CRM: Meaning, Evolution, Aspects, Strategies, Dimensions and Benefits

CRM is not only about building relations but also it is more than that. It is a programme, a process, a set of strategies and a system which highly focuses upon increasing and maintaining the loyalty of the consumer which in turn make customers brand advocates.

CRM is the process of attracting potential customers, retaining existing customers, and developing healthy relationship with them so as to improve their loyalty for earning profits on a long-term basis. CRM is a continuous process.

Learn about:- 1. Introduction to CRM 2. Meaning of CRM 3. Evolution 4. Aspects 5. Types 6. Customer Loyalty 7. Strategies and Benefits 8. Dimensions 9. CRM – In the Organized and Unorganized Retail Sector 10. Steps that turns Consumer Information into Consumer Loyalty.

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CRM: Introduction, Meaning, Evolution, Aspects, Types, Strategies, Benefits, Steps, Dimensions and Overview

CRM – Introduction

The retailer and customer relationship is favourable for organisations to flourish in any economic condition and for customers to receive quality products and services. Therefore, the right CRM strategies are very powerful to maintain the strong bond with the prospective customers which at last turn the customers into brand advocates. CRM is a dynamic process. Any retail business that wants to exist in the retail environment must make use of this technique.

Nowadays, businesses are moving towards using software for maintaining database which is the basis on which CRM is done. This ideal condition increases the profitability of the retailer in any economic situation. These days maintaining customer relationship is the top priority for any retailer. CRM is a never ending process. Big organisations spend millions of dollars on technology to understand their customers so that better service can be provided to the customers by understanding their behaviour.

The customer is the top priority; he or she is like a new kid and an old friend who needs to be taken care of by the retailer. Some research shows that for success of retail business CRM is a must. Presently, big retail giants are creating a separate department which deals with customer relationship matters. This is seen in every type of retail business from big to small irrespective of their sizes. In CRM there are many stages from attracting customer to defection.

The first stage is segmenting, targeting and positioning. Second stage is attraction, third is retention, fourth is attrition, and the last is defection. In every stage there are chances of converting a customer into a loyal customer or defection. In the primary step, the retail marketer divides the market according to its suitability, then the target market is selected, then the potential customers are attracted by various techniques like discounts, free with other products, buy one get one free, etc.

After a customer is attracted, the customer may go to other retailers for that sake, the retail marketer develops such a strategy that the attracted customer is retained in the organisation by way of providing reward points on the sales and it is materialised when additional sales are made. By various techniques the customer is retained, normally banks use the strategy of creating a web so that a customer cannot get out.

As for an example, for accounts holders of banks, the banks try to cross-sell some other items like mutual funds, insurance so that if a customer wants to close the account, then he or she will have to close all the relationship with the bank like insurance, mutual fund, etc. After retention, some customers are satisfied and some are dissatisfied. Those satisfied are converted into loyal customers and those are not satisfied switches to other retail business as a new customer. But this does not occur suddenly.

First some type of dissatisfaction occurs among the customers and as a result attrition of the customer starts by way of the process of reducing sales or not purchasing regularly from the retailer. This activity shows a sense of dissatisfaction among consumer groups. And lastly some customers leave the retail business and stop purchasing any more. So, this is the whole process of CRM. And that customer who is loyal may be of much type, loyalty continuum for them may be different like some are hard core, some are soft core and some may be switcher.

Hard core loyal customers are those who would not switch to other retailers inspite of all the dissatisfaction. Soft core loyal customers are those who are loyal but continue relation with the retailer only till the retailer satisfies them. Switchers are those who switch to different brands without any loyalty to any of the brands. Some research shows that the cost of attracting a customer is much more than the cost of retaining. So businessmen prefer retention of customers more than attraction.

But other research explains that in all types of businesses there will be defection and attrition, so to maintain appropriate level of customer in a retail business as well as sales attracting customers is a must because attrition is not stoppable for any types of business. This is explained in the bucket theory of customer retention.

Earlier retail business try to maintain relationship by the way of informal techniques like by way of mouth techniques but in the present era complete database of a customer is maintained by retail business on the basis of which relationship is maintained. In an informal way, CRM is as old as history itself.

CRM is not only about building relations but also it is more than that. It is a programme, a process, a set of strategies and a system which highly focuses upon increasing and maintaining the loyalty of the consumer which in turn make customers brand advocates. CRM is the process of attracting potential customers, retaining existing customers, and developing healthy relationship with them so as to improve their loyalty for earning profits on a long-term basis. CRM is a continuous process.

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CRM – Meaning

Customer Relationship Management (CRM) is a combination of policies, processes and strategies implemented by a company that unifies its customer interaction and provides a mechanism for tracking customer information. CRM is a comprehensive way to manage the relationships with customers— including potential customers—for long-lasting mutual benefit.

Effective CRM systems capture information about customer interactions and present that information to customer-facing users to service those customers more effectively and efficiently. CRM combines business processes, people, and technology to achieve one goal of keeping satisfied customers.

It is an overall strategy to help firms learn more about their customers and their behaviours so that they can develop stronger, lasting relationships that will benefit both the parties. Information in the system can be accessed and entered by employees in different departments, such as sales, marketing, customer service, training, professional development, performance management, human resource development, and compensation.

Details on any customer contacts can also be stored in the system. The rationale behind this approach is to improve services provided directly to customers and to use the information in the system for targeted marketing and sales purposes.

CRM includes many aspects which relate directly to one another:

i. Front office operations – Direct interaction with customers, e.g. face to face meetings, phone calls, e-mail, online services, etc.

ii. Back office operations – Operations that ultimately affect the activities of the front office, e.g. billing, maintenance, planning, marketing, advertising, finance, manufacturing, etc.

iii. Business relationships – Interaction with other companies and partners such as suppliers/vendors and retail outlets/distributors, industry networks, lobbying groups, trade associations, etc. This external network supports front and back office activities.

iv. Analysis – Key CRM data can be analyzed in order to plan target-marketing campaigns, conceive business strategies and judge the success of CRM activities, e.g. market share, number and types of customers, revenue and profitability.

Customer relationship management is implemented through various components such as rewards, customer services, and involvement of customers in planning and execution of retail strategy. Retail stores that enact a system of rewards but fail to focus on customer service fail. Only those retailers who deliver genuine benefits, based on intimate knowledge about their customers, and create a ‘customer- first’ mentality at all levels of their service reap the ultimate benefit- customer loyalty.

Customer relationship management, at a theoretical level, emerged in the 1990s and has since become an important marketing tool thanks to the compulsions of competition, globalization, and the emergence of more knowledgeable and demanding customers. In the marketing of consumer products, it is retailing that has attracted the most interest in the development of relational strategies.

The popularity of store-loyalty cards in the organized retail sector is cited as an evidence of the wide take-up of CRM in this field. Therefore, it comes as no surprise that retailers, today, are interested in relational strategies.

The intimate nature of the relationship that the industry shares with the ultimate consumer (compared to businesses further back in the distribution chain) suggests that the closer the retailers get to the customers, the better they can provide the services the customers seek.

