Tuesday, June 30, 2009

CRM Essay

The letters CRM stands for Customer Relationship Management. Over the last three or four years, customer relationship management has become a popular catchphrase. Although CRM in one form or another has been around for some time, the current interest in CRM has developed with a combination of new technologies that enable companies to ensure better customer relationships. A good CRM strategy is vital in the Supermarket retail sector. This is because there is increasing competition for customers, as well as the widespread realisation that customer retention and loyalty is just as important as customer acquisition. Another reason driving this renewed interest in CRM within the retail sector is the shift in the balance of power to customers. Better-informed customers are more aware of alternatives, and as customers become more informed consumers of services and products, customer expectations rise and change, and their sophistication increases, too. This essay will therefore explore elements of the CRM framework and see how this is utilised in the UK retail sector.

The principle of CRM is that the more information a company has about its customers, the better. It involves managing the customer relationship across all its interfaces with the company as one entire process According to Cook, S, 2002:

"The Strategic process of identifying desirable customers segements, micro-segments or individual customers on a one-to one basis and developing integrated programmes that maximum both value to the customer and the lifetime value of customers to the organisation through targeted customer acquisition, profit enhancing activities and retention"

From an application perspective, CRM is often talked about in terms of sales force automation (SFA), marketing automation, customer services and support. However, CRM really encompasses all business processes that impact the customer experience. Essentially the goal of CRM is to:

" Increase the lifetime value of a company's relationship with target customers. Optimize the effectiveness of marketing, selling and servicing of target customers and maximise the value of customer expenditures for mutual company/customer gain" (Marcouse & Gillespie, 1999, p121)

The above three goals seem to be very apparent in the retail supermarket sector as CRM is required as a operating model and to understand how it affects the customer experience. Eventually, it will permeate and impact all company initiatives. It must translate into effective business change in terms of insight, processes, systems and behavior that result in measurable return. Hill and O'Sullivan(2001) have identified The 10 Key principles of CRM:
  1. Value Segmentation. Segmentation is based in customer needs, preferences, behaviors and economic potential, which provides the basis for resource allocation decisions in marketing, sales and service.
  2. Institutional Memory: When the customer interacts with us, everyone in the enterprise is aware of prior inter actions, outstanding issues and pending opporotunities.
  3. Collaboration. Customers are involved in the specification, design and/or delivery ala desired result.
  4. Touch-point Alignment Customers are able to do business With you through multiple channels, which are aligned with your customer r needs and, their value to your business
  5. One & Done. Customer needs are solved during the first contact.
  6. Real-time information manager. Your employees have real-time access to the right information in order to make customer-based decisions and resolve issue immediately.
  7. Customer Scorecard: Employee performance requirements arid measures are designed to drive specific customer behaviors (e.g. share of spend, loyalty, average value of customer) that are measured explicitly.
  8. Closed-Loop Processes. Integrated front and hack office systems ensure that information and workflow carry through the entire enterprise to their logical conclusion, closing the customer loop and enabling continuous knowledge capture.
  9. Listening & Learning Posts: Forums facilitate information sharing and learning among your customers that help them do business with you, learn from each other and provide valuable input to your business processes and operations.
  10. Customer Experience Management: You have mapped all "touch points" between you and your customers and are able to deliver a consistent, high quality experience that provides added value to the customer."
Supermarkets have embraced the change of new technology, and have employed new technology as an integral part of their CRM Plan. Advanced technology can used to give the customer an competitive advantage which encourages a brand loyalty infrastructure and supports the future of online commerce. An example of such technology can be seen with "Tesco", the "biggest e-grocer in the world" they have purchased "Autonomy's" technology to power the next generation of its online shopping service. Tesco has used the technology to automatically manage products across its catalogue, as well as provide advanced personalisation, through both personal computers and mobile phones, for customers using the tesco.com site. Tesco has also created "personal shopping assistants" on the Web, as a way of suggesting products and services that are appropriate to customers' needs and interests. The technology is designed to understand customers' interests automatically as they interact with the content on the site, providing them with interesting and appropriate product suggestions and promotions, whenever they are online. Dr. Mike Lynch, CEO of Autonomy, explained:

" For example, beer connoisseurs will receive news of the latest continental lagers or real ales, chocolate addicts will be shown the latest confectionery, and vegetarians will avoid the latest meat promotions - without the need to fill in online forms specifying user interests."

