients who have seen their projects through to the end
and recognised the need to take a People, Process and Technology perspective
(whether by accident or design) the results have been excellent. Improvements
in the ability of the business to focus on the needs of specific customer groups,
faster through-put of orders, and an ability to deal with many more transactions
are just some of the benefits.
But it isn’t easy. Expect an implementation to take more management
time than you thought, expect there to be lots of non-technical implementation
costs from suppliers, and expect resistance from staff and stakeholders as you
go along.
If you are thinking about adopting CRM and want to test the robustness
of your plan or your current project isn't moving forward quite as well as
expected, then the National B2B Centre could help. We have independent

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consultants who can make an objective review, offer unbiased advice and, if
necessary, roll their sleeves up and make things happen.
5.4 REQUIREMENTS ANALYSIS
Customer relationship analysis can be considered a form of online
analytical processing (OLAP) and may employ data mining. As Web sites have
added a new and often faster way to interact with customers, the opportunity
and the need to turn data collected about customers into useful information has
become generally apparent. As a result, a number of software companies have
developed products that do customer data analysis.
According to an article in InfoWorld, customer relationship analysis can
provide customer segmentation groupings (for example, at its simplest,
dividing customers into those most and least likely to repurchase a product);
profitability analysis (which customers lead to the most profit over time);
personalization (the ability to market to individual customers based on the data
collected about them); event monitoring (for example, when a customer reaches
a certain dollar volume of purchases); what-if scenarios (how likely is a
customer or customer category that bought one product to buy a similar one);
and predictive modeling (for example, comparing various product development
plans in terms of likely future success given the customer knowledge base).
Data collection and analysis are viewed as a continuing and iterative process
and ideally over time business decisions are refined based on feedback from
earlier analysis and consequent decisions.
Benefits of customer relationship analysis are said to lead not only to
better and more productive customer relations in terms of sales and service but
also to improvement in supply chain management (lower inventory and
speedier delivery) and thus lower costs and more competitive pricing.
One of the major challenges implicit in customer relationship analysis is
how to integrate the analytical software with existing legacy systems as well as
with other new systems.
A new area of application and data collection has to do with Web site
customer usage.
Are you managing customer experience from the outside in? Customer
experience may sound like a simple concept – how your customers perceive
their interactions with your company.
But in a soon to be published book called “Outside In,”Forrester
Research argues that customer experience is a fundamental business driver.

