Master of Business Administration MBA Semester 3 MK0006 Services Marketing and Customer Relationship Management - 2 Credits Assignment Set

et 1 [30 Marks] Note: Each question carries 10 Marks. Answer all the questions.

Q.1 Mention the different bases for segmentation with appropriate examples. [10 marks]

ase segmentation

Over the last years we have been doing a tremendous amount of customer segmentation work with the marketing departments in companies across a number of industries. We have experienced that there are many misconceptions about what segmentation really is, why we do it, and what we can expect to achieve from it. All too often marketing departments thinks that database analysis is the first, last, and only step in segmenting the base of existing customers. In fact, identifying clusters of common behaviors is only the first activity you should undertake in creating a customer base segmentation.

Customer segmentation is not a piece of database work. It is a strategic or tactical business activity with with hard monetary benefits. Yes, you do need to do some data mining, and how clever you are in doing that is important, but that is not (or should not be) the primary activity. Assuming that you are doing segmentation for the right reasons and you therefore know how to measure if you are successful, then what are the steps you need to make it happen? We have found the following list useful: 1. Database analysis Behavioral clusters 2. Market survey Behavioral segment descriptions 3. Market strategy Brand and market positioning 4. Market research Strategic segments 5. Needs-based segmentation Development segments This is not intended to suggest that you must always perform all the activities on the list. Sometimes you may only need some of them to achieve your objectives. But it is an ordered list so start at the top and work your way through until you have achieved (and measured!) your goals. Lets look at the steps in turn.

1. Database analysis to determine behavioral clusters

The first step is to take your customer data and analyze it to determine clusters of similar behavior. Much has been written on the subject elsewhere so I will not go into technical details here. But from a business perspective it is essential that you know why you are segmenting so you know which variables you want the clusters to split. We discussed this in some detail in our previous article about the 3 things we want from customer segmentation. You want the segments to be different on the variables that are important for your business. Otherwise the segments are not useful. All too often we see marketing departments commissioning data mining without specifying clearly how they want to use the resulting segments. Find us some clusters is not a project brief. The analysts will find you clusters without any problems, but they will not be commercially significant or deliver the bottom-line benefits that you need.

2. Survey your customers to obtain behavioral segment descriptions

Sometimes the database clusters may be sufficient. Maybe you only want to improve the targeting of some existing campaigns. But if you want to consider developing new campaigns or new propositions then you need at least some business understanding of these customers. Not just what they do (step 1) but also who they are(step 2). Usually you will to this by asking them. You take a small random sample and interview them about who they are. This is classic market research and there is plenty of available literature on the subject. You know what you need to do, just realize that your organization is probably not very good at it unless it is a specialized agency and it has a large budget (which is rarely cost-justified). But it doesnt have to be perfect, it has to be useful. You can (and should!) almost always trial your campaigns first to see if they really deliver what you expect.

3. Determine your market strategy and your companys position in the market
Youll want to understand your organizations desired position in the market so you can develop the right segments witht he right propositions. It is that vision thing again. You need to have a vision for your company and where it is going. As a marketing manager, it is your responsibility to translate this into customer segments. Who are our customers. Who are our non-customers? Who are our customers that are not using all of our services or products? How do we target

them better and how do we articulate the value that we as a company can add to their lives. You need this when you want to develop new campaigns, new marketing messages, and new propositions.

4. Determine your strategic segments

This is segmentation as a strategic business tool. Youll want to understand your organizations desired position in the market so you can determine which segments to develop. Depending on how strategic the marketing department is considered with the company, and depending on the status and ambition of the marketing manager, this may be a step too far. But if you want to play at the top table this is what you do. One company we worked with commissioned additional market research on their segments to measure them on two dimensions: lifetime value (x-axis) and how well the segment was aligned with the organizations strategic direction as expressed in its vision (y-axis). They then focused their attention on the segments to the right of the dotted line. That does not mean giving up on the others, but most of new campaigns and propositions target the strategic focus segments. This picture proved to be an important tool in communicating at the CXO level what the company was about, where it was headed, what the challenges were, and where the opportunity lay. This is an extremely powerful tool.

