Customer Relations

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1. Customer Relationship Management (CRM)

In the next two sections we will look at two case studies, from the chemical and medical industries, on the impact of Information and Communication Technologies on CRM adapted from Chaffey (2004) and from Case Studies at Responsys web site (www.responsys.com accessed January 2013) respectively.

B2B CRM - Shell Chemicals

An example of a CRM initiative is Shell's SIMON (Shell Inventory Managed Order Network).

This example could be described as one of electronic "Value-Chain Management" since the system incorporates both supply-chain and customer relationship elements.

'Shell Chemical redefines its customers' supply chain: Shell Chemical manufactures the chemicals used by other manufacturers of many industrial and consumer products. Shell's customers use detergents, solvents, plastics, etc., to produce goods that range from aircraft parts and car paints to nappies and plastic bottles. Within such an organisation, supply chain management has a dramatic impact on profits. The managers of Shell's SIMON believe that supply chain management refers to both the upstream and downstream relationships. Shell used SIMON to turn around their downstream supply chain processes (for example: the ones dedicated to getting goods to their customers). Since SIMON, a Lotus Notes e-business application was successful in the downstream process it was then applied to its upstream processes (for example: acquiring raw materials from suppliers).

Implementation: SIMON is described by Shell as a Notes-based corporate extranet acting as a customer inventory management system. This represents a change from the industry standard practice of using electronic data interchange (EDI) forms, telephone orders, and paper invoices to communicate with customers. EDI didn't give Shell the flexibility it needed to accommodate data on exceptions and processes. Accordingly, the company invested roughly $200,000 and two months to set up the system at the first site; from where it has expanded to over 50 major customer accounts. The managers of the system state that SIMON enables the transfer of responsibility for inventory management from customer to supplier as there is no need for a Shell Chemical customer to place an order. Through SIMON, Shell is able to proactively keep vital inventory on their shelves as they are the sole-source supplier. As a result, customers pay only for what they consume. According to Shell managers, this is a cutting-edge supplier/customer business model that is built on a relationship of mutual trust and a belief that there are significant benefits to be realised on both sides.

Traditional Operations Model: Before the introduction of SIMON, there was a danger that Shell's customers might run out of an essential chemical, so plant time and then revenues are lost. To avoid this, companies tend to maintain safety stock levels. Re-ordering then occurs when inventory gets too close to these safety stock levels. The difficulty is that a typical re-supply order takes about two weeks from the time the order is placed. This delay occurs since chemicals must be weighed at the plant, loaded onto suitable transport and then sent to the customer, who then weighs the materials at the other end before moving them into inventory. Miscalculations tend to lead to rush orders. Rush orders are more expensive and quite common. Billing was inefficient; an invoice was sent out for every single suitable transport load of a product that was sent from Shell to their customer.

New Operational Model: The new arrangement is known as Supplier-Managed Inventory (SMI). Since companies are wary of running out of stock they traditionally tend to use inflated safety stock levels. Maintaining excess inventory is a very costly process since it eats into working capital. In the new system information on stock levels is replicated back to the Shell customer service centre in Houston, Texas, where Shell can reconcile it with their SAP Enterprise Resource Planning (ERP) system. A Shell account service representative is automatically presented with a re-supply plan. If the plan indicates that stocking levels at the customer site are low, the representative fills out an electronic purchase order and initiates a new shipment to the customer. Previously, the customer would have had to explicitly initiate each new order. Now, once a month, instead of once per suitable transport load, an invoice is generated. Hence, the invoice is based on consumption figures, instead of shipments.

New Functionality: Using the new SIMON application that the customer accesses from a Notes client, the customer can find out current levels of stock, consumption and goods on-order, including estimated dates of arrival and shipment weights. Access to this and other information retrievable from SIMON, facilitates cost-saving synchronisation of the supply chain and eliminates expensive excess inventory, which means an increase in working capital.

Results: SIMON was first introduced to 23 of Shell's largest, most strategic customers during summer 1996. Within 12 months, Shell experienced a $20 million increase in additional product sales, and Shell stated that its customers were reporting increased flexibility in its acquisition and delivery processes. Shell also stated that there were more sole supplier accounts as a result of this system, suggesting it is giving rise to some lock-in. In the second phase, Shell extended SIMON to its suppliers, enabling suppliers to manage the inventories of items they provided to Shell so that Shell could achieve similar benefits to its customers.

As we can see from the above case study, B2B CRM can often be seen as a form of supply chain management.

Reflecting the fact that the business under analysis occupies a position as both supplier and buyer within the industry value chain.

