Statistical research on results of automated CRM systems implementation.
Description of main advantages of usage of Information Technologies as an instrument of effective customer relationship management:
As the result of statistical research, executed in the countries with the developed economies, it was found that interaction with the significant number of existent (up to 50%) clients of many companies does not bring sufficient profit because of ineffective process of interaction with them. Dissatisfaction of clients is a reason for frequent change of suppliers. This was, for example, the majority of companies from Forbes 500 list lose up to 50% of their clients every 5 years. Clients leave has a great impact on the image of a company, as customers dissatisfied by the quality of service spread information about their negative experience far more extensively than satisfied clients share experience about positive interaction with a company.
That is the reason why for many companies a key factor of viability is permanence, loyalty of clients database. At the same time the main goal of marketing efforts of the majority of enterprises and organisations, that operate in various business areas, is an attraction of customers, realised through high-cost marketing campaigns. It requires revision of marketing policy and its reorientation to primary tasks solutions, namely to increase of customers loyalty.
Effective management of customer relationship requires individual approach to every client, analysis of relationship with customers with the aim of identification the most promising ones. It is necessary for it to gather and process large volume of information on history of relationship with every client.
To resolve these tasks the concept of Customer Relationship Management was actively developed. It presupposes usage of leading managerial and information technologies, developed for optimization of relationship with customers.
In the given publication an attempt to provide systematised presentation of main advantages of usage of Information Technologies as an instrument of effective Customer Relationship Management and to demonstrate main possibilities of their practical implementation.
The role of customers-oriented technologies in increase of effectiveness of an enreprise.
Statistical research, executed in countries with developed economies, show that:
1) Costs, spent to attract new clients, are on average five times bigger, than spent on existent customers retention;
2) Relationship with the major part of clients start to bring constant profit only one year after the beginning of the work with them. That's why, if a new client works with a company for less than a year, than costs for its attraction are paid off and the firm bear the losses;
3) To conclude a deal with the existent client is far more easier and in 5-10 times cheaper, than with a new client;
4) 5 % increase in the number of permanent clients increases volume of sales in more than 25 % and the profit in 50% - 100%;
5) Around 50 % of existing clients of the majority of companies do not bring profit because of inefficient interaction with them;
6) Around 80% of company’s income is assured by 20% of its clients;
7) Customers dissatisfied by interaction with a company spread information about negative experience far more extensively than satisfied customers share positive one.
Evidently, all these cifras are not more than an indicator of ‘average temperature at a hospital’, though the consequences of these investigations make it necessary to reflect on the necessity to put maximum efforts to retain already existing clients, to build up their loyalty. Up till now, many companies, when aiming to get a larger market share, pay the main attention to attraction of new clients, and implement high cost marketing programs.
In accordance with lately rapidly developing theory of Relationship Marketing, loyalty of customers has to be сonsidered as a complex of parameters, that characterise their behaviour (volume and consistency of sales) and the perception of goods and services of a supplier.
Customers loyalty increase has a particular importance for companies, that specialise in provision of various types of services, that require direct contact with clients. That is precisely that sector of economy that develops the fastest. If in the middle of 50s, for example, service industry market share equaled to 50% of Gross National Product of the US; till the end of 90s this figure grew to 73%. In the EU countries service sector generated 73 % of Gross National Product in the end of 90s. It provided jobs for 62% out of total number of employed. The corresponding figures in Japan were 59% and 56%.
Therefore, a client database is crucially important asset of a company, that has to be managed carefully and effectively. It requires:
1) Generation and maintenance in the psychology of clients of the commitement feeling to a chosen trademark (supplier of goods and services);
2) Personalisation of relationship on the basis of studies of a client preferences and his behaviour;
3) A choice of the most promising clients from the perspective ones from the point of view long-term cooperation.
Realization of the indicated interactions in a natural way requires individual approach to every client; analysis of relationship with customers, aiming to identify the most promising ones, with whom it is necessary to maintain the most ‘warm’ and credible relationship. A client's differentiation derived from such an analysis will allow not only to additionally stimulate perspective clients and to increase their loyalty, but also to reduce costs spent for maintaining relationship with those clients, who do not bring stable income. In order to resolve such a task it is necessary to gather and process big volume of information on history of relationship with every client.
Investments in technologies of work with existing clients can increase their loyalty, and finally significantly increase effectiveness and business sustainability. As indicated earlier, costs spent on organisation of products, services sale to the old clients in many cases are significantly lower than to new ones. As the result, profitability can be higher, even if the price is lower, than competitors have. In many cases a loyal clients becomes less sensitive to a price. It means it is possible to assign a higher price for a product (service) without running a risk to lose a turnover.
It is particularly a case if a situation of inelastic demand happens or if there are companies, which business requires high variable costs. It is necessary to take into account, that regular customers, it is highly probable, will use additional services (products), proposed by a company, increasing this way its turnover.
In order to optimise relationship with clients it is necessary to have an understanding that business activity of a commercial department of a company does not have to be limited to organisation and stimulation of sales, but also has to include issues of post-sales service, a service by itself, meaning of everything that makes a clients loyal to a company.
