Capital Market role and function

1. Mobilization of Savings: Capital market is an important source for mobilizing idle savings from the economy. It mobilizes funds from people for further investments in the productive channels of an economy. In that sense it activate the ideal monetary resources and puts them in proper investments.
2. Capital Formation: Capital market helps in capital formation. Capital formation is net addition to the existing stock of capital in the economy. Through mobilization of ideal resources it generates savings; the mobilized savings are made available to various segments such as agriculture, industry, etc. This helps in increasing capital formation.
3. Provision of Investment Avenue: Capital market raises resources for longer periods of time. Thus it provides an investment avenue for people who wish to invest resources for a long period of time. It provides suitable interest rate returns also to investors. Instruments such as bonds, equities, units of mutual funds, insurance policies, etc. definitely provides diverse investment avenue for the public.
4. Speed up Economic Growth and Development: Capital market enhances production and productivity in the national economy. As it makes funds available for long period of time, the financial requirements of business houses are met by the capital market. It helps in research and development. This helps in, increasing production and productivity in economy by generation of employment and development of infrastructure.
5. Proper Regulation of Funds: Capital markets not only helps in fund mobilization, but it also helps in proper allocation of these resources. It can have regulation over the resources so that it can direct funds in a qualitative manner.
6. Service Provision: As an important financial set up capital market provides various types of services. It includes long term and medium term loans to industry, underwriting services, consultancy services, export finance, etc. These services help the manufacturing sector in a large spectrum.
7. Continuous Availability of Funds: Capital market is place where the investment avenue is continuously available for long term investment. This is a liquid market as it makes fund available on continues basis. Both buyers and seller can easily buy and sell securities as they are continuously available. Basically capital market transactions are related to the stock exchanges. Thus marketability in the capital market becomes easy.

Customer Life Time Value:

Customer lifetime value has intuitive appeal as a marketing concept, because in theory it represents exactly how much each customer is worth in monetary terms, and therefore exactly how much a marketing department should be willing to spend to acquire each customer. In reality, it is difficult to make accurate calculations of customer lifetime value. The specific calculation depends on the nature of the customer relationship.

Customer relationships are often divided into two categories. In contractual or retention situations, customers who do not renew are considered "lost for good". Magazine subscriptions and car insurance are examples of customer retention situations. The other category is referred to as customer migrations situations. In customer migration situations, a customer who does not buy (in a given period or from a given catalog) is still considered a customer of the firm because she may very well buy at some point in the future. In customer retention situations, the firm knows when the relationship is over. One of the challenges for firms in customer migration situations is that the firm may not know when the relationship is over (as far as the customer is concerned).

Most models to calculate CLV apply to the contractual or customer retention situation.

These models make several simplifying assumptions and often involve the following inputs:

Churn rate The percentage of customers who end their relationship with a company in a given period. One minus the churn rate is the retention rate. Most models can be written using either churn rate or retention rate. If the model uses only one churn rate, the assumption is that the churn rate is constant across the life of the customer relationship.

Discount rate The cost of capital used to discount future revenue from a customer. Discounting is an advanced topic that is frequently ignored in customer lifetime value calculations. The current interest rate is sometimes used as a simple (but incorrect) proxy for discount rate.

Retention cost The amount of money a company has to spend in a given period to retain an existing customer. Retention costs include customer support, billing, promotional incentives, etc.

Period The unit of time into which a customer relationship is divided for analysis. A year is the most commonly used period. Customer lifetime value is a multi-period calculation, usually stretching 3-7 years into the future. In practice, analysis beyond this point is viewed as too speculative to be reliable. The number of periods used in the calculation is sometimes referred to as the model horizon.

Periodic Revenue The amount of revenue collected from a customer in the period.

Profit Margin Profit as a percentage of revenue. Depending on circumstances this may be reflected as a percentage of gross or net profit. For incremental marketing that does not incur any incremental overhead that would be allocated against profit, gross profit margins are acceptable.

Comfort Zones:

Tice has developed the concept of comfort zone in which people operate. Change of any type even if for the better, can be very uncomfortable. People become frozen into a particular situation and whilst it may not be the better situation available, the effort and uncertainty of changing can inhibit even a change for the better. Any movement away from the zone of comfort is it for better or worse is resisted.

In terms of relationship between customer relations and loyalty, the concept of comfort zones can be used to explain why customers stay loyal to an organization or product even if another is convenient. Customers tend to stick to what they know. This form of loyalty is termed as Comfort Loyalty.