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 In fact, it’s the only source of competitive advantage in an age where
customers and potential customers have unprecedented access to reams of data
about your company and competitors.
“Despite its economic power, customer experience remains the most
misunderstood element of corporate strategy today,” argues Forrester analyst
Kerry Bodine. “You must manage your business from the outside in – bringing
the perspective of your customers to every decision you make – and you must
do it in a systematic and repeatable way.
One of the best ways to bring the perspective of the customer to
business decisions is by using data analysis and CRM analytics to find
correlations, isolate patterns and track trends to serve up the type of information
to allow a company to tailor the customer experience for improved engagement
and better profits, according to an article by Marianne Cotter at CRMSearch.
Here are five reasons to integrate big data analytics to your CRM:
 Better Customer Understanding. CRM analytics can integrate all
customer data points including call center, the Internet, email and social
media to group customers according to their behaviors. This allows a
company to identify the most profitable customers who should receive
special offers or get preferential treatment to boost their lifetime values.
 Better Understanding of the Customer-Facing Operations. Analytics
will provide proof of how the company is performing in terms of service,
sales and marketing. Most CRM projects are launched to drive down costs
in these areas; without analytics to demonstrate the ROI of CRM, moving
into new areas, like linking CRM with social media, will be hard to justify.
 Decision Support After defining the value of customer-facing operations,
changes can be made to drive operational investments. Companies can
answer questions around building new call centers or outsourcing based on
this analysis.
 Predictive Modeling. Predictive analytics will allow a company to forecast
how customers are going to respond in the future based on their past
behaviors and their segmented demographics. For example, a
telecommunications company could find out how likely a customer is to
turn to another carrier when his wireless contract expires. Or, a consumer
products company could predict how well a certain demographic will
respond to a new marketing initiative based on past purchasing behavior.
 Benchmarking. CRM analytics will allow a company to track over time
how well it’s performing related to a strategy or to competitors.
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 per customer service call, and revenue per call will expose operational areas
that are lagging behind and those that are up or above company and
industry standards.
Next Steps:
 Subscribe to our blog to stay up to date on the latest insights and trends
in data analysis, CRM analytics, predictive analytics and big data analytics.
 Please join us on Tuesday, December 18th at 1 p.m. EST for
our complimentary webcast, “TIBCO Spotfire Delivers Game-Changer –
Brings The Power Of Discovery To Big Data,” presented by Lou Jordano,
Director of Product Marketing, TIBCO Spotfire. In this webcast we will
demonstrate the generally available version of Spotfire 5, the next
generation of data discovery and business analytics, offering breakthrough
capabilities to speed analysis of big data.
5.5 SELECTION OF CRM PACKAGE
Thoughtful selection and well-executed implementation are critical to
ensuring that your CRM system meets your organization’s specific needs.
Make sure you receive necessary features and support by staying on top of the
process.
If not chosen or implemented well, a CRM system may feel more like
an expensive mistake than a useful tool. Below, we’ll offer tips and strategies
for ensuring that your CRM system offers the features and support you need
and is implemented in a time- and cost-efficient way.
Your Organization: Systems Expert
A CRM system is a software tool that helps manage interactions with
constituents. To be successful, a CRM system must track and report
information about the people you engage with in a way that helps you further
your goals. For this reason, an organization’s specific needs and workflows
must be a critical factor when selecting and configuring a CRM.
A common assumption during implementation is that organizations do
not have a vital role to play in CRM implementation. Organizations often feel
that they must leave this job to the technology experts. However, technology is
only one critical part of a CRM solution. A CRM combines an organization’s
business rules with technology for managing information to support those rules.
Only the organization knows its own business rules best. Therefore, every
organization implementing a CRM is an “expert” in this process, and must
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Take Your Time
Your team will want to invest some time in determining your
requirements, as well as in choosing and implementing a system. Budget
enough time to make good, thoughtful decisions, informed by complete
information. Rushing through this process will often make the project much
more costly and time-consuming in the long run.
CRM Selection and Implementation: Steps and Considerations
A big part of a CRM system’s ongoing success is choosing well in the
first place, but implementation — the process of getting a CRM up and running
— will also greatly impact its value to your organization. The details of this
process will vary depending on the system you select, as well as on the
agreement between your organization and the vendor. Yet most selection and
implementation processes will involve the following steps and considerations,
which we will address in detail below.
1. CRM review and selection
2. Project management
3. Vendor contracting and software licensing
4. CRM system customization
5. Data migration
6. Training and support
CRM Review and Selection
There are dozens of CRM solutions to choose from. Check out a variety
of systems to get a good sense of what features are available and to assess how
easy the systems are to use. Narrowing in on appropriate CRM systems is
critical to maintaining a timely and cost-effective project.
Unsure of where to begin? A great (and often overlooked) resource for
narrowing in on CRM systems are organizations doing work similar to yours
that have already gone through the process of selecting and implementing a
CRM. These organizations will often have overlapping requirements, and can
offer valuable advice about tools they reviewed as well as pitfalls to avoid as
you proceed.
Trade associations often provide terrific technical assistance for specific
industry verticals, including best-fit technologies for your particular sector.
NGOs in the United States can likewise benefit from the Nonprofit Technology
Enterprise Network (nten.org). NTEN — often in collaboration with fellow
nonprofits Idealware (idealware.org) and TechSoup Global (techsoup.org) —
offers a variety of technology resources ideally suited to nonprofits and
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Project Management and Communications
Implementing a CRM can be a time-consuming and costly process, with
many elements often occurring simultaneously. Ensuring strong project
management and following a detailed communications strategy can help to
keep all participants informed of their responsibilities and upcoming steps in
the process.
Strong project management requires that the organization identify a
staff person in charge of this task. Typical tools of a project manager to help
keep the project on track include:
1. Calendar. Keep track of meeting dates for all participants, as well as major
project milestone dates, including the final launch of the CRM system.
2. Work plan. This is typically the part of the contract that specifies what will
be built or configured, what vendor support will be provided, what the
overall timeline and cost should be, and the basic obligations of both the
vendor and the organization.
3. Budget spreadsheet. A list of vendor costs, software fees, and other costs
per month during implementation
4. Task lists. A list of tasks for individual staff to complete, such as reviewing
CRM functionality, making decisions on reports, testing, and so on.
Both the CRM vendor and the organization should take care to follow both
the contract and work plan. The organization should ensure regular vendor
communication, including the addressing of any organizational questions. A
weekly or fortnightly formal communication is reasonable in keeping up-to-
date with the progress of the CRM implementation. The organization should
follow all costs closely to ensure the project is on track financially.
Vendor Contracting and Software Licensing
Once you have identified a CRM system that is a good fit for your
organization and selected a project manager to oversee the process, you’re on to
the next step: contracting and licensing. Each of these is vital in setting
expectations for what kind of CRM system will be implemented, how it will be
supported, and the costs involved. Don’t underestimate the importance of this;
CRM implementation projects that are not supported by clear contract and
licensing terms often result in significant cost increases and missed timelines.
Contracting
The contract phase of setting up a CRM involves an agreement (and
possibly negotiations) with a CRM vendor or outside consultant regarding
setup, services, and support of your CRM system. Whether you are signing a
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that a good contract is not just a legal agreement but part of a detailed work
plan that will impact how your system will be set up and run.
Some vendors will require that you exclusively contract with them to
implement and support the system; others may allow for support from
unaffiliated third-party consultants. For organizations with the proper staff and
skills, some CRM systems may be implemented in-house with no outside
technical support.
Licensing
Often incorporated into the vendor contract, licensing is a written
agreement outlining the CRM system vendor’s rules regarding intellectual
property, fair use, and costs. A license will describe what the organization can
and cannot do with a CRM system. Some CRM vendors retain all ownership
rights to the software, protecting their code from being modified by outside
parties. Other CRM systems are “open source,” allowing users to modify the
code extensively with minimal restrictions. Maintaining CRM software license
requirements may require one-time or ongoing payments, or it may be
free. Take care that you understand your CRM vendor’s licensing terms, and
make sure you have them in writing.
Key Elements to Contracting and Licensing
There are several factors to consider when contracting and licensing software.
1. Always negotiate a contract. Never begin a CRM implementation without
an agreement on a contract. All contracts are negotiable. Clearly articulate
what you need; ask for changes if anything is missing.
2. Know all costs. Every contract should clearly specify what the costs are for
complete system installation, and what licensing and support costs are
required going forward.
3. Determine a timeline. Clarify how long the project will take and identify a
delivery date.
4. Clarify communication. Agree on a point of contact with the vendor or
consultant, as well as how updates will be communicated. Ensure these
updates will address any changes in cost, features, and timeline
expectations.
5. Identify a process for quality control and testing. Most CRM systems will
require some unexpected modifications and updates during implementation.
Clarify what the process is for identifying these changes, and how much of
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6. Establish a data-migration plan. Moving customer information into a new
CRM system can be a time-consuming and technically advanced task.
Identify the vendor or consultant’s role in this process.
7. Know customer responsibilities. All customers must be involved in the
CRM implementation process. Agree on testing periods, data-migration
responsibilities, milestones for customer approval and sign-off, and training
opportunities.
CRM System Customization
Some CRM systems require only basic setup and preparation before
organizations can begin using them, while others require some to substantial
customization before they can be implemented. In most cases, the development
work will substantially affect the final CRM product, and will be the most
significant cost component.
CRM developers require a clear understanding of an organization’s
business rules. The organization should clarify any informal or undocumented
processes that affect the customization of the CRM, and clearly explain these to
the developer. The organization should also review the work of the developer at
regular intervals to ensure that the task is being completed to satisfaction.
Elements to consider during software development include:
1. Explain what, and why. Conversations with developers require a focus not
only on what features should be built, but why they are important from the
organization’s business perspective. Leaving out the “why” can lead
developers to make incorrect assumptions about how features should work,
resulting in costly overruns.
2. Get involved. Organizations should review features in development, even if
other parts of the CRM are not yet ready. This helps avoid mistakes from
growing into costly budget items or missed timelines.
3. Track accomplishments. Ask the vendor to document the features he or she
has worked on, and what has been accomplished in each case. This helps
organizations understand the costs of specific features, as well as what it
might cost to continue working on them. It also helps confirm that the
vendor is on schedule.
4. Clarify change requests and bugs. Be sure to identify issues that appear to
be “bugs” (something broken that the vendor should fix within the budget)
and “changes” (work that may or may not cost the organization extra).
Reach an agreement before proceeding to work on these.

