Analysis of the Herborist’s success in term of Customer Relationship Management (CRM)

By | April 20, 2014

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Executive summary

 

This study has focused on the research on the business success of Herborist, a Chinese herbal cosmetic brand, which just began its business in the end of last decade, the study will be carried out around the topic of the CRM (Customer Relation Management) in four major stages. In the first stage, the study will focus on the CRM approach according to the closed loop approach after a short brief introduction of the company profile. And in the secondly stage, some CRM issue such as privacy and security have been listed out even though the CRM practices may have been considered as successful. Thirdly, recommendations have been provide to Herborist as a reference, aiming at addressing some of the problems and improve the CRM practices in the long term’s perspective. Lastly, a brief conclusion has been given to summarize the overall analysis.

 

 

List of figures, charts & tables

 

Figure 1.0 Closed loop approach to CRM (Source: Hettich 2000)……………………5

Figure 2.0 Herborist’s advertisement…………………………………………………..7

Figure 3.0 Herborist’s advertisement…………………………………………………..7

 

Table 1.0 Dual membership plans in Herborist………………………………………10

 

Chart 1.0 Chart 1 Face book user number growth trend…………………………..…10

 

 

Table of content

Executive summary………………………………………………………………………………………….. 1

  1. Introduction of Herborist……………………………………………………………………………. 4
  2. CRM approaches……………………………………………………………………………………….. 4

2.1           Analytical CRM……………………………………………………………………………. 6

2.2           Operational CRM………………………………………………………………………….. 6

2.2.1     Acquire new customers……………………………………………………………. 6

2.2.1.1Advertising……………………………………………………………………… 6

2.2.1.2Sale promotion…………………………………………………………………. 8

2.2.1.3Sales force management……………………………………………………. 9

2.2.2     Enhance customer relationship………………………………………………… 10

2.2.2.1Customer service and support………………………………………….. 10

2.2.3     Retain customers…………………………………………………………………… 10

2.2.3.1Herborist royal membership plan………………………………………. 10

2.2.3.2Social media and networking…………………………………………… 11

2.3           Collaborative CRM……………………………………………………………………… 13

  1. CRM issues…………………………………………………………………………………………….. 13

3.1           Privacy and security…………………………………………………………………….. 13

3.2           User group coverage……………………………………………………………………. 14

3.3           The evaluation of sale force performance……………………………………….. 14

3.4           Cross culture issues……………………………………………………………………… 15

  1. Recommendations……………………………………………………………………………………. 15

4.1           Control of motivation through CRM support………………………………….. 15

4.2           Adaptation of CRM approaches to cultural differences……………………. 16

  1. Conclusion……………………………………………………………………………………………… 16

Reference list………………………………………………………………………………………………… 18

Appendix 1 Herborist user survey sample…………………………………………………………. 20

1.        Introduction of Herborist

 

Herborist, a famous Chinese origin cosmetic brand, initially released to the market in Shanghai in year 1998 under the Shanghai Jiahua Corporation., ltd. By adopting a different product concept to inherit and use the traditional Chinese concept “Yangsheng, Huyan” into the cosmetic business with the usage of natural herbal and Traditional Chinese Medicine (TCM) theory and technology (Herborist.com.cn 2010) while many Chinese cosmetic competitors are eager to follow the western brand in term of product design, production and marketing plan, Herborist has set up an excellent example in the Chinese cosmetic industry. With more than a decade’s careful operation and ambition to introduce the Chinese cosmetic product to the world, Herborist’s success has close relationship with its well enacted sale CRM plan. Below the study will focus on the analysis of the Herborist’s success in term of Customer Relationship Management (CRM).

 

2.        CRM approaches

 

Customer relationship management (CRM) is a widely-implemented strategy for managing a company’s interactions with customers, clients and sales prospects. It involves using technology to organize, automate, and synchronize business processes using approaches such as sales activities, marketing, customer service, and technical support (Gartner.com 2009). CRM originated from the management concept of “relationship marketing”(Levitt 1983). The comprehensive goal of Customer Relationship management (CRM) 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. And in a strategic perspective, the target of CRM is to obtain long-term competitive advantage by optimally delivering value and satisfaction to the customers and extracting business value from the exchange (Grünewälder 2007). As show below, there are different kinds of information system which illustrate a life cycle for date in CRM, and there are three major stages of Customer Relationship Management (CRM): Analytical CRM, Operational CRM and Collaborative CRM. Below analysis of the CRM approaches will be stated according to the sequence of these three stages aiming to understand how Herborist managed achieve business success with the help of a successful CRM and sale plan.