Linked to the effect of comfort zones is the cost of customer of switching to no other supplier or product. In the case of everyday house hold goods (FMCG), there may be no cost. However, switching, say computer operating systems may require a purchase of new software, Changing to another make of a car may require building up a relationship with a new supplier and dealer and these costs can be perceived as too high. They may not be monetary at all, often they are time and effort consuming and costs the consumer never the less.

Types of Customer Loyalty:

1. Supplier Loyalty:

Many customers are not only loyal to a particular brand, but also loyal to particular supplier, a type of customer known as hostage i.e., somebody who has no choice but to be a customer of a particular brand or supplier. Such a situation could occur in a small village community where there is only a shop selling perhaps just one brand of bread. A customer who is without transport could be forced, if they really want bread beans, to be loyal to that one brand and that one supplier. The term introduced for this is PSEUDO-LOYALTY.

2. Supra-Loyalty:

Supra-loyalty is a term that can be applied to those who are extremely loyal to an organization, product or service. In the case of loyalty to an organization, that have normally build up a personal relationship with the organization over a period of time or in these of product/service, their identify themselves with it. It is as if they have internalized relationship and consider themselves almost part of the organization instead of being a customer.

3. De-loyalty:

A customer who makes a deliberate decision to move to another organization because he or she has been let down by an organization that they were previously loyal can be described as being DE-LOYAL. This is not same as disloyalty, which suggests that it is the customer who is doing something wrong. In the case of de-loyalty, it is the organization which has let the customer down. There is evidence that people are willing to forgive one mistake or one case of poor service. Customer loyalty can be retained even after a mistake provided that rectification (an apology) is speedily forthcoming. However, if a super-loyal customer becomes disenchanted, they may take their business else where, in effect becoming de-loyal. if they are very disappointed they may become ANTI-LOYAL, seek retribution against the organization.

4. Disloyalty:

It is a mute point as to whether a customer can actually be disloyal. Customers owe nothing, in terms of loyalty to suppliers. Many customers may feel that they are being disloyal if they go else where but feeling disloyal is not the same as being disloyal. The only obligation actually placed on the customer is to render payment for the product or service provided by payment of monetary and other terms.

Organizations, having a responsibility to their customers, can be disloyal too. Disloyalty is not providing a product or service deliberately to a previously loyal customer. An example of this would be an organization that treated a new customer better, deliberately or unintentionally than the existing customers. In this case, the organization would be being disloyal to relationship that had been built up. If the existing customer decides to go elsewhere, then they would be making a perfectly valid and proper decision. Disloyalty implies an act and not the customer is capable of such an act. The customer may be a – loyal, de-loyal or even anti-loyal but never disloyal.

Customer Loyalty

Definition of Loyalty:

Loyalty may be defined as “The biased behavioral response, expressed over time by some decision making unit with respect to one out of a set of processes resulting in brand commitment”.

Loyalty must be seen as “biased repeat purchase behavior” or repeat patronage accompanied by a favorable attitude. Loyalty can originate from factors extrinsic to the relationship such as the market structure in which the relationship exists, but also in intrinsic factors such as relationship strength and handling of critical episodes during the relationship.

Advantages for setting up Loyalty:

1. Building lasting relationships with customers by rewarding them for their patronage.

2. Gathering high profits through extended product usage and cross-selling

3. Gathering customer information

4. Decommodifying brands i.e., differentiating from crowds.

5. Defending market position

6. Planning against competitive activity.

Classification of customers with reference to Loyalty:

There are six classifications of customers in respect of loyalty:

1) Current loyal customers who will continue to use the product or service

2) Current customers who may switch to another brand

3) Occasional customers who would increase consumption of the brand if the incentives were right.

4) Occasional customers who would decrease consumption of the brand if competitor offered the right incentive.

5) Non-users who could become customers.

6) Non- users who could never become customers.

It is important to distinguish between loyalty to the generic product, the brand and particular supplier. Many people drink coffee as beverage. Those who drink considerable quantity of coffee can be described as having a product loyalty. Within the group, there will be some that buy just the cheapest coffee or drink whatever available. They are product loyal but not brand loyal. They are not disloyal as that implies that there has been a loyalty, but they have no loyalty at all to a particular brand. Those who have a particular brand loyalty, they always buy a particular brand or at least a brand from the same product.

