Những vấn đề khoa học và thực tiễn để hình thành hệ thống bảo hiểm thất nghiệp ở Việt Nam

ĐẠI HỌC QUỐC GIA HÀ NỘI
KHOA KINH TẾ







BÙI VIỆT BẢO





Những vấn đề khoa học và thực tiễn để hình
thành hệ thống bảo hiểm thất nghiệp ở Việt
Nam




LUẬN VĂN THẠC SĨ KINH TẾ CHÍNH TRỊ

HÀ NỘI, 2001



iv
TABLE OF CONTENT
Abstract………………………………………………………………………… i
Tóm tắt………………………………………………………………………… ii
Acknowledgements……………………………………………………………. iii
List of table and chart…………………………………………………………. .vi
INTRODUCTION 1
1. Necessity of the thesis
2. Objectives of the thesis
3. Methodology
4. Structure of the thesis
CHAPTER 1: THEORICAL FRAMEWORK 4
1.1 The definition of customer relationship management (CRM): 5
1.1.1 Definition of customer relationship management: 5
1.1.2 Comparison between relationship and transactional marketing: 7
1.2 The principle of CRM 8
1.3 The element of CRM: 11
1.4 The characteristics and the challenges of CRM: 15
1.4.1 The characteristics of CRM: 15
1.4.1 The challenges of CRM: 16
1.5 Ideas support CRM: 17
1.5.1 The statistics of Harvard-Business review in December, 1995: 17
1.5.2 Pareto's Principle - The 80-20 Rule: 17
1.6 The benefits of CRM: 18
1.6.1 Long-term profitability 18

1.6.2 Lower costs 18
1.6.3 Repeat customer often cost less to service 18
1.6.4 Opportunities for cross-selling 18
1.6.5 Defection less likely 19
1.6.6 Employee retention 19
1.6.7 Family influence 19
1.6.8 Word of mouth marketing 19
1.7 The reason why CRM fails: 21
CHAPTER 2: BACKGROUND ON VIETNAM BANKING MARKET AND VPBANK SITUATION
ANALYSIS 25
2.1 Overview of Vietnam Banking Market 25
2.1.1 Background 25
2.1.2 Commercial Banks' Market 27
2.2 Situation of VPbank 30
2.2.1 Vision 30
2.2.2 VPbank’s mission, strategy and performance results in 2001-2005… 31

v
2.2.3 SWOT analysis 42
2.2.4 Value chain analyis 48
CHAPTER 3: RECOMMENDATIONS TO BUILD A STRATEGIC PLAN FOR APPLYING CRM IN
VPBANK
3.1 VPBank competitive advantages and general strategy from 2006-2010…53
3.2 Application plan of CRM in VPBank: 57
3.2.1 The first phase: Build foundation for CRM 60
3.2.2 The second phase: Deploy CRM 65
3.2.3 The third phase: CRM development 77
3.2.4 Conclusion 79

vi
LIST OF TABLE AND CHART
Table 2.1- VPBank Financial statement analysis in 2001-2004
Table 2.2- Total mobilized funds in the market I in the period 2001-2004
Table 2.3- List of VPBank’s competitors’ software names
Table 2.4- The equity growth rate of banking system and some commercial banks
Table 2.5- KPI to evaluate the performance of bank
Chart 2.1
–
Financial statement analysis
Chart 2.2
-
Profit structure in VPBank
Chart 2.3

-
Profit in the first six months of 2005
Chart 2.4
-
Mobilizing fund grow rate in 2003-2004
Chart 2.5
-
ROE comparison


1
INTRODUCTION
Competition in Vietnam business environment increases rapidly, especially
when opening the economy. By approval of operation of economic partners,
competition between industries and units of industry is significantly rising. Besides
that, expanding economic integration requires firms to improve quality of products and
services in order to create competitive advantages.
There is high competitiveness between commercial banks in inter-bank market.
Competitiveness is really carrying out between state banks and joint stock banks, two
biggest bank system in Vietnam. Moreover, joint venture banks and foreign banks are
emerging as potential competitors in the banking market.
Foreign banks will absolutely create high pressure on Vietnamese banks. When
foreign banks are free to operate in Vietnam, they will be big competitors of not only
state banks but also joint stock banks. This is reason why Vietnamese banks have to
apply modern technology in payment and management and diversify services in order
to create competitive advantages.
Vietnam joint stock commercial bank for private enterprises (VPBank) is entirely
businesses under high competitiveness pressure. It is difficult for VPBank to compete
against state banks because the government protects the state-owned banks. State banks
have many advantages under government‟s protection and they definitely drive

