Institute of Management Nirma University, Ahmedabad

Customer Relationship Management

March 1, 2010

Project Report
Study of CRM practices in Hospitality Industry and the use of Data Mining Tools and Applications to predict customer behavior in CRM

Submitted To: - Prof. T.S.Joshi

Submitted by:Prasenjit Sen (Roll No: 081136) MBA FT II Sec A

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TABLE OF CONTENTS
TOPIC PAGE NO.

SYNOPSIS OF THE PROJECT................................................................................................................... 4 CUSTOMER RELATIONSHIP MANAGEMENT AND DATA MINING AN INTRODUCTION .... 5 OBJECTIVE................................................................................................................................................... 7 METHODOLOGY ......................................................................................................................................... 7 DATA COLLECTION .................................................................................................................................. 7 LITERATURE REVIEW .............................................................................................................................. 8 ANALYSIS OF DATA MINING IN CRM .................................................................................................. 9 KEY UTILITIES OF DATA MINING IN THE CRM PROCESS ......................................................... 13 DATA MINING CHALLENGES & OPPORTUNITIES IN CRM ......................................................... 17 THE INDIAN HOPITALITY INDUSTRY ............................................................................................... 20 RELATIONSHIP MANAGEMENT FOR A HOTEL.............................................................................. 22 Customer Information ................................................................................................................................ 22 Decision Systems ....................................................................................................................................... 23 Customer super processes .......................................................................................................................... 24 Channel management ................................................................................................................................. 24 Customer recognition ................................................................................................................................. 24 SIX PS FOR THE TRANSFORMATION TO A CONNECTED HOSPITALITY ENTERPRISE ... 26 DATA MINING TOOL STUDIED DURING THE RESEARCH ........................................................... 27 ANALYSIS.................................................................................................................................................... 33 CRM ANALYSIS ...................................................................................................................................... 33

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INDUSTRY ANALYSIS ........................................................................................................................... 34 CRM PRACTICES ...................................................................................................................................... 37 SECONDARY RESEARCH RESULTS ................................................................................................... 37 PRIMARY RESEARCH RESULTS ......................................................................................................... 42 CONCLUSION............................................................................................................................................. 47 REFERENCES ............................................................................................................................................. 48 APPENDIX A ............................................................................................................................................... 49

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SYNOPSIS OF THE PROJECT

The project aims at studying the existing CRM practices in Indian Hospitality Industry (hotels, restaurants & fast food joints) and expected future trends and prospects. The hospitality industry has seen major profitability in the recent years. Revenue of Hotel and Restaurant (H&R) industry in India during the financial year 2007-08 was INR 824.32 billion. This has shown 8.17% increase

from the previous year. The hospitality industry is poised to grow at a faster rate and reach INR 1026.76 billion by 2011. This definitely derives a need for the hospitality sector to focus on customer needs and to understand the consumer behaviour. For the same reason this project is undertaken to study the existing CRM practices in the hospitality industry. Within this sector, the Restaurants, Hotels and Food Joints will be considered for the study. The impact of such practices on the revenues of these players will also be identified in this research project. Apart from these, the practices giving highest customer satisfaction will be accounted. The expected future trends and prospects will be highlighted in the study. The use of data mining tools for mining customer information would also be highlighted in the study.

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CUSTOMER RELATIONSHIP MANAGEMENT AND DATA MINING AN INTRODUCTION

Customer relationship management (CRM) is a broad term that covers concepts used by companies to manage their relationships with customers, including the capture, storage and analysis of customer, vendor, partner, and internal process information. CRM stands for Customer Relationship Management. It is a process or methodology used to learn more about customers' needs and behaviors in order to develop stronger relationships with them. 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 pieces of information about customers, sales, marketing effectiveness, responsiveness and market trends. CRM helps businesses use technology and human resources to gain insight into the behavior of customers and the value of those customers. According to industry view, CRM consists of:

Helping an enterprise to enable its marketing departments to identify and target their best customers, manage marketing campaigns with clear goals and objectives, and generate quality leads for the sales team.

Assisting the organization to improve telesales, account, and sales management by optimizing information shared by multiple employees, and streamlining existing processes (for example, taking orders using mobile devices)

Allowing the formation of individualized relationships with customers, with the aim of improving customer satisfaction and maximizing profits; identifying the most profitable customers and providing them the highest level of service.

Providing employees with the information and processes necessary to know their customers, understand their needs, and effectively build relationships between the company, its customer base, and distribution partners. 5|Page

CRM PROJECT Data Mining has enjoyed great popularity in recent years, with advances in both research and commercialization. The first generation of data mining research and development has yielded several commercially available systems, both stand-alone and integrated with database systems; produced scalable versions of algorithms for many classical data mining problems, and introduced novel pattern discovery problems. In recent years, research has tended to be fragmented into several distinct pockets without a comprehensive framework. Researchers have continued to work largely within the parameters of their parent disciplines, building upon existing and distinct research methodologies. Even when they address a common problem (for example, how to cluster a dataset) they apply different techniques, different perspectives on what the important issues are, and different evaluation criteria. While different approaches can be complementary, and such a diversity is ultimately a strength of the field, better communication across disciplines is required if Data Mining is to forge a distinct identity with a core set of principles, perspectives, and challenges that differentiate it from each of the parent disciplines. Further, while the amount and complexity of data continues to grow rapidly, and the task of distilling useful insight continues to be central, serious concerns have emerged about social implications of data mining. Addressing these concerns will require advances in our theoretical understanding of the principles that underlie Data Mining algorithms, as well as an integrated approach to security and privacy in all phases of data management and analysis.

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OBJECTIVE
The objective of the project is: To study the various CRM practices implemented by Hospitality Industry (Restaurants, Hotels and Food Joints). To find out the use of Data Mining and Datawarehousing tools for statistical and machine analysis and to utilize them to build models that predict customer behavior and use it for CRM purposes in hospitality industry

METHODOLOGY
The CRM practices applied by the players will be studied by using the secondary data sources. This is because the primary data collection is restricted due to certain company policies. The various sources accessible for collection of secondary data are Internet, Newspapers, Magazines, Journals, Online databases (e.g. EBSCO, SSRN) etc. The data so collected will be analyzed and future trends will be analyzed on their basis. Thus new dimensions for the practices will be prospected.