CRM development can have an equally significant impact on an organisation implementing B2C e-commerce, as the next case study demonstrates:

B2C CRM - Oticon

Oticon primary goal is to try to create an organisation that could respond better to customer needs.

Oticon Connects Doctors and Patients Over The Internet'

Responsys CRM solution yields response rates of up to 95%: “I am really very happy with Responsys Interact, I know that it is protected and safe, and I find it very easy to use. I'm on it every day” - [user], Oticon, Inc.

The Challenge: How to Keep Doctors in Touch with Hearing Loss Patients

As the oldest and largest hearing instrument manufacturer in the world, Oticon, Inc. has a well-established name. The company's hearing aids are sold in more than 100 countries. In 1995, the company invented the world's first digital ear-level hearing instrument, a breakthrough in hearing technology. But the company has some unique obstacles to increasing sales. Doctors, who act as distributors of Oticon's products, find it difficult to encourage patients to return to the office. Many patients visit the doctor infrequently, and use less-effective analog devices rather than more advanced digital hearing devices. In addition, many patients are unaware of technological advances available to them.

Oticon's challenge was to help Hearing Care Professionals bring patients into the office to evaluate hearing aid performance and inform them of technological advances in hearing technology. This is because hearing aids must go through fittings and testing, they are not suited to retailing online. So the company recognised that the Internet would be an ideal way for doctors to keep in touch with patients. Email is fast and cost-effective. In addition, it allows patients to establish a relationship with their doctor via written correspondence, rather than over the telephone. This is a method of communication clearly less than ideal for a person experiencing hearing loss.

The Solution: Responsys Interact

Many patients are new to the Internet, most of the doctor's offices that are Oticon's distributors find it difficult to promote themselves online. Also, the clinics do not have marketing staffs, nor much time and money to promote an online presence. Traditionally, doctors have marketed to patients by sending out direct mail pieces. For this reason, Oticon made a push to collect email addresses by using a direct mail piece as its medium. In the campaign, two types of direct mail pieces were mailed from Oticon's distributors. One campaign offered a free hearing aid battery to patients giving their email address; the other did not.

In the initial online interactive marketing campaign using Responsys Interact, recipients whose email addresses were collected by offices offering a hearing aid battery incentive in their direct mail pieces registered a 40% open rate, and 7% actually clicked through to their doctor's Web site. On the other hand, the success rates without the battery inducement were 61% open rate and a 14% click-through rate respectively; reflecting a higher rate of genuine interest by respondents in communicating with their doctor via email, beyond just getting the free pair of batteries.

Subsequent follow-up campaigns resulted in open rates of up to 95%. The most successful campaign was a simple informational message. The subject line of the campaign was “Information for You and Your Family”. The message inside explained how to use a cell phone with a hearing aid, and how to recognise an international symbol that offers benefits to people with hearing loss. Another campaign inviting patients to an open house at their doctor's office to learn about new hearing aid models resulted in an open rate of 52%. Although the doctor's offices did not provide Oticon with attendance numbers, they did say that the turnout was “very large”.

The Results: Building Solid Relationships with Responsys Interact

Overall, the effort to establish relationships online was considered a success. Oticon's doctor-distributors began building email databases, and got patients in the door that otherwise may not have visited. Oticon was able to build brand awareness and share advances in its hearing aid technology. The Responsys solution gave Oticon a method of maintaining good distributor and partner relationships, and sending leads to customers' offices. In addition hearing-loss patients were able to establish communication with their doctors online, easily and conveniently. “We've found that people enjoy conversing with their doctor via email” says Melissa Alfonso, the primary Responsys Interact user in Oticon's marketing department.

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Reference(s)
	Book		Chaffey, D. & Wood, S. (2004) Business Information Management: Improving Performance Using Information Systems. Financial Times Prentice Hall: United Kingdom (UK), England, Essex, Harlow. [ISBN: 9780273686552]. [Available on: Amazon: https://amzn.to/3yZ6vdF].
	Book		Pearlson, K. E. & Saunders, C. S. (2004) Managing and Using Information Systems: A Strategic Approach. 5th Edition. John Wiley & Sons: United States of America (USA), New York (NY). [ISBN: 9781118281734]. [Available on: Amazon: https://amzn.to/3TMqOTZ].

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Reference (or cite) Article
	Kahlon, R. S. (2013) Customer Relations [Online]. dkode: United Kingdom, England, London. [Published on: 2013-01-25]. [Article ID: RSK666-0000075]. [Available on: dkode | Ravi - https://ravi.dkode.co/2013/01/customer-relations.html].

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