A Case Study of Ping an Life Insurance Company of China - Dissertation Example

A Case Study of Ping an Life Insurance Company of China 2.0. Literature review 2.1. Importance of implementing CRM system The international business platform is becoming increasingly competitive. Businesses in the modern world consider consumers as one of the most important elements that determine the business outcome. In the competitive markets, development and maintenance of good customer relationship is indispensable for the success and survival of an organization in the long term. In this context, the concept of Customer Relationship Management (CRM) has evolved and it has gained significant importance in the global business scenario. In the emerging markets, customer management theories are being practically considered in the decision making processes of business firms. At present, Chinese firms are increasingly applying the CRM system with the aim of facilitating good customer relationship. In the competitive framework of market, choices and decisions of customers play an important role in the performance of businesses. Customers are the key element that plays at important role in the survival of business firms (Cheng, 2005). CRM systems allow firms in China to focus on the customers and take greater care of their demand through more personalized service offerings (Dyche, 2002). It has been found through research that wining a new customer is almost five times more costly to a firm than retaining the existing customers. On the other hand, an additional 5 percent of existing customers are capable of increasing the profit by nearly 100 percent (Cheng, 2007). This shows that it is very important for management to implement the CRM system in their organizations. CRM is one of the modern day developments that have taken corporate organizations to a greater level of business. Chinese firms are adopting the CRM system fast. This process involves implementation of software that would record the details of the company’s relationship with its customers through performance of various indicators. Several advantages have been found to be associated with the process of CRM and various benefits accrues to the companies that implement this system. However, certain limitations are also associated with the process of CRM. Ping An Life Insurance Company of China, Ltd. recognizes the importance of CRM. The company was established as a major subsidiary of the parent company, Ping an Insurance (Group) Company of China, Ltd. In the year 2002, Ping was the first company in China that had a shareholding structure. Gradually Ping An Insurance Group has grown and has began offering various financial services including insurance products as core services and banking, securities, and investment services as tertiary businesses (Ping An, 2009). The CRM system helps the organization to focus on the business processes, marketing processes and customer service offerings of the company. This leads to development of client relationship and maximization of ‘customer value’ in long run. In essence, implementation of CRM has brought a shift within the company from being a production oriented organization into a customer-oriented organization. After implementing CRM, the company improves its communication channels. The information technology (IT) system acts as a coordinating agency across the different levels of operations (Kanji, 2002). Since the organization becomes more customer-centric, it also needs to train its employees in order to make them more involved into the business process and more efficient. This entire process makes the organizational structure more concrete, improves employee training system and enhances the reward system (Chen and Popovich, 2003; Ed, 2008). 2.2. Strategies and performances of the CRM application CRM plays an important role in enhancing customer value and in turn increases shareholder value. Among Chinese firms, three perspectives of relationship management with customers are most commonly identified. When strategies are developed using the CRM system, it leads to a cross-functional and process-oriented approach towards management of customers. The five different stages of CRM process involve strategy development, value creation, integration among various channels within the organization, management of information and performance assessment. For successful functioning of the CRM system, the different processes within the system have to work in a synchronized manner and merge into a distinct process-based framework (Cheng, 2006). CRM is not a definite closely defined theorem, but relates to a continuum of different levels of customer management. CRM process might be useful if applied to any particular project (Peel and Gancarz, 2002). However, firms should strive to use CRM as a holistic approach for managing customer relationships and create high shareholder value. Although this process is directed towards betterment of relationship with customers, internally it also improves the existing training and development programs meant for the employees (Wang et al., 2004). Implementation of CRM involves rethinking of the existing customer management processes and reengineering them for making them more customer-oriented (Cheng, 2008). Different strategies are advocated by managers of different Chinese organizations for improving relationship with the customers. These strategies are also supported by academic researchers in their research work (Tien et al., 2006). It has been widely supported that implementation process should begin with identification of the tasks that play a critical role in the achievement of organizational goals. Secondly, each of the strategies should be developed in such a way that it should add to process of value creation. Thirdly, these processes should not be confined to any particular project or issue. Rather, they should be applied on a macro level so as to envelop the operations of the entire organization. Finally, these strategies should be able to manifest clear relationships between the organization and the Chinese customer base. The business strategy of the organizations should demonstrate a close connection with the customer strategy (Payne and Frow, 2005). Business Strategy The business strategy of an organization should be developed in such a way that it is capable of determining the customer strategy. Business strategy of an organization should also help in evolution and restructuring of the customer strategies over time (Goldenberg, 2008). The business strategy process therefore, has an integral relationship with the mission and vision of the company (Davidson, 2002). Customer Strategy Customer strategy typically refers to the responsibility of the marketing department to improve relationship with the existing customers and also establish good relationship