5. Needs-based segmentation for proposition development

There may not be enough growth opportunity in your strategic segments from the previous analysis. Or maybe you are responsible for developing new

propositions. In that case you want to develop an needs-based segmentation not just of your customers but of the whole market. You can start with your customers and understand their needs, especially the needs your company is not currently fulfilling. In fact, you should start by analyzing and questioning your customers since (a) it is much easier to sell to an existing customer and (2) you (probably) know who they are so they are easy to contact. Eventually you will probably want to commission market research to identify unmet needs in the general population of potential customers. But this is expensive research and it is hard to make sure you develop the right offers and very expensive to bring them to market. So make sure you get the most of your existing customers.

Organizational alignment to make use of segments

We will talk more about this some other time. But as the marketing manager it is your responsibility to clearly demonstrate the business value of the segmentation that you are developing at each step in the process and to ensure organizational buy-in to use them as the reference for communication and activities. Segments are not just for marketing.
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1.
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Over the last years we have been doing a tremendous amount of customer segmentation work with the marketing departments in companies across a number of industries. We have experienced that there are many misconceptions about what segmentation really is, why we do it, and what we can expect to achieve from it. In this first article in a series, we look at the goals and objectives you should set yourself for the customer segmentation effort.

3 things we want from a segmentation of the customer

2.

Inflow segmentation measuring new customers by value not volume

Do you have accurate and timely analysis of the quality of the customers you are acquiring? Most companies carefully track the quantity of new customers by the hour, day, or certainly the week, but it is still less common to track the quality of the inflow as it happens. It is interesting to know that we have acquired, say, 1000 new customers today, but so very much more informative to know that this inflow will bring in 22,000 of revenues over the next year at 35% margin. Break it down by channel and product to see who is performing and who is not, and I as a marketing manager get really excited: I have the tools to do my job! Monitoring the quality of the inflow and understanding the reasons for change is essential. After all, if your new customers are of lower

quality than your existing base, then you are setting your company up for difficulties over many years to come. Considering how much companies typically spend acquiring each new customer, this really should be a no-brainer. And yet many companies are completely unnecessarily stuck at reporting sales by volume instead of value.

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Customer equity and market value in the UK mobile

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ROC : Direct marketing and the tragedy of the

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Join the discussion

Q.2 Discuss the challenges involved in services marketing. [10 marks]
Services marketing is a sub field of marketing, which can be split into the two main areas of goods marketing (which includes the marketing of fast moving consumer goods (FMCG) and durables) and services marketing. Services marketing typically refers to both business to consumer (B2C) and business to business (B2B) services, and includes marketing of services like telecommunications services, financial services, all types of hospitality services, car rental services, air travel, health care services and professional services. Services are economic activities offered by one party to another. Often time-based, performances bring about desired results to recipients, objects, or other assets for which purchasers have responsibility. In exchange for money, time, and effort, service customers expect value from access to goods, labor, professional skills, facilities, networks, and systems; but they do not normally take ownership of any of the physical elements involved.[1] There has been a long academic debate on what makes services different from goods. The historical perspective in the late-eighteen and early-nineteenth centuries focused on creation and possession of wealth. Classical economists contended that goods were objects of value over which ownership rights could be established and exchanged. Ownership implied tangible possession of an object that had been acquired through purchase, barter or gift from the producer or previous owner and was legally identifiable as the property of the current owner. Adam Smiths famous book, The Wealth of Nations, published in Great Britain in 1776, distinguished between the outputs of what he termed productive and unproductive labor. The former, he stated, produced goods that could be stored after production and subsequently

exchanged for money or other items of value. But unproductive labor, however honorable, useful, or necessary created services that perished at the time of production and therefore didnt contribute to wealth. Building on this theme, French economist Jean-Baptiste Say argued that production and consumption were inseparable in services, coining the term immaterial products to describe them.