Benefits of Customer satisfaction

Many companies adopt strategies to improve customer satisfaction with the perceived objectives of strengthening bonds and achieving customer loyalty. Great claims are made regarding higher satisfaction levels. It is suggested that customer satisfaction:

Ø Increases customer loyalty

Ø Reduces price elasticity

Ø Insulates market share from competitors

Ø Lowers transaction cost

Ø Reduces failure rates and cost of attracting new customers

Ø Improves the firm’s reputation in the market place

Frank (USA, 1867 - 1924) and Lillian (U.S.A, 1878 - 1912)

The ideas of Taylor were also strongly supported and developed by the famous husband and wife team of Frank and Lillian Gilbreth. They became interested in wasted motions in work. After meeting Taylor, they combined their ideas with Taylor's to put scientific management into effect. They made pioneering effort in the field of motion study and laid the entire foundation of our modern applications of job simplification, meaningful work standards and incentive wage plans. Mrs. Gilbreth had a unique background in psychology and management and the couple could embark on a quest for better work methods. Frank Gilbreth is regarded as the father of motion study. He is responsible for inculcating in the minds of managers the questioning frame of mind and the search for a better way of doing things.

Gilbreth's contributions to management thought are quite considerable. His main contributions are:

(a) The one best way of doing a job is the way which involves the fewest motions performed in an accessible area and in the most comfortable position. The best way can be found out by the elimination of inefficient and wasteful motions involved in the work.

(b) He emphasized that training should be given to workers from the very beginning so that they may achieve competence as early as possible.

(c) He suggested that each worker should be considered to occupy three positions –

(i) the job he held before promotion to his present position, (ii) his present position, and (iii) The next higher position. The part of a worker's time should be spent in teaching the man below him and learning from the man above him. This would help him qualify for promotion and help to provide a successor to his current job.

(d) Frank and Lillian Gilberth also gave a thought to the welfare of the individuals who work for the organization.

(e) Gilbreth also devised methods for avoiding wasteful and unproductive movements. He laid down how workers should stand, how his hands should move and so on.

Customer Satisfaction Process:

At the heart of any successful strategy to ‘manage’ customer satisfaction is the ability to “listen to the customer”. They suggest five categories of approach.

1. Customer satisfaction indices

2. Feedback

3. Market research

4. Front-line personnel

5. Strategic activities

1. Customer Satisfaction Indices:

Customer satisfaction indices are among the most popular methods of tracking or measuring customer satisfaction. Indeed, business of all sorts now divert consider energies into tracking customer satisfaction in this way.

2. Feedback:

Feedback in this context includes comments, complaints and questions ,It may be among the most effective means of establishing what the customer regards as a satisfactory level of performance and whether ‘dissatisfiers’ exist within the operation as it is based on actual performance rather than contrived situations.

3. Market Research:

In addition to research among customers and non-customers into potential ‘satisfiers’, ‘dissatisfiers’ and ‘customer expectations’, market research can be used as customer entrance (to establish drivers which bought the customer to the company) and customer exit (to establish those factors which cause the customer to go elsewhere).Again more valuable information may be achieved in the latter rather than the former as it is based on actual behavior rather than the perception.

4. Frontline Personnel:

Direct contact with staff can provide a good means of listening to the customer. As it is frequently suggested that many customers, rather than making a formal complaint to the company, will simply break the relationship. Frontline staff provides an opportunity for less formal sounding on complaints which might to otherwise not be heard. The crucial factor here is how this information is fed back into the decision-making process.

5. Strategic activities:

Actively involving in the customer in the company decision making may be means of pre-empting potential “dissatisfiers” and establishing potential “satisfiers”.

Customer Satisfaction

Oliver defines Customer satisfaction as follows “Satisfaction is the customer fulfillment response. It is a judgment that a product or service feature, or the product or service itself provides a pleasurable level of consumption related fulfillment.”

Satisfaction can be viewed as contentment. Satisfaction may also be associated with some sense of happiness. For those services that really surprise in the positive way, satisfaction may mean delight. And in some situations, where the removal of negative aspect leads to satisfaction, the consumer may associate a sense of relief with satisfaction.

Retention in competitive markets is generally believed to be a product of customer satisfaction. Satisfaction is a psychological process of evaluating perceived performance outcome based on predetermined expectations.