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Data Migration
Many organizations have information stored in older systems that they
wish to move to the new CRM. This information is oftentimes organized
differently from the new CRM system, requiring some effort to relocate.
Focusing on migration strategies early on can help ensure a smoother transfer
of information down the road.
Vendors require a close partnership with the organization to properly
understand the groups or individuals responsible for migrating data. Having a
good grasp of the organization’s ability to understand and manipulate their own
data allows the vendor to offer tips and tools for how best to prepare for
migration into the specific CRM tool, as well as to determine the optimal
division of labor between the organization and vendor.
Guidelines to consider during data migration include:
1. Find the data. Information is often scattered among various organizational
staff and systems. Locate the useful information required to populate the
CRM and identify who maintains it, what it contains, and how accurate it is.
2. Improve the data. Many organization move inaccurate data into their new
CRM tool, creating just another problem for users. Work to identify
existing inaccuracies, correcting these when possible prior to importing to
the new system.
3. Identify available migration tools. Some CRM systems and vendors offer
tools and services to help transform data to fit the new CRM, and even to
automatically move it into the system. Understand these tools and services
early on and identify what work the organization must do to make use of
these tools.
4. Test before migrating. Make sure to run a “test migration” using the new
CRM. A test will help ensure that the information transfers correctly and
allows the organization to make corrections before the final transfer takes
place.
Training and Support
CRM software offers a wide range of tools for users to learn and master.
Many users will require multiple exposure to documentation and training in
order to gain the critical skills required to succeed with the new CRM. Some
CRM systems provide written documentation, videos, and other self-paced
trainings, while others offer single or ongoing in-person group and individual
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During training, remember:
1. Identify all training options early. Give future CRM system users a head
start by introducing them to an overview of how they can learn to use the
new CRM tool. Understand what is free and what is fee-based. Review
trainings for quality and to prepare users for future training.
2. Plan for gaps. In many cases, the available training materials will not cover
every CRM feature the organization plans to use. Identify any gaps in
training, including written materials, video, or live webinars. Plan for how
these gaps may be filled, whether internally or via external consultant.
3. Learn in context. Be sure to practice CRM skills using real data the trainee
can recognize and understand.
4. Train the trainers. Document all processes and tips gathered from trainings
to facilitate future training of other staff.
Selecting a CRM software package for your company is NOT an easy
decision. There are a lot of factors to consider, a lot of decision-makers to
collaborate with (usually), and user feedback to take into consideration. Here
we summarize the Top 10 criteria to use when evaluating CRM software for
your business.
1. Deployment Type: On Premise vs. Cloud – do you want the software
installed on your company’s servers and pay a one-time licensing fee to
use that software (on-premise), or do you want to essentially rent the
software from the vendor and have it hosted, backed up, upgraded, etc.
by them (Cloud)?
2. Ease of Use: How easy is it for users to use/navigate through the
product? Is the user interface (UI) simple or complex? Are there a lot of
clicks to get to where you need, or does the product make it very easy to
navigate through it?
3. Feature Breadth: Is there a full selection of CRM features? (see our
article on Top 10 Functionalities of CRM Systems for more information)
4. Feature Match: Are the features you need today in the product you’re
looking to purchase? Keep in mind your needs for today, as well as your
needs over the next 2-5 years. You do not want to have to purchase
another system in a year or two because you outgrew it!
5. Flexibility: How well can it adapt to your existing business processes?
Are there features you don’t need, but can easily “turn off” so your users
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 6. Reporting and Analytics: How well will it help you manage your
process? Can you create fully customized reports and Dashboards to get
the most out of your data?
7. Scalability: How will it handle adding more users and data now and in
the future?
8. Cost: What does it cost per user to license, implement and maintain? If
you are choosing on-premise software, don’t forget to include possible
server costs (or upgrades), any additional component licensing (like SQL
server, etc.), and annual maintenance costs. If you are looking at Cloud,
find out if the costs are annual or monthly; and whether they have
alternate licenses for part-time users or those that will only use one or
two modules of the system (this may reduce your overall costs!)
9. Integration Options: Will it work with your other software tools, such
as your accounting software, marketing tools, and the like?
10. Developer Strength: Can you trust that the company will stay in
business? How long have they been in business so far?
There are several other criteria that you may want to consider when
purchasing and implementing CRM software, but these are ones we find more
common and necessary for majority of companies.
We’d like to hear from you – what criteria do you use in selecting
software for your organization, whether you are currently using a CRM system
or are thinking about using one? Leave a comment to contribute to the
discussion.
5.6 REASONS AND FAILURE OF CRM
The Customer Relationship Management software implementation
success record is pretty depressing. Over the last decade, multiple studies have
shown than anywhere from 20 percent to over two-thirds of all CRM software
efforts have either failed to live up to expectations or failed outright.
It’s important to note that most of these projects weren’t complete
failures. They produced some benefits, just not all the benefits the
implementors used to justify the project undertaking.
However it’s also important to note that while the “failure” rates vary
significantly from study to study, they haven't tended to decrease over time.
One of the first well-publicized studies, by Gartner Group back in 2001
disclosed a failure rate of 50 percent. A 2009 survey by Forrester found a
failure rate of 47 percent.
While the trend isn't hopeful, the underlying facts and root cause
analysis reveal common factors which suggest preparation and planning can

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mitigate failure. Repeated studies over the decade have shown that most
failures result from a very limited number of causes. All those causes are
preventable if they are prepared for and recognized at the earliest occurrence. If
you understand why CRM fails you can take proactive measures to make sure
your implementation succeeds.
1) Lack of Focus
Customer relationship management strategy and application software
can deliver a powerful combination to achieve strategic objectives, tactical
goals and effective customer facing processes. But for sustained success, a
CRM effort must first focus on, and be aligned with, the enterprise’s most
strategic imperatives.
At the highest level CRM strategy isn’t so much an answer as a
question. The question is “How do we use these techniques to accomplish our
goals?”
That means knowing what your goals are – and being able to express
them in clear, measurable terms. Are you trying to increase sales? Improve
profitability? Grow customer share? Gain greater management insight into the
customer management effort? Provide better customer service? Attract new
customers? Serve existing customers more profitably? Obviously you’re not
going to settle for just one of those goals, but you should be able to rank them
in importance for your organization.
This also implies setting specific goals with measurable payback from
the CRM software investment. As the saying goes “If you’re not sure what
you’re trying to accomplish, don’t be surprised if you don’t accomplish it.”
2) Lack of Commitment
If you don’t have buy-in from all the stakeholders, you’re going to have
a tough time realizing the benefits from CRM strategy or software. The most
critical groups to engage and secure sponsorship from are top management, the
sales staff and the collective group of customer-facing employees.
Successful CRM projects have those groups enthusiastically on board.
Unsuccessful CRM projects don’t.
Corporate management has to be visibly and vocally committed to the
CRM effort. That means they have to devote the budget and resources to it and
have the commitment to see it through. Without this kind of commitment, any
but the most limited versions of customer strategies are unlikely to succeed.
In addition to top management, the people who will actually use the
CRM software system have to be engaged and committed to it as well. One of
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failure to simply use the system. This is particularly a problem with sales staff
who often see sales force automation (SFA) software as something imposed on
them that aids sales managers with improved performance visibility but hinders
sales staff’s ability to sell.
Getting sales people and other users to actually adopt SFA software or
CRM systems involves a three-fold approach.
First, it requires that you offer them a usable system. That is one that
meets their needs and offers them tangible productivity or information
advantages. And which actually works as advertised.
Second, it requires listening to the stakeholders and tuning the
information system to meet their real needs. CRM systems are supposed to
make things easy for workers and transparent for managers. If they do not meet
this fundamental need, the users will tell you – and they won’t use the system.
Third, getting user buy-in requires selling the benefits to the
stakeholders early and frequently. You can’t just rely on them to discover the
advantages your CRM software will offer any more than you can expect
customers to internally discover the advantages of your products. Successful
software deployment takes a guided, comprehensive effort to show the users
the most salient advantages.
In the case of customer relationship management software that means
emphasizing the appropriate feature sets to each individual group of
stakeholders (the sales staff do not much care about greater control over the
sales process and management may or may not be concerned that the
application makes life easier for the sales staff.), identifying champions in each
group, advertising success, and constantly reinforcing your message in a long
term campaign that doesn’t end when CRM “goes live” in your company.
3) Approaching CRM as a Technology (Only) Solution
Although software is important to making CRM work, customer
management is not a technology. Customer relationship management is an
ongoing effort to focus the company on its customers and their needs for
mutual benefits.
One of the most common causes of CRM failure is to approach CRM
strategy as a software project. Too many adopters have the IT department
install the system, get it running and then wonder why the strategic benefits fail
to be realized.
CRM must be a company wide effort that starts with customer
strategies which are then automated with application software. You can't just