A recently proposed alternative view is that services involve a form of rental through which customers can obtain benefits[2]. What customers value and are willing to pay for are desired experiences and solutions. The term, rent, can be used as a general term to describe payment made for use of something or access to skills and expertise, facilities or networks (usually for a defined period of time), instead of buying it outright (which is not even possible in many instances).[3][4] There are five broad categories within the non-ownership framework 1. Rented goods services: These services enable customers to obtain the

temporary right to use a physical good that they prefer not to own (e.g. boats, costumes) 2. Defined space and place rentals: These services obtain use of a defined portion

of a larger space in a building, vehicle or other area which can be an end in its own right (e.g. storage container in a warehouse) or simply a means to an end (e.g. table in a restaurant, seat in an aircraft) 3. Labor and expertise rental: People are hired to perform work that customers

either choose not to do for themselves (e.g. cleaning the house) or are unable to do due to the lack of expertise, tools and skills (e.g. car repairs, surgery) 4. Access to shared physical environments: These environments can be indoors or

outdoors where customers rent the right to share the use of the environment (e.g. museums, theme parks, gyms, golf courses). 5. Access to and usage of systems and networks: Customers rent the right to

participate in a specified network such as telecommunications, utilities, banking or insurance, with different fees for varying levels of access and use.

Q.3. What do you mean by customers service perception and how to influence customer perceptions? [10 marks]
ustomers value services in a significantly different manner than traditional software products. Customers judge the value of the service in terms of Service Quality. Traditional service

industry, which has been around for quite some time :), can provide valuable insight into customer perception of service quality. In Delivering Quality Service: Balancing Customer Perceptions and Expectations by Valarie A.; Berry, Leonard L.; Parasuraman, A. Zeithaml (Free Press, 1990), the authors present the relative importance of five dimensions of service quality from customer perspective based on service industry research. I think this research, although it predates S+S, is still very much applicable to S+S/SaaS space.

Reliability: Ability to perform the promised service dependably and accurately Responsiveness: Willingness to help customers and provide prompt service Assurance: Knowledge and courtesy of employees and their ability to inspire trust and confidence Empathy: Caring and individualized attention Tangibles: Physical facilities, equipment and appearance of personnel If you interpret these results in the context of S+S/SaaS, reliability of the service (which reflects technical quality) is most important but can get us only to the one-thirds the way to delivering quality service to customer. Rest two-thirds (which is process quality) journey of delivering quality service to customer is all about supporting the delivery of the service (how to deliver as opposed to what to deliver)!!! This finding matches with another service industry finding that only 30% of incidents that prompt customers to switch service providers are related to core service failure or technical reasons. 70% incidents are related to service encounter failures which are related to how companies interact with the customers. So in S+S/SaaS business model (esp. subscription-based) where you live and die by CLV (Customer Lifetime Value), process quality features of the service play very crucial role in successful service offerings. These process quality features have to be designed from the start (along with the technical features) and not as an afterthought.

These findings are of significant importance for any software company that wants to be a service provider as well and be successful in that business.

Master of Business Administration-MBA Semester 3 MK0006 Services Marketing and Customer Relationship Management - 2 Credits Assignment Set 2 (30 Marks) Note: Each question carries 10 Marks. Answer all the questions.

Q.1 Create an appropriate marketing mix for telecommunications organisation. [10 marks]

Mobile phones were originally used in the 1940s after the II world war in vehicles such as taxi cab radios, two way radios in police cruisers; Agar (2003) claimed that the success of this car radio telephony and AT & T highway service between New York and Boston in 1947 was the beginning of mobile telephony success story. The first fully automated MTA (Mobile Telephone System A) was commercially lunched by Ericsson in Sweden in 1956 but have a disadvantage of weight as it weighs 40kg, although in Europe, radio telephony has been in use since 1926 in Germany between Berlin and Hamburg on first class passenger train (Wikimedia 2007). But it was just in 1995 the mobile telecommunication became low cost, rich in features, and the mode of communications world wide (Tom Farley 2005). In 1971, ARP network was lunched in Finland and was considered a zeroth generation (0G) which provides slightly wider network coverage compared to the early and proprietary network. Following this was the first generation (1G), this are handheld mobile phone known as Motorola DynaTAC8000X which was a phone based on cellular network with multiple based stations located relatively close to each other. Next on the scene is the second generation 2G which includes the GSM, iDEN, IS-136 and IS-95 technology, it was used massively across the world. (Wikimedia 2007). But the third generation technology 3G has proven to be more sophisticated and has challenged the 2G technology, the sequence of this generation indicates increasing capacity (higher transmission speed) and richer message (Dunnewijk T., & Hulten S. 2006)