Moreover, for some types of business activities, when we take the activities of complex deliveries, tenders, projects, sale by itself is a unique type of relationship. That is why it is particularly important to take into account all types of relationships, that require tracking of all telephone calls, requests, meetings with potential clients, of all emails that were sent to a client and received from him; as well as received сlaims and suggestions, meaning the whole complex of activities, that are released when the sales are being realised and when post-sales service happens.
Сurrently, in order to attract and maintain clients the main instruments are mass advertisement and provision of various discounts at the time a purchase is realised. Though, an experience of economically developed countries shows that direct advertisement, mailing and other marketing promotions, that are executed without taking into account individual preferences of the consumers at the end lead to significant growth of expenditures on advertising gols and, therefore, to an overall growth of costs of goods sold.
This way, for example, typical percentage of positive feedbacks for a direct mailing of commercial proposals, usually, do not exceed two percents. Different types of accumulated discounts are also not always an instrument sufficient to maintain high level of clients’ loyalty.
High costs and low efficiency of a advertisements, usually, are the consequences of the fact that an advertisement targeted not a right audience or incorrect advertisement mediums were chosen.
Quality of marketing research to a significant degree depends on availability of necessary information about:
Who a client of a company is;
To what types of advertising mediums clients react better;
How satisfied clients are by current relationship with a company and what exactly they do not feel satisfied with.
Generally, in order to increase effectiveness of marketing campaigns, Marketing Department of an enterprise has to identify:
1) Consumers groups for products of a company;
2) Current and prospective needs of different consumers group for concrete types of products;
3) Indicative volumes of products purchase for assigned prices by different consumers groups;
4) Main company's competitors on the market;
5) Company’s market preferences in comparison with the competitors;
6) Goals, that a company aims to achieve and a strategy applied to their achievement.
Solutions of the given tasks require constant gathering and processing of significant factual information on relationship with clients. This information is often impossible to receive from simultaneously executed marketing researches.
For example, a potential consumer can indicate in the questionnaire, that he is a potential consumer of a car of ‘X brand’, as he can really afford it. But the information that he uses a company car is not indicated in the questionnaire. As the result, distorted understanding (excessive in this case) of a demand for a car of ‘X brand can be received.’
If information about sales reliased and contact with clients is accumulated regularly, than analysis of this information database can show the number of clients that really show interest of purchasing of such a car; their purchasing plan, suggestions to configuration etc. This information will reflect significantly more objectively demand for products and services of a company.
This way, solution to a task of increase of customers loyalty and optimization of marketing programs requires gathering and processing of large volume of information. Naturally, there arise a question of applying modern Information Technologies.
One of strategies of activisation of long term contacts with existent clients, as well as with potential ones is a concept of CRM (Customer Relationship Management), that suggests usage of innovative managerial and informational technologies, with the help of which a company gathers data on its clients and on all stages of relationship (attraction, maintaining and loyalty) with them; derives knowledge from them and uses it for the benefit of its business activity by building up of mutually beneficial relationship with clients.
From the point of view of Information Technologies CRM is a system that is represented by a number of applications, linked by one business logic and by integrated corporate informational environment of a company on the basis of a single database. Program software that is used for automation of business process during the process of realization of marketing campaigns, according to data gathered from different sources, allows
To decrease administrative costs by 10%-20%;
To increase the volume of sales up to 10% - 30% per year as of one manager;
To increase the number of deals concluded up to 5-15%.
Payback period of a CRM system on average is around one year. These are average cifras, of course, and they can fundamentally, differ for different entreprises.
The main advantage, that is received as the result of CRM system implementation is a possibility to personalise the process of customer service, that leads to increase of sales volume of a company. Due to more effective organisation of work of a Customer Department the decrease of administrative, operational and temporarily expenditures on preparation and realisation of deals happens. In turn, acceleration of processes of deals conclusion and control over all stages of their realisation allows to achieve a growth of sales and an increase of number of deals concluded.
Significant for an optimisation of company work in general is a the fact that anintegrated CRM system ensures coordination of activities of different departments, providing a joint platform for relationship with clients. This allows to remedy the situation when Marketing, Sales and Service Departments act independently from each other and their actions are not coordinated. Moreover, automation сreates the preconditions for overcoming different mistakes of a personnel: from ‘I forgot to call’ to ‘I mixed up the number of an order’.
An analysis of time and expenditures for different stages and phases of sales allows to decrease the costs. Identification of prioritised clients according to different criteria (for example, income/expenditures) allows to increase profitability of work of distribution channels. Identification of typical problems/requests of the clients; development of typical scenarios of clients problems resolvement allows to minimize time of an employee reaction and to increase satisfaction of a client. Analysis of sales channels allows to identify problematic departments and business processes and to understand what to put efforts to; how to execute restuсturing of problematic area (units) etc.
The main users of CRM system in economically developed countries are financial, insurance, telecommunication and pharmaceutical companies; air carriers, firms that work in retail and wholesale trade, Information Technologies, medical and educational organisations.
Results of implementation show that application of CRM system promotes increase of work effectiveness of industrial and trade companies, firms, that work in the spheres of tourism and publishing business, service entreprises. One must not think that CRM systems are needed for big companies only; usage of main functions of CRM systems is quite practicable for smaller enterprises as well.