Need for Customer Relationship Management and a Model of Customer

Relationship

Prof.K.Prabhakar
Director,
KSR College of Technology,
Tiruchengodu-637209
Abstract

In order to compete effectively in globalized economy, organizations must be

customer-focused. Customer relationship management (CRM) is the way to integrate
this approach throughout an organization. Many a times organizations are likely to
believe that it is function of marketing to have the customer relationship management.
In reality it is meant for every one in the organization starting from the security
person, telephone operator and accounting department. Providing good service and
then finding a way to leverage the good will created by quality service a company can
tie deeply into a consumers psyche and develop a strong business/client relationship.
This paper examines customer complaints as a major source of loosing customers and
suggests suitable policy measures to overcome these handicaps. In addition, there is
discussion on role of information technology as an enabler of customer relationship
management. The paper also develops a model for organizations to follow and
summarizes the discussion.

Introduction
Organizations have realized that retaining customers is more profitable than
crating a new customer. It is estimated that a customer for coke for a lifetime will bring
an estimated cash flow of Rs 50,000. Therefore, if we loose a customer we not only loose
him for present but also future. We have not calculated the cost of satisfied customers
references. Though customer relationship is being emphasized by Theodore Levitt in his
article on “Marketing Myopia”, organizations are yet to understand and implement
various customer related initiatives. However, technology as an enabler with very low
cost has come to the rescue of organizations to meet ever-changing need of customers.

2
Consider the following findings from a study
About 50 percent of the time, customers who have a problem with a product or
service are not likely to tell the company about it.
1) Nine out of ten of these "silent critics" will probably take their future business to a
competitor.
2) Even when a customer does complain, one out of every two will not be thoroughly
satisfied with the company's efforts to solve the problem.
3) Dissatisfied customers typically tell between seven to nine other people when they
had an unsatisfactory experience with a company.
4) Negative information has twice the impact of positive information on purchasing
decisions.
5) Word-of-mouth is one of the most important factors influencing a customer's decision
to buy from a company.

This study clearly reveals that complaints are one of the most important forms of
communication between a business and its customers, and constructive responses to
complaints can help retain customers who would otherwise be lost.

Why are the reasons for customer complaints?

Most customers complain because they purchased a product or service with

certain expectations, and, for any number of reasons, those expectations were not met.
Some of the research done by organizations found the following to be among the major
causes of consumer complaints.
Product Service Causes:
1) Poor product quality
2) Maintenance difficulties
3) Inadequate or poor repair work
4) Delays in delivery of goods or services
5) Failure to fulfill product or service warranties

3
6) Incompetent or discourteous employees

Accounting Causes:
1) Billing errors
2) Failure to provide timely refunds and adjustments, as promised

Sales Practice Causes:

1) Deceptive or inaccurate advertising
2) Advertising products that are not available, or are in limited supply
3) Misleading or false representations by sales staff

Underlying Causes:
1) A wide range of product choices coupled with a lack of information on which to base
purchase decisions
2) Advanced technology --- complicated product design
3) Inadequate, or complicated product instructions

The foundation of customer goodwill is the existence, promotion, and practice of

a sound customer relations policy. Such a policy is a formal promise to customers
representing commitment to their satisfaction. A customer should not be forced to run
from department to department, or individual to individual to get satisfaction. The policy
should spell out specifically how, when, where, and who handles complaints or questions.

One person within the company should have ultimate authority and responsibility
for customer relations. In a small firm, it may be the owner, while in a large organization
it may be a customer affairs executive. It is important that the person designated be
readily available, and authorized to act on behalf of the company in all customer relations
matters. The organization may want to consider incorporating a commitment to a third
party dispute resolution mechanism into customer relations policy. Even if organization
follows and carries out a sound customer relations policy, there still will be some

4
complaints that are difficult to settle, and a few customers whom the company cannot
seem to satisfy.
Alternatively, we may consider offering resolution through a third party
mechanism on a case-by-case basis. An independent and neutral third party will act as a
mediator, helping organization and customers communicate to reach an understanding. In
the event that an agreement is not reached, organization should be prepared to offer
arbitration. Arbitration is a process where a neutral person listens to both sides and makes
a final decision based on fairness and equity.