3.1.2 Mobile telecommunication industry progression The mobile network operation began in 1985 in the UK with Vodafone and Cellnet (now Telefonica 02), the market was then categorised as duopoly market structure until two other network operators were also licensed in the early 1993 (Cave & Williamson 2006). Despite the entrance of these two network operators, Vodafone and Cellnet still maintain 40% each of the total market share and were considered to have strong market power (Valletti & Cave 1996) which also was one of the reasons for the intervention of Ofcom. The government developed a policy to regulate the pricing system by creating a competitive marketing environment which allows the interplay of different marketing strategies from the existing operators and the new entrants. The UK market is not an exception of European mobile telecommunication as the mobile phones became increasingly used for business and personal activities worldwide (Tom Farley 2005). Table 1 show the percentage increase in the use of mobile telephone across Europe. Table 1 Fixed and Mobile phones connections in percentage of population 1993-2002 European Union -25 Main telephone lines Public payphones Cellular mobile subscribers 1993 40 2 2 2002 51 2 76

Sources: ITU, yearbook statistic, telecommunications service 19932002 The industry is well regulated but however, in an attempt to figure out whether the industry progression is standard created market or market created standard, economist have argued that free market system of high competition is the best guarantee for technological progress and market growth while some government advocates argument negates this argument (Harald Gruber 2005). For the purpose of this study, the contemporary market forces and strategies adopted by different network operators will be critically examine as the industry over the past decade has been reshaped by commercial forces and technological change (keynote 2006). So this dissertation work shall also anticipate five years future market trend and weather or not

commercial activities and rapidly changing technology will still be the industry driving forces
Q.2 What is CRM? Explain the emerging concepts in CRM. [10 marks]

Customer relationship management (CRM) is a widely-implemented strategy for managing a companys interactions with customers, clients and sales prospects. It involves using technology to organize, automate, and synchronize business processesprincipally salesactivities, but also those for marketing, customer service, and technical support.[1] The overall goals are to find, attract, and win new clients, nurture and retain those the company already has, entice former clients back into the fold, and reduce the costs of marketing and client service.[2] Customer relationship management describes a company-wide business strategy including customerinterface departments as well as other departments.[3] Measuring and valuing customer relationships is critical to implementing this strategy.[4]
Contents
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1 Benefits of CRM 2 Challenges 2.1 Complexity 2.2 Poor usability 2.3 Fragmentation 2.4 Business reputation 2.5 Security concerns 3 Types/variations 3.1 Sales force automation 3.2 Marketing 3.3 Customer service and support 3.4 Appointment 3.5 Analytics 3.6 Integrated/Collaborative 3.7 Small business 3.8 Social media 3.9 Non-profit and membership-based

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4 Strategy 5 Implementation 5.1 Implementation issues 5.2 Adoption issues 5.3 Statistics 5.4 Increasing usage and adoption rates 5.5 Help menus 6 Development 6.1 Clarity 6.2 Test users 7 Privacy and data security system 8 Market structures 9 Related trends 10 See also 11 Notes

[edit]Benefits

of CRM

A CRM system may be chosen because it is thought to provide the following advantages: Quality and efficiency Decrease in overall costs Decision support Enterprise agility Customer Attention

[edit]Challenges Successful development, implementation, use and support of customer relationship management systems can provide a significant advantage to the user, but often, there are obstacles that obstruct the user from using the system to its full potential. Instances of a CRM attempting to contain a large, complex group of data can become cumbersome and difficult to understand for an ill-trained user. Additionally, an interface that is difficult to navigate or understand can hinder the CRMs effectiveness, causing users to pick and choose which areas of the system to be used, while

others may be pushed aside. This fragmented implementation can cause inherent challenges, as only certain parts are used and the system is not fully functional. The increased use of customer relationship management software has also led to an industry-wide shift in evaluating the role of the developer in designing and maintaining its software. Companies are urged to consider the overall impact of a viable CRM software suite and the potential for good or harm in its use. [edit]Complexity Tools and workflows can be complex, especially for large businesses. Previously these tools were generally limited to contact management: monitoring and recording interactions and communications. Software solutions then expanded to embrace deal tracking, territories, opportunities, and the sales pipeline itself. Next came the advent of tools for other client-interface business functions, as described below. These tools have been, and still are, offered as onpremises software that companies purchase and run on their own IT infrastructure. [edit]Poor

