Customer Relationship Management (CRM) in Retail Industry – Assignment Case Study
This dissertation/thesis/research paper seeks to explore the impact that Customer Relationship Management (CRM) has on the retail business industry and how it relates to the key stakeholder in the relationship
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This paper seeks to explore the impact that Customer Relationship Management (CRM) has on the retail business industry and how it relates to the key stakeholder in the relationship; the customer. Another aspect covered by the paper is assessing the challenges faced by the industry, and how developments are being undertaken to overcome these.
The ability of customers to influence the policies and strategies of corporations make them the key link for the successful management of a business. It is important that an ideal solution be devised to counter any unexpected changes in trends and the environment.
The implementation of CRM has gained ground in recent years, with stronger competition driving the need to attract customers more vigorously. This paper aims to make a thorough review of various literatures on the subject, before concluding with suggestions.
Since consumers are the primary reason that businesses exist, marketing has become the core component for successful management of the organization. For most businesses, marketing can account for almost 50% of the product sale price, provided services such as distribution and promotion are accounted for in this.
For any business to succeed with its consumers, they need to establish a working relationship that understands the customer. One way of doing so is by implementing CRM. The term CRM is used to define the tools and methodologies used by an enterprise to manage the relationships it has with its customers. It forms the foundation by which a company brings sense to the needs of customers and can analyse the future changes that could develop. As knowledge is important in gaining competitive advantage in a challenging market, companies make every effort to differentiate themselves and retain customers, while reducing operational costs.
Another view of looking at CRM is as a process of learning, by which organizations can develop stronger relationships with customers having gained information on their needs and behaviours.
In order for a company to implement CRM within its organizational strategy, it is essential that the customer is regarded as the most valuable asset by the management, and the relationship considered vital for future progression. Additionally, the collaboration of various departments within an organization helps establish a defined process for data retrieval and the effective use of the information to bring positive change to the organization.
The aims of this paper are:
- To discover the implementation of CRM by businesses across the world, and the onward impact that this has on the organization’s marketing strategy;
- To assess the experience that customers gain from the CRM process; and
- To evaluate the challenges and opportunities that exist for businesses, and how they can be overcome through developments in CRM.
According to Saunders et al (2007:610), research is defined as “the systematic collection and interpretation of information with a clear purpose, to find things out”.
When conducting research, there are two approaches that can be used: Quantitative and Qualitative. Quantitative research methods usually involve large randomized samples, more application of statistical, and few applications of cases demonstrating findings (Saunders et al, 2007). The objective of quantitative research is to determine the covariance or relationship factor between two variables or entities. Qualitative research methods focus on providing a complete picture of the situation with the aim of understanding of behaviour and inter-relations (Saunders et al, 2007).
For this study, the writer has chosen to go with quantitative research to accurately collect the data as it allows for clear objectives to be defined for research, eases the data comparison process, and allows for a quick and cheap way to collect information.
The research for this paper was conducted through literature review, without any empirical work being conducted. A large resource of written material was used, which included books, magazine articles, academic journals, as well as the websites of various companies.
The analysis of numerical data, referred to as the quantitative method, is considered to be fairly accurate as it is based on the findings from actual printed material.
Generally, quantitative methods include both empirical and theoretical types. Empirical type concentrates on collecting data from evidence and experiment e.g. surveys, etc. Theoretical approaches are normally based on certain objectives, and utilise existing figures to make future projections.
In the global business world, customers have become an important aspect of success for companies, and their management is core to the fundamentals that drive the organization forward. Large corporations have taken the active step of investing heavily into various modes of relationship management, also known as CRM.
The underlying basic of CRM is to help a company by highlighting the procedures and processes for understanding a customer. Entry-level CRM software provides a company’s sales staff with valuable information about a customer, including some that could be more of personal nature. Call centre businesses often end up being the biggest users of this software (Wikipedia, 2009), by saving customer details in order to provide a more personable service in the future. However, the whole concept of CRM is not simply software. It is also the front-line staff and employees from the lowest level of the organization, who should be trained in the principles of customer relationship in order for the processes to be more effective and efficient.
As a concept, CRM is quite old in practice. Firms involved in both business-to-business (B2B) and business-to-consumer (B2C) marketing has looked for ways to acquire regular clientele’, which can also be linked to attempts of encouragement in a bid to entice loyalty in customers. The daily consumer experiences this concept at various shopping outlets, either directly or indirectly. The change to marketing and the introduction of CRM in the process can be laid down to the collaboration and cooperation of various entities of a single organization.