with potential target customers. Customer strategy entails examination of the existing as well as the potential customer base (Wang, 2013). It helps to identify the methods of customer segmentation and sort out the most appropriate methods. Marketing might be done on a one to one basis or in a mass marketing style. The method of marketing depends on two factors, the business aims of the organization and the demographic characteristics and preferences of the target market in which marketing activities are made. Use of internet has become widespread in the globalised world and has become more integrated with the current business platform. This channel of communication has allowed the organizations to convey their message to greater segments of the population and is cheaper than most other sources of marketing. E–commerce has evolved as one of the most popular channels of business interaction (Wang and Feng, 2012). The process of strategy development involves a two stage process; firstly, detailed assessment and evaluation of the business strategies of the organization and secondly, development of a customer strategy that suits the target customers the most. These two strategies would provide a solid platform to the organization for the development and implement of CRM activities. Case Study Analysis Ping An Life Insurance Company of China, Ltd. Ping An has a well established CRM process. The company has more than 10,000 permanent employees and almost 8,000 temporary employees that act as insurance salesmen for the company. Employees are at the centre of customer relationship management since they are chief agents that interact with the customers. Ping An has a strategic way of promoting its brand. Salesmen of Ping An play the dominant role in advertising the company’s name and its product offerings. Hence, for the division of the company that deals with life insurance products, promotion by the insurance salesmen acts as the first step towards building of customer relationship and also the channel through which this relationship is maintained (Ping An, 2009). The company has segregated the existing customer into different groups that belong to different zones of Customer Pyramid (Chikweche and Fletcher, 2013). Type-A customers are the high end customer group. They account for 1 percent of the total customers of the company and sales made to them is almost 45 percent of total value of sales of Ping An. These customers are categorized as platinum customers. Followed by the platinum customers are the gold customers (accounting for 18 percent of total sales), silver customers (accounting for 12 percent of total sales) and the lead customers (accounting for 25 percent of total sales). The lead customers are the initial stage of customers and form the low end group. They account for approximately 85 percent of the total number of customers (Deng, n.d.). This customer segmentation allows the company to assess the needs of the customers and also evaluate the performance of the CRM application. Customer satisfaction is one of the greatest indicators of performance of the CRM system. 2.3. Limitation of CRM system The process of CRM has evolved from the system of sales force automation within an organization into an application that controls the mind-setting within the company. This system has changed the perception of customer relationship management and organizations have now become more customer-centric. Along with this evaluation, needs of the customers have changed and the companies are required to continuously modify their strategies with regard to customer relationship development and maintenance. Chinese companies are making efforts to integrate their business needs with the customer needs, which provide increased opportunity for the application of CRM processes (Raab, 2008). In insurance sector, CRM has found huge importance since customer relationship is crucial for sales of insurance products in China. However, recent detailed research works have shown that there are several limitations of the CRM process. Despite the many advantages associate with the implementation process of CRM, the direct and basic limitation of this process is increasing customer dissatisfaction and lack of customer loyalty. Research reports reveal that almost 70 percent of CRM projects in China have become unsuccessful due to less than expected improvement in performance of the organization (Soeini, Jafari, and Abdollahzadeh, 2012). The most popularly experienced disadvantages of CRM are overhead costs, loss of record and training costs. Companies use the internet to collect and store customer records that are used in CRM applications. The main disadvantage of this kind of CRM application is lack of control over the data by the company. The data might be lost in case of an outage. Private and sensitive information related to customer records might be accessed by external agencies if the company or the service provider does not maintain strong security policies. The company also needs to keep local backups in order to avoid loss of record. For using some advanced CRM software, Chinese companies need to pay usage charge or rent to the company that provides the software to the user organization. Alongside, the organization also needs to bear maintenance cost and administrative costs for smooth running of the software. Keeping backup requires additional time as well as resources. For maintaining sensitive data, companies have to develop personalized CRM applications, which require high cost of development as well as maintenance. Additionally, it must be noted that CRM system is a new process and companies are gradually adopting it. Therefore, companies have train their employees to use the software efficiently and without making operational error. Presence of such error would lead to wrong conclusions. For small organizations, training requirements are less since they operate at small scale and also have to train lesser employees to make them use the software. But in larger organizations, new professionals have to be hired who can train the employees. Training programs take away some time that can be used for productivity purposes. Thus, in the short run it can be seen as a cost to the company. Managers need to learn extra functions in this system since they have greater responsibility than other staff which implies increase in their workload. Reference List Cheng, H. H., 2005. The influence of continuous improvement and performance factors in total quality organizations. Total Quality Management & Business Excellence, 16 (3), pp. 413–437. Cheng, H. H., 2006. Technical and management perceptions of enterprise information systems importance, implementation and benefits. Information Systems Journal, 16(3), pp. 263–292. Cheng, H. H., 2007. 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