A study on customer relationship management of ILA = Nghiên cứu về công tác quản trị quan hệ khách hàng của công ty ILA

VIETNAM NATIONAL UNIVERSITY, HANOI
SCHOOL OF BUSINESS

NGUYEN THI THANH TU

A STUDY ON
CUSTOMER RELATIONSHIP MANAGEMENT OF ILA

Major: Business Administration
Code: 60 34 05

MASTER OF BUSINESS ADMINISTRATION THESIS

Supervisor: Dr. Tran Doan Kim

Hanoi – 2011


TABLE OF CONTENTS
ACKNOWLEDGEMENT .......................................................................................... i
ABSTRACT ............................................................................................................... ii
TÓM TẮT ................................................................................................................. iv
TABLE OF CONTENTS .......................................................................................... vi
LIST OF FIGURES................................................................................................... ix
LIST OF TABLES ......................................................................................................x
INTRODUCTION .......................................................................................................1
1. The thesis title ...................................................................................................1
2. The thesis necessity...........................................................................................1
3. Objectives..........................................................................................................1
4. Scale of sample .................................................................................................2
5. Type of research ................................................................................................2

6. Research approach ............................................................................................3
7. Data sources and Processing .............................................................................3
8. Research method ...............................................................................................3
9. Research questions ............................................................................................3
10.

Significance ...................................................................................................4

11.

Limitations .....................................................................................................4

12.

Expectation ....................................................................................................4

13.

Disseminations...............................................................................................4

14.

Follow-up .......................................................................................................5

15.

The thesis structure ........................................................................................5

vi

CHAPTER 1. LITERATURE REVIEW ....................................................................6
1. Conception of Customer relationship . .............................................................6
1.1 Root of relationship ......................................................................................6
1.2 Characterize of relationship..........................................................................7
1.3 Relationship – value of company .................................................................8
2.

Customer relationship management (CRM) ....................................................11
2.1 Definition of CRM .....................................................................................11
2.2The use of CRM during times .....................................................................12

3.

The importance of CRM toward corporations ................................................14
3.1 Benefit of CRM .........................................................................................14
3.2 CRM success factors .................................................................................16

4. Basic model of CRM .........................................................................................17
CHAPTER 2. ANALYSIS AND ASSESMENT ON CUSTOMER
RELATIONSHIP MANAGEMENT AT ILA ..........................................................31
2.1 About ILA ........................................................................................................31
2.1.1 Introduction about ILA ..............................................................................31
2.1.3 ILA principle .............................................................................................32
2.2 Assessment on Customer relationship management in ILA ...........................34
2.2.1 Research method description.....................................................................34
2.2.2 Description of the Research process .........................................................35
2.2.3 The research survey and results ................................................................37
2.2.4. Interview result .........................................................................................44
2.2.5 Report research ..........................................................................................47

2.2.6. Current loyal programmes ........................................................................51

vii


CHAPTER 3 RECOMMENDATIONS TO IMPROVE THE CUSTOMER
RELATIONSHIP MANAGEMENT AT ILA ..........................................................55
3.1 CRM – Training programme for ILA people – Create a CRM view ..............55
3.2 Improve Customer relationship software ........................................................58
3.2.1 It is not necessary to use complicated solution when simple solution does
............................................................................................................................58
3.2.2 Employees at all level can collect information .........................................58
3.2.3 Tools should be customer-employee friendly ...........................................59
3.2.4 Report data need to be used, use data reported .........................................64
3.3. Applying CRM model in improving CRM in getting, maintain and growing
customers. ..............................................................................................................66
3.3.1 CRM in getting and growing customers activities ...................................66
3.3.2. CRM in maintaining customers – Building relationships ........................70
3.3.3 Privacy ......................................................................................................76
3.3.4 Metric for measuring the success of CRM ...............................................77
CONCLUSION .........................................................................................................79
APPENDIX ...............................................................................................................80

viii


LIST OF FIGURES
Figure 2.1 Training centres .......................................................................................32
Figure2. 2The interest in CRM between Academic and Business departments .......37
Figure2. 3 ILA's perception about CRM ...................................................................37