The ‘moment of truth’ in consumer goods and services mar­keting is seen as that point when the consuming public comes face-to-face with the point of supply. As it is the retailers who most often manage this interaction and who, historically, have gone beyond the mere ‘service counter’, their potential inter­est in relational strategies becomes even more apparent.

The retailers or marketers need to have a better understanding of customers at an individual level. They should provide to the consumers specific product-related information and deliver goods targeted to their specific needs. Through this, marketers develop long-term annuity streams that translate into worthwhile profits.

Customer service is a vital part of CRM. High level of customer service and satisfaction forces the suppliers and customers to have high ‘switching costs’. Customer commitment is crucial for market share retention of any product, brand, or store, which is the result of effective CRM. A customer who has committed loyalty to a single seller for a return of some ‘valued reward’ is not going to satisfy a competitor’s grab for additional sales.

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CRM – Evolution

Customer relationship management had its origins in two unrelated places. One was in the US where it was driven by technology, and the second was in the Scandinavian countries, where the concept developed as a result of Business- to-Business (B2B) marketing. In the US, marketers sought the development of information technology and statistical algorithms to increase the efficiency and effectiveness of selling various products of companies.

This popularly came to be referred to as database marketing. CRM systems such as call centres, websites, customer service and support teams, and loyalty programmes were used to manage the relationship with customers.

The IMP (Industrial Marketing and Purchasing) Group, a research body, is credited with popularizing the concept of CRM and enhancing people’s understanding about the nature and effects of building long-term, trust-based rela­tionships with customers. These are managed by the market­ing and sales departments.

They may be based as much on the structural ties between companies as they are on personal relationships among managers. Here, the emphasis is on understanding customer needs and then solving problems or delivering benefits that create demonstrable customer value.

While information technology is important in this style of CRM, it is designed to support rather than drive the customer relationship. The types of relationship that develop here are often deep and meaningful—for both the retailers and the customers involved.

In the latter half of the 1990s, the focus of database marketing began to shift to CRM. Marketers and retailers started using improved information technology to regularly communicate with a firm’s customers and to base product offerings as per the consumers’ buying behaviour.

Computer linkages not only aid communication among channel members but they have the added advantage of creating a relationship between a buyer and a seller. There is an economic and non-economic incentive for both entities to remain committed to the relationship.

Customer relationship management in retailing has emerged out of two major considerations: one at the macro level and the other at the micro level. At the macro level, marketing influences a wide range of areas including customer, employee, supply, internal, referral, and ‘influencer’ markets such as the governmental and financial markets.

At the micro level is the recognition that the nature of interrelations with customers is changing. The emphasis is on moving from a transaction focus to a relationship focus. Customer relationship management is different from transactional marketing.

Thus, CRM is different from the old concept of marketing, which used to be based more on increasing the customer base. Customer relationship management focuses on using relational strategies to acquire customers, retain them, and enhance relationship with them. In fact, as per Pareto’s Law, 80 per cent of the total sales come from 20 per cent of the customers, and, thus, CRM attempts to optimize the resources for the retailer by retaining the most profitable of the customers.

The retail industry plays an important role in the success of CRM as it serves as the major link between the supplier and the consumer. Therefore, it engages, maintains, and enhances the relationship with the ultimate entity of the value chain, which in turn determines the success of all the members of the entire chain. Retailers have always acknowl­edged the importance of long-term relationship with cus­tomers in their business.

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CRM – 3 Important Aspects (Loyalty Program Management, Campaign Management and Customer Analytics)

Customer Relationship Management is the strategies, processes and policies, implemented by retail organizations to better understand its customer. It helps retailers retain existing and profitable customers by providing them better customer experience, attract new customers and decrease customer management costs with help of technology.

Retail CRM encompasses three important aspects:

1. Loyalty program management,

2. Campaign management and

3. Customer analytics.

Let us discuss into each of these aspects:

Aspect # 1. Loyalty Program Management:

Loyalty programs enable retailers to engage with the customers. Through loyalty programs retailer offer personalized services/offers to the customers based on their profile. Retailers mine the data of the customers and based on the profile of the customers they roll out offers to suit the customer preferences.

This personalized care, provides customers a reason to choose a retailer over its competition. Retailers also use these programs to differentiate themselves from the competitors and attract new customers.

Aspect # 2. Campaign Management:

Campaign management in a retail company is set of processes to plan, target, execute, and measure one-to-one communication strategies to attract customers. These are generally promotional in nature. Campaign planning involves deciding frequency, timing and execution detail. After execution, retailers take feedback and measure the campaigns success, identify gaps and improve upon the processes in the next cycle.

Aspect # 3. Customer Analytics:

The greatest challenge for retailers is not attracting new customers but retaining the existing ones. Customer analytics helps calculate customers’ lifetime value, tracking buying patterns over time, assessing customer behaviour, and aligning loyalty programs with customer purchase behaviour. Retailers use customer analytics to mine data to gain deeper understanding in to the consumer behaviour and to improve up on ROI.

Apart from these three strategies, retailers use customer support and data management tools as a part of CRM. Data management tools help retailers to aggregate the customers’ data from across multiple sources and provide holistic view to the retailers.

Customer support takes care after sales/service support to the customer which enhances overall customer satisfaction and encourages repeat buying behavior from customers. CRM is still a nascent area in retail, lot of new technologies; methodologies are evolving each day. The retailers who master the CRM will emerge winners in the long run.

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CRM – Top 3 Types: Operational, Analytical and Collaborative CRM

Type # 1. Operational CRM:

Operational CRM streamlines the business process that includes Sales automation, Marketing automation and Service automation. Main purpose of this type of CRM is to generate leads, convert them into contacts, capture all required details and provide service throughout customer lifecycle.

i) Sales Automation:

Sales automation helps an organization to automate sales process. Main purpose of sales automation is to set standard within organization to acquire new customers and deal with existing customers. It organizes information in such a way that the business can meet customers’ needs and increase sales more efficiently and effectively. It includes various CRM sales modules like lead management, contact management, Quote-to-Order management, sales forecasting.

ii) Marketing Automation:

Main purpose of marketing automation is to find out the best way to offer products and approach potential customers. Major module in marketing automation is campaign management. It enables business to decide effective channel/s (like emails, phone calls, face to face meeting, ads on social media) to reach up to potentials customers.

iii) Service Automation:

Service automation enables business to retain customers by providing best quality of service and building strong relationship. It includes issue management to fix customers problems, customer call management to handle incoming/outgoing calls, service label management to monitor quality of service based on key performance indicators.

Type # 2. Analytical CRM:

Analytical CRM helps top management, marketing, sales and support personnel to determine the better way to serve customers. Data analysis is the main function of this type of CRM application. It analyzes customer data, coming from various touch points, to get better insights about current status of an organization.

It helps top management to take better decision, marketing executives to understand the campaign effectiveness, sales executives to increase sales and support personnel to improve quality of support and build strong customer relationship.

Features of Analytical CRM:

i. Gather customer’s information, coming from different channels and analyze data in a structured way.

ii. Help organization to set business methodology in Sales, Marketing and Support to improve customer relationship and loyalty.

iii. Improve the CRM system effectiveness and analyze key performance indicators, set by business.