The CRM structure utilised for business-to-business marketing is quite different from the one used for consumer marketing (Wikipedia, 2009). Either way, it is primarily a relationship process, where companies are looking to cultivate consumers who can provide information that is beneficial to both parties of the trade. The following form the pre-requisites of a CRM program:
- For there to be mutual benefits, there needs to be commitment from the company and customer. The cost and time that is utilised for the company is justified, since CRM requires changes to organizational processes.
- An orientation towards understanding the importance of ‘non transactional processes’, which is the foundation for the creation of strategies that maintain the relationship with the customer once the original transaction is completed.
- Agreement from the organization to invest implementing in a new or revamped system that could result in changes to the current infrastructure
The requirement of CRM is different for every organization. One example of this is TISCO; a large Anglo-Saxon corporation whose area of expertise is software and compiler development. Over the years, it has undertaken market research into various segments of the consumer-base, understanding where it holds advantages for building relationships. This includes the automobile sector, where better pre-sale service would create differentiation in the end-product (Bose, 2002). In another context, Dell Computers portrays a different view, having succeeded in the computer industry with the growth of small and medium enterprises (SMEs) and home office setups. As their objectives could differ, they may focus on the large companies under the CRM programme, in order to gain loyalty.
Before a CRM programme can be formulated, a company must ascertain the true value of its customer. While loyalty and satisfaction are the more generic links for implementing CRM programmes, it is necessary for the company to set out a specific objective at the planning phase. So, if distribution costs are the objective of the corporation, a restructuring of the patterns of orders received should be looked into, after analysing the trends in consumption and the held inventory. Alternatively, if the objective is to increase sale of a particular item, the CRM program should focus on promotional activity as a means of attracting some consumer return.
The marketing concept takes an outside look and starts with a well-defined market, focuses on the needs of customers, coordinates the marketing activities which affect customers and generates profits by creating more long-term Customer Relationships (CR) (Kotler et. al., pp. 409-10). Under this concept, the paths to sales and profits are customer focus and value.
There are a number of issues arise that need to be addressed, especially when viewing the future of relationship marketing. From the customer’s perspective, there is a need to develop a relationship that is fair on all counts. This reflects the sentiments of the last few years, where more consumers are noticing the leverage in the relationship being stronger towards the producer. In such a case where the power is in the hands of the producer, the consumer can only refuse to respond to calls for the further strengthening of relationship. Of course, this depends on the amount of choice available in the marketplace in respect to the services or goods that are being offered by the producer. Where there is any form of monopoly, the producers often ignore any consumer requests for exclusion from further relationship.
Customer satisfaction is an outcome that is realised when one experiences a company performance that has fulfilled their expectation. Satisfied customers tend to be more loyal to the company, returning to purchase and offering fewer demands. They also act as an ideal marketing form for producers, by the power of word-of-mouth. Hence, for a producer to have recognition, customer satisfaction must be measured at regular intervals (Kotler et. al., pp. 411 – 412).
In the past, many companies could take their customers for granted as there was a lack of alternative suppliers, or the choices available were as poor in quality and service. There was also the possibility of strong growths which allowed companies to forego on satisfaction levels. A company losing 50 customers in a given week will be satisfied if it gains 500 new ones anyway. Operating on what is referred to as a ‘leaky bucket’ theory of business (Kotler, et. al., pp. 405); the company believes that there will always be enough customers to replace those defecting it.
This is why customer retention programs offer a powerful tool in the CRM arsenal. An important feature for most companies, customer retention helps the organization understand that the cost of acquiring a new customer is far greater than the cost of maintaining a productive relationship with the current one.
In addition to this, retention programs also allow companies to perform data collection activities about their customers. This data is used to gain a better understanding of the customers, and to customize future interactions. Retention programs offer a relatively inexpensive means of making customers feel special.
All companies require a good customer retention system in place in order to thrive in today’s competitive environment. The general perception in business used to be, “If they want my services, they know where to find me.” The modern understanding has changed to a realisation that while a potential customer is looking for you, your competition’s marketing systems may find them first (Gage, 2007).
2: Literature Review
“A customer is the most important visitor on our premises. He is not depending on us. We are depending on him. He is not an interruption on our work. He is the purpose of it. He is not an outsider on our business. He is a part of it. We are not doing him a favour by serving him. He is doing us a favour by giving us an opportunity to do so.”