Figure 1 Closed loop approach to CRM (Source: Hettich 2000)

2.1    Analytical CRM

 

Analytical (Customer Relationship Management) CRM, is the process used to gather, store, and analyze date from different sources to gain more insight into the preferences of customers and their value to the company (Fjermestad & Romano 2006). Since establishment, Herborist has been putting a lot of effort and resources into the user data warehouse building from scratches and such data are collected from various ways such as marketing survey, user preference investigation and membership system. One important and often used analytical tool is data mining which has been defined as a technique for extracting knowledge from large volumes of data (Koontz 2005, p76). The data mining as a scientific tool has been adopted by Herborist to filter out useful information from the mass information.

 

2.2    Operational CRM

 

2.2.1            Acquire new customers

 

2.2.1.1      Advertising

 

Advertisement that Herborist make is considered as special and unique with the feature of traditional Chinese culture and the style of Herborist could be seen in the two typical Herborist print act below. One of the major concept and idea that Herborist tries promote and tell the customers is the harmony nature side of Herborist’s cosmetic products which are natural and cause no harm to the users’ body. And according to our survey on the Herborist users chosen on a random basis, attractive advertisement is the most common reason why customers would give it a shoot to try to use the Herborist the first time in their life.

Figure 2.0 Herborist’s advertisement

Figure 3.0 Herborist’s advertisement

 

 

2.2.1.2      Sale promotion

 

Sale promotion is the most eminent marketing mix among the four Ps marketing model and the concept of promotion refer to the attempts by marketers to inform, persuade, or remind customers and industrial users to influence their opinion or elicit a response (Gitman& McDaniel 2009, p328). Sale promotion could be classified into two kinds of promotions, one is regular and routine based sale promotion and the other one is special promotion. In term of routine based sale promotion, Herborist used to hold promotional activities in a large scale during the Chinese Golden weeks (i.e. Spring festival, Labor day & National day public holidays) and other festivals as well to attract the new customers as during these holidays, there will be extraordinarily high customer flow in the major shopping malls in the cities and it is a good chance to promote and introduce Herborist’s product to the potential new customers. And sale promotion is still the major method to attract consumers’ eye ball in these festivals. Another kind of sale promotion activities is on an irregular basis which could not be anticipated in a normal sense. This irregular way of promotional activities help to attract the new customers in a random way as a supplement to the regular sale promotion.

 

2.2.1.3      Sales force management

 

Sale force are staffs who have close relationship with both products and customers, in the eyes of the customers, sale staffs represents the image of the products and even the company, so there would be significant importance for the Herborist to keep its sale force highly motivated. If the sale staffs are motivated and eager to show the customers the positive image of the company and usefulness of the products, then it is anticipated that more potential customers would try to use the Herborist cosmetic products.

 

 

 

2.2.2            Enhance customer relationship

 

2.2.2.1      Customer service and support

 

In order to raise the customer satisfaction and enhance current customer relationship and further transform the new customers into royal and regular customers, Herborist has long set up its own customer service center in charge of the product and promotion enquiry, after sale service, feedback collection shortly after its establishment in 1998 aiming at increasing the customer satifaction and enhancing the current customer relationship. By upholding and implementating the idea of “putting the customers in priority” in the customer service, Herborist use this Customer Relation Management (CRM) approach to pursuade the customers into repeative purchasing behaviors by providing quality brand experience.