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concentrate on the software and ignore the rest. The software is an enabler, not
the be-all or end-all.
Among other things, successful CRM implementations involve the
improvement or possibly the re-engineering of customer facing (sales,
marketing, customer support and more) business processes which are then
integrated with the enterprise software in order to make them efficient,
consistent and timely. Customer strategies and business process improvements
require a willingness to change any aspect of the way your company relates to
its customers.
All this is a major undertaking, but it is far from impossible, as the
thousands of successful CRM implementations and executive adopters
demonstrate daily.
Common Failures and Mitigating Methods
IT projects, including new Customer Relationship Management (CRM)
installations, seem to always start out with the greatest intentions.
They're always slated to save money for your company.
They're targeted to help increase efficiency and productivity.
And they're usually brought in with the promise of easier, better, faster
and more streamlined operations.
Sadly, though, it often doesn't work out that way.
But there are methods to increase your odds for success when
implementing a new CRM system, while also avoiding a bad case of agita. It
starts with taking lessons learned from failed CRM implementations.
From many of those past CRM software disappointments, here's my list
of the top 5 reasons for CRM deployment failures and how you can avoid the
pain:
1. Unclear goals contribute to CRM deployment failures. Don't be theoretical,
subjective or wishy-washy with the reasons for your project. Figure out
exactly exactly what you want to accomplish. Know your goals and make
sure they are time-bound and measurable. Determine what CRM business
problems you are working to solve, then review the relevant products to
solve them. For example, are you trying to make it easier for your
customers to find the right people inside your company to make inquiries,
place orders or get customer service? Then know your strategy ahead of
time and be sure that every "must-have" item on your requirements list is
fulfilled by your new CRM software system. Oh, and don't take the
vendor's representation that something exists and will meet your intent –
business requirements are fluid and subject to interpretation so make sure

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 you view each of the CRM software feature sets that support your important
business processes. Then run their products on your test systems or in a
pilot in order to tweak them and see how closely they can accommodate
your objectives.
2. Lack of executive sponsorship degrades CRM projects until they fail. Don't
even think of implementing customer relationship management software if
corporate executives weren't involved in the software selection process and
aren't on board to actively support the implementation. This is not a small
project. You're not just installing a new, improved Web browser on
everyone's desktop computers. You are potentially modifying many or all
of your customer facing business processes, changing staff performance
measures and even sales quotas - so you need to be confident that your
company's executive team has reviewed and signed off on the proposed
strategy before you decide on any vendors, sign any contracts, or
commence an implementation. The big reason for this – if problems or
challenges arise, and they will – you don't want anyone questioning the
agreed upon direction in mid-stream of the new deployment. You want
everyone to buy in, to even think it's their idea, so that they can back you
even in the event of problems. By the way, the executives aren't your only
concern. You also want to be sure that your company's users accept or
embrace the proposed changes. They are the ones who will have to use the
new system to accomplish the new business processes. Be sure to get their
input early, explore their ideas and listen to their feedback. You'll be glad
you did.
3. The wrong vendor at the right price is no bargain. Perform an objective
software selection project before selecting and purchasing CRM software.
Talk to other customers of the prospective vendors you are reviewing. Ask
every question you can think of. Then ask the questions you don't think are
very important – they may be more important than you think. Don't leave
meetings without answers to every question and query, and don't be
satisfied with vague or ambiguous responses. Also seek service level
agreements and assurances, warranties, performance and uptime guarantees
and more. Many CRM software vendors and consultants now include risk
sharing provisions as part of their delivery. The software as a service (SaaS)
CRM solutions provide a new level of vendor partnership, as if the
deployment isn't successful, the SaaS CRM contract will be cancelled or not
renewed. Don't leave the negotiations until the end of the purchase cycle.
Begin acquiring assurances from your vendors from the beginning of the
software selection process.

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4. Don't overpromise. This is a new CRM system, and not the answer to every
IT or business problem that your company has or will have. Things can go
wrong and business conditions will change. But the idea is that you are
heading into the project with a sound plan, reasonable expectations,
management sponsorship, user backing, positive intentions and a
defendable ROI projection. Just don't go overboard with the promises. Give
reasonable goals and work to exceed them. Show small successes early and
frequently, and then unveil some surprise benefits that will make your
executives and users more appreciative. Stay within your project plan and
show consistent successes by exceeding week to week deliveries. You can
do this, and once you do watch how much easier it will be to get your next
IT project off the ground, building on your past successes.
5. Keep is simple (KISS). Don't introduce too many features which in turn
make it difficult for users to adopt the CRM solution. Simple is better.
Easy-to-understand is better. Make sure that what you roll out for your
company's users makes it easier and more satisfying for them to do their
jobs. You can win users over by replacing cumbersome tasks and manual
workarounds with system automation. You also want to make it easier for
your customers to communicate with your company. Don't think like an IT
worker. Think like a user who doesn't have all of your IT prowess and
experience. Because the easier it is for your staff and your customers, the
more successful your CRM implementation will be for your company. And
that, put simply, will be one of your most important indicators of success.
5.7 E-COMMERCE IN CRM
E-commerce (also written as e-Commerce, eCommerce or similar
variants), short for electronic commerce, is trading in products or services
using computer networks, such as the Internet. Electronic commerce draws on
technologies such as mobile commerce, electronic funds transfer, supply chain
management, Internet marketing, online transaction processing, electronic data
interchange(EDI), inventory management systems, and automated data
collection systems. Modern electronic commerce typically uses the World
Wide Web for at least one part of the transaction's life cycle, although it may
also use other technologies such as e-mail.
E-commerce businesses may employ some or all of the following:
 Online shopping web sites for retail sales direct to consumers
 Providing or participating in online marketplaces, which process third-party
business-to-consumer or consumer-to-consumer sales
 Business-to-business buying and selling