DATA COLLECTION
Primary research through company reports, qualitative interviews, etc. Emailers were sent with structured questionnaires to IT companies implementing Data Mining tools in hospitality industry for CRM. Secondary research through data collection with the help of internet, journals, magazines, newspapers etc.

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LITERATURE REVIEW
Until recently, most marketers focused on attracting customers from its target segments using the tools and techniques developed for mass marketing in the industrial era. In the information era, this is proving to be highly ineffective in most competitive markets. Slowing growth rates, intensifying competition and technological developments made businesses look for ways to reduce costs and improve their effectiveness. Business process reengineering, automation and downsizing reduced the manpower costs. The practice of relationship marketing has the potential to improve marketing productivity through improved marketing efficiencies and effectiveness (Sheth and Parvatiyar, 1995). Still relationship marketing appears to be an expensive alternative to firms practicing mass marketing due to the relatively high initial investments. Firms would adopt relationship marketing only if it has the potential to benefit them. The benefits come through lower costs of retention and increased profits due to lower defection rates (Reichheld and Sasser, 1990). When customers enter into a relationship with a firm, they are willingly foregoing other options and limiting their choice. Some of the personal motivations to do so result from greater efficiency in decision-making, reduction in information processing, achieving more cognitive consistency in decisions and reduction of perceived risks with future decisions (Sheth & Parvatiyar, 1995). In the context of service, relationship marketing has been defined as attracting, maintaining and in multi-service organizations enhancing customer relationships (Berry 1983). Here attracting customers is considered to be an intermediary step in the relationship building process with the ultimate objective of increasing loyalty of profitable customers. This is because of the applicability of the 80-20 rule. According to Market Line Associates, the top 20% of typical bank customers produce as much as 150% of overall profit, while the bottom 20% of customers drain about 50% from the bank's bottom line and the revenues from the rest just meeting their expenses. Berry (1983) recommended the following five strategies for practicing relationship marketing i. Developing a core service around which to build a customer relationship, 8|Page

CRM PROJECT ii. Customizing the relationship to the individual customer, iii. Augmenting the core service with extra benefits, iv. Pricing services to encourage customer loyalty, v. Marketing to employees so that they will perform well for customers. Developments in information technology, data warehousing and data mining have made it possible for firms to maintain a 1to1 relationship with their customers. Firms can now manage every single contact with the customer from account management personnel, call centers, interactive voice response systems, on-line dial-up applications, and websites to build lasting relationships. These interactions can be used to glean information and insights about customer needs and their buying behavior to design and develop services, which help create value for the customers as well as the firms. Although customized as well as off the shelf technological solutions are available in the marketplace, businesses need to do a lot more than just adopt these solutions to implement customer relationship management (CRM) practices. Successful implementation of CRM requires a strategic approach, which encompasses developing customer centric processes, selecting and implementing technology solutions, employee empowerment, customer information and knowledge generation capabilities to differentiate them, and the ability to learn from best practices.

ANALYSIS OF DATA MINING IN CRM

The maximization of lifetime values of the (entire) customer base in the context of a company's strategy is a key objective of CRM. Various processes and personnel in an organization must adopt CRM practices that are aligned with corporate goals. For each institution, corporate strategies such as diversification, coverage of market niches or minimization of operative costs are implemented by "measures", such as mass customization, segment-specific product configurations etc. The role of CRM is in supporting customer-related strategic measures. Customer understanding is the core of CRM. It is the basis for maximizing customer lifetime value, which in turn encompasses 9|Page

CRM PROJECT customer segmentation and actions to maximize customer conversion, retention, loyalty and profitability. Proper customer understanding and actionability lead to increased customer lifetime value. Incorrect customer understanding can lead to hazardous actions. Similarly, unfocused actions, such as unbounded attempts to access or retain all customers, can lead to decrease of customer lifetime value (law of diminishing return). Hence, emphasis should be put on correct customer understanding and concerted actions derived from it. The figure shows an idealized CRM cycle.

In this figure, boxes represent actions:

The customer takes the initiative of contacting the company, e.g. to purchase something, to
ask for after sales support, to make a reclamation or a suggestion etc.

The company takes the initiative of contacting the customer, e.g. by launching a marketing
campaign, selling in an electronic store or a brick-and-mortar store etc.

The company takes the initiative of understanding the customers by analyzing the
information available from the other two types of action. The results of this understanding guide the future behaviour of the company towards the customer, both when it contacts the customer and when the customer contacts it. The reality of CRM, especially in large companies, looks quite different from the central coordination and integration suggested by the above figure

Information about customers flows into the company from many channels, but not all of
them are intended for the acquisition of customer-related knowledge. 10 | P a g e

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Information about customers is actively gathered to support well-planed customer-related

actions, such as marketing campaigns and the launching of new products. The knowledge acquired as the result of these actions is not always juxtaposed to the original assumptions, often because the action-taking organizational unit is different from the informationgathering unit. In many cases, neither the original information, nor the derived knowledge are made available outside the borders of the organizational unit(s) involved. Sometimes, not even their existence is known.

The limited availability of customer-related information and knowledge has several causes.
Political reasons, e.g. rivalry among organization units, are known to lead often in data and knowledge hoarding. A frequently expressed concern of data owners is that data, especially in aggregated form, cannot be interpreted properly without an advanced understanding of the collection and aggregation process. Finally, confidentiality constraints, privacy considerations and law restrictions often disallow the transfer of data and derived patterns among departments.

In general, one must assume that data gathered by an organization unit for a given purpose
cannot be exported unconditionally to other units or used for other purpose and that in many cases such an export or usage is not permitted at all.

Hence, it is not feasible to strive for a solution that integrates all customer-related data into
a corporate warehouse. The focus should rather be in mining non-integrated, distributed data while preserving privacy and confidentiality constraints. A more realistic picture of current CRM, incorporating the typical flow of information, is shown in the figure below:

Data is collected from multiple organizational units, for different purposes, and stored in
multiple locations, leading to redundancies, inconsistencies and conflicting beliefs. No organization unit has access to all data and to all derived knowledge. Some data are not analyzed at all. Not all background knowledge is exploited. Data analysis is performed by many units independently. Some analyses do not mount to actions. Ideally, the CRM cycle should encompass: 11 | P a g e

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The exploitation of all data and background knowledge The coordination of analyses, and resulting actions, in different parts of the organization
Figure: Expanded CRM Cycle Current State

Gap Analysis: The grand KDD challenges in CRM arise from the objectives of exploiting all information and coordinating analysis and actions. These objectives require methods to deal with several specific challenges, which we discuss in turn:

Cold start: In CRM, one tries to influence customer behavior on the basis of prior
knowledge. Often, there is no (reliable) such prior knowledge.