Focusing on the customer has become a key factor for companies of all sizes, especially with survival in the competitive world at stake. Customer retention is particularly important to SMEs because of the limited resources they have available to them (Hubert, 2002). Another aspect of CRM is that knowledge of the customer and their traits allows for the easier acquisition of new customers.
The essence of the information technology (IT) revolution, in particular the online presence on the internet, is the opportunity for businesses to build better relationships with customers. Companies have developed a greater ability today to establish, nurture, and sustain long-term customer relationships, by combining the abilities to respond directly to requests and to provide customers with an interactive and customized experience.
According to Romano (2003), developing sustainable long-term relationships with valuable customers is economically sound for businesses in order to avoid invaluable ones. The need for gaining a better understanding of customer behaviour allows the organization to focus on those customers who can deliver long-term profits. This change in ideology has effected a change in how marketers view the world.
The traditional approach by marketers has been to acquire customers; either new ones who have not entered the respective product category yet or those who are currently linked with competitors. In order to do so, mass advertising and price-oriented promotions have been undertaken targeting customers in the hope of positive returns. Today however, the core of the conversation has evolved from acquisition to retention. This reflects the change in mindset and the adoption of a new set of tools that help businesses grow, including CRM.
CRM helps businesses manage customer relationships in an organized manner by combining methodologies, software, applications and internet capabilities. In order to build long-term customer relationships, the existence of effective communication, trust, and commitment between the participants is important (Wells et al., 1999). Every point of interaction and communication between the participants of a relationship leads to a trail of transaction and non-transaction data. It is the integration of this data that is essential to making the future interactions with customers powerful.
In the present world, most organisations are availing the benefits of the process by implementing CRM (Bose, 2002). Companies who accumulate large amounts of customer data and support a niche market avail most of the benefits of CRM. In contrast, those companies who have limited interaction with customers are less likely to be at advantage by using CRM, as they remain prone to customer turnover.
Goals and Objectives of CRM
There are four objectives of CRM as stated by Dimitris et al (2002):
- Company movement towards customer orientation
- Adoption of customer retention as focus
- Provision of value to customer
- Incorporating technology for effective data and knowledge management
According to Swift (2001), CRM increases business opportunities by improving the process of communication with customers, developing accurate information for customers, and providing the right offer to the right customer at the right time. CRM systems and applications help in operational flexibility, as well as providing the opportunity to analyse customer behaviour and data in real time (Ryals & Knox, 2001).
Customer orientation is basically a business philosophy that defines the ultimate goal of an organisation to be the fulfilment of customer needs for the purpose of maximising business profits. In the current age of competition, maintaining business advantage is becoming increasing difficult. The change in the outlook of management on the placement of customers has been propelled by accelerating technological developments, which have shortened the product life cycle and made it necessary to innovate in order to sustain a level of superior performance.
Customer orientation has often been associated with market orientation. Upon close analysis, the goal of putting customer at the centre of all marketing activities remains the primary goal for both. The dissemination of information, formulation of strategies and tactics to satisfy market needs; all form the crux of activities in this process (Hajjat & Mahmood, 2002).
Focus on Customer Retention
With the evolution of technologies and the customer, it has become more difficult for businesses to get new customers. There is a realisation that in order to be more profitable, businesses must maintain relationships with the existing customer rather than constantly seek new ones (Hildebrand, 1999).
Reichheld, (1996) proposed four reasons to outline the greater profitability gained from retention of customers, as compared to seeking new ones:
- Acquisition of new customers costs the business in the form of sales and marketing;
- Profits are realised from the customer in each year after acquisition;
- Older customers show tendency to buy more and be less price sensitive; and
- Satisfied customers are a source of profit and revenue generation for the company since they possess the powerful force of word-of-mouth marketing.
According to Newell (2000), there are three types of customer relationships: the top, middle and lower groups. Customers in top group make up 10% of the whole customer-base, and are the most profitable with the highest levels of loyalty to the organisation. An organization’s CRM focus should be in retaining these customers, by providing them excellent service. Middle group customers make up a large majority of the consumer-base, and are the ones who deliver good profits hold the potential for future growth and loyalty. Using CRM to target the middle group customers effectively will ensure in acquiring a good source of potential growth. Lower group customers are only marginally profitable. The expense and effort involved in targeting these customers hinders the effectiveness of servicing existing customers in the top and middle groups.