Satisfaction drivers:

Cumby and Barnes suggest that driver exist on five levels and, that these generally involve progressively more personal contact with the service supplier:

1. Core product or service
2. Support service and systems
3. Technical performance
4. Elements of customer interaction
5. Affective dimension of services

1. Core Product or service: this is the basic product or service provided by the company and probably provides the supplier with the least opportunity to differentiate or add value.

2. Support services and systems: These include the peripheral support services that enhance the provision of the core product or services. The customer may well receive an excellent core product or service from the supplier but are dissatisfied with the supplier because of inferior support service and systems.

3. Technical Performance: The level of “customer satisfaction model” deals with whether the service provider gets the core product or whether service and the support services and systems are in place but they do not get them right on every occasion.

4. Elements of customer interaction: This level relates to the way the service provider interacts with the customer either face-to –face or through technology based contact.

5. Affective dimensions of service: Beyond the basic interaction of the company are the messages, sometimes subtle and often unintentional, that companies send to their customers that leave them with positive or negative feelings towards them. A considerable amount of dissatisfaction has nothing to do with core products and services. Indeed the customer may be satisfied with more aspects of interaction. The problem may lie with “little things” that may not be noticed by the staff.

It is quite possible for the supplier to get things right on the first four levels and to dissatisfy the customer because of something that happens on the fifth level. This emphasize the importance of ‘critical episode’ in the exchange process

Henry Lawrence Gantt (USA, 1861 - 1819)

H.L Gantt was born in 1861. He graduated from John Hopkins College. For some time, he worked as a draftsman in an iron foundry.

In 1884, he qualified as a mechanical engineer at Stevens Institute.

In 1887, he joined the Midvale Steel Company. Soon, he became an assistant to F.W Taylor. He worked with Taylor from 1887 - 1919 at Midvale Steel Company. He did much consulting work on scientific selection of workers and the development of incentive bonus systems. He emphasized the need for developing a mutuality of interest between management and labour.

Gantt made four important contributions to the concepts of management:

1. Gantt chart to compare actual to planned performance. Gantt chart was a daily chart which graphically presented the process of work by showing machine operations, man hour performance, deliveries, effected and the work in arrears.

This chart was intended to facilitate day-to-day production planning.

2. Task-and-bonus plan for remunerating workers indicating a more humanitarian approach. This plan was aimed at providing extra wages for extra work besides guarantee of minimum wages. Under this system of wage payment, if a worker completes the work laid out for him, he is paid a definite bonus in addition to his daily minimum wages. On the other hand, if a worker does not complete his work, he is paid only his daily minimum wages. There was a provision for giving bonus to supervisors, if workers under him were able to earn such bonus by extra work.

3. Psychology of employee relations indicating management responsibility to teach and train workers. In his paper "Training Workmen in Habits of Industry and Cooperation", Gantt pleaded for a policy of preaching and teaching workmen to do their work in the process evolved through pre-thinking of management.

4. Gantt laid great emphasis on leadership. He considered management as leadership function. He laid stress on the importance of acceptable leadership as the primary element in the success of any business.

Taylor's Scientific Management (USA 1856-1915):

Started as an apprentice machinist in Philadelphia, in USA. He rose to be the chief engineer at the Midvale Engineering Works and later on served with the Bethlehem Works where he experimented with his ideas and made the contribution to the management theory for which he is so well known. Frederick Winslow Taylor well-known as the founder of scientific management was the first to recognize and emphasis the need for adopting a scientific approach to the task of managing an enterprise. He tried to diagnose the causes of low efficiency in industry and came to the conclusion that much of waste and inefficiency is due to the lack of order and system in the methods of management. He found that the management was usually ignorant of the amount of work that could be done by a worker in a day as also the best method of doing the job. As a result, it remained largely at the mercy of the workers who deliberately shirked work.

He therefore, suggested that those responsible for management should adopt a scientific approach in their work, and make use of "scientific method" for achieving higher efficiency. The scientific method consists essentially of

(a) Observation

(b) Measurement

(c) Experimentation and

(d) Inference.

He advocated a thorough planning of the job by the management and emphasized the necessity of perfect understanding and co-operation between the management and the workers both for the enlargement of profits and the use of scientific investigation and knowledge in industrial work. He summed up his approach in these words:

• Science, not rule of thumb
• Harmony, not discord
• Co-operation, not individualism
• Maximum output, in place of restricted output
• The development of each man to his greatest efficiency and prosperity.