financial market. Furthermore, some joint stock competitors have high capital and large
market as well as wide distribution channel. To become one of the top five biggest
joint stock banks in Vietnam, VPBank must prepare its competitive strategy in next
period in order to explore potential markets and enhance its competitive advantages.
1. Necessity of the thesis
Joint Stock banks (JSBs) systems in Vietnam are significantly competing with
State-owned banks (SOBs) system. Because of being result of opening the economy as
well as characteristics of economy system, JSBs are controlled by Central Bank much

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more tight than SOBs. Besides that, set up after SOBs they are really weak in
infrastructure, competitive capacities and supported policies. Furthermore, when
Vietnam becomes member of the World Trade Organization, Joint Stock Banks will
face increasingly competitive pressure by foreign banks that have much more high
power of finance and technology.
Vietnam joint stock commercial bank for private enterprises (VPBank) is one of
JSBs operating in Vietnam banking market. It is entirely difficult for VPBank to
compete with SOBs. However, VPBank is opposing increasing competition of Joint
Stock competitors in order to exist and development.
Moreover, I have been working in VPBank, one of the first Joint Stock banks in
Vietnam, as an officer for nearly three years.
2. Objectives of the thesis
Based on defining difficulties of VPBank in terms of competing with not only
other non-state banks but also state-owned banks, the research will significantly find
out a relevant competitive strategy for VPBank in the period from 2006 to 2010 and
answer Why VPBank should apply CRM as a competitive tool.
To get the general objective the research thesis will take detail objectives: i) examining
main effects of external and internal environment on VPBank‟s operation; ii) finding a
relevant competitive strategy for VPBank in next five-year period and the relationship
between VPBank new competitive strategy and CRM; and iii) how to apply CRM at

VPBank.
Questions
To achieve these objectives above, the dissertation will answer three key questions
follow:
1) What factors have significantly affected operations of VPBank?
2) What will be competitive strategy for VPBank in 2006 – 2010 and the
relationship between the new strategy and CRM?

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3) How to apply CRM solution?
3. Methodology
To find a relevant strategy for VPBank, the thesis will analyze competitive
advantages based on analyzing SWOT and value chain.
Data is definitely collected from secondary data source. They are government‟s
reports, Central Bank‟s annual reports, legal documents related to banking system,
VPBank‟s Annual reports, VPBank‟s surveys and banking articles. Besides that, the
research uses data collected from other Joint Stock Banks and State-owned Banks.
The research also uses comparison and contrast methods in order to answer the
research questions.
4. Structure of the thesis
To regard to the research topic, the research is clearly divided into three
chapters including:
Chapter 1: Theorical framework
Chapter 2: Background on Vietnam banking market and VPBank situation analysis
Chapter 3: Recommendation on competitive Strategy of VPBank in 2006-2010, and
how to apply CRM solution as a competitive tool.

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CHAPTER 1: THEORICAL FRAMEWORK
The evolution of marketing
The word marketing is derived originally from Latin “mercatus”, which means
marketplace. It comes from the word “mercari”, which means, “to trade”. The word
can also be somewhat confusing. If you ask people what marketing is, many will
respond with a variety of words such as selling, advertising, promotion, targeting, or
marketing research. The fact is that marketing encompasses all of these and yet many
other activities and it is concerned with the identification of marketing opportunities.
The traditional view on marketing with the concept of 4ps: Price, Product, Place, and
Promotion, was originally constructed by Niel Hopper in 1964. This approaches that
has then over the years been further developed by a number of authors. These four
elements are regarded as the traditional marketing mix and the marketing mix approach
constitutes a production-oriented definition of marketing where transactions are put in
the focus.
From the early 1980s an alternative approach to marketing theory and practice
was gaining power, namely relationship marketing. The term itself can be traced back
to the service marketing literature, through arguably it can be said to have originated in
industrial marketing. In the scope of industrial marketing this shift from traditional
marketing towards relationship marketing are occurring and several scholars are
claiming that this is a paradigm shift in marketing defines relationship marketing in the
following way: “Marketing is to establish, maintain, and enhance relationship with
customers and other partners, at a profit, so that the objectives of the parties involved

are met. This is achieved by mutual exchange and fulfillment of promises.”
In its earliest forms, relationship marketing focused simply on the development and
cultivation of long-term, profitable, and mutually beneficial relationships between an
organization and a defined customer group. However, the concept quickly broadened to

