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A customer-centric philosophy

Nivedan Prakash takes a sneak peek at where the Indian CRM market is heading in terms of trends, adoption of global best practices and deployments

The Indian CRM market has evolved from the early days of point solutions addressing a specific department’s requirement to organization wide deployments.

CRM as a market is growing worldwide and according to Gartner, it will be an $18 billion market by 2011. With regard to the Asia Pacific region, CRM will grow at a compound annual growth rate (CAGR) of 19% between 2006 and 2011, to reach $846 million.

As the market becomes more competitive, its dynamics will shift towards the customer. Organizations will move from a ‘product-centric’ working model to a ‘customer-centric’ working model. Each organization will be making its best efforts to retain profitable customers, cross-sell and up–sell while tackling churn management.

In India when it comes to adoption of CRM, we are relatively behind the curve as compared to the US and European countries. Business leaders in India realize its importance; organizations have invested significantly in CRM technologies. The foundation is in place. The gap is in terms of execution.

Companies have realized the benefits of using CRM across various departments and the importance of having a real-time, 360 degree view of a customer’s overall experience. It is less expensive to retain customers versus bringing in new ones. Everything from customer self-service portals to integrated CTI (Computer Telephony Integration) technology can help customer service departments be more efficient.

[What is unfortunate is that far too many organizations implement CRM but fail to follow the spirit of customer relationship management. CRM, like any other IT system, can only deliver results if an organization’s representatives are truly customer focused and intent upon solving the customer’s problems. In some organizations, particularly some of the more popular consumer durable manufacturers, this is true. In others, notoriously telcos, it is not. Even banks have largely paid lip service to the concept and customer service levels have if anything deteriorated over the years in the frenzied cost cutting that has become the norm across establishments. – Editor]

Global best practices

Globally, there is a larger macro trend in marketing of ‘direct’ rather than ‘mass’ marketing. Organizations are focusing on ‘leveraging existing customer value’ as against the ‘leaky new customer acquisition bucket’ challenge. This is resulting in increasing focus on CRM within organizations.

CRM today encompasses aspects like social CRM, invisible CRM, use of BI gadgets on the desktop, sales prospector, etc. Social CRM is the ability to harness the power of social networking between people. The CRM application picks up data from applications like Facebook and Linked-In and provides a sales person with a comprehensive view of the social linkages of the customer/prospect that he is dealing with. [This also constitutes a serious abuse of privacy by the social networking sites if such data is available to CRM vendors – Ed]. By effectively using this information, the organization can open up many more doors thus increasing the pipeline and the revenues for the organization. It is an effective tool for cross selling and up selling.

Samik Roy, Regional Director – CRM, Oracle South Asia, commented, “Any process redesign effort must be conducted with an unwavering focus on the customer and with an emphasis on understanding the impact of process change on the customer’s day-to-day experiences with a company. CRM has evolved into a customer-centric philosophy that must permeate an entire organization. It is a process that will help bring together lots of pieces of information about customers, sales, and marketing effectiveness, responsiveness, and market trends.”

Indian adoption

CRM adoption in India has largely been ‘first wave’ where adoption is driven by the needs of a specific unit like customer service, sales or marketing. Here the focus has been on operational efficiencies rather than a focus on customer centricity. Companies have not considered CRM a part of their strategy and have limited it to being an enabler for increasing process effectiveness. Currently the industry is looking at the ‘second wave’ of CRM where the focus should shift from operational effectiveness to ‘customer centricity’.

“CRM is being looked in a holistic manner to assist organizations right from the attraction phase of a customer through acquisition and through the retention phase of the customer. The customer remains at the center and the rest of the organizational processes align around the customer. The benefits looked upon are customer loyalty, increased lifetime value of the customer and so on. One of the key factors is that the improvements happen across the organization and not just in silos,” added Vinod Ganesh Ram, Director and Chief Operating Officer, CDC CRM Solutions.

We are also witnessing strong uptake by large enterprises especially in industries such as telecommunications, automotive, insurance, and pharmaceutical. It is interesting to note a similar demand for CRM coming from the SMB segment where companies are looking for quick deployments within a smaller budget.

According to Gartner, spending on packaged CRM application technologies will increase by 12% worldwide in 2008 and be more a third higher than the last CRM spending boom that peaked in 2001. As per Springboard Research, the Indian SaaS market will grow at a CAGR of 77% from 2006 to 2010, to reach $165 million by 2010. The SaaS CRM market in Asia is worth $193 million and it should touch $460 million by 2010.

Anil Bakht, Managing Director, Eastern Software Systems, asserted, “MNCs and other foreign companies (mostly services based) are using CRM software. However, most Indian companies have still not implemented basic software. Nevertheless, some services companies in India are using CRM software e.g. mobile phone operators. Services companies stand to be the biggest gainers, which is why service providers in various fields have adopted CRM.”

Natwar Mall, Vice President – CRM Analytics, Fractal Analytics, said, “If we refer to our CRM framework, which is that reality when recorded becomes information and when analyzed it becomes knowledge and when applied it translates into decisions that generates reality. It is the step between information and knowledge and knowledge to decision where Indian organizations need to work harder. To put it differently, the organizations have invested in gathering data, and they are investing in technology and deployment platforms. The step in between, which is translating this information to knowledge and insights, is currently missing in most organizations.”