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 Gathering and using demographic data through web contacts and social
media
 Business-to-business electronic data interchange
 Marketing to prospective and established customers by e-mail or fax (for
example, with newsletters)
 Engaging in pretail for launching new products and services
A timeline for the development of e-commerce:
 1971 or 1972: The ARPANET is used to arrange a cannabis sale between
students at the Stanford Artificial Intelligence Laboratory and the
Massachusetts Institute of Technology, later described as "the seminal act
of e-commerce" in John Markoff's book What the Dormouse Said.
 1979: Michael Aldrich demonstrates the first online shopping system.
 1981: Thomson Holidays UK is first business-to-business online shopping
system to be installed.
 1982: Minitel was introduced nationwide in France by France Télécom and
used for online ordering.
 1983: California State Assembly holds first hearing on "electronic
commerce" in Volcano, California. Testifying are CPUC, MCI Mail,
Prodigy, CompuServe, Volcano Telephone, and Pacific Telesis. (Not
permitted to testify is Quantum Technology, later to become AOL.)
 1984: Gateshead SIS/Tesco is first B2C online shopping system and Mrs
Snowball, 72, is the first online home shopper
 1984: In April 1984, CompuServe launches the Electronic Mall in the USA
and Canada. It is the first comprehensive electronic commerce service.
 1990: Tim Berners-Lee writes the first web browser, WorldWideWeb,
using a NeXT computer.
 1992: Book Stacks Unlimited in Cleveland opens a commercial sales
website (www.books.com) selling books online with credit card processing.
 1992: St. Martin's Press publishes J.H. Snider and Terra Ziporyn's Future
Shop: How New Technologies Will Change the Way We Shop and What
We Buy.
 1993: Paget Press releases edition No. 3 of the first app store,
The Electronic AppWrapper
 1994: Netscape releases the Navigator browser in October under the code
name Mozilla. Netscape 1.0 is introduced in late 1994 with SSL encryption
that made transactions secure.

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 1994: Ipswitch IMail Server becomes the first software available online for
sale and immediate download via a partnership between Ipswitch,
Inc. and OpenMarket.
 1994: "Ten Summoner's Tales" by Sting becomes the first secure online
purchase.
 1995: The US National Science Foundation lifts its former strict prohibition
of commercial enterprise on the Internet.
 1995: Thursday 27 April 1995, the purchase of a book by Paul Stanfield,
Product Manager for CompuServe UK, from W H Smith's shop within
CompuServe's UK Shopping Centre is the UK's first national online
shopping service secure transaction. The shopping service at launch
featured W H Smith, Tesco, Virgin Megastores/Our Price, Great Universal
Stores (GUS), Interflora, Dixons Retail, Past Times, PC World
(retailer) and Innovations.
 1995: Jeff Bezos launches Amazon.com and the first commercial-free 24-
hour, internet-only radio stations, Radio HK and NetRadio start
broadcasting. eBay is founded by computer programmer Pierre Omidyar as
AuctionWeb.
 1996: IndiaMART B2B marketplace established in India.
 1996: ECPlaza B2B marketplace established in Korea.
 1996: The UK e-commerce platform Sellerdeck, formerly Actinic, is
established.
 1998: Electronic postal stamps can be purchased and downloaded for
printing from the Web.
 1998: Cbazaar formerly chennaibazaar.com, India's first B2C eCommerce
portal launched by Rajesh Nahar and Ritesh Katariya.
 1999: Alibaba Group is established in China. Business.com sold for US
$7.5 million to eCompanies, which was purchased in 1997 for US
$149,000. The peer-to-peer filesharing software Napster launches. ATG
Stores launches to sell decorative items for the home online.
 2000: The dot-com bust.
 2001: Alibaba.com achieved profitability in December 2001.
 2002: eBay acquires PayPal for $1.5 billion. Niche retail companies
Wayfair and NetShops are founded with the concept of selling products
through several targeted domains, rather than a central portal.
 2003: Amazon.com posts first yearly profit.
 2003: Bossgoo B2B marketplace established in China.

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 2004: DHgate.com, China's first online b2b transaction platform, is
established, forcing other b2b sites to move away from the "yellow pages"
model.
 2007: Business.com acquired by R.H. Donnelley for $345 million.
 2009: Zappos.com acquired by Amazon.com for $928 million. Retail
Convergence, operator of private sale website RueLaLa.com, acquired
by GSI Commerce for $180 million, plus up to $170 million in earn-out
payments based on performance through 2012.
 2010: Groupon reportedly rejects a $6 billion offer from Google. Instead,
the group buying websites went ahead with an IPO on 4 November 2011. It
was the largest IPO since Google.
 2011: Quidsi.com, parent company of Diapers.com, acquired
by Amazon.com for $500 million in cash plus $45 million in debt and other
obligations. GSI Commerce, a company specializing in creating,
developing and running online shopping sites for brick and mortar
businesses, acquired by eBay for $2.4 billion.
 2014: Overstock.com processes over $1 million in Bitcoin sales. India’s e-
commerce industry is estimated to have grown more than 30% from 2012
to $12.6 billion in 2013. US eCommerce and Online Retail sales projected
to reach $294 billion, an increase of 12 percent over 2013 and 9% of all
retail sales. Alibaba Group has the largest Initial public offering ever, worth
$25 billion.
Business applications
Some common applications related to electronic commerce are:
 Document automation in supply chain and logistics
 Domestic and international payment systems
 Enterprise content management
 Group buying
 Print on demand
 Automated online assistant
 Newsgroups
 Online shopping and order tracking
 Online banking
 Online office suites
 Shopping cart software
 Teleconferencing

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 Electronic tickets
 Social networking
 Instant messaging
 Pretail
 Digital Wallet
Governmental regulation
In the United States, some electronic commerce activities are regulated
by the Federal Trade Commission (FTC). These activities include the use of
commercial e-mails, online advertising and consumer privacy. The CAN-
SPAM Act of 2003 establishes national standards for direct marketing over e-
mail. The Federal Trade Commission Act regulates all forms of advertising,
including online advertising, and states that advertising must be truthful and
non-deceptive. Using its authority under Section 5 of the FTC Act, which
prohibits unfair or deceptive practices, the FTC has brought a number of cases
to enforce the promises in corporate privacy statements, including promises
about the security of consumers' personal information. As result, any corporate
privacy policy related to e-commerce activity may be subject to enforcement by
the FTC.
The Ryan Haight Online Pharmacy Consumer Protection Act of 2008,
which came into law in 2008, amends the Controlled Substances Act to
address online pharmacies.
Conflict of laws in cyberspace is a major hurdle for harmonisation of
legal framework for e-commerce around the world. In order to give a
uniformity to e-commerce law around the world, many countries adopted the
UNCITRAL Model Law on Electronic Commerce (1996)
Internationally there is the International Consumer Protection and
Enforcement Network (ICPEN), which was formed in 1991 from an informal
network of government customer fair trade organisations. The purpose was
stated as being to find ways of co-operating on tackling consumer problems
connected with cross-border transactions in both goods and services, and to
help ensure exchanges of information among the participants for mutual benefit
and understanding. From this came Econsumer.gov, an ICPEN initiative since
April 2001. It is a portal to report complaints about online and related
transactions with foreign companies.
There is also Asia Pacific Economic Cooperation (APEC) was
established in 1989 with the vision of achieving stability, security and
prosperity for the region through free and open trade and investment. APEC has