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encompass internal marketing in acknowledgement that the successful management of
external relationships was largely dependent on the alignment of supporting internal
relationships.
1.1. The definition of customer relationship management (CRM):
1.1.1. Definition of customer relationship management:
As already stated, the change of the business environment and the evolution of
marketing to adapt to these changes have led to that the way companies organize
themselves has switched from product-based to customer-based structures. A key
driver of the change is the advent of customer relationship management-CRM, which
underpinned by information systems convergence and the development of support
software, promises to significantly improve the implementation of relationship
marketing principles.
From another perspective, CRM is a strategic view of how to handle customer
relations from a company perspective. The strategy deals with how to establish develop
and increase customer relations from a profitability perspective. Based upon
knowledge about the individual customer‟s need and potential, the company develops
customized strategies describing how different customers should be treated to become
long-term profitable customers. The basic philosophy underlying CRM is that the basic
of all marketing and management activities should be the establishment of mutually
beneficial partnership with customers and other partners in order to become successful
and profitable.
In order to more efficiently manage customer relationships, CRM focused on
effectively turning information into intelligent business knowledge. This information
can come from anywhere inside or outside the firm and this requires successful

integration of multiple databases and technologies such as the Internet, call center, sale
forces automation, and data warehouse. There is no universal explanation of what
CRM is, since the area is fairly new and still is developing. It is therefore important to

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remember that several attempts of defining CRM exist and that many companies adapt
the definition to their own business and their unique needs. The following quotations
are three examples of how CRM is defined:
“CRM is a new customer-centric business model that reorients firm operations
around customer needs (as opposed to products, resources, or processes) in order to
improve customer satisfaction, loyalty and retention”

“CRM is the integration of customer focus in marketing, sale, production, logistics
and accounting, i.e. in all parts of the company’s operations and structure”

“The activities a business performs to identify, qualify, acquire, develop and retain
increasingly loyal and profitable customer by delivering the right product or service,
to the right customer, through the right channel, at the right time and the right cost.
CRM integrates sales, marketing, service, and enterprise resource planning and
supply-chain management functions through business process automation,
technology solutions, and information resources to maximize each customer
contract. CRM facilitates relationships among enterprises, their customers, business
partners, suppliers, and employees”
As can be seen above, the three definitions have the following in common:
- They all include activities in all parts of the company
- The reason for CRM is to create a customer relationship focused company. In
essence, CRM provides management with the opportunity to implement
relationship marketing on a company-wide basis. However, for CRM to be
successful, all activities in a company need to be managed in a combination to
reach success.

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1.1.2 Comparison between relationship and transactional marketing:

Relationship marketing
Objectives

Transactional
marketing
Relationship marketing

Customer base analysis
and Need perceptions

Customer management
strategies

Customer management
policies
Transactional marketing

Market and competitive
analysis segmentation

Marketing strategies

Mix offer development

We can make it more clearly through this table:
Transactional marketing
Relationship marketing
- Only focus on sale
- Promote the characteristics of
product
- Short-term goal
- Don‟t care much for the customer
retention
- Less interaction with customer
- Focus on the retention and the
loyalty from customers.
- Focus on some characteristics
of product that are
meaningful to customers.
- Long-term goal, short-term
cost but more effective and
Implementation
Results
Review


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- Only the manufacturers take care
for quality.
- Less commitment
cost savings later.
- Emphasis upon higher levels
of service that are possibly

tailored to individual
customer
- Care for the interaction with
customers to gain information
to build the relationship
- Always keep and develop
customer relationship
- High commitment
- The entire organization shares
a commitment to quality
Source: Transaction v relationship marketing (adapted from Christopher et al 1994)
Christopher M, Payne A & Ballantyne D 1993, relationship marketing,
ButterworthHeinemann.
The two comparison tables show that the transactional marketing focuses on the
capability of taking over new customers, attracting the potential customers from
competitors while relationship marketing focuses on the capability of protecting the
market share in the market, keeping close relationship with the current customers,
cross-selling and up-selling.
1.2 The principle of CRM
The principle of CRM is that all customers are not the right customers, so in CRM
each customer group will be treated in the different ways.
Given the many benefits of long-term customer relationships, it would appear foolish
for a company to refuse or terminate a relationship with a customer. This section
considers the view that not all customer relationships are beneficial.