Provision of Customer Value
Customer value is an important component of a successful business-customer relationship and the ability of a business to provide superior value to its customers is regarded as successful competitive strategy. Customer value is defined as the customer’s overall assessment of the utility of a product/service, based on the perception of what is received and what is given (Wang et al., 2004).
Customer value is a strategic tool in attracting and retaining customers, and has become one of the most significant factors in the success of both manufacturing businesses and service providers. By adding more value, companies try to improve customer satisfaction so that the bonds between the two entities are strengthened and customer loyalty is gained.
Traditionally, customer value was defined and understood in terms of product/service quality and low prices. Business are continuously searching and exploring different ways to provide customer value (Wang et al., 2004).
Delivering superior customer value has become an ongoing concern in building and sustaining competitive advantage (Hansemark & Albinsson, 2004). A CRM strategy can provide a high level of satisfaction by optimizing the business processes and making every interaction more customer-centric.
Benefits of Customer Relationship Management
According to Swift (2001), companies can gain many benefits from CRM. These include:
- Lower costs of customer acquisition: Utilising the existing customers as the primary marketing tool, companies can save on promotional activities.
- Profitability from fewer customers: The number of customers required in maintaining sales and profitability is lower because of the loyalty of the retained customers.
- Assessing Customer Profitability: By implementing CRM, businesses are in a position to assess which of its customers are profitable and which are not. This is essential in understanding which group of customers the business should focus on in order to generate more profit.
Characteristics of CRM
CRM has four characteristics (Xu et al, 2002):
- Customer Service and Support: CRM improves the customer retention rate by incorporating a real time monitoring of customer service. It also helps the organisation in incorporating exemplary customer service. Companies can assign each query to the appropriate expert, who can then resolve the issue at the earliest.
- Marketing Automation: CRM provides up-to-date information on consumer trends so that the most effective marketing campaigns can be achieved. The innovation of various technologies offered by CRM systems can be combined to enable companies to address customers’ individual needs effectively.
- Sales-Force Automation: CRM applications effectively manage customer information, allowing for a singular view of each customer which contains all contact information and sales history. This allows for a better mapping of the customer’s spending habits and allows the companies to develop their products and marketing scheme accordingly.
- Field service: Remote staff can effectively communicate with customer service personnel to meet customers’ individual expectations, utilising the organization’s CRM system. Utilising a knowledge-base, the organization can nominate the correct technician or personnel to a customer, based on their location. Furthermore, service instructions can be accessed for a better quality of customer service.
Elements of CRM
Customer Relationship Management is a combination of people, processes and technology that combine to understand a company‘s customer. In order for CRM to be successful, the seamless integration of every aspect of business needs to be established.
Implementing applications like CRM requires a change to the organisational structure and culture. The people component is the most difficult component to manage as users are often reluctant to change. CRM initiatives require vision that must be understood by each member in order for the system to work.
The process component of CRM is delicate in nature because inappropriate automation of the CRM system will only speed up the errant process. To realize effective process change, a company first needs to examine how well existing customer-facing business processes are working and then, either redesign or replace or incorporate new processes which will be more effective.
Technology remains the key enabler to the redesign of business processes. When applied in CRM, it facilitates the collection and analysis of customer data as well as interprets customer behaviour and proposes models for predictive strategies. Chen & Popovich (2003) state “using technology to “optimize interactions” with customers, companies can create a 360 degree view of customers to learn from past interactions to optimize future ones“.
Enterprise resource planning (ERP) is used for the achievement of back-office automation of commercial strategy and is used in conjunction to the principles of CRM. In the past, CRM normally was referred to as the software used to help enterprises with customer relations. More recently, the focus has moved from the customer contact management aspect to more the sales force automation software (SFA), as well as the integration of knowledge management solutions.
With time, CRM has been used to define strategy in an organization. According to Laudon & Laudon (2007:102) the adoption of information systems (IS) allows for a tighter linkage between suppliers and customers, and assists in the achievement of competitive advantage.
In order for CRM to be successful, it is essential that all components of an organization process be covered. This begins with the commercial strategy adopted by the organization, and moves into the improvement of the enterprise and its work design by adopting technical means. According to Hintze (2006), “the key of CRM is to create a truly customer-centric philosophy, and help every member in organisation to follow up this philosophy”.
Organizations are required to be more radical with their strategies, as the market becomes ever more aggressive and competitive. This is emphasized by the fact that such strategies help the organization retain quality customers and bring more long-term value to the establishment. When considered against the backdrop of an economic downturn, this becomes ever more vital to the organization since the loyal customers are more likely to continue their relationship with the business, than new ones.