Elements of Scientific Management: The techniques which Taylor regarded as its essential elements or features may be classified as under:

1. Scientific Task and Rate-setting, work improvement, etc.

2. Planning the Task.

3. Vocational Selection and Training

4. Standardization (of working conditions, material equipment etc.)

5. Specialization

6. Mental Revolution.

1. Scientific Task and Rate-Setting (work study): Work study may be defined as the systematic, objective and critical examination of all the factors governing the operational efficiency of any specified activity in order to effect improvement.

Work study includes.

(a) Methods Study: The management should try to ensure that the plant is laid out in the best manner and is equipped with the best tools and machinery. The possibilities of eliminating or combining certain operations may be studied.

(b) Motion Study: It is a study of the movement, of an operator (or even of a machine) in performing an operation with the purpose of eliminating useless motions.

(c) Time Study (work measurement): The basic purpose of time study is to determine the proper time for performing the operation. Such study may be conducted after the motion study. Both time study and motion study help in determining the best method of doing a job and the standard time allowed for it.

(d) Fatigue Study: If, a standard task is set without providing for measures to eliminate fatigue, it may either be beyond the workers or the workers may over strain themselves to attain it. It is necessary, therefore, to regulate the working hours and provide for rest pauses at scientifically determined intervals.

(e) Rate-setting: Taylor recommended the differential piece wage system, under which workers performing the standard task within prescribed time are paid a much higher rate per unit than inefficient workers who are not able to come up to the standard set.

2. Planning the Task: Having set the task which an average worker must strive to perform to get wages at the higher piece-rate, necessary steps have to be taken to plan the production thoroughly so that there is no bottle neck and the work goes on systematically.

3. Selection and Training: Scientific Management requires a radical change in the methods and procedures of selecting workers. It is therefore necessary to entrust the task of selection to a central personnel department. The procedure of selection will also have to be systematized. Proper attention has also to be devoted to the training of the workers in the correct methods of work.

4. Standardization: Standardization may be introduced in respect of the following.

(a) Tools and equipment: By standardization is meant the process of bringing about uniformity. The management must select and store standard tools and implements which will be nearly the best or the best of their kind.

(b) Speed: There is usually an optimum speed for every machine. If it is exceeded, it is likely to result in damage to machinery.

(c) Conditions of Work: To attain standard performance, the maintenance of standard conditions of ventilation, heating, cooling, humidity, floor space, safety

etc., is very essential.

(d) Materials: The efficiency of a worker depends on the quality of materials and the method of handling materials.

5. Specialization: Scientific management will not be complete without the introduction of specialization. Under this plan, the two functions of 'planning' and 'doing' are separated in the organization of the plant. The `functional foremen' are specialists who join their heads to give thought to the planning of the performance of operations in the workshop. Taylor suggested eight functional foremen under his scheme of functional foremanship.

(a) The Route Clerk: To lay down the sequence of operations and instruct the workers concerned about it.

(b) The Instruction Card Clerk: To prepare detailed instructions regarding different aspects of work.

(c) The Time and Cost Clerk: To send all information relating to their pay to the workers and to secure proper returns of work from them.

(D) The Shop Disciplinarian: To deal with cases of breach of discipline and absenteeism.

(e) The Gang Boss: To assemble and set up tools and machines and to teach the workers to make all their personal motions in the quickest and best way.

(f) The Speed Boss: To ensure that machines are run at their best speeds and proper tools are used by the workers.

(g) The Repair Boss: To ensure that each worker keeps his machine in good order and maintains cleanliness around him and his machines.

(h) The Inspector: To show to the worker how to do the work.

6. Mental Revolution: At present, industry is divided into two groups – management and labour. The major problem between these two groups is the division of surplus. The management wants the maximum possible share of the surplus as profit; the workers want, as large share in the form of wages. Taylor has in mind the enormous gain that arises from higher productivity. Such gains can be shared both by the management and workers in the form of increased profits and increased wages.

Benefits of Scientific Management:

Taylor's ideas, research and recommendations brought into focus technological, human and organizational issues in industrial management.