Complaint Handling Procedures:

Complaint handling system, which is structured from customer relations policy,
must operate simply, effectively, and quickly. Speed is essential in responding to
customer dissatisfaction. Customer should be assured that organization care and that
prompt remedial action will be taken to resolve any reasonable problem. A sound
complaint handling system should include the following essential procedures:
• Screening And Logging -- There should be a formal procedure for recording the
date a complaint is called for attention, along with a record of pertinent
information. For example, the type of product or service; manufacturer/brand
name; model name/number; date of purchase/contract; warranty expiration date;
salesperson; cost of product/service; date problem occurred; and a description of
the problem should be listed. This will allow organization to exercise control, and
assure proper follow-through.

• Investigating -- customer's explanation of a problem can provide much

information. Nevertheless, to assure we have all the information needed for a
thorough review of the facts involved, by:
• Researching in-house records on the customer;
• Requesting receipts, or other records;
• Inspecting the product, or service performed; and
• Following-up with the customer for any necessary additional information.

5
 • Acknowledging -- When organization cannot resolve an issue immediately, it is
important to let customer know that the matter is receiving attention. Prompt
acknowledgment will set customer at ease, demonstrate that organization care,
and begin the process of preserving goodwill. Whenever possible, tell customer
how long it will take to complete action on the complaint. If there is further delay,
be sure to advise customer why, and when organization expect to have an answer.

• Formulating A Solution -- solution must be consistent with established customer

relations policy and should take into account a number of important criteria.
organization should consider:
• Contractual and/or warranty obligations;
• The customer's expectations;
• expectations of the customer;
• The cost/benefit of alternative solutions;
• The probability and cost of customer seeking redress in some other way;
• The comprehensiveness and fairness of solution;
• ability to perform the solution; and
• What to do if the customer rejects solution.

• Responding -- The response should be clear and appropriate. The customer must
understand the response, and the response must address the issues raised in the
customer's original complaint.
We should avoid "stock" language and form letters when an individual response is
needed, and refrains from using excessive technical jargon. An explanation of decision
may preserve the goodwill of customer, even if the decision itself is adverse.

• Following-Up -- Contact customer following response to verify whether or not

the matter has been resolved satisfactorily.

6
If customer is unhappy with response, organization should refer the matter to a third party
dispute resolution mechanism for assistance.
If we intend to seek the assistance of a third party, be sure to give the customer a name
and telephone number of the person, or office to be contacted.
The follow-up step is critical to ensure the effectiveness of system. While organization
may never satisfy everyone, this contact will provide direct feedback, and can be
extremely valuable in making customer relations the best possible.

Management should monitor complaint-handling procedures to ensure that

complaints are being handled properly, fairly, and promptly. Analyze complaints as
a basis for reviewing customer relations policies and operating procedures, and for
evaluating product or service quality.

Steps Involved in customer Satisfaction through Service:

Learn how to make a strong, positive impact on customers, especially when there is a
problem. Analyze the factors that affect the customer’s relationship with organization and
their perceptions of how organization handle their business. Learn how to build customer
satisfaction through a service communication process that focuses on not only solving the
problem but also reinforcing a positive long-term relationship. Following are some of the
steps
• Seeing problems from the customer’s perspective
• Managing customers' "moments of truth"
• Communicating effectively through better listening
• Analyzing how customer perceptions are formed
• Managing anger and other service behaviors
• Dealing with long-term consequences of service breakdowns
• Negotiating solutions

7
 • Generating an action plan for improved on-the-job effectiveness

Customer Relation-Profile

When mapping the quality of a customer relationship, we use the following model where
the head symbolize the competencies we exchange. The Heart symbolizes our
communication and co-operation, and the Legs concern the responsibility and
professionalism with which we implement or deliver the competencies we have agreed
upon.

Model for Customer Relationship

8
 The essence of this process is mutually to discover weak, strong and wanted sides
of the organizations, in order to improve future relations. Using the Customer Relation
Profile, organization should be able to identify the terms of relationship with others and
the profile will indicate what to focus on if organization want to develop it further. If
organization want an "easy to use tool" to realize how organization can maximize
business relations, this is the tool for organization and organization.

Customer Relations Management (CRM) and Role of Information Technology

In the era of information revolution , customer relations, or rather "customer

relations management" (CRM) is playing an ever-increasing role. CRM entails compiling
information concerning customers' profiles, their previous purchases, their preferences,
etc. This is very useful when, for example, a customer requests repairs to his refrigerator,
because the service company has all the information, such as make and type of
refrigerator, date of purchase, etc. readily available. It makes it easier, both for the
customer and for the service company, to arrange for a technician's visit because most of
the necessary information is already on file.