The above demonstrates that Tesco has employed technology to carry out part of its CRM plan, as it has utilised technology to automate the entire online shopping experience, enhance personalisation, and turn one-time visitors into regular users.

Terry Leahy, CEO of Tesco, said:
"Customers love Internet shopping. This year we have doubled to half a million the numbers signed up to shop with us on the net.Customers know and trust Tesco and that gives us a real competitive advantage. 30% of our customers shop nowhere else on-line which means Tesco is driving the use of the Internet.

Tesco.com, the UK's leading online retailer, will this week officially launch its Pocket Shopper application, which will allow registered users with Microsoft Pocket PC-based mobile devices to submit their orders on the move.Analysts said the move, revealed by Computer Weekly in January, will provide a boost to the burgeoning UK m-commerce market, which will be worth [pound]2.63bn by 2005, according to research firm GartnerG2. The Pocket Shopper application, available for download from the Tesco.com Web site, allows consumers to choose their shopping, from a total of 20,000 items, and pay by credit card without having to a connect to a network. The next time the user goes online, their order will be sent to Tesco.com, which delivers the goods to their home from their local Tesco store. The Pocket Shopper application is aimed, according to Carolyn Bradley, chief operating officer at Tesco.com, at what she described as "long suffering commuters".
"Being able to shop anywhere is an advantage many commuters would love to have," she said.
"As prices tumble, the technology will become available to everyone."
Duncan Brown, consulting director at analyst firm Ovum, said m-commerce is ideally suited to supermarkets."Mobile grocery shopping has a good chance of working as it is just another step on the evolutionary path from loyalty cards and online shopping," he said. However, Brown warned, companies should not be over-ambitious with their mobile projects.
"M-commerce should be very specific - the consumer's usual order or a delivery at a certain time," he said.
"If you can get it right it has the potential to be very popular," Brown added.

In recent years competitive markets have been flooded with customer loyalty programmes which is considerd a cost-effective customer relationship management strategy. To obtain customer loyalty, the biggest single step, and the one with the widest implications, is the progressive introduction of loyalty cards., According to Customer Loyalty today, 51% of all British shoppers possess a loyalty card and of those who shop in a supermarkets which offer them 70% have a card. Through loyalty card schemes, retailers have been able to build up databases of customer profiles and preferences. Supermarkets are building relationships with customers by sending them individually adressed letters and customised promotions. In return for a very small discount, typically 1 per cent, the store gets what it really wants, information about its customers. It is hardly getting what it says it wants, loyalty; when all stores have cards, and all customers have cards for all stores, we will be back where we began. With this difference: the stores' computers will know more about us than we know about ourselves. There are, of course, safeguards: there is statute law on data protection. Research carried out by Mori for the Black Sun Consultancy, has shown that supermarket loyalty cards do not encourage shoppers to stay loyal to any particular chain. The study found that although over 50% of the UK's supermarket shoppers carried a loyalty card, 69% said that it did not persuade them to shop at any particular chain.Nine out often people said that they were more concerned with getting a better price for their shopping than collecting points on loyalty cards. Many shoppers said that they were forgetful about the points, and 25% said they "rarely" or "never" redeemed the points, according to the article in the Sunday Times. Some supermarket chains seem to have taken notice of the research, with Safeway having dropped its loyalty card back in 2000, while Waitrose never introduced a card scheme, saying they were a waste of time.