Benefits of Taylor's scientific management included wider scope for specialization, accurate planning, timely delivery, standardized methods, better quality, lesser costs, minimum wastage of materials, time and energy and cordial relations between management and workers. According to Gilbreths, the main benefits of scientific management are "conservation and savings, making an adequate use of every one's energy of any type that is expended". The benefits of scientific management are:-

1. Replacement of traditional rule of thumb method by scientific techniques.

2. Proper selection and training of workers.

3. Incentive wages to the workers for higher production.

4. Elimination of wastes and rationalization of system of control.

5. Standardization of tools, equipment, materials and work methods.

6. Detailed instructions and constant guidance of the workers.

7. Establishment of harmonious relationship between the workers.

8. Better utilization of various resources.

9. Satisfaction of the needs of the customers by providing higher quality products at lower prices.

Criticism:

1. Worker's Criticism:

(a) Speeding up of workers: Scientific Management is only a device to speed up the workers without much regard for their health and well-being.

(b) Loss of individual worker's initiative: Scientific Management reduces workers to automatic machine by taking away from them the function of thinking.

(c) Problem of monotony: By separating the function of planning and thinking from that of doing, Scientific Management reduces work to mere routine.

(d) Reduction of Employment: Scientific Management creates unemployment and hits the workers hard.

(e) Weakening of Trade Unions: Under Scientific Management, the important issues of wages and working conditions are decided by the management through scientific investigation and the trade unions may have little say in the matter.

(f) Exploitation of workers: Scientific Management improves productivity through the agency of workers and yet they are given a very small share of the benefit of such improvement.

2. Employer's Criticism:

(a) Heavy Investment: It requires too heavy an investment. The employer has to meet the extra cost of the planning department though the foreman in this department do not work in the workshop and directly contribute towards higher production.

(b) Loss due to re-organization: The introduction of Scientific Management requires a virtual reorganization of the whole set-up of the industrial unit.

Work may have to be suspended to complete such re-organization.

(c) Unsuitable for small scale firms: various measures like the establishment of a separate personnel department and the conducting of time and motion studies are too expensive for a small or modest size industrial unit.

CRM from the Business Strategy Perspective

CRM from the Business Strategy Perspective:

The Business Strategy perspective has most in common with many of the lessons and topics contained on this website, and indeed within the field of marketing itself. The diagram below shows the Marketing Teacher Model of CRM and Business Strategy. Our model contains three key phases - customer acquisition, customer retention and customer extention, and three contextual factors - marketing orientation, value creation and innovatove IT.

We now consider the Business Strategy Perspective on CRM. Here, we propose a model, which is a hybrid, and typical of many of the models and diagrams of CRM that you will find on The Internet and in popular books on the topic of eMarketing/eCommerce. The model has three key phases and three contextual factors:

Three key phases:

• 1. Customer Acquisition.
• 2. Customer Retention.
• 3. Customer Extension.

Three contextual factors:

• 4. Marketing Orientation.
• 5. Value Creation.
• 6. Innovative IT.

1. Customer Acquisition - This is the process of attracting our customer for the first their first purchase. We have acquired our customer.

Growth - Through market orientation, innovative IT and value creation we aim to increase the number of customers that purchase from us for the first time.

2. Customer Retention - Our customer returns to us and buys for a second time. We keep them as a customer. This is most likely to be the purchase of a similar product or service, or the next level of product or service.

Growth - Through market orientation, innovative IT and value creation we aim to increase the number of customers that purchase from us regularly.

3. Customer Extension - Our customers are regularly returning to purchase from us. We introduce products and services to our loyal customers that may not wholly relate to their original purchase. These are additional, supplementary purchases. Of course once our loyal customers have purchased them, our goal is to retain them as customers for the extended products or services.

Growth - Through market orientation, innovative IT and value creation we aim to increase the number of customers that purchase additional or supplementary products and services.

4. Marketing Orientation - means that the wholes organisation is focused upon the needs of customers. Customer needs are addressed by the Three Levels of a Product whereby the organisations not only supplies the actual, tangible product, but also the core product and its benefit, and also the augmented product such as a warranty and customer service. Marketing orientation will focus upon the needs of consumers for all three levels of a product. (N.B. 'market' orientation and 'marketing' orientation are not the same).

5. Value Creation - centers on the generation of shareholder value based upon the satisfaction of customer needs (as with marketing orientation) and the delivery of a sustainable competitive advantage.

6. Innovative IT - is exactly that - Information Technology must be up-to-date. It should be efficient, speedy and focus upon the needs of customers. Whilst IT and/or software are not the entire story for CRM, it is vital to its success. CRM software collects data on consumers and their transactions. Huge databases store data on individuals and groups of individuals. In some ways, CRM means that an organisation is dealing with a segment of one person, since every consumer displays different purchasing habits and preferences. Organizations will track individuals, and try to market products and services to them based upon similar buyer behavior seen in other individuals (e.g. When Amazon tells you those customers that viewed/bought the same product as you, also bought another product).