CRM applications are also useful in gathering information from various business
departments and merging them into one file, so that the company representative who
takes a customer's call can answer most questions that the customer may have. This
avoids the problem of having to transfer customers to other departments. Of course, CRM
is a "two-way street," in that it enables companies to use information on a customer's
previous purchases to focus their marketing on items of special interest to a particular
customer. For instance, a bookseller may send information on new travel books to a travel
enthusiast.

While acknowledging the benefits of CRM (a technology which would seem to be

mainly applicable to large organizations), it must be recognized that CRM covers only a
small percentage of what we refer to as "Customer Relations." Customer relations is a

9
multifaceted domain which ranges from business policies, practices and strategy at the
management level, to enthusiasm, eagerness to achieve customer satisfaction,
resourcefulness, flexibility, and a positive attitude towards customers on the part of
employees and company representatives who are in direct contact with customers or
clients.

Both management decisions and employee behaviours/interactions should be

governed by what is referred to as "organizational culture". It is the perceived internal
environment of the organization that has a major influence on how a organization
operates, values it espouses, and how it treats its employees. In a company culture that
stresses customer satisfaction, strives for excellence, values its employees, and is able to
instill in them a sense of mission, or of common purpose, all members of the organization
will recognize that their contributions play an important role in the overall success and
profitability of the organization of which they are a part.

Unfortunately, in many organizations, ambitious and well-meant plans are made

at the top management. While the behaviour of employees who are in actual contact with
customers may be negatively influenced by a number of factors. Some of the factors are,
1) Feelings of not being appreciated by management,
2) Unwillingness to go beyond the basic requirements of their jobs and to tap into their
own resourcefulness/Entrepreneurship,
3) Seeming lack of interest in advancing the company's business through their
interactions with customers.

What seems to be misunderstood by people working for companies is that

everyone, from the business owner or manager to the telephone operator or receptionist
or the sales associate, plays an important part in how customers view a company. Rude,
unfriendly, uncooperative, or inappropriate behaviour on the part of company
representatives who are in direct contact with customers may translate into loss of
business, regardless of the quality of the goods or services the company has to offer. It
has been estimated that 68% of business losses are because rude behaviour of employees.

10
 Furthermore, customers who encounter this type of treatment are likely to tell
others about their experience, who in turn, will not be very interested in dealing with that
particular company, thereby magnifying the extent of customer loss (actual and
potential).
In this era of fierce competition, both on a local and a global level, it becomes
increasingly important to ensure that a business is "customer-centered." There is an
abundance of merchandise available, and there is no shortage of businesses that offer the
same type of goods. It is therefore necessary for companies to try to set themselves apart
from their competitors by offering superb customer service. This can be achieved by
listening to customers' comments and suggestions; by upper management spending time
at the reception desk, at the service counter, or in the store, observing customers'
comments and reactions. Anyone associated with a company needs to see him/herself as a
company representative who contributes to the company's image. Of course, everyone
working for a company needs to receive recognition for special efforts, ingenuity, and
problem solving, geared towards achieving customer satisfaction.
No doubt, excellent plans are made at the management level of many companies, but
inadvertently, the message communicated to customers or potential customers often is
more akin to saying, "We do not really care whether the organization become or remain
our customer or not!" How else could one interpret the message that "Our computer
department is too busy to take order," or "We will let organization know when the item
you wish to purchase is in stock," and never getting back to the customer. Alternatively,
turning away a group of patrons in a restaurant, just because the kitchen will close in ten
minutes?

Similarly, customer complaints or suggestions do not seem to receive the attention

they deserve. It has been pointed out that customer complaints should be treated as gifts
because they enable a company to take corrective action and to make improvements.
Apparently, customer complaints are relatively rare--customers are inclined to tell their
friends and relations about negative experiences, rather than informing the companies in
question. For that reason, it seems incomprehensible that some large companies tend to

11
dismiss customer complaints and consider them immaterial (if one goes by the reactions
of the company representative receiving the complaint).

In order to ensure excellence in customer relations and customer service,

organizations need to assess all aspects of their operations, in order to determine whether
any of their business practices and interactions with customers needs to be improved.
Corrective actions could take the form of training or retraining staff, establishing a code
of conduct, empowering staff to apply company guidelines less rigidly, where warranted,
and keeping focused on the customer at all times.

12