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an Electronic Commerce Steering Group as well as working on common
privacy regulations throughout the APEC region.
In Australia, Trade is covered under Australian Treasury Guidelines for
electronic commerce, and the Australian Competition and Consumer
Commission regulates and offers advice on how to deal with businesses
online, and offers specific advice on what happens if things go wrong.
In the United Kingdom, The Financial Services Authority (FSA) was
formerly the regulating authority for most aspects of the EU's Payment Services
Directive (PSD), until its replacement in 2013 by the Prudential Regulation
Authority and the Financial Conduct Authority. The UK implemented the PSD
through the Payment Services Regulations 2009 (PSRs), which came into effect
on 1 November 2009. The PSR affects firms providing payment services and
their customers. These firms include banks, non-bank credit card issuers and
non-bank merchant acquirers, e-money issuers, etc. The PSRs created a new
class of regulated firms known as payment institutions (PIs), who are subject to
prudential requirements. Article 87 of the PSD requires the European
Commission to report on the implementation and impact of the PSD by 1
November 2012.
In India, the Information Technology Act 2000 governs the basic
applicability of e-commerce.
In China, the Telecommunications Regulations of the People's
Republic of China (promulgated on 25 September 2000), stipulated
the Ministry of Industry and Information Technology (MIIT) as the government
department regulating all telecommunications related activities, including
electronic commerce. On the same day, The Administrative Measures on
Internet Information Services released, is the first administrative regulation to
address profit-generating activities conducted through the Internet, and lay the
foundation for future regulations governing e-commerce in China. In 28 August
2004, the eleventh session of the tenth NPC Standing Committee adopted The
Electronic Signature Law, which regulates data message, electronic signature
authentication and legal liability issues. It is considered the first law in China’s
e-commerce legislation. It was a milestone in the course of improving China’s
electronic commerce legislation, and also marks the entering of China’s rapid
development stage for electronic commerce legislation.

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Forms
Contemporary electronic commerce involves everything from ordering
"digital" content for immediate online consumption, to ordering conventional
goods and services, to "meta" services to facilitate other types of electronic
commerce.
On the institutional level, big corporations and financial institutions use
the internet to exchange financial data to facilitate domestic and international
business. Data integrity and security are pressing issues for electronic
commerce.
Aside from traditional e-Commerce, the terms m-Commerce (mobile
commerce) as well (around 2013) t-Commerce have also been used.
Global trends
In 2010, the United Kingdom had the biggest e-commerce market in the
world when measured by the amount spent per capita. The Czech Republic is
the European country where ecommerce delivers the biggest contribution to the
enterprises´ total revenue. Almost a quarter (24%) of the country’s total
turnover is generated via the online channel.
Among emerging economies, China's e-commerce presence continues
to expand every year. With 384 million internet users, China's online shopping
sales rose to $36.6 billion in 2009 and one of the reasons behind the huge
growth has been the improved trust level for shoppers. The Chinese retailers
have been able to help consumers feel more comfortable shopping
online. China's cross-border e-commerce is also growing rapidly. E-commerce
transactions between China and other countries increased 32% to 2.3 trillion
yuan ($375.8 billion) in 2012 and accounted for 9.6% of China's total
international trade In 2013, Alibaba had an e-commerce market share of 80%
in China.
Other BRIC countries are witnessing the accelerated growth of
eCommerce as well. Brazil's eCommerce is growing quickly with retail
eCommerce sales expected to grow at a healthy double-digit pace through
2014. By 2016, eMarketer expects retail ecommerce sales in Brazil to reach
$17.3 billion. India has an internet user base of about 243.2 million as of
January 2014. Despite being third largest userbase in world, the penetration of
Internet is low compared to markets like the United States, United Kingdom or
France but is growing at a much faster rate, adding around 6 million new
entrants every month. The industry consensus is that growth is at an inflection
point. In India, cash on delivery is the most preferred payment method,
accumulating 75% of the e-retail activities.

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 E-Commerce has become an important tool for small and large
businesses worldwide, not only to sell to customers, but also to engage them.
In 2012, ecommerce sales topped $1 trillion for the first time in history.
Mobile devices are playing an increasing role in the mix of eCommerce.
Some estimates show that purchases made on mobile devices will make up
25% of the market by 2017. According to Cisco Visual Networking Index, in
2014 the amount of mobile devices will outnumber the number of world
population.
In the past 10 years, e-commerce is in a period of rapid development.
Cross-border e-commerce is called the Internet thinking along with traditional
import and export trade. Cross-border e-commerce enables international trade
towards more convenient and free open to cooperate between different
countries in the world, incorporating developed and developing countries. In
the short term, developing countries may be limited to IT, but in the long term,
they would change the barrier to develop their IT facilities, and continuing to
close to developed countries. The moment, developing countries like China and
India are developing e-commerce very rapidly, such as China 's Alibaba, the
financing capital (£15 billions) is the highest ever in e-commerce company. In
addition, China is becoming the biggest e-commerce provider in the world. The
number of Internet users in China which amounts to 600 millions, and which is
doubled than USA users in total.
For traditional businesses, one research stated that information
technology and cross-border e-commerce is a good opportunity for the rapid
development and growth of enterprises. Many companies have invested
enormous volume of investment in mobile applications. The DeLone and
McLean Model stated that 3 perspectives are contributed to a successful e-
business, including information system quality, service quality and users
satisfaction. There is no limit of time and space, there are more opportunities to
reach out to customers around the world, and to cut down unnecessary
intermediate links, thereby reducing the cost price, and can benefit from one on
one large customer data analysis, to achieve a high degree of personal
customization strategic plan, in order to fully enhance the core competitiveness
of the products in company
Impact on markets and retailers
Economists have theorized that e-commerce ought to lead to intensified
price competition, as it increases consumers' ability to gather information about
products and prices. Research by four economists at the University of Chicago
has found that the growth of online shopping has also affected industry
structure in two areas that have seen significant growth in e-commerce,

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bookshops and travel agencies. Generally, larger firms are able to
use economies of scale and offer lower prices. The lone exception to this
pattern has been the very smallest category of bookseller, shops with between
one and four employees, which appear to have withstood the trend. Depending
on the category, e-commerce may shift the switching costs—procedural,
relational, and financial—experienced by customers.
Individual or business involved in e-commerce whether buyers or
sellers rely on Internet-based technology in order to accomplish their
transactions. E-commerce is recognized for its ability to allow business to
communicate and to form transaction anytime and anyplace. Whether an
individual is in the US or overseas, business can be conducted through the
internet. The power of e-commerce allows geophysical barriers to disappear,
making all consumers and businesses on earth potential customers and
suppliers. Thus, switching barriers and switching costs my shift. eBay is a good
example of e-commerce business individuals and businesses are able to post
their items and sell them around the Globe.
In e-commerce activities, supply chain and logistics are two most
crucial factors need to be considered. Typically, cross-border logistics need
about few weeks time round. Based on this low efficiency of the supply chain
service, customer satisfaction will be greatly reduced. Some researcher stated
that combining e-commerce competence and IT setup could well enhance
company’s overall business worth. Other researcher stated that e-commerce
need to consider the establishment of warehouse centers in foreign countries, to
create high efficiency of the logistics system, not only improve customers’
satisfaction, but also can improve customers’ loyalty.[weasel words]. A recently
published comprehensive meta-analysis shows that e-service quality is
determined by many different factors, and influences customer satisfaction and
repurchase intentions among customers.
Some researcher investigated that if a company want to enhance
international customers’ satisfaction, where cultural website need to be adapted
in particular country, rather than solely depending on its local country.
However, according to this research findings, the researcher found that German
company had treated its international website as the same local model, such as
in UK and US online marketing. A company could save money and make
decision quickly via the identical strategy in different country. However,
opportunity cost could be occurred, if the local strategy does not match to a
new market, the company could lose its potential customer.