The equal treatment of customers by companies has needed a change of sorts. Compromising on the quality of service can lead to defection by customers, and hence, enterprises need to be able to understand what standard is required by each level of customer.
Best Customers First
Unless an organization is able to differentiate between the values of customers, it is unlikely that customer retention activities will hold no positive result. Businesses should treat their best customers with as much loyalty as they exhibit on the establishment.
Single View of the Customer
In a balanced service situation, the customer with lower expectations will likely end up being happier than those who are more demanding. This relates to the fact that more valuable customers can be enticing to competitors and thus prove harder to retain.
Optimizing ‘exchange of value’
A company’s knowledge on a customer is the key to optimizing the value of the relationship between the two entities. Meeting customers’ value expectations is the key to customer profitability, since it is value that creates satisfaction, which results in customer loyalty.
Tactics for Improvement
The most common cause of annoyance in customers is the time experienced in waiting for service. For organizations who wish to realise the satisfaction of high-value clients, it is important to give them some form of special treatment, that will allow their resulting level of acceptance to be higher, and thereby create a stronger line of loyal clientele’.
The correct targeting of promotions is also another way of ensuring customer satisfaction, since expectations can be managed to effectively identify the right time and channel.
Loyalty is used in business to describe the faith that a customer exhibits to a company and its products, meaning that the customer repeatedly returns to do business with the company, without the need to re-consider price or delivery service.
An organization needs to recognize the unique situation of a customer at any particular time. CRM systems can be used as tools to measure how various facets of a customer’s interaction with the business and how it affects the business.
To achieve customer loyalty, a business needs to address the following areas: the key services that of value to their customers, the incentives they can be offered in return for loyalty and the performance measures that need to be implemented so that incentives have the right effect.
It is important for a business to show commitment to the customer, by creating an environment that provides a valuable service and embodies a sense of accountability. It is important for the customer to feel like a part of the organization, and this can only be achieved if a positive perception is implemented by the business.
The steps taken by any business to achieve customer loyalty can vary depending on the industry it is involved in. From determining the target audience, to understanding the needs, from developing the strategies and the focus of identifying special attention; all rely on an organization’s readiness to accept the responsibility to protect its image and bring stability to the overall environment.
Consumers: Selection and Positioning
According to Peelen (2005:25), a customer or client is defined as “the individual or group who are willing to buy products for sustained earnings of a business”. Meanwhile, according to Grönroos (2000:61), the effective customer is “a group of consumer who agrees to the values of corporate identity, service concept, and accepts to provide return for the corresponding products and services”.
The aim of CRM is to help organizations to manage their marketing and build up a better relationship with the customer. Some of the purposes that a successful CRM program includes are:
- Improving customer satisfaction
- Improving customer loyalty
- Customer-oriented focus on demand
- Improving sales
Management: Theory and Technology
Enterprise CRM programs are set up on the basis of technical support. According to Kumar and Reinartz (2005:192), the following technical tools are used in CRM programs:
- Data warehouse technology
- Data Mining Technology
- Database System Technology
- VOIP technology
- Email and Internet technology
- Wireless communication technology
The objective of these tools is to offer customers a variety of media to maintain communication with the organization. Additionally, they are also used to collect information about the customers and analyse the data for improvements in processes, services or products.
Focus on CRM technology and business application is important in the overall success of established processes for an organization. The collection and analysis of customer activity holds vital data that could result in the market strategy success for the organization. Additionally, CRM can help in the promotion of sales, and provide valuable insight for new product development and improvement, which could be used to retain and attract customers.
According to Dyché (2001:189), it is necessary to improve the six core competencies in the implementation of CRM, shown below:
- Customer Value Management
- Mining sales opportunities
- Sales implementation
- The collection and use of customer intelligence
- Found that the potential value of customers (cross-selling)
- Customer service and customer retention
The success and failure of a CRM program depends on the organization’s understanding of the underlying values and the concept of customer-centric concept.
Impact on Retailer
The implementation of a CRM system can help a retailer in understanding the customer, enhance the relationship as well as predict potential behaviour and sales; all forming an effective way of managing the client-retailer relationship (McKenzie, 2001: 143).