Figure 2. 4 The benefit of CRM for business operation ...........................................38
Figure 2.5 Criticise of CRM from Business group ...................................................39
Figure 2.6 Satisfaction about ILA's communication .................................................42
Figure 2.7 Satisfation about loyalty programme .......................................................43
Figure 2.8 Judgment ILA's problem solving .............................................................43
Figure 2.9 New sales based on programmes .............................................................49
Figure 2.10 Re-enrolment based on programmes .....................................................49
Figure 2.11 Sources to receive complaints ...............................................................50
Figure 2.12 Times to solve problems ........................................................................51
Figure 2. 13 Satisfaction about problem solving ......................................................51

ix


LIST OF TABLES
Table 2.1 Number of Training centres ........................................................................... 32
Table 2. 2 Number of responsed questionnaire.............................................................. 36
Table 2.3Tools to get ILA information .......................................................................... 41
Table 2.4 Visitors based on programmes ....................................................................... 48
Table 2.5 New sales based on programmes ................................................................... 49

x


INTRODUCTION

1. The thesis title
A study on Customer relationship management of ILA

2. The thesis necessity

ILA was established in 2000 in Ho Chi Minh City and opened Training
Centre Hanoi in 2007. After four years of operation, ILA Hanoi has not been
known on a large area. Thus, attracting new students is very difficult without
the help from the marketing department of Head office. Therefore, in order
to stabilize the company‘s revenue, it has become more urgent to make the
existing customers more loyal to ILA.
Thus, it is a necessity to have a suitable system of managing customers to get
the loyalty from the existing customers of ILA, to remain the service quality
and fulfill the programme design, to motivate the employees to contribute for
the customer relationship management of company honestly. Having been
operated well but ILA Hanoi is coping with many difficulties from
competitors.
All the plausible reasons above lend me strong grounds enough to choose the
topic: ―A study on Customer relationship management of ILA‖ for my MBA
graduation thesis.
3. Objectives
The objectives of this thesis are:
(a) Review and summarize the theory of Customer relationship management
(b) Apply the reviewed literature to analyze and access the managing
customer relationship in ILA now

1


(c) Propose some recommendations to enhance the customer relationship
management in ILA, contributing to the tangible and intangible profit of
the company
4. Scale of sample
Sampling unit: ILA staff, current students and alumni
Sampling size: This thesis only does the research on ILA Hanoi branch including 01

Academic manager, 01 Training center manager and teachers and staff, 250 students
and parents who chosen randomly.
ILA staff

50

ILA current student

200

ILA alumni

50

Sampling process: During 3 last months, the author conducts the interview (both
collecting questionnaire and directly interview)
5. Type of research
The writer chooses the type of research is analytical because analytical research
often extends the descriptive approach to suggest or explain why or how something
is happening. Reminds about descriptive, descriptive research can be used to
identify and classify the elements or characteristics of the subject. With the
combination of descriptive and analytical research with analytical plays a main role,
the author locates and identifies the different factors (or variables) involved.
Quantitative techniques are most often used to collect, analyze and summarize data.

2


6. Research approach
The author urged to identify the main variable which causes low revenue at ILA

Hanoi. Due to the large range of factors, the author collected facts and figures to
find out specific problems. Quantitative is very supportive.
Although the quantitative is harder to design initially, the writer still apply it
because it brings highly detailed and structures and results can be easily collated
and presented statistically.
To well prediction, the author also use qualitative research. It is more subjects in
nature then quantitative research and involves examining and reflecting on the less
tangible aspects of a research subject.
7. Data sources and Processing
Primary data was collected from questionnaire and interview. Secondary data has
been performed by research of documents, annual/quarterly reports of ILA and
internet sources.
The author conducts this research by collecting both primary and secondary
information. To analyze the operating situation, the author use secondary with
filtering the useful information to have the big picture but supportive detail. This
data is not only for this research, the author has the ambition to use them for our
suggestion with the Board of director because it is from the real situation.
8. Research method
Case study
Survey method using questionnaire, Interview focus group, Desk research
method was applied in this paper.
9. Research questions
(a) Which theories can be applied in Customer relationship at ILA
(b) What current situation of Customer relationship management at ILA