Correct vs. incorrect customer understanding: CRM is about understanding the customer.
It's about time to elaborate on the impact of misunderstanding the customer, and to fold this into our analyses and action workflows.

Data sovereignty: There is no such thing as a CRM data warehouse; we are faced with
multiple data sources. If and when problems of semantic disparity are solved, we will still face legislative and the political hurdles.

Data quality: Some Customer-Company-Interaction channels deliver very good data.

Others deliver notoriously poor quality data; web server logs belong to the latter category. 12 | P a g e

CRM PROJECT The issue of data sovereignty impedes integration of raw data. Despite these odds, data must be enhanced to ensure that the results of the analysis are reliable.

Deeper understanding: Profiling is based on some rudimentary behavioral data and some
preferences, carefully extracted from questionnaires or learned from the data using data mining methods. Integration of cultural and psychological data is at its infancy. The experts in those domains come from outside of the KDD community (marketing researchers, practitioners, etc.) and we should establish collaborative relationships with them.

Questioning prior knowledge: Everything associated with prior knowledge is assumed

correct. We need mechanisms that capture and align prior knowledge in the face of conflicting information.

Actionability: Pattern discovery should lead to actions. In some cases, this is

straightforward, e.g. site customization and personalization, but this step is often omitted. We need mechanisms that incorporate patterns into the action-taking processes in a seamless way. We also need an understanding of the action-taking processes and their influence on what patterns are most valuable.

KEY UTILITIES OF DATA MINING IN THE CRM PROCESS

In general, CRM promises higher returns on investments for businesses by enhancing customeroriented processes such as sales, marketing, and customer service. Data mining helps companies build personal and profitable customer relationships by identifying and anticipating the needs of customers throughout the customer lifecycle. Data mining can help to reduce information overload and improve decision making. This is achieved by deriving and refining useful knowledge through a process of searching for relationships and patterns from the extensive data collected by organizations. The extracted information is used to predict, classify, model, and summarize the data. Data mining technologies, such as rule induction, neural networks, genetic algorithms, fuzzy logic, and rough sets, are used for classification and pattern recognition in many industries. Data mining builds models of customer behavior by using statistical and machine- learning techniques. 13 | P a g e

CRM PROJECT Hence, data-mining applications can help companies to identify market segments containing customers with high profit potential, by searching for patterns among the different variables that serve as effective predictors of purchasing behaviors. Marketers can then design and implement campaigns that will enhance the buying decisions of a targeted segment. To facilitate this activity, marketers feed the data-mining outputs into campaign management software that focuses on the defined market segments. Regarding the three ways of boosting profitability discussed in the first section, the data mining techniques may be used as following. Data mining can help firms understand which customers are most likely to purchase specific products and services, thus enabling businesses to develop targeted marketing programs for higher response rates and better returns on investment. Businesses can increase their value proposition by offering additional products and services that are actually desired by customers, thereby raising satisfaction levels and reinforcing purchasing habits. Data-mining techniques can identify which customers are more likely to defect and why a company can use this information to generate ideas that allow them to maintain these customers. Moreover, there are additional ways in which data mining supports CRM initiatives. Data mining helps database marketers develop campaigns that are closer to the targeted needs, desires, and attitudes of their customers. If the necessary information resides in a database, data mining can model a wide range of customer activities. The key objective is to identify patterns that are relevant to current business problems. For example, data mining can help answer questions such as Which customers are most likely to acquire a certain tourists service? Answering these types of questions can boost customer retention and campaign response rates, which ultimately increases sales and returns on investment. The growth strategy of businesses depends heavily on acquiring new customers, which may require finding people who have been unaware of various products and services, who have just entered specific product categories (for example, new parents and the diaper category), or who have purchased from competitors. Although experienced marketers often can select the right set of demographic criteria, the process increases in difficulty with the volume, pattern complexity, and granularity of customer data. Highlighting the challenges of customer segmentation has resulted in 14 | P a g e

CRM PROJECT an explosive growth in consumer databases. Data mining offers multiple segmentation solutions that could increase the response rate for a customer acquisition campaign. Marketers need to use creativity and experience to tailor new and interesting offers for customers identified through datamining operations. Many marketing organizations have a variety of methods to interact with current and prospective customers. The process of optimizing a marketing campaign establishes a mapping between the organization set of offers and a given set of customers that satisfies the characteristics and constraints of a campaign, defines the marketing channels to be used, and specifies the relevant time parameters. Data mining can elevate the effectiveness of campaign optimization processes by modeling the channel- specific responses of customers to marketing offers. The different data mining techniques may be associated with CRM tasks. The Table A below presents some of these associations. The ones presented above demonstrate the fact that there is some data mining techniques which application, on the data related to the customers of a company, can lead to an improvement of the different aspects regarding the customer relationships. According to the survey made by the KDNuggets on 138 companies, in 2009 of data mining in CRM took the first place in the top of data mining applications in industry. The results of this survey are presented in the Figure below.

Table A

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DATA MINING CHALLENGES & OPPORTUNITIES IN CRM

In this section, we build upon our discussion of CRM and Life Sciences to identify key data mining challenges and opportunities in these application domains. The following is a list of challenges for CRM:

Non-trivial

results

almost

always

need

combination

of

DM

techniques.

Chaining/composition of DM, and more generally data analysis, operations is important. In order to analyze CRM data, one needs to explore the data from different angles and look at its different aspects. This should require application of different types of DM techniques and their application to different slices of data in an interactive and iterative fashion. Hence, the need to use various DM operators and combine (chain) them into a single exploration plan.

There is a strong requirement for data integration before data mining. In both cases, data
comes from multiple sources. For example in CRM, data needed may come from different departments of an organization. Since many interesting patterns span multiple data sources, there is a need to integrate these data before an actual data mining exploration can start.

Diverse data types are often encountered, which requires the integrated mining of diverse and heterogeneous data. In CRM, while dealing with this issue is not critical, it is nonetheless important. Customer data comes in the form of structured records of different data types (e.g., demographic data), temporal data (e.g., weblogs), text (e.g., emails, consumer reviews, blogs and chat-room data), (sometimes) audio (e.g., recorded phone conversations of service reps with customers).