Type # 3. Collaborative CRM:

Collaborative CRM, sometimes called as Strategic CRM, enables an organization to share customers’ information among various business units like sales team, marketing team, technical and support team. For example, feedback from a support team could be useful for marketing team to approach targeted customers with specific products or services.

In real world, each business unit works as an independent group and rarely shares customers’ data with other teams that often causes business losses. Collaborative CRM helps to unite all groups to aim only one goal – use all information to improve the quality of customer service to gain loyalty and acquire new customers to increase sales.

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CRM – Customer Loyalty

The main objective of the CRM is to achieve the customer loyalty, and when we talk about customer loyalty, it is not only the repeat purchases by the consumers or the consumer satisfaction which is the outcome of his or her experiences. The meaning of consumer loyalty is that the consumer is highly committed to buy the products and services from the firm and he or she will not be affected from the attractive offerings by the competitors and will not hesitate to pay an extra price for the brand. The loyal consumers have a very good relationship with the retailer and the communication between both the parties is very strong.

In today’s world the consumer’s decision-making is not limited to rationality only. Consumer has turned into emotional and rational decision-makers so the consumer is more of emotionally driven, when we talk of loyal customers, they share a great emotional bonding with the retailer.

The chances that they will go beyond the convenience level of the retailer are very less. High pricing and new brand offered by the retailer also do not become irritating factors for the consumers. The loyal consumers have such goodwill towards the retailer that they spread the positive word of mouth and influence the closed ones to avail the services of a particular retailer.

The promotional programmes run by a company are easy to copy by the competitors. Because these programmes are mainly based on the reduction of the price and these programmes encourage the consumers to get the best offering from the consumer rather than developing emotional relationship. But when a consumer is emotionally attached with the retailer, it is difficult for the competitor to attract that consumer.

How the emotional connections build-up?

When a consumer receives personal attention from the retailer, these connections start to build-up. For example, in many services providing organisations like in hotels and restaurants for building emotional relationship, they try to function as a neighbourhood cafe and the staff of the hotel tries to recognise the consumers by their name and preferences.

Unique experiences build-up strong emotional experiences. For example, once there was a family, shopping shoes for their teenage son, who is having a deformity with regard to foot size.

The size of one foot was 8 and the other was 8.5 and the family was not finding such a pair so the retailer broke up two pairs of shoes and gave them, but he just not only ensured the sale of a pair of shoes but also he delivered satisfaction and catered to an emotional attachment to the consumers and the result was that the family bought three pairs of shoes from the shop at the same day and due to this act of generosity of the retailer the family turned into a loyal customer to that retailer. So, creating unique experience is the basis to build customer loyalty.

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 CRM – Strategies and Benefits

Customer relationship management strategies refer to any effort that is actively made by a seller towards a buyer, and is intended to contribute to the buyer’s customer value above and beyond the core product and/or service efforts received, and can only be perceived by the buyer after continued exchange with the seller.

Hence, CRM strategies attempt to provide benefits to the buyer beyond the core service performance. For instance, many traditional Indian retailers treat their regular customers in a warm and personal way and also provide them with special benefits in terms of home delivery, discounts, etc. These benefits are an attempt to provide benefits in addition to the core service performance.

CRM strategies could be a combination of one or all of the following benefits:

1. Personalization benefits

2. Special treatment benefits

3. Communication benefits, and

4. Rewards.

Customer relationship management efforts in terms of personalization, communication, special treatment, and rewards find expression in the form of specific retailer focus on customer service and/or loyalty programmes. Hence, retailers’ efforts for personalization, communication, and special treatment benefits are implemented through various customer-service strategies.

Similarly, communication benefits, special treatment benefits, and rewards are implemented through loyalty programmes—quite popular in the organized retail sector. In the sections that follow, we discuss implementation of CRM strategies through customer service focus and loyalty programmes.

1. Personalization Benefits:

Personal exchanges between buyers and sellers are important in influencing the quality of relationships. There are many ‘personalized shoppers’ who appreciate personal contact in the store. In fact, sometimes the social interaction works as a prime motivator for some consumers to visit retail estab­lishments.

These people consider retail encounters as valuable sources of social contact. The term personalization describes the social content of the interaction between service employees and their customers. It refers to the way in which employees relate to customers as people—cold and impersonal on the one end, and warm and personal on the other.

Consequently, personalization can be regarded as a means of showing recognition and respect for the other party. Examples of social relationship benefits include feelings of familiarity, personal recognition, friendship, and social support. One of the suggested ways of valuing a buyer’s uniqueness as an individual is to address him/her by name as people feel good when someone remembers their names at a later point in time.

Sales practitioners often stress the importance of remembering and using customers’ names. Other indicators of personalization efforts are employees’ attempts to get to know a customer as a person, their efforts to engage in friendly conversations, and their exhibition of personal warmth. This corresponds to the feeling of ‘being included in the communication process’ and of ‘being liked and treated with respect’.

Personalization leads to a positive impact in terms of increasing trust in the seller/store, customer satisfaction with the relationship, and repeat purchases.

2. Special Treatment Benefits:

Consumer focus and selectivity, that is, all consumers do not need to be served in the same way, is a key aspect of CRM. If a consumer receives personalized, customized service from retailer A but not from retailer B—and if this service is valued—then the consumer will be less likely to leave retailer A for B. Customers, generally, perceive such customization efforts as preferential treatment not normally provided to the other customers.

The retailers can distinguish between at least two iden­tifiable customer segments, that is, loyal customers and non- loyal customers. Differentiating between loyal and non-loyal buyers enables a seller to address a person’s basic human need to feel important. Most retailers use core-service upgradation and service augmentation as ways to provide special treatment benefits to customers in return for their loyalty.

Differentiation refers to the fact that loyal customers are provided with extra recognition in terms of better service and additional efforts that are not being made to other, non-loyal customers. By not differentiating between loyal and non-loyal customers, retailers waste resources in trying to ‘over-satisfy’ less profitable customers, whereas ‘under- satisfying’ the more valuable, loyal ones.

3. Communication Benefits:

Communication is often considered as a necessary pre­condition for the existence of a relationship. A seller’s communication with a buyer conveys their interest in the buyer and serves to strengthen the seller’s relationship with the latter. Efforts to ‘stay in touch’ with the customers have been identified as the key determinants of relationship enhancement in retailer-customer relationship. It is generally recognized that buyer—seller relationships become stronger when the ease and volume of exchange between buyers and sellers increase.

The intense levels of buyer-seller communication- (a) increases the probability of discovering behaviours that generate rewards, (b) enhances the prediction of behaviour of the other party and clarifies each other’s roles, (c) leads to easier discovery of similarities between parties, and (d) encourages feelings of trust, special status, and closeness.

In general, communication strategies as part of CRM efforts refer to directed communication to the customers, as against mass-media communication, which does not afford selectivity. However, it does not include face-to-face interaction, which forms part of the personalization efforts by the retailer. Many retailers adopt direct mail, e-mail, telephone, and SMS as means to interact with their loyal customers or members of loyalty programmes.

4. Rewards:

Providing customers with tangible rewards is often referred to as ‘level one CRM’. This level of CRM relies primarily on pricing incentives and money savings to secure customer’s loyalty. It implies that clients earn extra based on purchasing performance. As opposed to the previously discussed relationship efforts, rewarding efforts are of a more functional, economic nature.