3


(c) How to improve Customer relationship management at ILA
10. Significance

By reviewing the theory of customer relationship management, this research
benefits ILA in recommendation to apply method of increasing loyal customers,
from that increase the reputation and improve the revenue, which contribute to the
company‘s development.
11. Limitations
The study is limited in the sense that small scale of sample in interview and
questioning. Furthermore, the method of managing CRM requires a certain standard
of technology which meets some requirement in restructure and software. Finally,
this thesis just runs the research on products offered to individual, not corporate
field; the profit flow from corporate party counted in this thesis is eliminated. Thus,
the solution applicability for other English training centers may cope with certain
difficulty or limitation.
12. Expectation
The new kind of managing relationship between company and customers is assessed
and some appropriate recommendations are proposed. The same methodology can
be applied in the scenario of other companies in inspection industry with little
adjustment.
13. Disseminations
The result of study will be useful for operation of ILA in particular and for other
English centers in general. Many new services project might apply the method of
research and the recommendations, the conclusion of the study, from which they
can get useful information before starting new plan.
The frame of reference on the other hand could be interesting for new customers
when they have to find the English centre for their improvement of learning English
process in future.
4


The findings in theory will help both parties to reach the right target in supplying
English training service and being satisfied by service quality.

14. Follow-up
Further study will be taken on improvement of implementation customer
relationship management based on the experience and achievements of using and
perfecting in large range. Other way of study will be analyzing the impact of the
competition of other English centers and require the steps of avoiding and get over
the unexpected impacts.
15. The thesis structure
The thesis is started with the introduction part, followed by the three chapters
and the conclusion part:
Chapter 1: Literature review
Chapter 2: Analysis and assessment on the customer relationship
management in ILA
Chapter 3: Recommendations to improve the customer relationship
management in ILA

5


CHAPTER 1. LITERATURE REVIEW

1. Conception of Customer relationship
1.1 Root of relationship
To understand customer relationships, should go back to the basics-back to the social
psychology origins of interpersonal relationships, which James Barnes and Daphne
Sheaves did in their book ―The fundamentals of relationships‖. Their conclusions about
what contributes to the development and strength of interpersonal relationships are just
valid in allowing us to better understand what customers want in their dealings with
businesses and other organizations. A relationship in its simplest form and as understood
by customers is based on feelings and emotions. However, many customers are
exhibiting functional loyalty; there is no emotional connection in this case1.

Some companies follow very well this guidance. For examples, Dell Computers invites
customers to specify exactly what they want in a computer and delivers a custom-built
one in a few days. Proctor & Gamble (P&G), on its Reflect.com website, allows
someone to specify needs for a shampoo by answering a set of questions. P&G then
formulates a unique shampoo for that person. Levi's is now able to produce customized
jeans that are based on a person's measurements. Those companies know what their
customers want and focus on the thing they are good at best. From that, their customers
feel they are respected from their favorite brands.
Katherine Lemon with Don and Martha in their working paper ―Managing the customer
lifetime value: The role of learning relationships‖ said that learning relationships brings
two benefits:
1

Sheaves, Daphne E. and James G.Barners "The fundamentals of Relationships: An exploration of

the concept to guide marketing implementation". Advances in Services marketing and
management, Vol 5., eds. Teresa A. Swartz, David E. Bowen and Stephen W.Brown, London, JAI
Press Inc.

6


The customer learns more about his own preferences from each experience and
from the firm‘s feedback, and is therefore able to shop, purchase, and handle some
aspect of his life more efficiently and effectively than was possible prior to this
relationship.
The enterprise learns more about its own strengths and weakness from each
interaction and from the customer‘s feedback, and it therefore able to market,
communicate, handle some aspect of its own tactics or strategy more efficiently and
effectively than was possible prior to the relationship2.

In conclusion, the root of any relationship is to satisfy the interest of both parties.
Relationship between customers and enterprises is the root of CRM that helps
enterprise increases its value. The reality is that becoming a customer-strategy
enterprise is about using information to gain a competitive advantage and deliver
growth and profit. Enterprises need to decide early on which customers they want to
have relationships with, which they do not, and what type of relationships to
nurture.
1.2 Characterize of relationship
The most important issue for us to consider is how well our own definition of
relationship helps companies succeed in the ―customer dimension‖ of competition.
Before do any CRM, companies should characterize relationship to come to the
least risk decision. Don and Martha listed some of the distinct qualities that should
characterize a relationship between an enterprise and a customer3.