Highly and unavoidably noisy data must be dealt with. In CRM, weblog data has a lot of
noise (due to crawlers, missed hits because of the caching problem, etc.). Other data pertaining to customer touchpoints has the usual cleaning problems seen in any businessrelated data.

Privacy and confidentiality considerations for data and analysis results are a major issue. In
CRM, lots of demographic data is highly confidential, as are email and phone logs. Concern about inference capabilities makes other forms of data sensitive as welle.g., someone can recover personally identifiable information (PII) from web logs. 17 | P a g e

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Legal considerations influence what data is available for mining and what actions are
permissible. In some countries it is not allowed to combine data from different sources or to use it for purposes different from those for which they have been collected. For instance, it may be allowed to use an external rating about credit worthiness of a customer for credit risk evaluation but not for other purposes. Ownership of data can be unclear, depending on the details of how and why it was collected, and whether the collecting organization changes hands.

Real-world validation of results is essential for acceptance. In CRM, as in many DM

applications, discovered patterns are often treated as hypotheses that need to be tested on new data using rigorous statistical tests for the actual acceptance of the results. This is even more so for taking or recommending actions, especially in such high-risk applications as in the financial and medical domains.

Developing deeper models of customer behavior: One of the key issues in CRM is how to
understand customers. Current models of customers mainly built based on their purchase patterns and click patterns at web sites. Such models are very shallow and do not have a deep understanding of customers and their individual circumstances. Thus, many predictions and actions about customers are wrong. It is suggested that information from all customer touch-points be considered in building customer models. Marketing and psychology researchers should also be involved in this effort. Two specific issues need to be considered here. First, what level should the customer model be built at, namely at the aggregate level, the segment level, or at the individual level? The deciding factor is how personalized the CRM effort needs to be. Second is the issue of the dimensions to be considered in the customer profile. These include demographic, psychographic, macrobehavior (buying, etc.), and micro-behavior (detailed actions in a store, e.g. individual clicks in an online store) features.

Acquiring data for deeper understanding in a non-intrusive, low-cost, high accuracy

manner: In many industrial settings, collecting data for CRM is still a problem. Some methods are intrusive and costly. Datasets collected are very noisy and in different formats and reside in different departments of an organization. Solving these pre-requisite problems is essential for data mining applications. 18 | P a g e

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Managing the cold start/bootstrap problem: At the beginning of the customer life cycle
little is known, but the list of customers and the amount of information known for each customer increases over time. In most cases, a minimum amount of information is required for achieving acceptable results (for instance, product recommendations computed through collaborative filtering require a purchasing history of the customer). Being able to deal with cases where less than this required minimum is known is a therefore a major challenge.

Evaluation

framework

for

distinguishing

between

correct/incorrect

customer

understanding: Apart from the difficulty of building customer models, evaluating them is also a major task. There is still no satisfactory metric that can tell whether one model is better than another and whether a model really reflects customer behaviors. Although there are some metrics for measuring quality of customer models (e.g., there are several metrics for measuring the quality of recommendations), they are quite rudimentary, and there is a strong need to work on better measures. Specifically, the recommender systems community has explored this area.

Good actioning mechanisms: Once data mining has been conducted with promising results,
how to use them in the daily performance task is critical and it requires significant research effort. It is common that after some data results are obtained, the domain users do not know how to use them in their daily work. This research may require the participation of business and marketing researchers. Another way to accommodate actioning mechanisms is to integrate them into the knowledge discovery process by focusing on the discoveries of actionable patterns in customer data. This would make easier for the marketers or other domain experts to determine which actions should be taken once the customer patterns are discovered.

Incorporating prior knowledge: This has always been a problem in practice. Data mining
tends to find many pieces of patterns that are already known or redundant. Incorporating prior domain knowledge can help to solve these problems, and also to discover something novel. However, the difficulties of incorporating domain knowledge result in little progress in the past. There are a number of reasons for this. First of all, knowledge acquisition from domain experts is very hard. This is well documented in AI research, especially in the literature of expert systems building. Domain experts may know a lot but are unable to tell. 19 | P a g e

CRM PROJECT Also, many times, domain experts are not sure what the relevant domain knowledge is, which can be very wide, although the data mining application itself is very narrow. Only after domain experts have seen some discovered patterns then they remember some domain knowledge. The second reason is the algorithmic issue. Many existing methods have difficulty to incorporate sophisticated domain knowledge in the mining algorithm. Also, once the new patterns are discovered, it is important to develop methods that integrate the newly discovered knowledge with the previous knowledge thus enhancing the overall knowledge base. Although there is some general work on knowledge enhancement, much more needs to be done to advance this area and adapt it to CRM problems. Also, integration of these methods with existing and novel Knowledge Management approaches constitutes a fruitful area of research.

THE INDIAN HOPITALITY INDUSTRY

The word hospitality covers hotels, restaurants, industrial or organized catering for offices, hospitals, educational institutions, private functions, defense services, railways, cruise ships and in-flight catering. There are about 20,000 hotels in India in the organized sector, accounting for about 5 lacs hotel rooms. The Ministry of Tourism also approves and classifies hotels in star categories: 1-star, 2star, 3-star, 4-star, 5-star and 5-star deluxe. In addition, there is a category of heritage hotels. Currently there are some 1,900 hotels approved and classified by the Ministry of Tourism, with a total of approximately 1,07,000 hotel rooms. The star-category hotels are considered superior in terms of facilities, services and reputation. Most attract an upscale clientele, including international tourists. Foreign tourist arrivals in India have been hovering around 2.5 million for the last five years. In 2003, with 2.72 millions tourists, growth was at 14.3%. In calendar year 2004, foreign tourist arrivals reached the figure of 3.37 million, showing a growth of 23.5% and India crossed the magic figure of 3 million foreign tourists for the first time. Foreign tourist arrivals are expected to achieve a healthy growth of 15% in 2005, reaching a figure close to 4 million tourists. Visitors include 20 | P a g e