Having seen rival supermarket chain Sainsbury's join the Nectar loyalty card scheme, Asda claims that such cards do not work.The UK-based food retailer, owned by US giant Wal-Mart, has unveiled new research by NOP that shows that plastic cards fail to keep customers loyal. Asda said the survey, conducted at the beginning of September, shows that shoppers across the UK, regardless of their favourite store overwhelmingly prefer lower prices to plastic points. Over nine out of ten people (93%) said they would prefer lower prices to loyalty cards. The survey also found that people have not warmed to loyalty cards in the last few years with almost three-quarters (73%) saying their attitude to them had not changed. Asda, the UK's number three supermarket chain according to their market share 2002. (www.mintel.co.uk, 10/08/03) is hot on the heels of number two Sainsbury's, and Asda said it will continue to do what it has done since it abandoned its own loyalty card pilot in 1999--chip away at prices. However, with the Nectar scheme Sainsburys has recoginised the need to give shoppers instant gratifiaction in conjuction with have having a m points scheme that builds up. They therefore can offer instant rewards such as savings in real cash, like Ј5.00 of your shpooing bill when you spend over Ј50.00. However, whether this increases loyalty is also questionable as on the writers recent visit to their local Tesco store the check- assistant advised that I could reed all Sainburys vouchers at that store.

Loyalty schemes such as Loyalty cards act as an incentive for repeat purchasing, which will help maintain or increase a supermarket market share. Supermarkets such as Tescos which uses the loyalty card scheme, will save time analysing customer requirements, which will allow them to reduce stock levels and improve cash flow.

"Tesco, uses the data obtained from its Clubcard to target future offers, minimising customer annoyance and maximising their own sales." (Cran,S,2001,p18)

Loyalty depends on personal relationships, and it is not possible to have a 'meaningful relationship' with an electronic check-out or even generally, with the young person at it. The chains have attacked this problem - which they recognise - by various routes. Some, such as Sainsbury's, have produced glossy magazines full of recipes and suggestions of how to enjoy an enviable lifestyle - all from Sainsbury's own shelves. Some chains develop a house style of architecture: 'Tesco tithe-barns' have gables, mansard windows and occasionally clock-towers, while Safeway's larger newer stores have spacious glass atriums; they remain, of course, basic steel-framed sheds underneath. The range of products and services they offer constantly extends. Some are approaching 20,000 'lines' of merchandise. All the larger stores now have cafeterias .Financial services are appearing, where pension schemes, savings plans and loans on mortgage are among the 'products' on offer. In theory, town planning law enables local councils to limit and control what is sold in a supermarket, but in practice this is a broken reed, and herein lies the next and greatest threat to the traditional town centres. When one can obtain banking, professional advice and even medical services along with groceries, clothing and household goods in one visit, under one roof, the reasons for going to the High Street will be few indeed.

Increasing numbers of UK retailers are adopting a new customer profiling technique which is designed to allow them to exploit their large CRM investments in a more effective way. The purchase behaviour profiling (PBP) technique, which is already being used by Sainsburys and Co-op, segments data by transaction rather than simply by customer demographics.This means retailers can analyse customer behaviour without the need for a loyalty card scheme, giving them meaningful insights into buying patterns, said datawarehousing specialist Teradata, which developed PBP.Retailers have made massive investments in loyalty card schemes but they do not use the data properly," said Mikael Bisgaard-Bohr, retail industry director at Teradata. "Segmenting data by demographics is fine for financial services firms, but it does not work for retailers. With PBP you can break down types of customer behaviour into more meaningful segments

This CRM essay has identified and defined the key concepts of CRM and how this is being utilised in the Uk supermarket sector through inplementing new techonlogy and indentifying cutomers needs. Businesses also need to keep their valuable customers. A keen focus on customers is an axiom of good business. Businesses that do not maintain that focus are doomed. The customer can easily be forgotten in the rush to develop and launch new products and services, mitigate competitive threats, appease financial markets, manage the organization, increase profitability, expand market share and globalize. While CRM applications and their associated technology are critical, they are only tools to enable an idea. CRM is a vision, an In this sense, CRM is like Total Quality Management (TQM) you cannot buy it in a box; instead, you must make it happen through a variety of efforts. Therefore, care must be taken to ensure that CRM does not become a pure product push or an efficiency play wherein customers bear the brunt of a company's cost-containment measures, CRM must be developed from the outside in-- beginning with target customer's wants and needs. Understanding customer behavior can lead to very simple changes in business processes that can improve customer value. As with many things that are simple in concept, the real challenge of CRM lies in its execution.

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