Some successful examples of CRM implementation by retailers include Wal-Mart, Tesco and Boots etc. The example of Wal-Mart is highlighted below:
“There is a story that a large supermarket chain, usually Wal-Mart, did an analysis of customers’ buying habits and found a statistically significant correlation between purchases of beer and purchases of nappies (diapers in the US). It was theorized that the reason for this was that fathers were stopping off at Wal-Mart to buy nappies for their babies, and since they could no longer go down to the pub as often, would buy beer as well. As a result of this finding, the supermarket chain is alleged to have the nappies next to the beer, resulting in increased sales of both.” (Onetel.co.uk, 2009)
Utilising CRM, Wal-Mart was able to collect detailed customer information, and then create a flexible and high-speed supply chain IT system for effective business strategy. The model adopted by Wal-Mart model amalgamated the enterprise resource planning (ERP) and with a strong communication medium to create a hybrid system that could allow it effectively understand the trends being adopted by the consumer. From the above case study, Wal-Mart was able to quickly reflect on the consumer demand, linking it to production and following up with the development of a customized product according to customer needs. This is identical to the model used by ASDA in the United Kingdom, acquired by Wal-Mart. While the general perception may be that the organizations are focused on price, the actual benefit of employing IT systems in collaboration with CRM systems is to systematically understand the customer, and market according to the developing trend, growing the consumer-base steadily.
The implementation of CRM helps an organization to compete both in service and quality. According to Freeland (2002:118), the key point of CRM is that it helps organizations win customers enhance stable relationships, utilising appropriate time, money and resources of the organization.
Non-achievements of CRM
CRM applications can be used to enhance productivity, improve decision-making, and streamline call centre operations (Iyer and Bejou, 2004: 67). However, it is illogical for any organization to think that it can achieve the completion of all tasks using this system.
CRM relies on the sales staff to perform tasks like following up with clients and closing sales, while it remains a component of the market structure. The success or failure of the transaction depends on the skills of the staff. Also, since CRM applications are based on historical data, they cannot predict the future. Rather, they offer projections based on the collected data to highlight areas that could become possible changes in trajectory. Lastly, CRM systems are not complete solutions to every any crisis that an organization may face. They are designed to assimilate with an organization’s existing culture, and amalgamate with established processes. CRM is not a fool-proof method of establishing business sustainability if innovation and change is not implemented.
4: Analysis and Conclusions
The purpose of Customer Relationship Management (CRM) is to give organizations the ability to manage their customers in an efficient and effective manner (Wikipedia, 2009). This is achieved through the introduction of systems and procedures that are reliable, especially when it comes to any form of interaction with customers. The hi-tech world that we live in requires organizations to modify their business processes along with installing software that will make the CRM system more effective. However, assuming that a CRM system on its own will be the key to success is wrong.
Organizations need to understand that technology is merely the starting point, with the importance lying in embedding customer focus into the culture and procedures of the company, especially in order to gain competitive advantage in the industry and market.
From the initial point of creating viable relationships with customers, to the retention and growth activities, CRM plays a dynamic role for any business. It is ever more important in time of downturn, as it offers avenues for a business to utilise to in order to gain further attention from the consumer-base, while relying on the loyalty of the established customers to see it through.
Technology and Process
The success of CRM is not solely on technology, but reliant on the integration of various processes. While technology should be strategic and cost-effective, it should provide the flexibility and growth options for long-term opportunities of the business. An important factor that must always be considered for any form of network linkup is security, as that is adamant in respect to protecting the core functionality and the resources of CRM.
Since system customization is a costly exercise, organizations should take into account the future needs that could develop, and design CRM systems that are configurable to changing business demands. This will allow the business to reap optimized value from its customer, while keeping in-sync with the organization’s short and long-term goals.
Timing is everything in an effective CRM program. Knowing about the customer and their habits helps a business identify the right time and product to ensure that the system produces the results that help the productivity of the business. Also, a business should give due importance to the regular monitoring and refinement of various processes, so that the organization can retain optimum performance in all aspects.
The CRM process is divisible into the following:
- Profile the Market: This refers to the grouping of customers based on their different characteristics. Segmentation of customers can be done on the interaction that they have at the time of sales or the way they wish to be informed of upcoming products or events. The creation of a profile for each customer allows for a systematic flow to be embedded in the CRM process design.
- Design Communication Strategy: Communication with clients can take several formats. With multiple modes at the disposal of the business, it is important that the right one be selected in order to have a stronger and positive response from the consumer. The choice depends on the nature of the business and the message being imparted, but the mode could be print, mail or electronic.