CRM PROJECT those on business, leisure and persons of Indian origin with foreign passports. Not included are Non-Resident Indian (NRI) travelers, who account for about 0.5 million each year. Similar growth is foreseen to continue for the next few years. The World Tourism Organization (WTO) and other knowledgeable experts are predicting that India, together with China and other countries in the Asia-Pacific region, may achieve a high growth of for many years to come. Apart from international tourists, there is a huge domestic tourist market in India, including business and leisure travelers. This is estimated at some 300 millions tourists or tourist trips a year, which may also include those traveling for social and religious purposes. The industry expects a boom in tourism in the domestic sector in India, and a growth of 10% to 15% over the next few years. A growth in tourism will certainly lead to a boom in hotels and restaurants. In the last two peak seasons of 2003-04 and 2004-2005, there was a shortage of hotel rooms in the major cities and tourist destinations. This shortage is continuing at a more acute level in the current peak season of 2005-06. This is already resulting in a high level of activity in construction of hotels, and a boom in the restaurant sector. The hospitality industry has seen major profitability in the recent years. Revenues of Hotel and Restaurant (H&R) industry in India during the financial year 2006-07 was INR 604.32 billion. This has shown 14.17% increase from the previous year. The hospitality industry is poised to grow at a faster rate and reach INR 826.76 billion by 2015. Currently there are some 1,980 hotels approved and classified by the Ministry of Tourism, Government of India, with a total capacity of about 110,000 hotel rooms. The hospitality industry is poised to grow at a faster rate and reach INR826.76 billion by 2010(as already mentioned above). It is estimated that over the next two years 70,000-80,000 rooms will be added across different categories throughout the country. In the Indian scenario, the current trends in the Hotel industry are changing. The changes are increase in foreign tourist arrivals, MNC's foraying into India, demand supply mismatch getting closer, rise in Occupancy rates, strong recovery of the Indian economic structure key and increasing consumer segments (business traveler, leisure traveler, & airline cabin crew) . As result the companies in the Indian hotel industry are also moving up the value chain to management contracts and co-branding.

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RELATIONSHIP MANAGEMENT FOR A HOTEL

Customer Information Customer information is the foundation for any CRM initiative, and allows an accurate picture of customer needs and wishes to be built. Typically, this information is a collection of data elements acquired from backend operational systems, such as customer loyalty and reservations systems, and customer contact, complaint and feedback solutions. Information captured falls into the following categories: Demographic profiles Loyalty membership information Service preferences Purchase and travel history Contact information Online behavior Customer information can then be exploited to provide customer intelligence, which translates raw data into true customer knowledge. It is this intelligence which allows travel companies to personalize operational workflow and begin the process of ongoing dialogue. The customer intelligence component includes such activities as data-driven customer segmentation, lifecycle modeling, prediction and scoring, targeting, and true customer value management. The intelligence layer also embraces the decision systems which influence the behavior of operational transactions according to any combination of customer-related criteria, allowing for operational processes to be modified becoming customer-centric. The customer information layer collects customer attributes from any number of operational systems to allow the airline or hotel to develop a customer focused model of its operations. Typically data may be collected from up to 30 operational systems to produce the complete view

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CRM PROJECT required to support effective CRM. A hotel will also collect data from many operational systems to produce a complete view, including: Central reservations system Property management system Loyalty program Back-office systems Customer contact system (call-center) Food and beverage systems Web site

Decision Systems These functions act upon the customer information using predefined criteria to determine the way in which operational transactions should be influenced. For example, the decision systems may analyze contact histories to identify the most effective channel for targeting certain customers and then target customers through the channel with the highest proven success rate. The decision systems may also analyze staying trends to segment those customers most suited to a specific promotion and use these as the target audience for a campaign. These are: Lifetime value models Targeting rules for sales and marketing campaigns Service personalization rules and prompts Service recovery rules

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CRM PROJECT Customer super processes Existing customer processes will be modified and enhanced to become customer-focused based on the different rules and prompts dynamically derived from the decision systems. The processes in themselves are unlikely to change, but their behavior will alter. Examples may include: Enabling processes for multiple channels Support for extended operating hours and changed operating environments Utilizing customer information to introduce priorities, recognition and personalization of service Integrated collection of customer feedback

Channel management The overall architecture operates on the underlying premise that each customer-related process can take place through any combination of contact channels, with consistency of response and experience being supported through active channel management techniques. Channel management will act as the gateway between the physical channel and the operational transaction, controlling the information provided irrespective of whether the channel is a reservations office, Internet booking facility, self-service kiosk, or any other medium.

Customer recognition All of the systems and processes combine to optimize customer recognition. At all contact points, customers should be seen as individuals. They should receive personalized mailings and personalized greetings at check-in and other assisted contact channels. Their preferences for booking, payment, channel and service will be honored. Online forms should be pre-filled, and personalized messages and offers targeted to specific individuals. Ultimately service recovery actions will reward customers for their value and their continued loyalty.

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CRM PROJECT All these steps could be well understood by the following diagrammatic representation:

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SIX PS FOR THE TRANSFORMATION TO A CONNECTED HOSPITALITY ENTERPRISE

PRIORITIZE Using customer experience as the key decision criteria, determine the priorities for the connecting applications and systems.

PROFESSIONAL HELP Seek help of professional IT service companies to re-architect the application landscape and jointly determine a road map for enterprise application integration initiatives.

PLATFORM Identify and make necessary investments in IT platforms in infrastructure that are capable of carrying the next generation of IT.

PROTOCOLS Adopt emerging technology and industry standards and protocols for application integration.

PARTENER Partner with ISVs to get existing legacy applications upgraded to meet emerging technology/industry standards.

PROGRESSIVE DEPLOYMENT Transform the enterprise IT landscape through progressive enhancements of legacy applications and deployment of next generation IT rather than a big bang approach.