Drivers for CRM adoption

As services account for a larger portion of India’s GDP, the adoption of CRM will continue to rise. The consumers are also getting educated and expect good service from all vendors. [It is another matter that they rarely get good service. – Ed]

One of the key drivers is the rising cost of customer acquisition. It makes the industry focus on customer retention and overall customer value. This is possible only through a combination of smart CRM deployment and a genuine customer-centric focus.

The other major drivers for CRM adoption in India are increased competition, which is driving companies to have a stronger relationship and understanding of the customer. Average revenue per user is dropping in telecom. Service providers want to increase the revenue the get from each customer leading them to look at a strong platform to manage their relationships with the customer. [The upshot of all this should not be a narrow focus on high net worth individuals (HNWI). For tomorrow’s HNWIs are today’s ordinary customers. Companies ignore them at their own peril. – Ed] Customer retention is a tough task. Competition is rising and untapped markets are shrinking. Cost of acquisition is going up as a result. Companies need to understand the behavioral patterns of various segments. All of the above leads to customer centricity as a critical force driving CRM adoption.

Commented Aaron Katz, Area Vice President - Corporate Sales, Asia Pacific, Salesforce.com, “Software-as-a-Service delivers on the promise of enabling CRM strategies by eliminating the cost, complexity and risk associated with earlier software models. In a market like India the buoyancy of the economy makes customer acquisition and retention, as well as enabling business continuity through a single information repository by mitigating the impact of employee attrition competitive prerequisites. The next wave driving the CRM market will focus on the ability to access CRM applications via mobile devices.”

[Considering the boom in mobile usage, that is quite true. We may never get a computer in every house but a phone’s already there and most feature phones support GPRS. It just needs suitable pricing, decent bandwidth caps and some mobile-ready applications for usage to skyrocket. CRM via mobile devices could be the Next Big Thing. – Ed]

“Indian organizations are focusing on optimizing strategies, people, processes and technology around customers. This is the key to delivering strong customer loyalty and retention, resulting in increased growth and shareholder value and this is where, we believe, CRM will play a critical role. Take the example of Tata Motors - Tata Motors, India’s largest integrated automaker, has put in place one of the largest centralized dealer management systems in the world over a period of four years. Using Siebel CRM the company manages a widespread network of over 15,000-dealer outlets spread across India,” added Roy.

[Automobile manufacturers historically have a long-term relationship with their clients. Most folks do not replace their cars in less than 5-10 years and during that period the manufacturer has to maintain a relationship through strong service and support and when the customer is ready to buy a new vehicle, ensure strong resale value all of which ensures customer loyalty. Maruti is perhaps the best example of a well-executed customer loyalty model. CRM can play a strong role in such efforts if a company backs it up with robust service and support. – Ed]

More than mere call centers

After an initial phase of euphoria, organizations have realized that there is more to deploying a CRM solution than simply setting up call centers or giving some sales force automation (SFA) tool to the sales force or dealers. Hence, customers are looking at CRM as an enterprise-wide software solution with back-end integration rather than as a stand-alone software module for a call center or SFA or for selling on the Web. [All these aspects are vital in themselves—SFA, call center, Web sales—however, unless all of them are brought together into one comprehensive whole, the customer experience suffers badly. – Ed]

Another aspect of CRM is the growing popularity of the On-Demand model. The SaaS model is picking up and clearly, CRM is leading the race when it comes to application adoption in this model. Companies are opting for the On-Demand model because of the low-cost of implementation, speed of implementation enabling benefits to roll in faster. Moreover, customers do not have to focus on the IT infrastructure. Hence, we are increasingly seeing a greater uptake of On-Demand model especially from the SMB segment.

The CRM market is at a nascent stage. There is definitely scope for growth. The industries that have adopted this technology in India are financial services, telecom and retail to some extent. Insurance companies, airlines and hospitality are also realizing the benefits of using CRM.

An IDC report had estimated that the CRM market in India back in 2005 was worth $73 million and forecasted it to increase at a CAGR of 22.5%, to reach $200 million by 2010. While CRM comprises the largest segment of packaged applications in business, industry analysts have predicted that Europe and Asia Pacific would represent the next huge growth opportunity for CRM vendors.

“We expect the market to grow 40% year on year for the next two years. The growth for the CRM industry would come from the enterprise segment moving into the next phase of CRM rollouts and the SMB sector that is looking into CRM more actively,” said Ram.

Roy concluded, “We clearly see a growth in the area of CRM because the economy and competition will force organizations to be customer-centric. The second wave of CRM update and deployments is far more mature than the first one. We still have a long way to go to reach the destination of one-to-one customer management and true customer advocacy. Many segments e.g. the government sector has yet to adopt the citizen-centricity applications in its true sense. This in itself is a large potential area moving forward.”

[Oddly enough, the government has probably done a far better job of adopting this kind of solution, albeit in a crude but effective manner, than the private sector. The problem with government adoption has been only that it has been spotty. There have been pockets of brilliance but overall there is scope for improvement although things are getting better with every passing year. – Ed]

nivedan.prakash@expressindia.com