Case Study: The Case Of Customer Retention, Pg 2

CASE STUDY
The Case Of Customer Retention
Continued..

THE DISCUSSION

MALCOLM MONTEIRO
Sr Vice-President (Sales & Systems), Blue Dart

It is important for CEO Sunil Garg and his team to realise that Customer Relationship Management (CRM) will deliver if and only if Garud's Executive Committee believes-and makes it a point to regularly reiterate the belief-that managing relationships with the customer is a critical part of the activities of every individual in the organisation. It is only in such an environment that CRM can deliver; otherwise, there is a risk of it becoming a standalone resource.

There are, however, several pre-requisites to building up customer commitment.

The company should take a fresh look at all those processes that have a bearing on its basic business objective of providing quality offerings to the customer at the lowest cost and in the least amount of time. A number of grey areas, where time and effort are being duplicated, leading to cost over-runs, will automatically surface. These should be tightened up.

Infotech can add value to processes by eliminating the wastage of resources and reducing cycle-times. Also required is an analysis of the infrastructure so that the company can have a robust Wide Area Network in place before moving on to sophisticated packages like CRM. It is not enough to capture information; what is more important is to store, structure, securitise, and retrieve that information in a manner that enhances the quality of managerial decision-making in the company.

The real costs incurred in introducing initiatives like CRM are not on the hardware or the software, but on people. Garg and his team should treat training as a focal area of managerial attention.

While it is imperative to ensure friendly, unified interaction with the customer at the front end, the real differentiator in the competitive services industry is the attitude of the organisation towards the customer. An organisation could well have service quality levels of 99 per cent, but the customer may have only a clinical perception of its efficiency. This happens when the productivity parameters at the individual level are not in sync with the business needs of the company.

For instance, under compulsion to meet his daily physical targets, a delivery-boy may have little patience with a delay at the customer's premises. It is here that Garg and his team must ensure a mesh between individual targets and company goals. If the intangible warmth is missing, there is every likelihood that the customer will switch at the earliest opportunity.

Garg should head a CRM steering committee comprising all the functional heads. Incidentally, he should get an infotech head on board. The nitty-gritty of implementation should be the responsibility of a project team, which should be led by the head of sales and marketing. This team should think about the expectations of the company from CRM, and document it. Once the document is cleared by the steering committee, a pilot project should be undertaken so that glitches, if any, can be addressed before a formal roll-out.

Customer-teams are effective only around the time the customer has just come aboard. But, once the customer-profile is incorporated into the CRM package, anybody should be able to handle the customer as effectively as the front-end staff. That, incidentally, is the purpose of CRM. Equally important is the need to update the package through initiatives like developing industry-specific expertise. That can give Garud a formidable edge not only in getting closer to the customer, but also over the competition.

SANJAY SHARMA
Head (Operations & Service Quality), ICICI

There is little doubt that Garg should go in for CRM. It will help the company improve its rate of customer-retention-an issue that is, evidently, causing concern-by improving the quality of its customer-service. Such a system will enable the company to track changing customer-preferences on a regular basis and, thereby, manage its relationship with the customer from a more enduring platform.

In a competitive industry where price-cutting is the norm, and customer churn is high, Garg should definitely focus on all those initiatives that generate customer loyalty. After all, customer acquisition is far more expensive than customer retention. However, CRM is only a tool; it is only a means to an end. So, its success will depend on the ambience in which it operates, the way it is deployed, and the manner in which the data it generates is put to use.

There are certain pitfalls that Garg should guard against:

The first stage in implementing CRM is, of course, the requirement specification stage. This is the responsibility of the steering committee, which must be made up of the company's top management. The requirement specification stage is, in fact, the most crucial stage, which also takes the longest time.