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DATA MINING TOOL STUDIED DURING THE RESEARCH

The web mining software utilized in this research is that of Megaputer PolyAnalyst. This software is an enterprise analytical system that has unique feature of integrating web mining together with data and text mining. PolyAnalyst can load input data from web site sources for disparate data sources including all popular databases, statistical, and spreadsheet systems. In addition, it can load collections of documents in html, doc, pdf and txt formats, as well as load data from an Internet web source. Megaputer PolyAnalyst has the standard data and text mining functionalities such as Categorization, Clustering, Prediction, Link Analysis, Keyword and entity extraction, Pattern discovery, and Anomaly detection. These different functional nodes can be directly connected to the web data source node for performing web mining analysis. Figures 1 to 12 below are screen shots of PolyAnalyst as applied to actual text of written comments of hotel guest as provided by Megaputer Intelligence Inc. Figure 1 shows the workspace created by drop-and-drag icons from node palette to workspace for keyword extraction, spell check, replace terms, phase extraction, and others. Figure 2 shows the source properties window with some of the data for attributes of code, purpose, hotel, region, and comments. Figure 3 shows keyword extraction report with the selected term highlighted of breakfast with the corresponding extraction report with relevance index, comment, and gender. Figure 4 shows link term report for the term room as being the origin node for the links. Figure 5 shows for the selected expression of noise and traffic the corresponding comments, gender, age, code, purpose, and hotel name. Figure 6 shows the new dimension matrix for dimensions of hotel name, region, age, and gender.

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CRM PROJECT Figure 7 shows the clustering report with found clusters indicated as desk and front. This clustering report in Figure 7 includes attributes of relevance index, comment, gender and age. Figure 8 show the taxonomy window with the root node indicated as breakfast and the corresponding relevance index, comments, gender and age obtained upon performing web mining using a drill down. Figure 9 show a window of link analysis properties with the available attributes indicated as TaxNodeType, TaxLevelName2, gender, code, purpose, hotel, region, and length; and independent attributes of TaxLevelName1 and age. Figure 10 shows the window of PolyAnalyst with the desktop icons additional used in the web mining of the hotel customer data. These additional icons include those for dimension matrix, dimension matrix of interest, link term from kernel, taxonomy, scored taxonomy, and link analysis. The smaller window on the left bottom of this window shows the skeleton of the web mining process.

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Figure 11 show the results of a search query with the selected comment of noise. The search tree shows the roots in Figure 11 as being noise, noise and parking, noise or parking, related (noise), and (noise) and traffic . Figure 12 shows the actual data set of written comments of hotel guests. The attributes of this data set that were collected include gender, age, code (e.g. room, housekeeping, staff, food, general), purpose of visit, hotel name, region (e.g., North, South, East, West) and written text of comments.

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CRM PROJECT Figure 13 is a pie chart showing frequency of origin for hotel customers per region, where the possible origins are those zones described and used in Figure 12 of North, South, East and West. As can be seen in the upper left region of this figure, the user has options to create several other pie charts (e.g. gender, age, code, purpose, hotel name, and comment). These other pie charts would likewise indicate the frequencies for each possible category of that attribute of data (e.g. gender: (male, female)). Figure 14 is a dimension matrix including additional dimension of hotel to those of region, age, and gender. Similarly each of these dimensions has frequency counts for each of the list sub-categories. It appears from Figure 14 that the most frequent region is North with frequency 160, the most frequent age is 31-45 with frequency of 562, and the most frequent gender is female with frequency of 1605.

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CRM PROJECT Figure 15 shows actual written comments of hotel customers related to traffic noise. The screen includes a root figure with branches of categories and their frequencies such as noise and parking, a list of the most relevant and irrelevant results of the search for the combination of terms of noise and traffic. Some of the most relevant results shown in Figure 15 are Noise from traffic terrible, no sleep and excessive traffic noise at all times, affects sleep. The latter comment was highlighted and thus also made visible in the center window of this screen as shown in Figure 15.

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ANALYSIS
CRM ANALYSIS

CUSTOMER LIFE CYCLE In customer relationship management, customer life cycle is a term used to describe the progression of steps a customer goes through when considering, purchasing, using, and maintaining loyalty to a product or service.

OFFICIAL MEETINGS

LUNCH/DINNER/ OFFICE STAFF CONFERENCE HALL

CATERING SERVICES

HOTELS/ RESTAURANTS

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CRM PROJECT INDUSTRY ANALYSIS

a. SWOT ANALYSIS

STRENGTHS 1. Natural and cultural diversity: India has a rich cultural heritage. The "unity in diversity" tag attracts most tourists. The coastlines, sunny beaches, backwaters of Kerala, snow capped Himalayas and the quiescent lakes are incredible.

2. Demand-supply gap: Indian hotel industry is facing a mismatch between the demand and supply of rooms leading to higher room rates and occupancy levels. With the privilege of hosting Commonwealth Games 2010 there is more demand of rooms in five star hotels. This has led to the rapid expansion of the sector.

WEAKNESSES 1. Poor support infrastructure: Though the government is taking necessary steps, many more things need to be done to improve the infrastructure. In 2003, the total expenditure made in this regard was US $150 billion in China compared to US$ 21 billion in India.

2. Slow implementation: The lack of adequate recognition for the tourism industry has been hampering its growth prospects. Whatever steps are being taken by the government are implemented at a slower pace.

3. Susceptible to political events: The internal security scenario and social unrest also hamper the foreign tourist arrival rates.

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CRM PROJECT OPPORTUNITIES 1. Rising income: Owing to the rise in income levels, Indians have more spare money to spend, which is expected to enhance leisure tourism. 2. Opening up of the Aviation Industry: The opening up of the aviation industry in India brings exciting opportunities for hotels; as they rely on airlines to transport 80% of international arrivals. With the open sky policy, the travel and tourism industry has seen an increase in business. Increased airline activity has stimulated demand and has helped improve the infrastructure. It has benefited both international and domestic travels. 3. Increase in Travel and Tourism - The World Tourism Organization (WTO) and other knowledgeable experts are predicting that India , together with China and other countries in the Asia-Pacific region, may achieve an average growth of 12% per annum in tourism for many years to come. Indias share in global tourism is expected to reach 1.5% by 2010. Indian outbound tourist flow is expected to increase at a CAGR of 12.79% over the five-year period spanning 2007-2011. The inbound tourist expenditure per head is increasing significantly due to increase in the disposable income. 4. Demand-Supply gap - The demand for hotel rooms far exceeds the country's supply. Thus exist an opportunity to develop the hotel industry to meet this demand. 5. Key Events - Hotel Industry in India is also set to get a boost with Delhi hosting 2010 Commonwealth Games and 2011 World Cricket Cup. THREATS 1. Fluctuations in international tourist arrivals: The total dependency on foreign tourists can be risky, as there are wide fluctuations in international tourism. Domestic tourism needs to be given equal importance and measures should be taken to promote it. 35 | P a g e