Psychologists have long been interested in the role of rewards in behavioural learning and modification. According to Skinnerian or social exchange theory (operant conditioning theory), any behaviour that is rewarded will tend to be repeated, whereas behaviour that is punished is likely to be curbed. Since various types of consumer rewarding programmes imply reinforcements that are promised and provided, consumers can be persistently conditioned for long periods of time as a result of receiving rewarding relationship efforts.

Frequent flyer programmes, customer loyalty bonuses, free gifts, personalized discount coupons, and other point- for-benefit ‘clubs’ are examples of these efforts. Trying to earn points on such things as hotel stays, movie tickets, and car maintenance would help customers to remain loyal, regardless of service enhancement or price promotions of competitors.

However, it is important to remember that rewarding efforts generally do not lead to sustained competitive advantages, given the reality that price is the most easily imitated element of the marketing mix, that some customers may react opportunistically, and that the already-loyal customers may be ‘unnecessarily’ rewarded.

Nevertheless, rewarding strategies can lead to sustainable competitive advantages if such strategies are not short-term promotional give-aways, but planned and implemented parts of a larger loyalty management strategy.

Rewards should be designed to promote long-term behaviour and discourage short-term deal-seeking behav­iour. Rewarding efforts refer to structured and planned marketing efforts that should encourage loyal behaviour, distinguishing it from short-term oriented sales promotions.

While concentrating on reward and loyalty programmes, it is very important for the retailer to not lose focus on quality. The retailer should not sideline the significance of quality products and services. The opportunity for repeated service gained by rewards should be taken advantage of and used to prove the high quality of the offering.

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CRM – Top 4 Dimensions

Marketing is concerned with the exchange relationships that exist between a retailer and its customers. Quality and customer service are the key elements in this relationship. Today’s competitive environment requires a retailer to understand and properly apply the concept of relationship from the perspective of the customer and other channel members.

This will ensure that customers strongly believe that the retailer offers good value for money; and all the channel members (including the customers) would like to do business with that retailer.

The challenge for a retail unit is to bring three critical areas—marketing, customer service, and quality into close alignment. CRM attempts at bringing these three areas together.

Peters and Waterman (1984) drew a lot of attention to the efforts that top performing companies were placing on ‘getting closer to the customer’ in their book, In Search of Excellence. In the financial services sector of the UK, virtually every major player in retail financial services has adopted some form of ‘customer care’ programme.

Different retailers have different views on the nature and package of customer services offered to the customers. It is essential to have a distinct store ambience and an attractive atmosphere to attract high-income customers to a speciality store, whereas store ambience will not be a major issue for retail stores in neighbourhood centres catering to middle- class consumers.

Quality of the product or services is also a must, as customers will not accept an inferior quality product. Even though a retail store may be very good in developing relationship with customers, it will not succeed in its CRM with poor-quality core products or associated services.

On the contrary, a strong product or service will enhance CRM between a retailer and a customer. Similarly, the composition and relevance of the services extended to customers varies across product categories, target segments, and competitive market structures. For example, with the advent of private financial institutions post-liberalization, customers have started experiencing a totally new set of services offered to them by banks.

New offers include wide product portfolios, and multiple associated services to enhance customer comfort and convenience with financial management, which was not the case earlier.

Customer service refers to a rightful blend of activities involving all areas of retail business, which combine to deliver and invoice the store’s products or services in a fashion that is perceived as satisfactory by the customer and which advances the store’s objectives. It also implies timeliness and reliability of getting products or services to customers in accordance with customers’ expectations.

Customer service, therefore, can be seen as a process which provides time and place utilities for the customer and which involves pre-transaction, transaction, and post-transaction considerations in relation to the exchange process with the customer.

The provision of quality customer service involves an understanding of what a customer wants and eventually buys, and determining how additional value can be added to the products or services being offered.

However, the implementation of customer service varies considerably from one retail unit to another. In this context, it is important to discuss the focus on customer service by the small independent retailers in India. In general, the customers favour the small retailers for the low prices and services they offer.

A small retailer provides all those services, which supermarkets normally do not. This has increased competitiveness in the trade. The increased competitiveness has improved customer service levels, which are reflected in the wide-ranging facilities being offered by the retailers. Such facilities include telephone-order system, credit facilities, home delivery, and branded products procured on order (in case of stock-outs).

More importantly, they are available next door; most often the owners themselves are present to offer personalized service. In this way, they are able to develop a strong relationship with their customers who, over a period of time, become extremely loyal.

The small retailer has, thus, ensured convenience, which is the basic platform on which a supermarket positions itself. Large, organized retailers agree that small retailers are a powerful lobby to stand up against and have been difficult to dislodge.

In fact, the small retailers have forced supermarkets to offer the same range of services, such as telephone order and other personalized services, which defeats the very purpose of the supermarkets. However, supermarkets generate greater revenues when they get the customer or the traffic into the store as it facilitates impulse purchases.

Managing Gaps between Expectation and Performance:

When customers’ expectations are greater than their perceptions of the delivered product or service, customers get dissatisfied and feel that the quality of the retailer’s offering is poor. Thus, retailers need to reduce the service gap—the difference between customers’ expectations and perceptions of retailer service—to improve customer satisfaction with their service.

There are four important dimensions that customers employ to judge the effectiveness of services provided by retailers.

These are as follows:

a. Knowledge- The difference between consumer expectations and the retailer’s perception of customer expectations.

b. Standards – The difference between the retailer’s perceptions of customers’ expectations and the customer service standards it sets.

c. Delivery or actual performance – The difference between the retailer’s service standards and the actual service provided to customers.

d. Communication- The difference between the actual ser­vice provided to customers and the service communicated in the retailer’s promotion programme.

These four dimensions determine the quality of customer service extended by the retailers or marketers. The retailer’s objective is to enhance performance on account of the aforesaid dimensions by reducing differences in each of the four components of customer service satisfaction.

Thus, the key to improving service quality is to –

(a) Understand the level of service customers expect,

(b) Set standards for providing customer service,

(c) Implement programmes for delivering service that meets the standards, and

(d) Undertake communication programmes to inform customers about the services offered by the retailer.

We will now discuss each of these dimensions in detail:

a. Knowledge Gap:

The most critical factor in providing effective and efficient service to the consumers is that the retailers or marketers need to have a comprehensive knowledge of their expec­tations. Lack of accurate information about customers’ needs and expectation leads to faulty preparation of retail strategy, and lack of information can result in poor decisions, which might leave a bad impression on the customers who visit the retail store.

For example, a grocery store may put everything on display to enable the customers choose what they want, but it may fail to realize that customers in the locality prefer being served personally. Therefore, what the store should have done is to keep staff to take orders from the customers and serve them over the counter. To develop a better understanding of customer expectations, retailers and marketers need to –

i. Undertake customer research,

ii. Increase interaction between retail managers and cus­tomers, and

iii. Improve communication between managers and employ­ees who provide customer service.

b. Service Standards:

Once information about customers’ expectations and perceptions of the products and services provided by the retailers or marketers is gathered, the next step is to use this information to set standards or benchmarks of service and develop systems for delivering that service. Service standards should be based on customers’ perceptions rather than internal operations.

