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customer-focused moves with CRM
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.
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
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.
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.
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
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
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.