CRM from the Customer Life Cycle (CLC) Perspective

The Customer Life Cycle (CLC) has obvious similarities with the Product Life Cycle (PLC). However, CLC focuses upon the creation of and delivery of lifetime value to the customer i.e. looks at the products or services that customers NEED throughout their lives. It is marketing orientated rather than product orientated, and embodies the marketing concept. Essentially, CLC is a summary of the key stages in a customer's relationship with an organisation. The problem here is that every organisation's product offering is different, which makes it impossible to draw out a single Life Cycle that is the same for every organisation.

Let's consider an example from the Banking sector. HSBC has a number of products that it aims at its customers throughout their lifetime relationship with the company. Here we apply a CLC. You can start young when you want to save money. 11-15 year olds are targeted with the Livecash Account, and 16-17 year olds with the Right Track Account. Then when (or if) you begin College or University there are Student Loans, and when you qualify there are Recent Graduate Accounts.

When you begin work there are many types of current and savings account, and you may wish to buy property, and so take out a mortgage. You could take out a car loan, to buy a vehicle to get you to work. It would also be advisable to take out a pension. As you progress through your career you begin your own family, and save for your own children's education. You embark upon a number of savings plans and schemes, and ultimately HSBC offer you pension planning (you may want to insure yourself for funeral expenses - although HSBC may not offer this!).

This is how an organization such as HSBC, which is marketing orientated, can recruit and retain customers, and then extend additional products and services to them - throughout the individual's life. This is an example of a Customer Life Cycle (CLC).

Another important point is that a lifetime CLC is made up many shorter CLC's. So, for example, Volkswagen Cars retains a customer for many years and one can predict the products that meet a customers needs throughout his or her family lifetime. However the purchase of each car, will in itself be a CLC with many Customer Touch Points. The consumer may need a bigger vehicle as his or her family expands - so they visit VW's website and register.

The customer reviews models and books a test-drive with her or his local dealer. He or she decides to buy the car and arranges finance. The car is then delivered from the factory, and returns every year for its annual service. Then after three years, the customer decides to trade in his or her car, and the cycle begins again. The longer-term life cycle is simply the shorter-term life cycles viewed consecutively.

CRM Perspectives [Information Technology]

CRM is a term that is often referred to in marketing. However, there is no complete agreement upon a single definition. This is because CRM can be considered from a number of perspectives. In summary, the three perspectives are:

1. CRM from the Information Technology Perspective.

2. CRM from the Customer Life Cycle (CLC) Perspective.

3. CRM from the Business Strategy Perspective.

1. CRM from the Information Technology Perspective.

From the technology perspective, companies often buy into software that will help to achieve their business goals. For many, CRM is far more than a new software package, the renaming of traditional customer services, or an IT-based customer management system to support sales people. However, IT is vital since it underpins CRM, and has the payoffs associated with modern technology, such as speed, ease of use, power and memory, and so on. Information Technology (IT) and CRM have three key elements, namely Customer Touch Points, Applications, and Data Stores. This section is based loosely upon Raisch (2001) The e-Marketplace.

Customer Touch Points are vital since your business has a marketing orientation and focuses upon the customer and his or her current and future needs. This is the interface between your organisation and its customers. For example you buy a new car from a dealership, and you enter a showroom. The dealership is a contact point. You meet with a salesperson whom demonstrates the car. The salesperson is a contact point. You go home and look at the car manufacturer's website, and then send the company an e-mail. Both are contact points. Other contact points include 3G telephone, video conferencing, Interactive TV, telephone, and letters.

Applications are essentially the software and programmes that support the process. Incidentally, this is what some would call CRM - but we know better. Applications serve Marketing (e.g. data mining software* and permission marketing**), Sales (e.g. monitoring Customer Touch Points), and Service (e.g. customer care).

Data Stores contain data on every aspect of the customer, and the Customer Life Cycle (CLC). For example, an organisation keeps data on the products you buy, when you buy them, and where they are sent. Data is also kept on the web pages that you visit and the products that you consider, but then do not buy. Leads are stored here. Data on the life time value of individual customers is stored here, as well as details of how and when the customer was recruited, how - and for how long - individuals have been retained, and details of any products that have been extended to individuals are also stored. The data is analysed using Applications.