usability

One of the largest challenges that customer relationship management systems face is poor usability. With a difficult interface for a user to navigate, implementation can be fragmented or not entirely complete. The importance of usability in a system has developed over time.[5] Customers are likely not as patient to work through malfunctions or gaps in user safety,[6] and there is an expectation that the usability of systems should be somewhat intuitive: it helps make the machine an extension of the way I think not how it wants to me think. An intuitive design can prove most effective in developing the content and layout of a customer relationship management system.[7] Two 2008 case studies show that the layout of a system provides a strong correlation to the ease of use for a system and that it proved more beneficial for the design to focus on presenting information in a way that reflected the most important goals and tasks of the user, rather than the structure of the organization.[8] This ease of service is paramount for developing a system that is usable.[9] In many cases, the growth of capabilities and complexities of systems has hampered the usability of a customer relationship management system. An overly complex computer system can result in an equally complex and non-friendly user interface, thus not allowing the system to work as fully intended.[10] This bloated software can appear sluggish and/or overwhelming to the user, keeping the system from full use and potential. A series of 1998 research indicates that each item added to an information display can significantly affect the overall experience the user.[11] [edit]Fragmentation

Often, poor usability can lead to implementations that are fragmented isolated initiatives by individual departments to address their own needs. Systems that start disunited usually stay that way: siloed thinking and decision processes frequently lead to separate and incompatible systems, and dysfunctional processes. A fragmented implementation can negate any financial benefit associated with a customer relationship management system, as companies choose not to use all the associated features factored when justifying the investment.[12] Instead, it is important that support for the CRM system is companywide.[13] The challenge of fragmented implementations may be mitigated with improvements in late-generation CRM systems.[14]

Q.3 How to formulate and implement effective CRM strategies? [10 marks]
The business imperative for 2003 is top-line growth initiatives that increase customer profitability. According to a new CRM magazine/ A.T. Kearney survey, the two leading factors driving companies' CRM strategies are increasing customer loyalty and retention, and maximizing customer profitability. How do companies achieve these goals in an uncertain market? The pending economic recovery will have different effects on companies that have tailored their CRM programs to the new economic realities. Winners will be those that capitalized on the downturn and prepared for increasing the value of customer relationships. Companies that want to lock in customer loyalty and maximize profitability need to employ four CRM tactics: 1) build a customer growth strategy upon a CRM foundation of strategic intent and cost management; 2) avoid the CRM whipsaw effect; 3) don't buy into the technology silver bullet; and 4) measure satisfaction with CRM. These tactics will ensure that CRM programs can successfully adapt to the pending changes in the economy. Build a Customer Growth Strategy Businesses must build top-line growth strategies upon the foundation of their CRM programs by ensuring that strategic intent and cost management measures are institutionalized. Many companies have not determined strategic intent or have not focused on developing clear metrics to measure performance. Yet many have done some cost-cutting within customerfacing functions and lowered their cost-to-serve just to reduce the overall cost of sales. These cost-structure changes should be modified to invest in these fields of CRM so that growth strategies gain some early wins, no matter what state the economy is in. As the economy turns into recovery, the winners are likely to be those who have not only stabilized their customer service and sales costs, but those who are improving the effectiveness of customer retention and loyalty programs. Improved customer segmentation, customer satisfaction, and service strategies should be tailored in downturns and expanded in upswings, but need to remain long-term goals of any successful CRM program. Avoid the Whipsaw Effect Senior management commitment is critical to the success of any major corporate initiative. CRM is certainly no exception. In fact according to the CRM magazine/A.T. Kearney survey results, IT decision-makers ranked executive sponsorship as the most important factor for maximizing the return on their CRM investments. If CRM initiatives are not in the CEO's agenda, then investments in these initiatives have a much lower probability of success. Additionally, because CRM is a fundamental shift in the way a company does business with its