2

Katherine Lemon, Don Peppers, and Martha Rogers, PhD, "Managing the Customer Lifetime

Value: The role of learning relationships," Peppers & Rogers Group white paper series, 1998.
3

Don Peppers and Martha Rogers, "Managing customer relationships: A strategic frame work",

Published by John Wiley & Sons, Inc., Hoboken, New Jersy, 2004, p.36

7


First, a relationship implies mutuality. This means that relationships must inherently
be two-way in nature. It is a very important distinction for parsing out what does

and does not constitute relationship-building activities with customers.
Second, relationships are driven by interaction. An interaction takes place when a
customer buys a product from the company that sells it. Every interaction adds to
the total information content possible in the relationship.
Third, it is iterative in nature. One practical implication of the iterative nature of a
customer relationship is that it generates a convenience benefit to the customer for
continuing the relationship.
Forth, it will be driven by an ongoing benefit to both parties. Each party expects
form the continued relationship can easily outweigh the current cost of remedying
an error or problem.
Fifth, relationships also require a change in behavior on the part of both parties in
order to continue. This is an important characteristic to note separately, because
companies sometimes mistakenly believe that interactions with a customer need
only involve routine, outbound communications, delivered the same way to every
customer.
Sixth, it is uniqueness. Relationships are constituted with individuals, not with
populations.
Finally, the ultimate requirement and product of a successful, continuing
relationship is trust. Shared values, interdependence, quality communication and no
opportunistic behavior are factors to of main contributors to formation of trust.
1.3 Relationship – value of company
Peter Drucker said, "The purpose of a business is to create customers."4 Implied in
this words and his work is the importance of keeping those same customers and of
growing the depth of their relationship with company.

4

Peter F.Drucker, "The practice of management", Published by Elsevier Ltd, 2007, p.31

8

In the book Managing customer relationships, 2004, Don Peppers and Martha
Rogers said that: ―The goal of every enterprise is simply to get, keep, and grow
customers‖5. According to Michael Treacy and Fred Wiersema (The discipline of
market leaders, 1995), whether a business focuses its efforts on product innovation,
operational efficiency and low price, or customer intimacy, that firm must have
customers. This is true for non-profit as well as for profits, for firms large and
small, for public as well as private enterprise6
Exhibit 1.1 is the reference about increasing the value of the company through
specific customer strategies.
Acquire profitable customers

GET

Retain profitable customers longer

KEEP

Win back profitable customers
Eliminate unprofitable customers
Unspell additional products in a solution

GROW

Cross-sell other products to customers
Referral and word-of-mouth benefits
Reduce service and operational costs
Exhibit 1.1 Increasing the value of the customer base
Getting customers is all about making the sales and marketing process not only

more efficient, but also more effective. Keeping customers address the biggest
5

Don Peppers and Martha Rogers, "Managing customer relationships: A strategic Framwork",

Published by John Wiley & Sons, Inc., Hoboken, New Jersey, p.17
6

Micheal Treacy and Fred Wiersema, "The discipline of market leaders", published by Perseus,

1995

9


challenge in business today. Keeping customers is also about knowing which the
right customers to keep. Fundamentally, this is a question of profitability. Finally,
growing customers is about increasing every customer‘s lifetime value to company.
The two ways to grow customers are to increase their lifetime, and increase the
amount of revenue generated from every customer interaction during that lifetime.
The first part is straightforward-understanding a customer and effectively
anticipating and responding to that customer‘s needs is the fastest way to increase
loyalty and make sure that customer is around for a long time. The second partincreasing the sales yield per every contact-involves predicting a customer‘s needs
and reacting in real time to his actions with personalized, relevant offers.
George, in his book, Market-Driven strategy: Process for creating value, had the
agreement with Don and Martha and released a similar conclusion that ―it is an
enterprise approach to understanding and influencing customer behavior through
meaningful communications to improve customer acquisition, customer retention,
and customer profitability‖7.
From those views of Don and Martha, the author came to the statement:

Enterprises determined to build successful and profitable customer relationships
understand that the process of becoming an enterprise focused on building its value
by building customer value begins with: (1) A strategy or an ongoing process that
helps transform the enterprise from a focus on traditional selling or manufacturing
to a customer focus, while increasing revenues and profits; (2) The leadership and
commitment necessary to cascade the thinking and decision-making capability
throughout the organization that puts customer value and relationships first.