*Data Mining is where an organisation evaluates large Data Stores for patterns, or relationships between groups or individuals (or segments). Applications present 'patterns' in a format that can be used for marketing decision-making.

** Permission Marketing is where a customer elects to accept (or 'opt-in' to) marketing material from an organisation e.g. where you buy insurance and the vendor asks if you wish to receive further details from them, or similar organisations. It is so called because marketers need your 'permission' to market to you. Permission marketing can occur at any of the Customer Touch Points.

Needs / objectives of CRM:

1. Enable the company to identify, contact attract and acquire new customers:

CRM allows the company to focus its limited marketing resources on the most promising target markets with the highest potential value. This is typically done using the information generated by CRM application which

a) Automatically generates customer and market profiles

b) Identify and target market with high revenues

c) Generates, leads, tracks marketing campaigns across a variety of media

d) Selects appropriate contact media, plans promotions and incentives

e) Manages the proposal process through negotiations to close.

2. Obtains a better understanding of the customers- their wants and needs:

CRM applications, often used in combination with data warehousing, e-commerce applications and call centers, allow companies to gather and access information about customers buying behavior, wants in terms of products or services provided by the company. The information is used in planning and execution go marketing campaigns. It enables customers to seek products and reveal their preferences in an interactive manner.

3. Defines the appropriate product and service offering and match it to the unique needs of the customer:

CRM provides customization and personalization capabilities that gives customers the power to view the enterprise in a way that they can relate to, there by making it easier for them to do business with it. This includes configuration, pricing, quotation, catalog and personal generation capabilities that harness the power of Internet while ensuring the flexibility to respond quickly to changing technical and business conditions.

4. Manages and optimizes company’s sales cycle:

The productivity of the sale process is increased by accurating the contracting process and improving revenue velocity. This is accompanied to capabilities such as online order entry, credit card processing, tax calculations, auctions, billing, order status and payment processing. CRM solutions also include tools, which provide the ability to communicate important information from supply chain modules to the customer interface in real time. These tools can help in determining feasibility, profitability and delivery dates, while understanding the constraints of the entire supply production and logistics chain across multiple channels and enterprises.

5. Increases retention of existing customers through improved sales, service and support:

CRM applications document all post –close service and support related interaction with customers, record customer requests and collect feedback from variety of communication channels and use the information to anticipate the demand for service and technical assistance and maximize customer satisfaction and retention while maximizing customer service staff. The goal is to ensure greater customer loyalty. CRM provides capabilities for providing online support information, online product registration to an electronic help desk, self service support logging and tracking and integration with call centres.

6. Identifies Cross selling and up selling opportunities:

CRM can help in identifying opportunities for cross selling and up selling of higher value added services to the existing customers, based on their past purchasing behaviour.

Definition of CRM:

Customer Relationship Management (CRM) is a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value and strong relationship with customers.

A commonly cited definition of CRM is that of CRM (UK) Ltd (2002), as follows:

“Customer Relationship Management is the establishment, development, maintenance and optimisation of long-term mutually valuable relationships between consumers and organizations”.

CRM is neither a product, nor service but a business strategy to learn more about customer behaviour and requirements in order to create long term relationship with them. CRM involves use of technology in attracting new and profitable customers while forming tighter bonds with existing one.

Managerial Skills

Manager:

Manager is a person who undertake the tasks and function of managing at any level, in any kind of enterprise.

Managerial Skills:

There are four skills of managers are expected to have ability of:

(1)Technical skills: Technical skills that reflect both an understanding of and a proficiency in a specialized field. For example, a manager may have technical skills in accounting, finance, engineering, manufacturing, or computer science.

(2)Human Skills: Human skills are skills associated with manager’s ability to work well with others, both as a member of a group and as a leader who gets things done through other.

(3)Concept Skills: Conceptual skills related to the ability to visualize the organization as a whole,
discern interrelationships among organizational parts, and understand how the organization fits into the wider context of the industry, community, and world. Conceptual skills, coupled with technical skills, human skills and knowledge base, are important ingredients in organizational performance.

(4) Design Skills: It is the ability to solve the problems in ways that will benefit the enterprise. Managers must be able to solve the problems.

Skills of management at different levels.

The Skills vary at different levels they are as follows:
Top management ---------------Concept and design Skills.
Middle management ------------Human Skills.
Supervisor’s --------------------Technical skills.