Indian Companies Wary Of Investing Heavily In CRM Solutions

New Delhi: | Updated: Mar 31 2003, 05:30am hrs
The fundamental mistake companies make in handling customer relationship management (CRM) is that they look at it as a technological issue rather than a consumer issue. Which is why, a survey in Europe has shown that despite companies in the west investing billions in CRM initiatives, 70 per cent of such programmes fail in the first year itself.

Speaking to FE, OgilvyOne Worldwide president (Asia-Pacific) John Goodman said,It is naive to expect a software solution to do the trick for you. Efforts need to be customer-focused and creative. He was in the Capital to address a seminar on the effectiveness of CRM.

Said Mr Goodman,My advise to companies is to start small, not try to change the entire organisation. Compa-

nies should not look at CRM as an enterprise wide issue. They should look for isolated experiments and then extend it to other departments. There should be a shift from operational CRM to marketing-driven CRM.

In the Indian context, he said in comparison to global investments in customer loyalty programmes, Indian companies appear to be a little wary of investing heavily in CRM solutions and their over-cautious approach is a definite dampner to success in this area. This despite the fact that the Indian CEOs appear to take CRM very seriously and are more involved personally in the efforts than their counterparts in other parts of the globe.

The need to be focused on the customer is also what makes emotional bonding so important. Said Mr Goodman,Of the three kinds of bonding: emotional, financial (discounts, offers etc) and structural (contracts), emotional bonding is the most long-lasting, the strongest yet hardest to achieve. Efforts to understand the consumer more as individuals not blocks would hold the key. What is needed is more psychographic rather than demographic data and its correct interpretation. Using terms like 16 years to 25 years age band is misleading, as people never behave in a logical predictable manner.

Unfortunately, there is a tendency to focus on financial aspects like promotions and discounts. Said Mr Goodman,Promotions are a very good way of destroying brand value. In the US, 70 per cent of marketing expense is spent on promotions. Promotions are unhealthy as they train consumers to buy on discounts. Ironically, those who buy during discounts are also those who would have bought your product anyway. So it becomes a habit and is an easy route, specially in the case of brands dependent on retail.

His advise: Substitute promotions with something more long-lasting. Chalk out innovative CRM programmes that include the retailer, manufacturer and consumer. Such experiments have been a huge success in the European market.

Talking about measurement, Mr Goodman said,If you cant measure the efficacy of any CRM initiative, dont start it. On a macro level, market share is an effective long-term way of measuring the success of customer loyalty programmes. On the micro level, however, share of wallet is an effective indicator of the success of CRM initiatives.

There is a definite link between customer loyalty and revenues, added Mr Goodman. A controlled survey by OgilvyOne has revealed that good CRM initiatives resulted in a 15-30 per cent jump in revenues.