customers, rather than just a one-time e-business initiative, it requires continuous leadership support over multiple years. This type of long-term senior management support can only be achieved and maintained if a long-term strategic plan is developed. The time frame also requires the strategic plan to have built-in contingencies for the ups and downs of the business cycle. Without this type of flexible strategy, companies get caught in a CRM whipsaw: overinvesting in one year and then cutting to the bone in the next. The result is unrealized investments, squandered opportunities, and a loss of employment for the CRM champion. The whipsaw may affect users as well. Employees whose new customer-centric behaviors enable CRM success can get caught in the whipsaw if communications about customer strategy and CRM processes are not clear or consistent throughout changes in the business cycle. Don't Buy in to the Technology Magic Bullet The CRM vendor landscape is changing rapidly. Placing all bets on a single vendor or technology can prove disastrous. The unstable economy has caused a vendor shakeout. It has reduced the number of CRM vendors, but also has enabled the strongest companies to survive with the best integrated offerings. Strong vendors, after acquiring or merging with smaller niche vendors, still have to refine the resulting integrated offerings. Even so, research indicates software functionality is not the prime factor in selecting a CRM vendor. Financial viability and ROI remain the most important factors in selecting a vendor, and reflect the fact that the best-of-breed approach in recent years has left a number of companies holding the bag of unsupported applications. The focus on vertical expertise has also been increasing. Companies stung by the challenges and high costs of customizing standard applications are demanding that the major vendors of the CRM world ensure that vertical customizations are prebuilt into the application they install. Customers are focusing on implementing the best vertical application available. This shift has also been pressuring vendors that have not caught up with the verticalization wave or have poorly packaged and standardized their industry experience within applications. Measure Satisfaction With CRM Measuring CRM success has often been elusive, but it is possible to measure satisfaction with CRM. Companies have often measured success either by ROI or by changes in customer satisfaction to justify CRM benefits. Although capturing ROI and preventing CRM budget expansion is important, the CRM magazine/A.T. Kearney research indicates that 60 percent of companies claim their CRM initiatives met or exceeded expectations. Of the rest, 25 percent did not set expectations. So for the moment, there appears to be more satisfaction with CRM projects than not. However, ROI generally measures the internal return of a technology/ process or organization improvement project. In the survey, external measures like customer satisfaction, retention, and profitability--often the best indicators of how well customers view their overall relationship with companies--were selected by only 37 percent, 33 percent, and 22 percent respectively. This leads to two possible conclusions: 1) given the challenges of deploying CRM initiatives and effecting customer change, companies may be assigning lower levels of expected success without engaging their customers; or 2) companies are embarking on expensive CRM initiatives without understanding the drivers of their customer satisfaction, retention, and resulting profitability. In either scenario, companies are shortchanging themselves by reducing the future value of their customer relationships and placing the long-term success of those relationships at risk. From an internal perspective, ROI was the dominant metric used to measure returns, though notably 21 percent of respondents didn't know how their companies measured return. As for time-to-return after project completion, most of those surveyed were split between the six- to 12-month time frame and more than one year. This is on average longer than most e-business initiatives, and reflects the fact that CRM often involves multiple channels and functions undergoing organizational, process, and technology changes. Given the complexity and level of investment in CRM, companies need to ensure they understand the drivers of value in their customer relationships before they embark on major

initiatives, as well as build robust business cases for internal measures of CRM success. Plan for Growth Up to 44 percent of companies do not have a strategic plan in place, although many respondents are planning or implementing CRM initiatives. Those that do not have one in place are likely to be out of position to reap benefits from CRM. As benefits from CRM take longer on average than benefits from e-business, there will be a lag between the companies that have a plan that can execute and those that will need to start a strategic plan. Developing a CRM strategic plan takes one to two quarters, which is about the duration of catch-up that companies without a current plan will face. While cost reductions will provide a sound CRM foundation, the real benefits come from top-line growth--and these gains should be pursued within a CRM program no matter which way the economic pendulum is swinging. Those companies that don't have a sound CRM strategy should use the current economic downturn to begin developing their strategy to include both short- and long-term scenarios with ranges of ROI for different CRM initiatives. Then, depending on how and where the economy improves, their focus will be on executing against the best scenario. Those with plans should prepare their customer-facing units for the economic recovery ahead and ensure that the organization is aligned with incentives for growth. Those companies with initiatives on hold should have implementation plans drafted so they may ramp up quickly when CRM budgets are restored. It is this advanced planning--along with building a customer growth strategy, avoiding the CRM whipsaw effect, avoiding the technology silver bullet, and measuring satisfaction with CRM--that will increase customer loyalty and retention and maximize customer profitability.