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Impact on supply chain management
For a long time, companies had been troubled by the gap between the
benefits which supply chain technology has and the solutions to deliver those
benefits. However, the emergence of e-commerce has provided a more practical
and effective way of delivering the benefits of the new supply chain
technologies.
E-commerce has the capability to integrate all inter-company and intra-
company functions, meaning that the three flows (physical flow, financial flow
and information flow) of the supply chain could be also affected by e-
commerce. The affections on physical flows improved the way of product and
inventory movement level for companies. For the information flows, e-
commerce optimised the capacity of information processing than companies
used to have, and for the financial flows, e-commerce allows companies to
have more efficient payment and settlement solutions.
In addition, e-commerce has a more sophisticated level of impact on
supply chains: Firstly, the performance gap will be eliminated since companies
can identify gaps between different levels of supply chains by electronic means
of solutions; Secondly, as a result of e-commerce emergence, new capabilities
such implementing ERP systems have helped companies to manage operations
with customers and suppliers. Yet these new capabilities are still not fully
exploited. Thirdly, technology companies would keep investing on new e-
commerce software solutions as they are expecting investment return. Fourthly,
e-commerce would help to solve many aspects of issues that companies may
feel difficult to cope with, such as political barriers or cross-country changes.
Finally, e-commerce provides companies a more efficient and effective way to
collaborate with each other within the supply chain.
The social impact of e-commerce
Along with the e-commerce and its unique charm that has appeared
gradually, virtual enterprise, virtual bank, network marketing, online shopping,
payment and advertising, such this new vocabulary which is unheard-of and
now has become as familiar to people. This reflects that the e-commerce has
huge impact on the economy and society from the other side. For instance, B2B
is a rapidly growing business in the world that leads to lower cost and then
improves the economic efficiency and also bring along the growth of
employment.
To understand how the e-commerce has affected the society and
economy, this article will mention three issues below:

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1. The e-commerce has changed the relative importance of time, but as the
pillars of indicator of the country’s economic state that the importance of
time should not be ignored.
2. The e-commerce offers the consumer or enterprise various information
they need, making information into total transparency, will force
enterprise no longer is able to use the mode of space or advertisement to
raise their competitive edge. Moreover, in theory, perfect competition
between the consumer sovereignty and industry will maximize social
welfare.
3. In fact, during the economic activity in the past, large enterprise
frequently has advantage of information resource, and thus at the expense
of consumers. Nowadays, the transparent and real-time information
protects the rights of consumers, because the consumers can use internet
to pick out the portfolio to the benefit of themselves. The competitiveness
of enterprises will be much more obvious than before, consequently,
social welfare would be improved by the development of the e-
commerce.
4. The new economy led by the e-commerce change humanistic spirit as
well, but above all, is the employee loyalty. Due to the market with
competition, the employee’s level of professionalism becomes the crucial
for enterprise in the niche market. The enterprises must pay attention to
how to build up the enterprises inner culture and a set of interactive
mechanisms and it is the prime problem for them. Furthermore, though
the mode of e-commerce decrease the information cost and transaction
cost, however, its development also makes human being are overly
computer literate. In hence, emphasized more humanistic attitude to work
is another project for enterprise to development. Life is the root of all and
high technology are merely an assistive tool to support our quality of life.
The e-commerce is not a kind of new industry, but it is creating a new
economic model. Most of people agree that the e-commerce indeed to be
important and significant for economic society in the future, but actually that is
a bit of clueless feeling at the beginning, this problem is exactly prove the e-
commerce is a sort of incorporeal revolution. Generally speaking, as a type of
business active procedure, the e-commerce is going to leading an
unprecedented revolution in the world, the influence of this model far exceeded
the commercial affair itself. Except the mentioned above, in the area of law,
education, culture and also policy, the e-commerce will continue that rise in
impact. The e-commerce is truly to take human beings into the information
society.

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Distribution channels
E-commerce has grown in importance as companies have adopted pure-
click and brick-and-click channel systems. We can distinguish pure-click and
brick-and-click channel system adopted by companies.
 Pure-click or pure-play companies are those that have launched a website
without any previous existence as a firm.
 Bricks-and-clicks companies are those existing companies that have added
an online site for e-commerce.
 Click-to-brick online retailers that later open physical locations to
supplement their online efforts.
Examples of new e-commerce systems
According to eMarketer research company, "by 2017, 65.8 per cent of
Britons will use smartphones" (cited by Williams, 2014).
Bringing online experience into the real world, also allows the
development of the economy and the interaction between stores and customers.
A great example of this new e-commerce system is what the Burberry store in
London did in 2012. They refurbished the entire store with numerous big
screens, photo-studios, and also provided a stage for live acts. Moreover, on the
digital screens which are across the store, some fashion shows´ images and
advertising campaigns are displayed (William, 2014). In this way, the
experience of purchasing becomes more vivid and entertaining while the online
and offline components are working together.
Another example is the Kiddicare smartphone app, in which consumers
can compare prices. The app allows people to identify the location of sale
products and to check whether the item they are looking for is in stock, or if it
can be ordered online without going to the `real´ store (William, 2014). In the
United States, the Walmart app allows consumers to check product availability
and prices both online and offline. Moreover, you can also add to your
shopping list items by scanning them, see their details and information, and
check purchasers´ ratings and reviews.
Although traditionally, CRM has been a popular tool within the B2B
space, it’s beginning to make its mark in the B2C world, and specifically will
have a significant lasting impact within the eCommerce industry. A major
factor that has caused a shift in the CRM and B2C space is the pressure
companies now face to deliver a superior customer experience. With fierce
competition online, price isn’t your competing factor anymore, everything now
revolves around creating a great and memorable customer experience, which is
actually defined by the customer, not the retailer themselves. Whether it’s the

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ability to find a product effortlessly, or having multiple touch points for
customer service, your customer’s experience is becoming the most important
part to your business. CRM systems can arm both sales and marketing teams
with data to have more relevant conversations with customers, and allow for a
much richer customer segmentation experience.
Up until this point in time, there haven’t been many quality tools for
businesses to use that were natural, and facilitated easy integration. Now with
software like OroCRM, merchants can easily integrate a seamless CRM with
their Magento install and therefore enhance their overall customer experience
with valuable insights and proper data analysis.
This post will begin to dive into the importance of CRM for B2C in
eCommerce and Retail as well as why you as a merchant should be actively
considering to implement a CRM system, in order to better understand
customers, and how to provide them with the best possible online (and offline)
experience.
CRM &Big Data for B2C
A Conversation about Data
When we talk about CRM, it’s a conversation about data. With digital
marketing and commerce, CRM has become synonymous with visibility for
your customers, shoppers, website browsers. For now, we’re just going to
narrow it down to the following topics that a strong CRM strategy can help you
plan for:
1. Loyalty
2. Single View of the Customer
3. Segmentation
4. Lifetime Value of a Customer
5. High Value Customers vs. Low Value
Loyalty
Many retailers have some form of loyalty program. It can be as simple
as “press this box” and presto you’re a VIP customer! Or as complex as a
points calculation model. What’s changing however, is that merchants don’t
just interact with their customers in-store or online anymore, it’s everywhere.
The channels we have to interact with our customers, are too many to count.
For merchants to build a strong retention tracking and incentivize on it
properly, they need to track the different ways they interact with their
customers. This is where CRM comes in.