 

2.2.3            Retain customers

 

2.2.3.1      Herborist royal membership plan

 

Membership scheme is one of the most frequently used techniques to retain the royal customers by providing discount and special offers to the royal customers who hold the membership card and purchase the Herborist in a regular basis. There are two kind of membership card designed to Herborist customers: Heart touching card and Heart knowing card, every customer could become a heart touching card holder by purchasing any of the Herborist product and the upgrade from a heart touch card to a heart knowing card can be done if the heart touching card holder purchase more than 800 CNY within 6 months or purchase more than 500 at one time. Different benefits will be enjoyed by different membership as shown in the table below:

 

Benefits of Heart touching cardBenefits of Heart knowing card
With possibility to enjoy the special offerWith priority to enjoy the special offer
With possibility to receive internal magazine, updated product info and activity infoWith priority to receive internal magazine, updated product info and activity info
With possibility to receive Herborist SMS noticeHerborist SMS notice
With possibility to be invited to join the Herborist saloon activitiesWith priority to be invited to join the Herborist saloon activities
With possibility to receive email noticeRegular mail notice

Table 1 Dual membership plans in Herborist

 

2.2.3.2      Social media and networking

 

Social media and networking is becoming one of the most popular and promising marketing channel in the marketing area. According to a report earlier in the previous year, among the fewer than half of marketers who have used the mobile or social apps in 2009, social networking is leading the marketing channels usage. In the western world the number 1 social networking platform is one of the fastest growing networking in the world: Facebook. According to the statistics released by Facebook official website (2010), the number of the registered users has reached 500 million as demonstrated in the chart below.

Chart 1 Face book user number growth trend

 

Similar trend is also witnessed in China though Facebooks is banned in China, with the dramatic growth of the networking website “Ren Ren Network” (previously well know as “xiaonei network”), social networking is also widely used as a marketing channel and it is even more effective among the users in the young age groups. For Herborist, it has build up its showcase in the “Ren Ren Network” and tens of thousands of “Ren Ren Network” users have been followers of the Herborist and discuss the products and exchange the Herborist products usage experience in the “Ren Ren Network”. These followers are mostly royal customers to Herborist, by encouraging the active discussion and experience sharing of Herborist’s cosmetic products. And with the effective networking, it is expected that more than more Herborist users will be invited to join the Herborist network and gradually become the royal customers by their own participation.

 

2.3    Collaborative CRM

 

Collaborative CRM contains the integration and synchronization of different communication channel (Schwede and Spies 2001) and Collaborative CRM is also called as multichannel management. Among the contact channel shown in the figure above regarding the closed loop approach to CRM, according to our survey done to the customers, the top three marketing channel through which they can access to the Herborist’s products information are: Face to face contact, email and mail.

 

3.        CRM issues

 

3.1    Privacy and security

 

Even though customers date could be very helpful in assisting the management to understand the customers but on the other hand the collection of customers’ detail, and the date mining job could also lead to another concern: the privacy and security especially in nowadays when the majority of the people are considering their privacy and security as one of their top concerns and the plethora of information out there also endangers one’e privacy and security (Sabr & Shaikh 2010). This has created a challenge for the company to collect and use the customers’ details.

 

3.2    User group coverage

 

With the fast growth of the Herborist’s expansion in China and in the oversea market, one of the CRM issues are need to be addressed is that the company may still focus the data mining on the original coverage of users leaving the users in the new rising market uncovered.

 

3.3    The evaluation of sale force performance

 

Another CRM relative issue that may pose potential risks to the company business is regarding the sale force performance. It is common sense that in term of business expansion with a fast rising trend, some problems could be covered without management’s notice and sale force performance is one of these hidden problems. The logic of the appearance of this problem is simple: actually the sale could still increase because consumers already want to purchase the Herborist product before they get in touch with the sale forces and in other words, sale performance could be higher if the sale staffs do their job to persuade customers to try and purchase the products. Another sale force performance issue is that sale people may not obtain enough of support from the management when they are faced with a higher sale goal set for them to achieve.

 

3.4    Cross culture issues

 

As a Chinese cosmetic brand, there are two major challenges when the Herborist starts its oversea expansion in term of CRM in a foreign market. One is that in a different culture, the product concept may not be in the customers’ preference. And another one problem that could make the situation worse is that the advertisement that Herborist make in the past are in a Chinese style which for whom do not have the background of Chinese culture may find it hard to read the advertisement and thus it could be a major cause that the oversea potential users may be simply discourage to try the new product because they cannot read the advertisement in a direct and straight forward way and instead in order to understand the advertisement effort and time must be consumed.