For example, a mail order house may require its employees to answer a phone call after not more than two rings. However, the customers may not be concerned with the time they have to spend over the phone. Instead, they may be more concerned with the time it takes to deliver the merchandise ordered.

Thus, retailers, in order to establish service standards, need to incorporate the following aspects:

i. Committing their store to providing high-quality service

ii. Developing innovative solutions to service problems

iii. Defining the role of service providers (e.g., sales people, cashier, and designers)

iv. Setting service goals, and

v. Measuring service performance.

c. Performance—the Delivery:

Merely setting standards and communicating the same to the client would not help unless a retailer takes steps to meet the set standards. The retailer must try to deliver in excess of what is expected by the customers to earn their loyalty and, consequently, profits.

In order to deliver goods and services as promised and expected by customers, retailers need to take the following steps-

i. Impart service providers the necessary knowledge and skills

ii. Provide instrumental and emotional support

iii. Improve internal communication and reduce conflicts, and

iv. Empower employees to act in the customers’ and firm’s best interests.

d. Communication:

The fourth key factor that influences the quality of customer service provided by a retailer is the difference between the actual service provided to customers and the service communicated in the retailer’s promotional campaigns. Overstating the services offered raises customer expectations.

Then, if the retailer does not follow through, expectations exceed provided service and customers end up dissatisfied. For example, a supermarket gives calendars to its customers every year on the occasion of New Year. Customers will feel dissatisfied if they do not get the calendar a certain year. Raising expectations too high might bring in more customers initially, but it can also create dissatisfaction and reduce repeat business if the expected level of service is not maintained.

For example, a leading private sector bank initially attracted customers through an extensive advertising campaign regarding its innovative product profile, luxurious ambience, helpful sales staff, and above all convenient and effective services. However, with the unexpected increase in the number of customers, the established infrastructure could not provide the services as communicated to the customers.

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CRM in Organized and Unorganized Retail Sector

1. Organized Retail Sector:

Broadly, the organized retail sector can be divided into two segments- In-store retailers, who operate in fixed point- of-sale locations, located and designed to attract a high volume of walk-in customers, and non-store retailers, who reach out to the customers at their homes or offices.

The organized retailers provide various standardized services to their customers. Large retail formats with high quality ambience, and courteous and well-trained sales staff are the distinguishing features of these retailers. In most of the cases, they have a wide range of merchandise stocked with them so that the customers can have their pick.

Further, in most cases, customers are required to choose from the available items and forward all the merchandise to a cashier. These retailers have a wide reach and cater to customers of a very large geographical area. People visit these stores not only for shopping but also for having a nice time outside their homes.

2. Unorganized Retail Sector:

The unorganized retailers, especially in India, comprise the kirana or small independent stores located in neighbourhood centres and central business districts of a city. These stores have a limited reach in the sense that people living in a particular locality visit stores in their own colony.

The USP of these stores is the convenience they provide to their customers by virtue of their location. They provide customized services to their customers and at times go to the extent of procuring merchandise and on order delivering them to their customers.

In the context of Indian traditional retail formats, one can easily understand the significance of CRM in the success of a retail store, particularly the relationship between retailers and customers. The existence of a sound relationship between these two entities is a testimony to the significance of the present unorganized retail network in the entire value chain in India.

The role of retailers is not clearly defined in terms of delivering the core goods and services that the customers are looking for; they also have to build their image and role in accordance with the needs and purchasing, and usage behaviour of the customer segments. For example, most of the general (kirana) stores located in the neighbourhood centres or locality lanes not only extend locational convenience to the customers but also establish a comfortable relationship between shoppers and service providers.

Customers, on a regular basis, inform the retailers about their ever-changing needs and provide them a feedback about the products used. On the other hand, retailers conceive their entire product mix according to the needs of their target segment.

They may include services such as home delivery, taking order over phone (extending such services for minimal bill), returns and adjustments (even if suppliers do not provide), offering product on order, and credit services to add value to their core products and also satisfy consumer needs.

It is a common feature of transactions between customers and retailers not to discuss issues such as brand, SKU, price, and quantity to be delivered, as a retailer is used to delivering merchandise according to the given parameters for ages. The retailers in small towns and localities are considered part of the customer’s family—these two entities with their respec­tive families regularly interact at socio-political gatherings.

Retailers depend for extra resources, to meet the payments of suppliers and company, on their trusted customers, who in turn do not charge interest on such friendly loans. Such quality relationships help both parties in economic and non-economic terms to a great extent. One cannot measure the nature and quantum of benefits extended by such relationships in the unorganized sector.

These relationships are not only confined to grocery retailers dealing in convenience goods but also include those selling shopping or speciality goods such as garments, jewellery, and other durables. In such a retail set-up, the retailers have a significant say in the selection of goods— as most of the customers are not well aware of high-value products.

They, thus, depend on retailers rather than on brands. Such dependence is the result of the relationship mutual trust between the retailer and the customer. For example, most rural migrants to cities rely on the advice of their friends, relatives, or the retailer of the product category itself to help them make the right choice.

The strength of the relationship between the retailers with customers has provided the former with immense bargaining power in the value chain, particularly in developing economies where organized retailing is at a nascent stage. Sound relationship between the two is mutually beneficial, both economically and non-economically.

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CRM – 4 Steps that Turns Consumer Information into Consumer Loyalty

CRM is a repetitive process that turns consumer information into consumer loyalty through the following four steps:

1. Identifying a consumer

2. Analysing the consumer

3. Developing CRM programmes

4. Implementation of CRM programmes

The whole process begins with identifying the consumer. Data is collected regarding the potential and actual consumer of the retailer and then it is analysed. The analysis gives the output regarding value-added information which is of relevance to the consumers. After the analysis results are out, these results are conveyed through the communication programmes carried out by the marketing or promotion team and at ground level implemented by the customer relationship employees.

Step # 1. Identifying Customer:

Construction of consumer database is the first step in the CRM process. Consumer database contains all the data about the consumer which stays with the retail organisation.

Consumer Database:

The consumer database contains the following information:

i. Transactions:

Due to the technological innovations the retailers are having such software which records the history of purchase by the customer which includes the purchase date, the amount paid by the customer and whether the commodity was purchased on a general shopping day or on special promotional day.

ii. Customer Contacts:

The record of the interactions between the retailer, and the consumer, including the visit history of the retailer’s website, or the information gathered by the consumer at the in-store kiosk, and the number of calls made by consumer at the retailer’s call centre is maintained. It also includes the information about the retailer like how many mails have been initiated by the retailer or number of catalogues delivered and direct interactions done with the customer.

iii. Customer Preferences:

Gaining information about the customer preferences like what colour the consumer prefers, what the consumer prefers to eat, what are his or her favourite brands and fabrics and flavours are not as complicated as it was earlier. Software has made it possible to know about the consumer’s preferences. Earlier, it was like you have to fill up the questionnaire and then after analysis the retailers were able to know about the preferences of the consumer. Now software reads the buying pattern and then now the preferences of the customer.

iv. Evocative Information:

Psychographic and demographic data describing the consumer that can be used in developing market segments.

v. Marketing Activity Responses:

When a retailer does the analysis of transactions made by consumers then he or she finds out the responsiveness of consumers to marketing activities.