There are simple questions to answer. But, once Garg and his team begin to address them, they will realise that the answers are, by no means, simple. Garud will have to grapple with fundamental issues, like the reason for its existence, the business purpose, the critical success factors et al. It is in arriving at those answers that CRM begins to take shape, substance, and evolve into a workable tool. Most failures of CRM-and of course, most successes-are rooted in this stage.

It is also necessary to have a project plan specifically for CRM, incorporating the milestones to be achieved in a specific time-frame, designed by the team that is vested with the responsibility for its implementation. The team's members should have clear roles, and the implementation should be reviewed and reported to the steering committee. It is the absence of co-ordination between the steering committee and the project team that, often, leads to disaster.

Taking the training needs of the end-user for granted is a pitfall. People need to be sensitised to the use of a sophisticated package like CRM, and this can happen only through training. Proper training will also ensure that CRM does not, as happens, hype employee expectations. It is, therefore, important for everyone in the company to be clear about what CRM can do and what it can not. Otherwise, CRM becomes a guinea-pig for organisational mistakes not of its making.

A company may have the best CRM package in place, but it could still be providing poor quality service. This happens when the underlying culture of the organisation remains unchanged. It is important to manage the internal culture early. A culture that drives superior service-which measures service parameters, and rewards those who meet them-is fertile ground for the success of CRM. When you have proper measures, it is easy to monitor performance. And when good performance gets rewarded, it generates, like a self-fulfilling prophecy, increasingly higher levels of performance.

In the final analysis, CRM cannot be a substitute for either dedicated teams or customer satisfaction surveys. Each has its place, and the learnings can be reinforced by one another. For instance, when price becomes a differentiating factor, the attrition-rate may be on the decline in a company that offers discounts, but the customers may still be dissatisfied. It is here that CRM helps provide not only an integrated, balanced view of customer expectations, but also enables the company to fine-tune its internal processes to meet those expectations.

H. VISHWANATHAN
Principal Consultant, Tata Infotech

The essential premise of CRM is, in fact, quite traditional. It is well known that, in order to stay in the market, you need to be clear about what you are marketing, and to whom. Since customer needs are constantly changing, your product-offerings have to be regularly changed too. While dealing with this premise from a platform where there is a technology add-on, companies go wrong in two areas: looking at technology as a panacea, and looking at technology in complete isolation.

Of course, CRM is not just a software package; it is a way of doing business. More specifically, it is a state of mind. It delivers only when it is rooted strongly in the culture of the organisation. If the company has not, over the years, nurtured and developed an internal mindset that places the customer at the centre of all its business processes, CRM will become a liability rather than an asset. But, given the right ambience, CRM impacts powerfully on customer attrition-rates and loyalty.

Garg should start by taking a comprehensive view of the company's customers, their businesses, their needs, and, of course, the retention strategies of his competitors. It is important to define and articulate the company's business objectives. This should be done only after it has identified, from among the mass of customers for the courier services business, the segments it will service.

Once they are identified, the company can confidently address the more critical issue of the kind of product-offerings it can offer in tune with the expectations of the customers in those segments. Garg and his team should recognise the fact that no product or service is cast in stone; it has a life-cycle of its own. Does Garud, as an organisation, have the competence to extend that cycle, innovate around it, and offer newer offerings on a regular basis?

Xerox is a classic case in this regard. It evolved from a facsimile company to a complete documentation company, providing end-to-end service to customers. Garud, for instance, could gradually evolve into a logistics solutions company, offering a complete range of intermediary services like shipping, warehousing, and freight forwarding, thereby controlling the gamut of the links of the value chain that connects the producer to the end-user. It is necessary to get Garud's vision right, and Garg has to lead this task from the front.

How do you retain customers? That is the next crucial issue. Obviously, you can't work to retain all your customers. You need to focus on only those who fit in with the company's vision. While Garud has its focus to some extent, the top management is, quite rightly, concerned about the customer-attrition rate. The perceived need to target specialist segments, like garment-exporters and field-trial research firms, is commendable.