 

4.        Recommendations

 

4.1    Control of motivation through CRM support

 

Sale force could level up to a higher motivation level provided that their firm could directly and indirectly supports and help them manage the customer relationships and sales territories (Darmon 2007). For the managers in Herborist, they can use CRM approaches to assist the sale staffs to analyze and segment customer portfolio in each market to find out the most profitable segments for the sale staffs to focus their effort on.

 

4.2    Adaptation of CRM approaches to cultural differences

 

Regarding the culture differences which will certainly be encountered by Herborist when it tries to expand its business into the oversea markets, Herborist could make adaptations to its CRM approaches to reduce the cultural differences. For example, in term of advertisement which is the major method through which the potential customers get to know the Herborist branding as mentioned above, in a oversea market which has a more closed to a western cultural style, the advertisement could be designed in such a way that it is more direct easy to be understood by the western customers. And in order to determine what adaptations are effective to a certain market, before the adaptations could be finalized, it is recommended that Herborist understand the customer behavior any using the analytical CRM approach to analyze the customer information and date compared to their purchasing habits.

5.        Conclusion

 

From the analysis and discussion we have above, Herborist’s success has close relationship with its sale and Customer Relation Management (CRM) plan using analytical CRM, operational CRM and Collaborative CRM methods and techniques to manage its customer relationships in an efficient manager. By implementing such a successful CRM program Herborist manage to increase its core competitiveness and thus outperform the competitors. But there are also CRM issues that need to be noticed and addressed accordingly. What’s more the CRM plan should be built up based on the overall corporate marketing strategy which could help generate synergy effect for the overall company’s sake.

 

 

Reference list

 

Darmon, R. Y. 2007, Leading the sales force: a dynamic management process, London: Cambridge University Press, p273

 

Fjermestad, J. & Romano, N. C. 2006, Electronic customer relationship management, New York: M. E. Sharpe, Inc

 

Facebook.com 2010, Facebook Statics, accessed on 26 Nov 2010 [online] available: http://www.facebook.com/press/info.php?statistics

 

Gitman& McDaniel 2009, The Future of Business: The Essentials, Student Edition, Mason: South-Western Cengage Learning, p328

 

Grünewälder, A. 2007, Implementing CRM Systems: Approaches and Potential Problems, Germany: Grin Verlage

 

Gartner.com 2009, What’s ‘Hot’ in CRM Applications in 2009, accessed on 8th Dec 2010 [online] available: http://www.gartner.com/DisplayDocument?&id=1004212

 

Hettich, S., Hippner, H. 2000, Wilde, K. Customer relationship management (CRM), accessed on 9th Dec, [online] available: www.ku-eichstaee.de

 

Herborist.com.cn 2010, About Herborist , accessed on 8th Dec 2010 [online] available: http://www.herborist.com.cn/

 

Koontz, L. D. 2005, Data Mining: Agencies Have Taken Key Steps to Protect Privacy, p76

 

Levitt, T. 1983, After the sale is over, Harvard Business Review, 63, 5 (September- October 1983), p87- 93

 

Schwede, S. S. and Spies, R. 2001, Customer relationship management, Berlin: Springer

 

 

 

Appendix 1 Herborist user survey sample

 

How would you rate your level of satisfaction with Herborist?

A Highly dissatisfied   B Somewhat dissatisfied  C Neutral  D Somewhat satisfied E Highly satisfied

 

How often would you buy a Herborist product?

A More than once in a week   B About once a week  C Almost once a month   D Once several months   E One time for more than half a year  F Never

 

How do you know Herborist’s products?

A  Advertisement  B Friends’ and families’ recommendation  C Sale promotion

D Herborist store visiting  E News and report

 

Through what channel do you know about Herborist?

A  ATM   B  Face-to-face contact  C Phone  D Fax  E Mail   F Internet

G Email  H  Mobile Device

 

How likely would you be to recommend us to a friend or colleague?

A Very unlikely   B Somewhat unlikely     C Neutral      D Somewhat likely    E Very likely

 

What recommendations do you have or improvements would you like to see happen?