- Implement Strategies: Any strategies designed by the organization should fit within the culture and the operational processes. Once this fit is determined, the strategy should be implemented. As an example, the strategy could be linked to the sending out of direct mails that have been prepared for introduction of a new product. As a CRM strategy, it is essential that staff who deal with customer are well-informed of the segments and the strategy, so they can be ready to pass the information to customers, or direct customers in the right direction. Where customers have been classified for a particular level of service, this would require more organizational entities to remain in the loop, in order for the strategy to be effective.
- Evaluate Results: At the end of the implementation, it is important for the company to assess the effectiveness of the strategy. In terms of any campaigns, this could be in the form of numbering the performance of various aspects of the process, by both the customer as well as an internal individual of the organization. This data helps in analysing the changes that should be adopted for future strategies.
The focus of this paper is on the CRM process when it comes to roles that are facing the customer. The perspective in discussion is the building of a common view of the customer from all business channels and sharing the information gathered with relevant functions. At any time, it is imperative that the information be managed in a systematic and coordinated manner so that the organization’s relationship with the customer can be managed efficiently.
There are four factors that companies should reflect on deeply, based on various marketing literatures:
- The building and managing of ongoing customer relationships remains the essence of the marketing concept. But organizations should not look forward to increasing the relationships on a quantity scale. Instead, the focus should always be on improving the quality of the existing relationships, and any new ones that may develop with time.
- The concept behind relationships is that they evolve with distinct phases. Businesses should not view these or measure them as independent incidents, but instead focus on them as interdependent transactions that create their own dynamic system with time.
- At each stage of an organizational process, a firm will interact with customers, and manage the relationship. It is important that the firm show a difference in each interaction and manage the relationships in a variety of ways. CRM systems allow companies to manage each stage of the relationship in a systematic and proactive manner.
- With new procedures adopted by organizations, it is essential that the value of every relationship be independently assessed, in order for the firm to allocate different resources to each type of relationship.
Benefits of CRM
The primary benefits of CRM include significant improvement to the marketing techniques, as well as better chances of customer retention and growth in market share for the business. By ensuring that the system targets customers with high-value propositions that satisfy their needs, CRM improves marketing tools used by an organization. Upon improving its product offerings, a business gains the ability to retain its customers and establish a sense of loyalty between each other. However, it is important for better service to be maintained over time, which generated enough positive marketing from word of mouth to help establish a significant level of growth in the market.
Capitalization on CRM
The benefits of CRM are not limited to any one department of a company, but rather flow across the various units and functions of the business. Firms should make an informed decision of offering customers solutions that are designed to fulfil their needs, and not simply developed to be a quick sale. By creating relationships with consumers, firms can gain the ability to access improved interactions with their target audience and gage the needs of the customer.
Some key attributes of creating good customer relationship are:
- Giving time for the development of a relationship, through the utilisation of various activities that a company can provide to the customers.
- Establishing a two-way communication medium. This reflects on the ability to offer a medium to listen to suggestions and complaints that a customer may have. Communication allows the organization to have a better understanding of the consumer, and develop a stronger bond with them.
- The quality of products offered by any business is directly linked with the relationships that it has with its customers. Hence, it can be stated that there is value to be added to a business from relationships.
- Due to the different nature that exists in each relationship, CRM offers the flexibility of fine-tuning the system to be able to respond to the needs of all. It is essential that every member of an organization understand the customer in order to make consumer loyalty a reality for the business.
- The CRM tools provide businesses to gain further efficiency from their resources, and work towards new models of customer relationship, which can transform the company into a stronger, understanding entity.
CRM Retention Strategies
Customer retention is important, because it is cheaper to keep existing customers happy than to attract new ones. It is due to this reason that businesses continue to invest in CRM, as customer turnover cost can result in an overall loss for the business. For customers, the decision of engaging with any business comes down to the satisfaction and value that they can receive or expect to receive.
Price of a product or service is only one of the aspects that could affect the bottom line of consumer’s decision. For the continuation of any relationship, consumers evaluate the current and past performances of the firm, as well as incorporating the expected performance from the future. This is why CRM’s integration with the core business activities is important for an organization, as it allows the business to cater for the expectation that customers will have and incorporate it within the future strategy. If a customer believes there is a benefit, real or perceived, of doing business with a vendor they may be less likely to stop doing business with them.
Charles Schwab, the investment and financial company, embraces the notion of managing customer value (CRM Magazine, 2008). The company analyzed the method in which clients did business with them and anticipated emerging priorities that could develop. The organization’s customer retention improved due to their ability to understand ad project what customers might value in the future, having monitored their current behaviour. By utilizing technology to improve data mining and sales processes, the information was applied to establish marketing strategies that could entice potential customers.