CRM PROJECT 2. Increasing competition: Several international majors like the Four Seasons, Shangri-La and Aman Resorts are entering the Indian markets. Two other groups - the Carlson Group and the Marriott chain - are also looking forward to join this race. This will increase the competition for the existing Indian hotel majors.

b. PORTERS FIVE FORCE MODEL ANALYSIS

Forces Driving Competition in the Hotel Industry in India, 2007

Figure Source: Data Monitor

Barriers to entry High capital costs, poor infrastructure facilities and scarcity of land especially in the metros are the factors contributing towards high barriers to entry in the hotel industry. Bargaining power of suppliers Bargaining power of suppliers is limited due to higher competition, especially in the metros. Suppliers in this market are defined as property owners, developers and real estate companies, 36 | P a g e

CRM PROJECT interior design and furnishings companies, architects, management and training service providers, marketing companies, industry consultants and ICT manufacturers. The industry is also labor intensive. Bargaining power of customers The bargaining powers of buyers are moderate due to the demand supply gap. Brand recognition is important to attract consumers in a competitive and mature industry. A strong brand image helps to attract first-time customers and also repeat business, as switching costs are negligible in this industry. Degree of rivalry The degree of rivalry is intense in metro cities, however it is slowly picking up in secondary cities. Competition has picked up due to the entry of foreign hotel chains. Substitutes The threat of substitutes is assessed as moderate because of the factors like brand recognition and brand loyalty.

CRM PRACTICES
SECONDARY RESEARCH RESULTS 1. HOTEL A hotel is an establishment that provides paid lodging, usually on a short-term basis. Hotels often provide a number of additional guest services such as a restaurant, a swimming pool or childcare. Some hotels have conference services and meeting rooms and encourage groups to hold conventions and meetings at their location. Hotel customers are becoming ever more discerning as the choice of places to study grows.

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CRM PROJECT Quality and service are both key to the hotel sector and reservations system go some way ensure every element of customer relationship management has been catered for via front office management, sales and marketing, accounting and reporting.

THE E-BUSINESS STRATEGY The key objectives of e-business strategy includes serving customers proactively, personalizing the service offerings according to the needs and preferences of the customers, enhancing brand loyalty and awareness and cross-selling. Marriott used this strategy to transform itself from a property-focused to customer-focused company. Serving Customers Proactively Marriotts e-business system enabled its sales personnel to obtain data relating to their clients, take note of the leads and share new business opportunities with one-another. Equipped with data, sales personnel could cultivate a long-term relationship with their clients and present the Marriott group as a whole, rather than selling space for a single property. Personalizing Service Offerings Marriotts e-business system was connected to a standardized database of customer data. This link enabled Marriott to provide customers with standardized information, irrespective of the channel through which they were interacting. The system automatically updated customer requests made through any channel. The customer database also provided any information regarding a particular customers spending across all Marriott group hotels. This enabled them to understand the customer spending habits better enabling them to frame customized sales pitches and bag more lucrative deals. Enhancing Brand Loyalty Depending upon customer requirements and spending capability, Marriott offered accommodations at various price and service levels, from economy to luxury. An important application of Marriotts e-business was in making clients aware of its wide portfolio of brands. It helped Marriott to get customers hooked on to one of several Marriott hotels. The 38 | P a g e

CRM PROJECT sales force automation system launched by Marriott provided sales personnel with the information required to make client booking quickly and efficiently. Cross-Selling Marriotts e-business strategy aimed at cross-selling other products and services to its existing customers i.e. earning more from the existing customers while at the same time ensuring higher customer satisfaction levels. For example, Marriott could sell various packages to its business customers. Satisfied with the service, the customers would not hesitate to spend more than the planned amount, thereby boosting revenue per customer for Marriott. As per 1999 estimates, Marriott earned a whopping $55 mn through cross-selling.

CUSTOMER LOYALTY Beyond new amenities, services, pricing, and other tangible features and tactics that hotels use these days to gain a competitive advantage, exists the more intangible world of customer relationship management. And it is within that realm that hotels now realize they can gain the ultimate competitive advantage customer loyalty. That loyalty is especially important to the non-chain affiliated hotels that cant rely on huge national advertising campaigns. Such is the case with Hotel Hyatt Regency, Mumbai. In keeping with its commitment to deliver high quality customer experiences through all its employees, Hyatt selected Convergys to develop skill-based training for management and non-management employees. Specifically, Convergys will provide training in support of Hyatts award-winning Gold Passport program, which is designed to reward Hyatts loyal guests with every stay that they make.

In recent years, both of these properties have come to understand and utilize CRM technology and services in order to better serve, care for and understand their guests, which are often repeat customers. Toward that end, the hotel has used CRM and e-marketing services, which have helped the hotel, build stronger relationships with their guests. If a guest provides them with their e-mail address, they provide them with e-mail confirmations and a follow-up to their stay that seeks feedback. Beyond simple e-mail correspondence, its 39 | P a g e

CRM PROJECT CRM is used to do very focused marketing campaigns, depending on how much information it can procure from guests. RESTAURANTS A restaurant is a retail establishment that serves prepared food to customers. Service is generally for eating on premises, though the term has been used to describe take-out establishments and food delivery services. TICKET RESTAURANT (MEAL VOUCHERS) AND TICKET COMPLIMENTS (GIFT VOUCHERS) A ticket restaurant is a type of restaurant which usually has dealing with business clients. A particular ticket/voucher is given to the employees of the company. These could be used instead of paying cash at the restaurant. The restaurants use such schemes in order to maintain good relationships with the business clients. Accor is already present in India through its Services business. Accor Services, global leader in the field of employee benefit, incentive and loyalty programs, as well as expense management, opened its Indian subsidiary in 1997, introducing two of its major products: Ticket Restaurant (meal vouchers) and Ticket Compliments (gift vouchers), used by over 180,000 employees of Indian companies. Last October, Accor Services acquired Royal Images Direct Marketing (RID), the Indian leading provider of customer relationship management services customer loyalty, channel incentives and sales force motivation. This acquisition made Accor Services a benchmark player in the marketing services market. CUSTOMER ORDER TRACKING This concept uses a telephone ordering system that tracks each customers order history, preferred payment method, directions for delivery, comments/complaints made and much more.