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A key step towards successful customer relationship management is to
distinguish the transaction buyer from the relationship buyer. The transaction buyer
tends to be interested in price and will easily shift to a competitor who offers a reduced
price, even when the service may be inferior. The relationship buyer is looking for a

supplier they can trust. Even when they are aware of cheaper products, they will prefer
to stay with the original supplier for the peace of mind. Transaction buyers are rarely
profitable as they only discounted items. Very often, relationship buyers subsidize the
sales of transaction buyers.
Database marketing software enables suppliers to separate transaction buyers
from relationship buyers. For those whose customer files cannot be queried by profit
per customer, some system for flagging lower profit transactions is required. In some
businesses there are time periods when all transactions are discounted. Customers who
purchase only in these times are easy to identify as transaction buyers.
The remaining customers represent potential relationship buyers. They can be divided
into three district segments:
- Those who are significantly the most profitable;
- Those who are delivering good profit and suggest the capability of becoming
top profit customers;
- Those who are only marginally profitable.
This leads to one of the most basic database marketing tools: the monetary decide
analysis. These segment customers into tenths, showing the total profit each decile
contributed in the time period specified and the % in the total market that segment
represents. This analysis is consistent with Pareto‟s law which shows that 80% of a
business‟s revenue derives from 20% of customers. In most businesses, in fact, 60% of
the customer base accounts for at least 90% of sales and an even greater %of profit.
The next step is to conduct the purchase deciles analysis. This involves separating
the total sales and profits into tenths to show how many customers account for each

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10% of company profit. The results of this analysis frequently show that a little more
than 1% of customer account for 10% of company sales with an even smaller segment
contributing to 10% of total profit. Therefore, for a company with 150,000 potential
relationship customers, fewer than 1,500 represent 10% of company profit.
This analysis can be used to identify the three distinct segments of profitable

relationship buyers as follows:
- The first group of buyers: Those customers who represent 10% of the
company‟s business and are the most profitable should be the first to be targeted
for CRM. The purpose of the CRM efforts will be retention. Even although it
may be difficult to make these customers more profitable, CRM should help
assure that none of them are lost to the competition.
- The middle group of buyers: The balance of the customers in top 40% or 50% as
ranked by sales and profit. It will be just as important to target this middle group
of buyers who are delivering good profit but may be capable of moving up to
the top of profit level. Customers in this group are probably giving some of their
business to your competitors. CRM activities for these customers should be
aimed directly at increasing your company‟s share of their business. CRM
marketing strategy developed for this middle group of buyer more than paid for
the company‟s significant investment in database software within a year.
- The final, less profitable, group of customers: The third group of customers
represents those who, while profitable, are only marginally so. While it is
possible that some in this group would move up the sales ladder as a result of
increased communications, it will probably not be worth the effort. Typically,
this group will represent almost half of the customer file. Hence this simple
analysis has greatly reduced the size of the challenge of implementing CRM.

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1.3 The element of CRM:
CRM consist of three elements: People, Process and Technology, that help
companies to understand their customers. To gain the success in CRM project, the
company must coordinate all aspects.
People and Culture
The culture of an organization must be thoroughly understood before moving
forward with an implementation. Organizations must concentrate on overcoming
resistance. It is a strong reason why CRM projects often experience failure. Know your

corporate culture and where the challenges will be prior to the start of the
implementation so the appropriate changes can be made. Create long lasting awareness
that a CRM solution is needed in the organization and exactly why. “Customer
management behaviors … are often not embedded in the culture of an organization.
Hence, people change roles and their thinking is either lost or moves with them”
(Starkey, 2002). Explain the long-term goals and what the future culture will be so
employees can change their perspectives. Help them understand that it is a cultural
shift that must remain constant even through turnover or promotions.
In addition, an organization must consider culture and social norms are not
globally consistent. For example, the CRM approach in North America is very different
from the Nordic School, which focuses “much more on aligning the organizations
resources in such a way that ongoing (personal) relationships are formed and
maintained” (Schultz, 2002). The description further details that the North American
version of CRM is technology driven, and the Scandanavian version is built on personal
relationships. This means one program may not be able to be rolled out uniformly in
Japan, Europe, North America, and India. This is an interesting topic for global
businesses trying to integrate processes throughout their organizations. Organizations
must be keenly aware of the differences and how that affects a CRM program. There
must be flexibility to change the process according to the cultural differences.