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One Single View of the Customer
Channels have increased, and there’s no way around it. Customers come
to your store, both online and offline. But it might be in a browser on their
laptop, or on a phone. They can browse, buy, email, tweet, search, like, share,
review… the list goes on! There are so many ways to interact with your
customers. All the interaction is impossible for any one team to keep track of.
What a CRM strategy and what the right application will allow you to do, is
store all the data that you have at the customer level, in one place. Why is this
important?
If we were to collect all your data, put it in one place, and show you the
full 360 of each of your customers, would you take it? You’d be crazy not to!
Having this all in one spot, and the fact that we’re not already doing this, or a
lot of us aren’t doing it, it’s something that we can no longer ignore.
Segmentation
Once we have all the data in one place. What do we do with it? We’d be
bananas, if we tried to act on data for each customer individually. We’re not
saying that you can’t do this, there are great pieces of software that build
product recommendations based on specific customers but overall, marketing
initiatives and budgeting won’t go down to that level, it can’t, it’s just not
manageable. When we begin to collect data, customers start to fall into certain
segments (demographics, characteristics, or any other data set that customers
share with each other). With this, you can send more targeted marketing
messages, and manage your budget more efficiently. This means that there’s an
email that is sent to a specific set of customers who bought from you before, or
have always liked a certain brand etc. Targeted messaging leads to a higher
engagement of those customers. If you add in that higher level of engagement,
the fact that you are managing your money better, overall your revenue
profitability will increase.
Many merchants, don’t feel sophisticated enough to do segmentation.
Customer segmentation doesn’t have to be hard, or incredible difficult. In fact,
segmentation can be incredibly basic, and of course to the opposite end of the
spectrum more complex. You can begin to segment by geographic locations, or
even demographics (ie. male vs female customers). Then from there you can
start to branch out and try more involved segmentation ideas.
Other Segmentation Examples:
 Customers always buy a certain brand
 Customers only buy when things are discounted
 Customers only open if products are discounted or share with friends

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  Customers only buy on certain days or holidays, or certain time of the
year
It’s possible to track all this activity, then start to market to your
customers based on that. Our favourite segment, one that is becoming very
important is the segment of your customers who are most influential. This is an
amazing one if you track referrals and shares, because you can use those as
incentives and then drive more activity on your site.
That’s the important thing about segmenting your customers, consumers
nowadays are not expecting to see the same messages as everybody else. They
want to know that the experience is personalized to them.
Life Time Value of Customers (LTV)
Merchants are still spending large amounts of their marketing dollars,
but focusing on cost per order as opposed to the cost per acquisition. The Life
Time Value of a Customer (LTV or CLTV) means thinking about the customer
beyond just their initial order. Merchants want repeat business, so you need to
begin thinking in terms of what your customers’ relationship looks like with
you over time.
Start thinking about your customers in following ways:
 What is the customer life time value of acquired customers in the last 6
months? 12 months? Or 18 months?
 How does their life time value differ if they just signed up, or if they
bought from us?
 What’s the customer life time value by different acquisition channels?
Organic vs social?
This type of tracking is no longer a good piece of information to have.
These pieces of information are becoming necessary and vital. Make sure you
stop looking for the short term win, and start looking at the long term gain. By
doing this, you will see a much stronger on-going strategy and a much stronger
consistent flow of revenue.
To bring us back to CRM, it’s that tool that allows you a 360 degree view
of your customer, to build out those segments, and then overall assess your life
time value of each customer. It’s not crazy to think that your life time value
might be attributed to a certain customer segment as opposed to a specific
customer.
Beyond dollars, how else can you measure customer value to a
merchant?

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Value
Retailers use the word “value” all the time, but they rarely focus on it.
Most merchants only equate value to dollars. If you start tracking people
beyond just how much is my customer spending? The true value of that
customer, and the data you have on them can help to drive many other
strategies.
Somethings you might want to keep track of:
 How often do people walk into our stores?
 How often do customers engage on social?
 Is this a signal to purchase more?
 At what frequency do they purchase?
 Do they have influence on other customers? Have they referred other
people?
As you begin to ask yourself these questions, what you can start to see is
an assigned dollar values to these questions and characteristics. These questions
will also help guide you to build alternative strategies based on this kind of
value. Things like: Omni-Channel strategies, Mobile strategies and Search
Engine Marketing strategies. All of which should be a part of your digital
discussions, and if they’re not, we’d recommend that they are.
High Value Customers vs. Low Value Customers
When it comes to overall CRM strategies, this will help you with
overall loyalty and retention management. It will give you a 360 degree view of
your customer, help you build out customer segments which gives you an idea
of life time value, and then help you assess which customers have high value as
opposed to lower value.
CRM: your data goldmine:
It starts with integrating your data, and ensuring you have the right tools
to give you a 360 degree view of your customer. What are the ways you
interact with your customer? What are the various ways you connect? Once you
have enabled this integration, you can use the data as your goldmine. You can
begin to formulate better strategies, associate true value to customers, and begin
a 1-to-1 level of marketing with your customer segments. Where does this lead
you? To having more relevant conversations with your customers, ensuring
they are given the best possible shopping experience, and of course have them
keep coming back for more.
There are various incarnations, generally grouped by the aspects
stressed.

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 Sales Force Management (SFM) or Sales Force Automation (SFA)
concentrates on the sales process, enabling companies to use their sales
representatives more effectively.
Marketing CRM systems focus on identifying and targeting potential
clients to generate leads for the sales team. Media used include email, Internet
search, social media, telephone and direct mail. Metrics include clicks,
responses, leads, deals, and revenue.
Prospect Relationship Management (PRM) tracks customer behavior
from first contact to sale, nurturing the relationship throughout.
Appointment CRM helps sales, customer support, and service
personnel to arrange effective meetings with customers and prospects.
Analytics are generally accessed by sales, marketing, and service, and often
integrated with web statistics to compare on- and off-line marketing campaigns.

Advantages
1. Quick access to all critical account data, including a company overview,
key sales data, relevant documents, partners involved in the account, and
data sharing rules.
2. Integration of data from a wide variety of sources: email address books,
calendars, company data, personnel profiles, financial data, industry
contacts, etc.

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3. Improved management of marketing campaigns, with the important
metrics displayed in customizable reports and visual presentations.
4. A more effective sales force, with data, quotes and examples immediately
to hand.
5. Better forecasts of product demand and sales revenues.
Problems
CRM systems have a mixed reputation. A 2003 Gartner report
estimated that more than $1 billion had been spent on software that was left
unused, and a 2007 TMCnet article cited employee resistance as still the
biggest problem.

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