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Making customer-focused moves with CRM
Salil Parekh

P R O F I L E

Salil Parekh is CEO, Cap Gemini Ernst & Young India. He is responsible for providing management consulting and IT services to CGE&Ys' customers. He is an Executive MBA in Finance from New York University with a Masters Degree in Computer Science and Mechanical engineering from Cornwell University.

CRM applications are straddling across business functions to retain, capture and capitalize on customer data

The shift from a single-dimensional product-centric model to a 'multi-dimensional' customer-centric model has seen numerous companies placing the 'customer' as the focus of their strategic business vision. The blurring of borders and the free trade mantra espoused by global economies has led to an increased customer base. The concomitant surge in customer related information has made it imperative for organizations to go in for Customer Relationship Management (CRM) tools and applications in their marketing mix, so as to effectively harness their force-multiplier value.

CRM should not be looked upon as a mere concept or a quick fix mantra, but as a broader business strategy used to understand, anticipate and manage both current and potential customers, and tailored to unique market segments. CRM applications are designed to optimize customer interaction by collecting relevant data about the customer at progressive stages of interaction. CRM tools and its attendant applications uniquely capture a three-dimensional view of every customer while analyzing the synthesized information generated from customer databases. The premise here is to get closer to the customer and thereby proactively respond to changes in customer perceptions, needs and wants more quickly and efficiently.

THE ULTIMATE PANACEA?
It is not that CRM is a 'silver bullet' solution or a panacea to address all business related problems that corporations can turn to during downturns. CRM allows corporates to focus on those customers that are 'business generators' rather than 'laggards.' This ensures that the company's marketing, advertising and promotional efforts are uniquely directed to that 'critical set' of customers who are most likely to generate business in any given market condition and for sustained periods of time. From an internal frame of reference, CRM applications cut call center costs (for one) and assists in charting out a focused sales plan for the marketing & sales teams thereby cutting overheads and maximizing revenues.

As customer acquisition costs continue to inflate in a slow economy, numerous companies are turning to CRM tools to help them realize their existing customer value. According to IDC's 'Worldwide CRM Market Forecast and Analysis, 2000-2005,' the CRM services market is expected to total over $148 billion by 2005 demonstrating a five year Compounded Annual Growth Rate (CAGR) of 25.2 percent. This growth rate remains well above that of overall IT services market, which shows a 2000-2005 CAGR of 12 percent.

WHAT ABOUT THE RECESSION?
Recession and downturn are not a 'now' phenomena. Businesses have always had to contend with the peculiarities and complexities of changing business cycles and related challenges. Ergo, a set of factors (variable or otherwise) stimulates the very need for CRM. These could include the vagaries of transition from an essentially manufacturing or agricultural-oriented economy to a more service-driven one, the swirl of global competitive forces, shorter product cycles, discerning consumers etc. An inter-play of various forces then compels companies to take dominant or reactionary postures in the constantly morphing marketplace and accordingly configure their customer relationship exercises/programs.

It becomes easy to look at variables that will help the company reduce costs, operational allocation and related belt-tightening measures when there are definite signs of a slowdown in the economy. The cost heads then start encompassing hitherto untouched areas of business functions with CFOs and financial managers taking center stage. However, it is during these times that the age-old mantra 'customer is king' is tested to the extreme. To be sure, top management (essentially the CEO along with the CMO and CFO) should ensure that a 'blanket' and 'inward' cost cutting exercise should not dilute the existing consistent focus on the customer. So consequent investments in CRM should be prioritized and configured according to changing market scenarios.

PRIORITIZING CRM MECHANICS
Corporates have realized that efficiently managing existing customer relationships is a low-cost input for cost-effective growth. Clearly, the closer the company is to its own customers, the better it is for the company to stay afloat in a down economy. What tends to happen in a near recession market is competitive firms get more competitive (i.e. manage their customer relationships more aggressively) and the least competitive ones phase out. As a result, there is a shakeout that throws up a pool of 'unserviced' or poorly serviced/unattended customers who are most likely to be 'switchers.' This presents an enormous opportunity for companies who have the necessary wherewithal and the operational scalability to efficiently manage these 'floating' customers. These companies then have to make the right investment related decisions on CRM applications and packages while positioning themselves accordingly in the marketplace.

Market barometers indicate that, even as companies are downscaling their overall capital expenditure, most firms are still very keen to allocate funds to CRM related activities. What has changed is the priority and phased incremental spending on CRM related applications and the added pressure on CRM return on investment. This has been largely due to the increased maturity level of clients and the prevalent economic scenario. Expectedly, in a downturn, the focus of capital spending is generally in areas that are measurable in the short-term and ensures core revenue streams.

Therefore, it becomes important for companies to realize that, in contrast to other management tools and applications that have an implicit linkage to business process and systems, CRM tools have a direct and an incremental effect on businesses with short-term measurable parameters and long-term payoffs. It is often observed that the companies that invest in CRM programs know what they want because they tend to understand that business has to continue as usual and accordingly realign their processes and systems to the changed scenario.

The emerging trends in CRM indicate that CRM applications are straddling across business functions to retain, capture and capitalize on customer data i.e. integrating all aspects of business processes and systems by keeping the customer as the core. According to an IDC report, CRM projects are no longer viewed as stand-alone implementations but are now being increasingly pursued in context of larger business objectives and core strategic agendas. Corporations that realize the true value of their customers in a downturn are the ones that will be better equipped to tide over the slump and jump start, consolidate and thrive again.