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Employees may be resistant, because they feel overwhelmed with more work or
drastically changing responsibilities. In addition, there may be blame in areas having
significant customer failures. In a CRM environment the culture must shift to solutions
rather than punishment for errors. In order to determine the root cause of problems, the
culture must exhibit the freedom to communicate at all levels without fear of recourse
for mistakes.
In addition, the culture must shift from silos to one integrated operation. For
example, sales people have traditionally guarded their turf, refusing to share
information on customers they have cultivated. Teams must begin to work efficiently

with other departments and other divisions around the world (Arthur, 2002). This
means overcoming organizational and global cultural differences.
Clear communication, resources, awareness, and training must be integrated into
the culture or the transformation cannot occur. “Have a vision and passionately
communicate it” (Brendler, 2001). This means communication is key; it will reduce
resistance of employees. Employees want to know how they are expected to support
the business. The more educated employees are on their new role, the smoother the
transformation. In addition, providing a forum for employees to give input and give
feedback can ease the implementation. Implementation should have complete
involvement of those that know the business best. In order to have success, a complete
view of the organization and „buy in‟ should be ingrained into the culture.
Process
The current process requires evaluation to determine what changes in the
process must occur. "This is not just about investing in software; it is investing in a
new approach to relationships," says Ronald S. Swift, vice president of strategic
customer relationships with NCR Corp (Groves, 2002). Change the process before
making technology infrastructure changes. Technology is the enabler not the focus.

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The process of implementation has fundamental steps of development,
implementation, and maintenance. There are also four key factors as the project
advances from development to maintenance. These project factors include teamwork,
resource commitment, consensus, and clear communications (Menon et. al., 1999).
Teamwork is pinnacle at the early stages in the implementation. Resource commitment
may seem obvious, but it still is an issue for organizations to resource adequately when
undertaking a large project. Consensus represents the strategic alignment of managers
and employees in the organization. Clear communication is important for the same
reasons mentioned in the discussion on culture. A project cannot be successful if it fails
to be methodical from development through maintenance while at the same time
incorporating the success factors.

During the developmental stage it is important to first define the outcome that is
to be achieved from the project. “Ready, fire, aim” doesn‟t work. Resist the temptation
to make it up as you go along. CRM is complex (Thompson, 2001). A well thought out
strategy is a requirement for success (Menon et al, 1999). This will minimize scope
creep and ensure the ultimate goal is clear. At this vital stage it is key to determine the
members of the team.
The team members of the project should be a cross functional group
representing the different areas of the organization. For example, a manufacturing
company should include quality assurance, supply chain, operations, accounting,
research, and sales departments. This is most effective in problem solving and
understanding a range of complex issues or opportunities.
During the implementation phase of the process it is critical to have strong
commitment from participants, leadership, and the entire organization. This
commitment can be best achieved by laying out the project steps of implementation.
The project must be broken down into achievable steps that are manageable. “We tend
to implement in small phases,” says Boise CEO Milliken. Focusing on objectives with

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a documented plan creates structure to the CRM implementation that ensures resource
allocation and commitment to tasks. Resources include financial, people, training, and
support. Clear commitment and resource allocation go hand in hand to achieving
success. A company cannot have success without both factors.
There also must be a focus on post implementation involvement to keep the
project alive, create continuity and momentum as part of the process. The project
doesn‟t end after the initial implementation. The implementation of CRM is a process
and cultural change that must continue to offer results over time. In addition, poor
follow-up could stifle customer relationships if attention doesn‟t continue.
Think of customer relationship management as a never-ending journey with
satisfied customers as guideposts along the way. No matter how successful you‟ve
been, you‟re never really done with CRM. As customer expectations continue to rise,

what was exceptional service yesterday becomes the status quo today—and will be
going out of business strategy tomorrow (Thompson, 2001, p.64).
Technology
The success of CRM is not based on technology, but is described as the enabler of
the process integration. The technology must be strategic, cost effective, and
accessible. Strategic technology means there is flexibility and growth for the long-term
corporate strategy. The information technology manager must select a healthy
company that has a firm foundation in cutting edge software offerings. If the goal is to
have Internet access for customers to place and track orders, the software must be able
to provide or integrate with such systems. The system must also meet the needs defined
by the business for security. Failure to take the proper security precautions can be a
deadly experience for a business if intellectual property is lost or customer trust is
publicly destroyed.
The system should be cost effective. The technology should aim for configuration,
not customization. This allows companies to “break the habit of writing custom code to