The establishment of a communication channel is dependent on the importance that a company places on the relationship it has with its customers
Another benefit of a successful CRM implementation is the ability to analyse customer profitability. This is the term used to define the right customers, as well as to convert average customers to ones from which the business can derive a profit.
The customer relation process should include methods of determining the cost that each customer brings to an organization, in order to be able to calculate the value of the relationship and allow the business to focus on those which are more profitable than others. The concept behind such an analysis is to be a win-win situation for both the customer as well as the organization, as the elimination of transactions which are not feasible or of value to the organization would allow more focus to be made on the ones that do matter. Hence, customers who are symbolic to the effectiveness of the business would be given special attention and have stronger relationships with the company.
It is not easy to track the cost of the services an organization performs for customers, despite the importance that it holds. One of the reasons behind this is the variance in expectations that each customer brings to the relationship with the business. Some customers demand more time and services than other customers. Organizations must be able to determine when a relationship is costly; however, potential customer relations should also be considered.
Another aspect for the organization to consider prior to making any decisions is the future sales that a customer could bring in. This means that even if a current customer is high maintenance for the business, but is likely to generate larger volumes of trade with the organization, it is feasible for the long-term growth of the organization to retain the customer. Due to the multitude of options that must be considered, customer relationship management systems should be able to assist in determining pending and possible opportunities.
The crux of value-oriented marketing is not in collecting data about customers through various modes and systems, but in ensuring that the information extracted is of importance. The collected data is utilised by an organization to establish the allocation of its resources, as well as determine the best way in which to improve the experience that a customer has with an organization. Additionally, incorporating a strategy that understands the needs of the customer is important, especially if there is a concentrated market.
For an organization, it is also important to recognize the opportunities of value, especially when a customer is prepared to pay extra for services or goods. In this case, there is a need for a more systematic approach to be adopted when information is collected about the customer. The collected information should be detailed and complete, as well as relevant to the need of the business. For example, the data from sales calls, customer service centre calls, internet usage, and all other points of contact can be put together to give the company a “360-degree view”. However, the data must be relevant, in order to properly represent the customer view. This is a continuous process, and part of a forward-looking strategy to anticipate the customer’s needs and wants, allowing the company to focus on future products and services that are likely to be demanded by the market.
CRM has become a key element in the modern marketing world in recent years. Across the world, companies of various sizes have adopted and implemented CRMS systems to help in establishing a competitive business. At the same time, the increased level of competition in the market has resulted in it being harder for companies to acquire new customers, as well as retain those who have an active and sound relationship with the firm.
As discussed earlier, it has been recorded that the cost of keeping an existing customer happy is far less than that of acquiring a new one. But the maintenance of a relationship with an existing customer requires the organization to be dynamic. The automated CRM system plays a critical role in such cases, by allowing for more processes to be made efficient and more effective than those already in effect.
It is important for CRM processes to be implemented across all departments of a business, especially the sales and marketing ones which forms the core focus. In recent years, corporation have become attracted to a new ideology or market approach called customer value management. The aim of this process is to identify the value that can be delivered to a customer through processes and services running in parallel to the product offerings. This new approach encompasses a key idea of CRM which is to focus and understand the customer, and target the ones who bring more overall value to the organization, rather than simply going after larger volumes of clients.
In order for there to be a successful relationship, it is up to the company to perform a customer’s profitability analysis. This analysis allows the company to judge whether or not a customer is doing well against the set of products and services that are on offer, allowing an informed decision to be taken in regards to finding an ideal solution. It is also important for an organization to understand the variety of customers that it has relationships with, and therefore must accommodate when establishing new strategies or developing new products and services.
The social bond that an organization creates between itself and its customers is the foundation of the relationship that could result in long-term benefits to both parties. The term ‘social bond’ refers to the friendly companionship whose properties are incorporated by the organization in the relationship. Interpersonal interactions between people within the organization and customers strengthen the linkage and decrease the likelihood that the customer will want to switch providers; thus, efforts that focus on such bonds will help in increasing the level of customer loyalty.
A complete CRM system is a combination of each of these types of relationship strategies: value-added incentives, emotional bonding, an interactive dialog, customized and personalized treatment, and an eye towards the ethics of the situation. The key objective of a comprehensive CRM system is its ability to retain customers at each stage of the business life cycle.
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