7

George S.Day, "Market driven strategy: process for creating value", Published by Free Press,

1999.

10


2. Customer relationship management (CRM)
2.1 Definition of CRM
Customer relationship management has been addressed by many academic
researchers. To some extend, customer relationship management is a widelyimplemented strategy for managing a company‘s interactions with customers,
clients and sales prospects. It involves using technology to organize, automate, and
synchronize business processes—principally sales activities, but also those for
marketing, customer service, and technical support. The overall goals are to find,
attract, and win new clients, nurture and retain those the company already has,
entice former clients back into the fold, and reduce the costs of marketing and client
service. Customer relationship management describes a company-wide business
strategy including customer-interface departments as well as other departments,
according to Gartner, Inc. (6 June 2009) What's 'Hot' in CRM Applications in 2009
To some executives, CRM is a technology or software solution that helps track data

and information about customers to enable better customer service. Others think of
CRM, or one-to-one, as an elaborate marketing or customer service discipline, even
recently heard CRM described as "personalized email".
From other point of view, customer relationship management supplies a reliable
system helping managers and staff to improve relationship between staff and
customers. A reasonable customer relationship policy contains training courses for
staff, adjust running business method and apply an appropriate information
technology. Customer relationship is not only software or a technology; it is also a
business strategy containing marketing strategy, training and services which
company provides customers. Enterprises can choose a customer relationship based
on centralize customers, care about customers demand to get along well with
customers and maximize profit. There are many technological components to CRM,
but thinking about CRM in primarily technological terms is a mistake. The more
useful way to think about CRM is as a process that will help bring together lots of

11


pieces

of

information

about

customers,

sales,

marketing

effectiveness,

responsiveness and market trends.
Don and Martha said: ―Customer relationship management is a comprehensive
approach for creating, maintaining and expanding customer relationships‖8.
I totally agree with two authors that CRM need to be comprehensive way because it
does not belong to sales and marketing or the customer service group. CRM must be
a way of doing business that touches all areas. The fact of the matter is that it costs a
company dramatically less to retain and grow an existing client, than it does to court
new ones. Customer relationship management is a business philosophy, describing a
strategy which places the customer at the heart of an organisation‘s processes,
activities and culture. While businesses will continue to expand their client base,
they must also focus on keeping and growing their best clients. Increasing ‗share of
customer‘ – in other words, the amount of business which each good client gives to
you – becomes as important as increasing market share. CRM can develop better
communication channels, collect vital data, like customer details and purchasing
histories; create detailed profiles such as customer preferences, deliver instant,
company-wide access to customer histories, identify new selling opportunities.
2.2The use of CRM during times
According to Lucy P. Roberts, CRM is one of those magnificent concepts that
swept the business world in the 1990's with the promise of forever changing the
way businesses small and large interacted with their customer bases9.
The 1980's saw the emergence of database marketing, which was simply a catch
phrase to define the practice of setting up customer service groups to speak
individually to all of a company's customers. In the case of larger, key clients it was
8

Don Peppers and Martha Rogers, "Managing customer relationships: A strategic frame work",