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accommodate unique business processes; it will be well worth the effort when it is time
to upgrade” (Bednarz, 2001). The more customization the harder it is to upgrade to the
next version of the software. In addition, from personal experience the more code
manipulations the less standardized the programming, and harder to proof out in
productive systems.
Managing the content of this information means ensuring customer information is
properly collected, analyzed, and documented so that each department within the
company has the customer data it needs to implement CRM functions (Groves, 2002).
Otherwise information can create a wealth of data without a positive means of applying
it properly in decision-making.
The financial community, the board, and senior management are mostly focused on
outcome indicators, especially those pertaining to the value created for investors. In
addition to conventional financial and share measures the CRM system affords a more

finegrained look at marketing effectiveness with respect to customer acquisition and
defection rates, customer tenure, customer value and work, percent inactive customers
and cross-selling (Crosby and Johnson, 2001, p.2)







1.4 The characteristics and the challenges of CRM:
1.4.1 The characteristics of CRM:
 Customer database centrally: Give to the company a overall view of
relationship of each customer.
People
Process
Technology

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 Profitability of customer analysis: CRM helps to create the balance sheet of
individual customer, and helps the company to invest more effectively on each
customer, the profitability is the most important thing to evaluate and classify
customers. Normally, each company has three classes of customers:
- The first class: Take about 10% of total customers, this class makes the highest
profit and has long-term transactions with the company.
- The middle class: Take about 40%-50% of total customers, this class makes
profit and is very potential.
- The last class: Also take about 40%-50% of total customers, the profit of this
class is not high and mainly is the current customers who have few transactions
or only come to the company in some special occasions like sale-off, discount

 Customer segmentation: CRM classifies customers into different segmentations
and measures the effectiveness of each segmentation.
 Marketing campaigns base on customer database: Use the database and
information of each segmentation to plan and implement marketing campaigns
 Analysis of customer‟s needs: Help to give personalized product or service to
each customer and find more new and potential needs from customers to
compete with competitors.
1.4.2 The challenges of CRM:
 Have to change the policies and process in the whole
 Need full support from the board of management and all staffs, for example: the
way they import the customer information to CRM system and dig this
database
 Need large initial cost to invest on software, machine, equipment and human
resource

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1.5 Ideas support CRM:
1.5.1 The statistics of Harvard-Business review in December, 1995:
- Only 4% of dissatisfying customers complain, the other say nothing but they
will come to your competitors. In the banking industry, 65% of customer will
chose other suppliers if they are not satisfied.
- The average person with a problem eventually tells nine other people
- Satisfied customers tell 5 other people about their good treatment
- The cost of acquiring a new customer is 5 to 7 times greater than retaining
current ones
- The cost of recruitment a new employee is 10 times greater than retaining
current ones
1.5.2 Pareto's Principle - The 80-20 Rule:
In 1906, Italian economist Vilfredo Pareto created a mathematical formula to
describe the unequal distribution of wealth in his country, observing that twenty

percent of the people owned eighty percent of the wealth. In the late 1940s, Dr.
Joseph M. Juran inaccurately attributed the 80/20 Rule to Pareto, calling it Pareto's
Principle. While it may be misnamed, Pareto's Principle or Pareto's Law as it is
sometimes called can be a very effective tool to help the company manage
effectively.
The 80/20 Rule means that in anything a few (20 percent) are vital and many (80
percent) are trivial. In Pareto's case it meant 20 percent of the people owned 80
percent of the wealth. In Juran's initial work he identified 20 percent of the defects
causing 80 percent of the problems. Project Managers know that 20 percent of the
work (the first 10 percent and the last 10 percent) consumes 80 percent of your time
and resources. .
You know 20 percent of you stock takes up 80 percent of your warehouse space and
that 80 percent of your stock comes from 20 percent of your suppliers. Also 80

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percent of your sales will come from 20 percent of your sales staff. 20 percent of
your staff will cause 80 percent of your problems, but another 20 percent of your
staff will provide 80 percent of your production.
It means that in your company only 20% of your total customer brings 80% of total
benefit to you. So, CRM help to keep these 20% customers.