It is highly possible that all the members of the same household have different tastes and preferences and all of if not all then many of them are contacting with the retailer. Retailers must be able to combine the data of every individual family so that when time comes the retailer can suggest the other member about the purchase for the other member. For example, shop X is a family owned apparel chain, where husband and wives purchase things for each other.

The database of the shop keeps track of both the individual and household purchases so that the sales executive can suggest the individual regarding the purchase of a gift to the other. This database also keeps track of the changing spending habits, which mean the ups and downs in the spending activity. So with the help of technology the companies are able to spread their network and can increase the level of loyalty and thus automatically can increase the profitability of the company.

Information about Identification:

It is very easy to make database of those consumers who shop from the retailer’s credit card while purchasing commodities or those who shop from the internet, but to make a database of those who purchase from the store channels is very difficult because if a retailer has to keep a record of those consumers then he or she needs to ask the customer about his or her personal information which sometimes is not an appropriate strategy but in a non-store channel it is mandatory for the consumers to give their personal information to get the delivery.

Even when the retailer issues retail credit cards, they easily collect the information about the consumer because in order to avail the credit the consumer has to reveal the personal information. But it is difficult to keep the information about the consumer who does the in-store purchase because the mode of payment varies. Consumer can use the cash, master/visa card or cheque in exchange of goods or services so getting personal information from them is not possible for the retailer. The retailer then can opt for the two options- (1) Retailer can issue a frequent-shopper card, and (2) Retailer can connect the online data with store data.

Gathering Identification Information:

Food retailers like McDonald’s, Pizza Hut and Dominos outlets have their sales representatives who ask consumers for identification information like their contact number and address when they interact at the point-of-sale. This information is then used to create a consumer database. But this system of getting information has two limitations. The first one is that some consumers hesitate to share their personal information with the retailer, sometimes they feel like the sales representative is violating their privacy. The second one is sometimes sales representative forget to ask about the identification information in prime hours of busy check-ins.

Offering Frequent Shopper Card:

Distribution of a shopper’s card is also known as loyalty programmes. The objectives of these programmes are to identify the loyal consumers and give them rewards for patronising the retailer. When any consumer enrolls himself or herself for such programmes he or she gives some basic information about him or her family which is then noted down by the retailer and acts as a consumer database.

Thereafter, the consumer would be issued a card with a unique identification number which is attached to that consumer database and it provides the organisation an opportunity to track down the shopping behaviour of that consumer, and in return consumer is offered an incentive to use that card every time he or she makes a purchase.

If we talk from the retailer’s perspective, this frequent shopper programme has two benefits:

(1) The retailer gets the information about the consumer and motivates the consumer to identify himself or herself at every purchase.

(2) Retailer motivates the consumer by offering the reward associated with the programmes and it leads to the increase in the number of visits and the total amount spent on every visit to the retailer.

There are many problems in using this frequent shopper card. Many a times consumer forgets to bring the card to the store and in that case one important transaction is missed to be recorded. Another situation is that a consumer does not produce the card at the time of purchase because he or she is in a hurry and does not want to kill his or her time by producing the card. But the retailers have overcome this problem and the sales representative conveys the consumer that if he or she has forgot his or her card then it is not a problem because it is linked with the mobile number of the consumer in which case telling only mobile number is also sufficient.

Modern retailers are now experimenting with a new technique to enhance the loyalty of the consumer by eliminating the cards. With the advancement in technology, a new “the interactive loyalty card” concept has come. It is a miniature optical scanner which is having the capacity to communicate the data in two ways-it can store and transmit the data. The equipment is attached with the store’s loyalty programmes and equipped with the retailer’s promotional schemes.

The customers can see, choose and print these coupons and the coupon codes are then integrated with consumer’s personal loyalty account and then deductions are made from the total purchase. The consumers have all the freedom to choose the schemes as per their purchase specification and the kiosks are available at the store and at the point-of-purchase.

This technology has been tested in the New York City of USA and has shown positive results. The testing retailer saw a very good amount of growth in the year-to-year sales, frequency of visits increased, and the total revenue generated reached to a new high, and the good thing about the programme was that the loyal consumer base was increased.

There is one other good way to promote the consumer loyalty programmes without a frequent shopper card. In a service sector there is a technique which is known as cardless, cashless payments which is part of the loyalty system. This system uses a pre-registered fingerprint of the frequent visitors and consumers can pay efficiently and the retailer has the opportunity to get the information quickly thus saving time for both the consumer and retailer.

A very good example is of Piggly Wiggly grocery chain retailer. The firm has implemented this biometric technology in more than 100 retail outlets in Carolina states of the USA. After choosing the required grocery, the consumer put his or her fingerprints on the biometric ID. Once it is recognised, the consumer’s loyalty account is opened in the window along with payment options. The system automatically gives the discount options available to the consumer and the best part is that it eliminates the necessity of all cards, and the consumer automatically gets the benefit in a hassle-free manner and the retailer gets the desired data from the consumer.

Internet Purchasing Connection with the Stores:

If a person is paying through his or her credit card or debit card at the retail store and with the same card he or she has purchased anything from online store then the retailer can track the records of the consumer. Records like where he or she lives can be generated and also they have the opportunity to update their database but the ethical value inherent in this process should also be taken care of as maintaining customer database without his or her consent may not be ethical although the retailer has the opportunity to know more about his or her customer.

CRM Programmes and Consumer Privacy:

With the help of detailed information about the consumer, the retailers have the opportunity to provide efficient and effective deals to the prospective consumers, but the consumers are always more concerned about the privacy of their personal information, and always want to make sure that their information is not being leaked. It is a very sensitive issue. For example, Amazon had to take very cautious steps while changing their policy regarding consumer privacy and they had to send individual emails to each consumer registered with them to gain their confidence in the company.

Privacy Concerns:

It is defined as the degree to which a consumer feels his or her privacy is violated by the company.

It depends upon the following given factors:

1. A consumer’s control over his or her personal information while doing the transactions. Does he or she feel that he or she can decide how much information he or she wants to give which is being collected by the retailer?

2. A consumer’s awareness about collection and use of his or her personal information.

3. Does he or she know for what purpose the information is really collected and how it is going to be used and whether the retailer is going to share this information with other parties or not?

In this technological era, while shopping online consumer does not even realise and they provide a huge amount of information to e-commerce companies. E-retailers can collect extensive amount of information from the consumer by placing cookies on the consumer’s hard drive. Cookies are small text files and they have the ability to identify the visitors when they return again to a website.

The data available with the cookies makes it possible for the retailer to recognise the consumer and him or she does not have to identify himself or herself by entering a password all the time they surf the website of the retailer. But the hidden fact is that the cookies also collect the data about the other sites visited by the consumer or the information downloaded by him or her.

Consumer Privacy Protection:

When it comes to define the personal information, it is very much debatable, for many people it is the information which is publicly not available. For some people it includes the publicly available information like pan card details or driver’s license details and the information which is publicly not available like monthly income and hobbies.

The moot point is how to keep such information safe.