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CRM PROJECT McDonalds, which is a family restaurant, uses this practice. Whenever an order is placed, and is fed into the system the previous orders made, if any are popped. The person taking the order then knows about the customer preference and the way/mode the payment is done. Also if it is an home delivery order then the address, which is already present in the records is also known to the person concerned. It thus becomes easy for the people at McDonalds to take orders and deliver them accordingly taking full care of customer needs and preferences.

TELEPHONE ORDER SYSTEM The restaurants today take orders on telephone and deliver the food at home. In some cases, the order for the food is taken beforehand. The customer then later comes to the restaurant and enjoys his meals. Telephone order system in the form of Home delivery has been adapted by many restaurants, including McDonalds, Hyderabad House and various other restaurants across the country. FOOD JOINTS

CUSTOMER LOYALTY PROGRAMS Customer loyalty program are mainly the ones which facilitate the customers by giving them some special offerings in order to make them the regular customer of any restaurant. Recently this has been adapted by Pizza Hut. Their customer loyalty program is called VIP (Very into Pizza). Pizza Hut VIP club which gives their latest pizza news, fantastic discounts and the coolest offers delivered right to customers mailbox and mobile phones.

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CRM PROJECT PRIMARY RESEARCH RESULTS In order to collect the data from various restaurants, hotels and fast food joints, a primary survey was conducted across Hyderabad. This was done on the basis of a questionnaire (Refer Appendix A).The results are based on the survey questions and described below: Q1. Maintenance of customer records in databases

60 percent of the respondents were using databases for maintaining customer records. Q2. Average customer value (bill)

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CRM PROJECT Maximum customers were in the range of Rs.500-Rs.1000 of about 35%. This was also because the hotels surveyed were priced at higher ends. Q3. Knowing about customer requirements

Personal Conversations were the major source of understanding about customer requirements

Q4. Implementation of applications for business

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CRM PROJECT Reservation System and Billing software are the most preferred applications in the hospitality industry. Q5. Special program/project for your regular customers

Maximum hotels and restaurants have special programs or projects for their regular customers of about 85% of the respondents accepted this view. Q7. Frequency of customer complaints

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CRM PROJECT The complaints were mostly received once in a month which 30 % of the respondents agreed Q8. Repeatability of customer complaints

The complaints were repeated mostly once in 3 months, 29 % of the respondents were of this view.

Q9. Implemented any data mining tools

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CRM PROJECT 25 % of the respondents agreed that they have implemented data mining tools and applications to mine customer behaviour and potential customers.

Q10. Data mining tools implemented

COGNOS was the most preferred data mining tool among the respondents.

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CONCLUSION
CRM makes a companys customers more loyal. Every time a company interacts with a customer, the company customizes its service to be a bit more closely suited to the customers needs. The company is getting a little higher up on the customers learning curve. Moreover the company is making the product more and more valuable to the customer. The relationship with the customer is developing in its own context. It is more than just technology. With CRM, one is operating in a different dimension of competition finding products and services for customers, as opposed to finding customers for the products and services the company sells. This study has shown the usefulness of web mining in extracting key words, link analysis of key words, dimension matrices, text clustering, taxonomy, and search queries all from hotel customer survey data. Data mining of the hotel customer responses makes it known to management what hotel services need to be improved. The potential of future applications of data mining to other types of data is made evident by the visual outputs obtained from using data mining tools like Megaputer PolyAnalyst. Hence Data Mining tools and applications can be immensely useful for extracting information of potential profitable customers for the hospitality industry.

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REFERENCES
http://www.accor.com/gb/upload/pdf/INDEGB.pdf http://www.marketresearch.com/map/prod/1545431.html http://crmtutorial.com/CRM/CRM.aspx http://searchcrm.techtarget.com/sDefinition/0,,sid11_gci213567,00.html http://www.marketline.com HTTP://WWW.FHRAIINSTITUTE.COM/ABOUTGROWTH.HTML http://en.wikipedia.org/wiki/DataMining www.marriott.com http://mumbai.regency.hyatt.com/hyatt/hotels/index.jsp http://en.wikipedia.org/wiki/Restaurant Cygnus Research Paper titled Indian Hotel Industry Berry, L. L. (1983), Relationship Marketing of Services : Growing interest ,Emerging Perspectives, Journal of the Academy of Marketing Science Gruen, T. W. (1997), Relationship Marketing: The Route to Marketing Efficiency and Effectiveness, Business Horizons Berry, L. L. (1983), Relationship Marketing of Services: Growing Interest, Emerging Perspectives, Journal of the Academy of Marketing Science. Parasuraman, A., Zeithaml, V. A., and Berry, L. (1985), "A Conceptual Model of Service Quality and its Implications for Future Research," Journal of Marketing, Payne, A. (2000), Relationship Marketing : The UK Perspective, in Sheth, J. N. and Parvatiyar, A. (eds.) Handbook on Relationship Marketing, Sage Publications, Inc Reichheld, F. F. and Sasser, W. E. (1990), 'Zero Defections: Quality Comes to Services', Harvard Business Review, September October

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APPENDIX A

Questionnaire on CRM Study

As a student of the second year MBA of Institute of Management, Nirma University, I am doing a survey in response of various restaurants, hotels and fast food joints towards the use of CRM in Hospitality Industry and the use of Data Mining Tools to mine customer information as a part of my study. I request you to provide the required information for the completion of my research study. The information is to be used exclusively for academic purpose only. Name: Gender: 1. Do you maintain customer database? Yes No

2. What is your average customer value (bill)? < Rs 200 Rs 200 500 Rs 500- 1000 > Rs 1000

3. How do you know about your customer requirements? Customer Feedback Personal Conversations Others _______________________________________________________________________________ _____________________________________________________________________________ 4. Which of the following have you implemented for your business? (Tick all applicable) Baggage Management Reservation System 49 | P a g e

CRM PROJECT Website Billing Software Any Other, pls specify__________________________________________________________ _____________________________________________________________________________ 5. Do you have any special program/project for your regular customers? Yes No

6. If yes, please specify_______________________________________________________ ______________________________________________________________________________ 7. How often do you get customer complaints? Daily Once in a week More than once in a week Once in a month

More than once in a month 8. What is the repeatability of those complaints? Daily Once in 3 Months Weekly Annually Every Fortnight Monthly

9. Have you implemented any data mining tools for mining customer data? Yes No

10. If yes, please specify which data mining tools have you implemented ______________________________________________________________________________

THANK YOU.
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