1.6 The benefits of CRM:
1.6.1 Long-term profitability
At the beginning of CRM project, it takes costly but if the company keeps,
maintains and develops the close relationship with customer they will gain the
loyalty, and the high retention. It means that in a long timescale the company can
receive more profit from them.

1.6.2 Lower costs
There is often substantial start-up cost associated with attracting new customer.
These include advertising, sales commissions and the operating costs of setting up
an account. Sometimes these costs can outweigh the revenue expected from the new
customer un the short term
1.6.3 Repeat customer often cost less to service
Repeat customers are more likely to be familiar with the company and its products
and may make fewer demands on the time of employees
1.6.4 Opportunities for cross-selling
Over time, business customer often grows larger and may need to purchase in larger
quantities. Individuals may purchase more products as their families grow or as
20%
80%

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they become more affluent. Both types of customers may decide to consolidate their
purchase with a single supplier who provides high quality service.
Another advantage of an increase in cross-sale is the corresponding effect on the
organization‟s share of the customer‟s total consumption in the particular market.
This has been referred to as an increase in the share of wallet and is simply a
measure of the consumer‟s expenditure with the organization as a percentage of his
or her total expenditure in that market.
1.6.5 Defection less likely
Satisfied customers will be less susceptible to the pull of competition. Moreover
when customers trust a supplier, they may be more willing to pay higher prices in
return for the assurance of quality service (up-selling).
1.6.6 Employee retention
An indirect benefit of customer retention is employee retention. The stress
associated with dealing with customers who are unhappy with products and services
can lead to high employee turnover and poor quality. Conversely, customer

satisfaction can improve employee morale and encourage them to remain with the
firm.
1.6.7 Family influence
One of the key factors influencing the choice of many purchases for young people
is parental influence. Hence it is assumed that building a relationship with one
family member will have an impact on other members of the same family.
1.6.8 Word of mouth marketing
The satisfied customers provide referrals and may be willing to pay a price
premium. And they may generate positive word of mouth and provide free and
credible advertising for the institution.
In general, we can withdraw three main benefits from CRM, as following:


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Main benefits
Explanation
Increase customer loyalty
Information captured by CRM system
helps a company to identify the actual
costs of winning and retaining
individual customers.
Having this data allows the
organization to focus its time and
resources on its most profitable
customers.
Classifying one‟s best customers in
this way allows the company to
manage them more efficiently as
premium group, with the
understanding that it is neither

necessary nor advisable to treat every
customer in the exact same way.
More effective marketing
Having detailed customer satisfaction
from CRM system allows a company
to predict the kind of products that a
customer is likely to buy as well as the
timing of purchases.
CRM allows for more targeted
campaigns and tracking of campaign
effectiveness.
Customer data can be analyzed from
multiple perspectives to discover
which elements of a marketing

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campaign had the greatest impact on
sales and therefore profitability.
Greater efficiency and costs
reduction
Integrating customer data into a single
database allows marketing teams,
sales force, and other departments
within a company share information
and work toward common corporate
objectives using the same underlying
statistics.
Source: Adapted from Scullin, S., Allotra, J., Lioyd, G.O. and Fjemestad.,J. (2002),
Electronic customer relationship management: benefit, consideration, pitfalls and
trend

1.7 The reason why CRM fails:
Lack of planning The number- one reason CRM initiatives fail is lack of adequate
planning. Planning in this case includes not only a comprehensive project plan, but also
a detailed business case that properly sets expectations for the likely return on
investment. The CRM plan should be broken down into phases of not more than six
months, with measurable goals and success metrics for each phase.
Narrow Focus on Technology For many organizations, CRM is technology, but
achieving a true focus on customers and demonstrating a positive return on investment
requires that the organization look beyond technology. CRM technologies are tools;
however, without new or significantly revised business processes and business focus,
it's extremely difficult to develop true relationships with customers.
Lack of Senior Management Commitment Creating, maintaining and sustaining
customer relationships is not easy; it requires a significant shift in business focus. That
type of shift is next to impossible without broad senior management commitment. Yes,
new technology can be implemented, but chances are that the staff who interact with