Some of the provisions of the European Union (EU) on the consumer privacy include the following points:

i. If the purpose is clearly defined then only the retailer can ask the consumers for their information.

ii. Retailers must convey their purpose to the consumer before asking for the personal information.

iii. The information must used by the retailer for that purpose only.

iv. If the retailer wants to use the information for another purpose then he or she must initiate another data-gathering process or if the consumer gives approval to use the data then only the retailer can use it for another purpose.

v. Retail operators in European countries can export and import the data from the 25 EU affiliated countries with the exact privacy data policies. So the countries like India and USA whose business presence is in those countries cannot transfer the information because these outer countries do not have the same privacy policy.

Step # 2. Analysing Customer Data and Identifying Target Customers:

After the identification process, the next move in the CRM chain is to build-up the consumer loyalty development programmes for consumer loyalty. It is only possible when consumer database data is analysed. One of the common approaches used by the consumer is data mining. Data mining helps in identification of the patterns in data and helps the analyst to search through the data.

There is one more technique which is known as market basket analysis, and this technique focuses on the different products purchased by a consumer at a single shopping window.

This technique helps a retailer to know about the arrangement of the product in the store, on the basis of analysis of data. This technique shows the retailer that at a time if many consumers are buying N number of things which are similar then those products should be located strategically in the store so that the consumer can avail the desired item without any trouble.

As an example, let us look at Walmart, and understand how they have changed the location of the products with the help of this technique:

i. American shoppers purchase bananas very frequently and it is the common item in the grocery carts. So the company has placed them near to cornflakes and near to the point-of-payment.

ii. Tissue papers are placed with cold medicines as well as in the paper goods section.

iii. Measuring spoons are hung at two places: Crisco shortening and in housewares section.

iv. Flashlights are in the hardware aisle and with the Halloween costumes.

v. Little Debbie snack cakes are next to the coffee.

vi. Bug spray is merchandised with the hunting gear.

Identifying Market Segments:

In the past the function of the consumer data analysis is to focus on market segment identification. The extracted meaning of the above statement is to identify the groups who have similar interest in shopping means to identify the set of consumers whose purchase habits are the same, they purchase the same kind of merchandise and they always respond in a similar way to the marketing conditions.

For example, once Eddie Bauer a very well-known apparel brand analysed their consumer database and their findings were as follows – They found two kinds of shoppers visiting their store. The first kind of shoppers was termed as professional shoppers, “shoppers who preferred good consumer service and they are much in love with fashion styles.” The second kind of shoppers was termed as too busy to shop shoppers, “these shoppers want the best shopping experience as soon as possible.”

The first kind of shoppers was very much communicative as they used to talk with the consumer relationship executive and sales executive very frequently. The good thing about the professional shoppers is that they always wanted the same salesperson at every visit. Too busy to shop shoppers were people used to shop from the website. The company utilised this information to create wonderful advertising programmes for each type of consumers. The company also found that the consumers who used to shop in the morning were more price sensitive than the consumers who used to buy commodities in the evening.

Identification of Best Consumer:

Finding the valuable customer is easy for a retailer if he or she uses the information regarding the customer database and by effectively analysing the data on customer, the retailer can easily find out which customer to target. When a retailer talks about lifetime value of the customer, it is used to measure the customer value in the organisation. It can be defined as the expected contribution which will be made by customer in his or her entire lifetime with the retailer.

Estimation of the customer lifetime is a complicated task as the retailer cannot make mistakes in choosing the right customers. Past purchase records of every customer are analysed to know the pattern and history of the customers. Retailer predicts the purchasing behaviour of the customers on their past purchase patterns that how much an individual customer will purchase from the retailer and how much profit he or she will produce for the retailer and what will be the cost of servicing to that customer.

The servicing cost may be in the form of discounts, gifts, and promotional offers to make any customer happy. It is a tool to increase the brand loyalty of the customer towards an organisation and it helps in maintaining long-term relationships with the customer. Lifetime value can be understood from the following example. Let us say that there are two customers who prefer to go to the same retailer. The first customer goes to the retailer every month and spends Rs.6000 on each visit.

The second customer goes to the retailer every week and spends Rs.1500 on each visit. Although both the customers are spending same amount of money with the retailer but from the retailer’s point of view the second customer is more valuable as he comes to shop frequently. This means his visits are frequent and consistent, whereas on the other hand the first customer comes in a month.

So he is not a frequent visitor so trusting him may cause huge loss because if in a month he does not show up there will be a loss of Rs.5000 and as he is not in constant touch with the retailer so predicting his loyalty is a bit difficult but second customer can be tracked down easily by the retailer and possible causes of not coming in a week can be easily find out in the next week and the loss of a no show will be just Rs.1500.

Consumer Pyramid:

Most firms comprehend that their consumers vary in terms of their profitability or lifetime consumer value. Specifically, they know that a relatively small number of consumers account for most of their profits. This comprehension is often called the 80-20 rule—It means that 20% of the consumers bring 80% of the profit and the rest 80% of the consumers bring only 20% of the profit. Thus, firms can group their consumers into two groups on the basis of the lifetime consumer value marks.

One group will be the 20% of the consumers with the highest lifetime consumer value marks and the other group would be the rest. However, this two- segment scheme, “rest” and “best” does not consider important differences among the 80% of the consumers in the “rest” segment. A very common segmentation scheme is to divide the whole consumer segment into four equal parts so that the degree of loyalty can be defined and the consumers can be placed more effectively to their groups and can be described efficiently according to their behaviour-

i. The best part in the segment is platinum segment; it is comprised of the top 25% of lifetime consumer value of the retailer. Consumers in this category are the most loyal consumers of the retailer. They are not concerned with the price of the product and focus more on the quality of consumer service.

ii. The second category is known as gold segment; it is comprised of the 25% consumer after the platinum segment. These consumers have lower lifetime consumer value and they are price sensitive as opposed to the platinum consumer. The fact is that they also buy very frequently from the retailer. But they are not as loyal as the platinum shopper and can have a say in influencing pricing strategies of competitors.

iii. The other 25% shoppers are known as iron segment consumers. The company should not pay much attention to them because their lifetime consumer value is very low.

iv. The last 25% consumers come under lead segment. These consumers are very clever and cost money to the company because they demand very much but do not spend. So the companies should be aware of them and should never be influenced by these peoples’ demand.

This segmentation scheme differs, for example, from the segments of passengers in airline frequent flier programmes because it is based on lead time variance (LTV) rather than miles flown. Thus, it recognises that some customers who fly a lot of miles might be taking low-cost flights, whereas other customers, though flying the same number of miles, might be much more profitable because they fly first class, and do not seek discount fares.

Regency, Frequency and Monetary Analysis:

It is a segmentation scheme of customers and very often used by the direct marketers as well as retailers. This analysis is based on how frequently a customer purchase from the retailer and when the last was time him or she made a purchase.

For example footwear retailer according to a catalogue which he send to his customers each month distributes his customers into many groups according to the several categories that how often a customer is buying and how much the customer is buying and when was the last time customer placed order online with the help of catalogue. Let us say that he has categorised his customers into ten groups and then every group is represented by one cell.