Published by John Wiley & Sons, Inc., Hoboken, New Jersy, 2004
9

Lucy P. Roberts, article on the "The History of CRM", Evaluseek Publishing

12


a valuable tool for keeping the lines of communication open and tailoring service to
the clients needs. In the case of smaller clients, however, it tended to provide
repetitive, survey-like information that cluttered databases and did not provide
much insight. As companies began tracking database information, they realized that
the bare bones were all that was needed in most cases: what they buy regularly,
what they spend, what they do.
In the 1990's companies began to improve on Customer Relationship Management
by making it more of a two-way street. Instead of simply gathering data for their
own use, they began giving back to their customers not only in terms of the obvious
goal of improved customer service, but in incentives, gifts and other perks for
customer loyalty. This was the beginning of the now familiar frequent flyer
programs, bonus points on credit cards and a host of other resources that are based
on CRM tracking of customer activity and spending patterns. CRM was now being
used as a way to increase sales passively as well as through active improvement of
customer service.
Real CRM as it's thought of today really began in earnest in the early years of this
century. Instead of feeding information into a static database for future reference,
CRM became a way to continuously update understanding of customer needs and
behavior. Branching of information, sub-folders, and custom tailored features
enabled companies to break down information into smaller subsets so that they
could evaluate not only concrete statistics, but information on the motivation and

reactions of customers. With the increased fluidity of these programs came a less
rigid relationship between sales, customer service and marketing. CRM enabled the
development of new strategies for more cooperative work between these different
divisions through shared information and understanding, leading to increased
customer satisfaction from order to end product.

13


3 The importance of CRM toward corporations
3.1 Benefit of CRM
CRM today is about using information technology systems to capture and track
your customers' needs. And CRM today is about integrating that intelligence into all
parts of the organization so everyone knows much about your customers: data
turned into information and information turned into customer-satisfying action. If
customer relationships are the heart of business success, then CRM is the valve the
pumps a company's life blood. As such, CRM is best suited to help businesses use
people, processes, and technology to gain insight into the behaviour and value of
customers. This insight allows for improved customer service, increased call centre
efficiency, added cross-sell and up sell opportunities, improved close rates,
streamlined sales and marketing processes, improved customer profiling and
targeting, reduced costs, and increased share of customer and overall profitability.
The impetus for this interest in CRM came from Reichheld, who demonstrated
dramatic increase in profits from small increases in customer retention rates.
Reichheld showed the dramatic increase in profits from small increases in customer
retention rates, " His studies showed that as little as a 5% increase in retention had
impacts as high as 95% on the net present value delivered by customers. Other
studies done by consultants such as McKinsey have shown that repeat customers
generate over twice as much gross income as new customers.
From some theories of authors, benefit of CRM can be divided into each party‘s

sake as below:
For business:
Implementing a customer relationship management (CRM) solution might involve
considerable time and expense. However, there are many potential benefits.
(1) A major benefit can be the development of better relations with existing
customers, which can lead to:

14


- Increased sales through better timing by anticipating needs based on historic
trends
-

Identifying needs more effectively by understanding specific customer

requirements
- Cross-selling of other products by highlighting and suggesting alternatives or
enhancements
- Identifying which of your customers are profitable and which are not
(2) This can lead to better marketing of your products or services by focusing on:
- Effective targeted marketing communications aimed specifically at customer
needs
- A more personal approach and the development of new or improved products and
services in order to win more business in the future
- Collect purchase data, campaign responses, account information and web data.
Review and analysis of this data helps the company to organize marketing
campaigns and to formulate business strategies. The CRM system can manage new
customer leads and information on the changing marketplace. Ultimately this could
lead to get to know who customers are and what company can do to eliminate

obstacles and problems in conducting their business. This cultivates customer
loyalty and builds company brand; works to increase the value of the benefits the
customers receive; develops products and services that speak to your customer's
needs.
- Enhanced customer satisfaction and retention, ensuring that good reputation in the
marketplace continues to grow
-

Increased value from existing customers and reduced costs associated with

supporting and servicing them, increasing overall efficiency and reducing total cost
of sales

15


- Improved profitability by focusing on the most profitable customers and dealing
with the unprofitable in more cost effective ways
For customers:
CRM contributes to promote last-long relationship between customers and
enterprises, customers know more clearly about enterprise and are served
attentively. They are cared from tiny things such as birthday, interests, demands,
etc.
For managers:
Managers need to modify business processes based on the customer's needs and
adopt computer services that enable the CRM strategy. CRM provides managers
variety of effectively supporting tools such as statistic analyze and assess business
situation in fastest way. Enterprises discover threats, hidden risks to give out timely
solutions. CRM also helps manager to evaluate job performance of employees.
For employees:

CRM allows staff to manage time and work effectively, helps them understand
customers‘ information to contact and take care customers and make reputation for
company and make customers retention.
3.2 CRM success factors
According to Kristin Anderson and Carol Kerr, Customer relationship management,
200210, while clear intention fuels the power of CRM, there are several other
success factors to consider.
- Employees at all levels and all areas accurately collect information for the CRM
system.
Employees are most likely to comply appropriately with your CRM system when
they understand what information is to be captured and why it is important. They
10

Kristin Anderson and Carol Kerr, "Customer relationship management", McGraw-Hill, 2002

16


are also more likely to trust and use CRM data when they know how and why it was
collected.
- It is not necessary to use high-tech solution when low-tech solution still works.
Organizations that successfully implement CRM look for the simplest solution
when implementing their CRM strategy. A low-tech solution that works for the
people who actually use it is more effective than high-tech solution that is
cumbersome, costly and apt to be discarded or inconsistently implemented.
Tools enable customer relationship management. Tools don't have to be high-tech.
The best tools are the ones that allow you to gather the information you need in the
easiest way for both you and your customer.
- CRM tools are customer-and employee-friendly.
CRM tools should be integrated into your systems as seamlessly as possible,

making them a natural part of the customer service interaction.
- Report out only the data you use, and use the data you report.
Just because your CRM tool can run a report doesn't mean it should. Refer back to
your CRM strategy, and then run the data you will actually use. And share that data
with your team.
4 Basic model of CRM
Russell established a model in his paper with a major purpose of providing a
managerially useful, end-to-end view of the CRM process from a marketing
perspective. The basic model is shown in Exhibit 2 and contains a set of 7 basic
components11:

11

Russell S. Winer, "A framework for Customer relationship management", California

management review, 2001

17


A database of customer activity
Analyses of the database
Given the analyses, decisions about which customers to target
Tools for targeting the customers
How to build relationships with the targeted customers
Privacy issues
Metrics for measuring the success of the CRM program
Exhibit 1.2. Model of CRM
Step 1: Creating a Customer Database
A necessary first step to a complete CRM solution is the construction of a

customer database or information file. The task will involve seeking historical
customer contact data from internal sources such as accounting and customer
service. Ideally, the database should contain information about the following:
 Transactions:

This should include a complete purchase history with

accompanying details (price paid, delivery date)
 Customer contacts: There is an increasing number of customer contact points
from multiple channels and contexts. This should include sales calls and
service requests, any customer- or company-initiated contact.
 Descriptive information: This is for segmentation and other data analysis
purposes.
 Response to marketing stimuli: This part of the information file should
contain the customer responded to a direct marketing initiative, a sales
contact, or any other direct contact.

18


 The data should also be over time.
Companies have traditionally used a variety of methods to construct their
databases. For example, telecom companies built customer records from e-mails,
direct mail, telemarketing, and other customer contacts, with descriptive
information by department, division, and location; tour companies developed agents
to enlist the assistance of travel agents in building the database; some shops offer a
discount on purchases if customers provide information to the company, etc.
Step 2 Analyzing the Data
Customer databases have been analyzed to define customer segments. Their
goals are to target the most profitable prospects from different groups. More

recently, such segmentation approaches have been heavily criticized.12 Taking a
large number of customers and forming groups or segments presumes a marketing
effort towards an average customer in the group. Database needs more attention on
criticizing what customers can deliver to the company in terms of profits and then,
depending on the nature of the product or service, either addressing customers
individually or in small clusters.
As a result, a new term, lifetime customer value or LCV, has been introduced
into the marketers. The idea is that each customer of the database should be
analyzed in terms of current and future profitability to the firm. When a profit
figure can be assigned to each customer, the marketing manager can then decide
which customers to target. The past profit that a customer has produced for the firm
is the sum of the margins of all the products purchased over time less the cost of
reaching that customer.
Profit that
customer
produces
12

=

sum of the margins of all the products purchased over time
cost of reaching that customer (*)

Don Peppers and Martha Rogers, The One to One Future, (New York: Doubleday, 1993), Ch.4.

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