Garg and his team should look at similar customer groups. Software firms, for instance, could have special needs while transmitting data through diskettes and floppies. Garud should, gradually, move towards doing business in core areas with core customers. Once it understands the specific needs of the customer, it becomes easier to move towards customisation.

Contrary to popular belief, I do not think that customisation involves a trade-off between costs and revenues. The advantage of customisation is that, over a time, the customer will be only too willing to pay a premium for a specialised service. It is at this stage that customer retention efforts not only become sharper, but also more profitable. There are 3 other issues that Garg should look at:

Talk to each of those 400 customers that Garud has lost in the last 2 years. Somewhat in the nature of an exit interview, this interaction will throw up gaps in Garud's customer service. It would also be worthwhile incentivising come-backs.

A Customer Needs Survey should be undertaken. A Customer Satisfaction Survey merely asks if the customer is satisfied with the existing service-level. It does not talk about the current and future needs of the customer. The Needs survey will bring to light several new opportunities, not only for customer-retention but, more importantly, business expansion.

Garg should develop a Customer Loyalty Programme-somewhat on the lines of an airline's Frequent Fliers Programme-that rewards customers for their loyalty. While the incentives could be both monetary and non-monetary, it will enable Garud to charge a premium price and retain customers even during a price-war.

YASH SAHNI
President & CEO, Global Telesystems

Garg should not lose sight of the fact that an on-line system, however advanced and sophisticated, cannot reduce the rate of customer-attrition at Garud. The human element is still important.

CRM is an aid, a tool that helps a company read the mind of its customer. It does not build relationships with customers on its own. It is upto the users-who, incidentally, are not just the sales and customer service staff alone, but a spectrum of employees across the board-to interpret, analyse, and act on the data. If there is confusion about what a particular trend means for the long-term interest of the company, no amount of information will help.

If there is an internal lack of understanding of what superior service means, no package can rescue the company. I think Garg faces the risk-very real, in many cases-of people going overboard about the benefits of CRM. In any change-initiative-like the introduction of CRM-there are 2 hazards which often surface simultaneously: reluctance to change, and high expectations. The latter is a trap that companies fall into particularly when implementing a technology-led change.

Garg should reiterate the fact that the quality of individual interaction with the customer is still the key to customer-retention. All other initiatives can only be supportive in nature. This issue needs to be driven home consistently. In fact, one characteristic of CRM is that it is top-driven; its success depends on the level of commitment by the senior management of the company. That is why Garg should personally take charge, and send out the right signals.

Let me address 3 relevant concerns. First, should Garud go in for CRM? The answer is self-evident: it should. The sheer number of customers that Garud is servicing demands the deployment of a package like CRM. When you have a large number of customers to whom you are delivering a wide range of products and services, it is not possible to track their changing needs, however committed the front-end staff, physically. The advantage of CRM is that it allows all the employees of the company, irrespective of their functional affiliations, to handle a variety of customer needs equally well.

It also means that the sales and marketing employees can then concentrate on the core objectives of generating revenues and building brands. But I don't think Garg and his team should look at CRM as an alternative to focus groups or satisfaction surveys. Dedicated customer teams certainly help; they provide that all-important human element in the customer interface, which is invaluable. But, again, given the numbers at Garud, you need many teams. That may not be workable.

Second, should Garud develop the package in-house or outsource it? A readymade package is, invariably, a tried-and-tested package. Not only would the glitches have been taken care of, it will incorporate the best practices since vendors normally benchmark their packages. An in-house package would have to be developed from scratch. It may be less expensive, but will take longer to settle. My own comfort-level, however, is with the latter. Of course, you should make certain that there is adequate expertise within the company, and the larger business perspective is not lost sight of.

Finally, irrespective of whether Garud goes in for CRM or not, it is important to ensure that the entire organisation becomes customer-focused. After all, only an employee mindset that places the customer at the centre of the business is a guarantee for customer-retention.

Send us your solutions