The customers who are not frequent buyers or for example who are very infrequent or have done very small purchase with the footwear retailer are placed in the first cell and called first time customers. This category of customers is paid a lot of attention as they can be potential loyal customers. So to increase their frequency of buying many offers-related programmes can be run by the retailer. These customers are known as high value customers. The retailer always attempts to sell more to them to gain their loyalty and to generate more revenue to the organisation.

The customers who are not in recent purchase category have lower tendencies to become loyal towards the retailer. These types of customers have low life time and investing time and money to persuade them to be a frequent shopper may not be a profitable business deal to the retailer.

Step # 3. CRM Programme Development:

When the retailer is done with the customer segmentation according to the future buying and profit potential of the customer, then the retailer should try to develop specific programmes to specific category of the customer.

There may be three kinds of programmes which can be run by the retailer:

(i) High value customer retention,

(ii) Conversion of a good potential customer into a high value customer, and

(iii) Unprofitable customer elimination.

Customer Retention:

The retailers can use the following four approaches to retain their best customers:

a. Programmes for frequent shoppers

b. Personalised and special customer service

c. Customisation and personalisation

d. Community

a. Programmes for Frequent Shopper:

These programmes are built on the data available on the consumer database. By analysing the data customers are identified according to their transactions done in the retail and accordingly they are encouraged to perform more and more transactions to increase the profitability of the retail store. The incentives may be given in the form of discounts.

Points for every rupee of merchandise purchased. These reward points can get redeemed on special occasions.

An effective reward system should include:

Tiered:

Rewards should be linked to purchase volume either individual or cumulative transactions. This motivates consumers to increase their spending. These tiers can be based on transactions.

i. Offer Choices:

All customers usually do not prefer same rewards. Retailer should offer choices to a frequent customer. For example, “Coles Myer, a leading Australian retailer, originally offered customers air miles but shifted to a menu of rewards when it was discovered that many customers did not value air miles. Tesco, a UK supermarket chain, lets customers cash in points for special discounts on entertainment, vacation packages, or sporting events. Sainsbury, a competitor, allows customers to use their points for vouchers at a variety of retail partners such as Blockbuster and British Gas”. Some customers also get attracted to non-monetary incentives.

However, these incentives should not be the central point of the programme.

Studies have shown that effective incentives directly benefit the recipient. Retailers should avoid providing incentive indirectly like charitable contributions.

ii. Reward All Transactions:

To encourage repeat purchases retailers should collect details of transaction of consumers and should provide incentives on all purchases.

iii. Transparency and Simplicity:

Incentive programme should be simple so that consumers can quickly and easily understand how much rewards points they have earned and how can they redeem these rewards. The fundamental rules should be clearly mentioned. There should be no confusion or hidden surprises.

If a problem occurs then it is difficult for a retailer to make changes. Reward programmes are central part of the consumer’s shopping experience; hence, they must be promptly informed if some changes occurs. They respond negatively to any perceived “take away” after implementation of programme; consequently, loyalty, and trust of the consumer towards the retailer may diminish. If a programme is highly successful, then the customer responds sharply to such changes.

Third, research has to still find out if these programmes enhance customer loyalty towards the retailer and increase their frequency of shopping.

Fourth, most important, frequent shopper programmes find it is very difficult to provide competitive advantage to retailers. Competitors can easily copy these programmes due to their maximum advantage. Retailers are providing personalised rewards to their best customers according to their exclusive customer knowledge. These personalised rewards are invisible and thus difficult to be copied by competitors.

b. Special Customer Services:

To develop and maintain loyalty retailers provide high-quality services like home delivery or keep opening their store for long hours to customers. These special services are crucial for the success of retailers in difficult times.

The challenge to CRM is segment market (foe); this segment is comprised of consumers, which are not identical. This is personalisation. Now, the retailers with the help of database can segment the customer and provide benefits according to their requirements.

They can tailor the product with respect to the specific customer. Many sports product retailers have demonstrated this strategy by organising the community sports of their existing customers. This strategy has proved much effective in the present days as the urge of retail is moving in a very fast rate in the present era of globalisation in the Indian subcontinent.

One-to-one retailing is the term which means selling products to a single group or an individual customer. It is evident that many retailers have used this strategy for retailing. For example, Securities Minting and Printing Corporation sells coins and securities to the Reserve Bank of India only.

The retailers can identify their customers individually. They call them by their names at the time of walking in the store. They also recommend products to the consumers. No data mining or database is required for them. In fact, they greet their customer and discuss their problems. But the large retail giants having retail do not have the customer’s knowledge.

They are highly dependent on software and database for any decision-making. Therefore, CRM helps in developing good relationship with not only customers but also other small retail shops and businesses. The one-to-one retailing is possible by the use of the internet. Competitor cannot use the database of a consumer. Competitive advantage is guaranteed by the information maintained by the retailer.

Creating a sense of community feelings among customers helps in forming loyalty among customers and improves retention among customers. This is called community. This strategy creates feelings of being in community and results the leaving of other retailers family for it. For example, a sports shop can organise an event in which the customer have interaction with the fellow players as well as retailers. This creates a sense of community feeling among the retailers.

The sale of related services and product to an existing customer above its existing purchase budget is called cross-selling. As for an example, a bank selling insurance product to its existing customer is the relevant example in this context. In retail the outlets allows additional purchase and they award reward points which can be materialised only or additional sales.

The sale of extra and additional services and merchandise to retain a loyal consumer is called add-on selling. A bank inspiring its customer to buy an insurance product is an excellent example in this regard.

Managing Customers – Unprofitable:

In the profitability hierarchy of a customer, the bottom portion is always negative. There is loss on all sales made to this set of customers. Some examples show that there are customers to catalogue retailer, who return after buying five to six products. The returning cost of these products is two to three times higher than profitability generated.

It may be possible that customers get reduced by the act of competitors and its attractive offering or they may return after years or months out of dissatisfaction from being regular. The re-acquisition cost proves unprofitable to them. “Getting the lead out” is the key maxim which tells that selling to unprofitable customer is no longer done.

Step # 4. CRM Programme Implementation:

In order to improve profitability as well as sales with the help of CRM programme is regarded a great difficult venture. Some study shows that 52% of retail businessmen are involved in the process of database management and mining. Another study shows that 76% of the retail businessmen who maintain database and do data mining show that that this process is worthless.

It provided an idea that for making CRM effective, more than explaining the significance of a consumer, analysing the database and installation of a computer system in required. In order to make efficient and effective CRM programmes implementation all the functions of retailers should have close coordination in retail business.

There should be hiring, training and motivating the workers involved in CRM activity for good human resource management and effective outlet operation. It is the responsibility of the management information system department to analyse, collect and make reliable, and relevant data, and information easily accessible to workers who are involved in the implementation of the programme.

Predictions on Retail Technology of Future:

We see increasing use of technology in the retail industry in India as online and offline retailers scale-up and address newer market segments.

There will be substantial investment in enterprise class infrastructure and applications and a space for a varied range of global players to address customers across categories. The Indian technology players focusing on retail would find more opportunities as system integrators, development and support services.

While areas like analytics and campaign management would find gradual traction, we predict significant amount of initial investment in supply chain management, web-enabled channels, user interface development and non-cash-based transactions solutions.

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