This chapter will first provide an initial introduction to the CRM literature and discuss the challenges in attempting to define the subject. Several CRM definitions are discussed followed by CRM questions arising from literature relating to CRM. A variety of CRM models and concepts will be presented, the issue of CRM failure will be discussed. The research then concludes with a summary literature on CRM strategies and factors for successful implementation.
The importance of effective customer relationships as a key to customer value is widely emphasized and therefore many companies have adopted a relationship marketing approach to manage and improve relationships with customers for long-time profitability. Relationship marketing emphasises that customer retention affects company profitability in that it is more efficient to maintain an existing relationship with a customer than create a new one (Payne et al., 1999; Reichheld, 1996). (PDF: strategic_issues_in)
[In recent years many organisations have identified the need to become more customer facing with increased global competition. As a consequence, customer relationship management (CRM) has risen to the agenda of many organisational strategies. Definitions of CRM are discussed in detatils in the further parts of this chapter. In 1998 global corporate expenditure on CRM was estimated to be in the region of US$1.9 billion (IDC and AMR Research, 2001) and it was predicted that by 2004, it will reach approximately US$23.5 billion (Datamonitor, 2001)
“Most companies are now adopting CRM as a mission-critical business strategy” (Eckerson & Watson, 2001). Customer relationship management (CRM) uses information technology in implementing relationship management strategies, and it assists companies to gather customer data, identify the most valuable customers, and increase customer loyalty by providing customized products and services. However, it has been shown that CRM may often fail to produce the expected results. When companies start to adopt relationship marketing strategies, there is often a need to transform the relevant marketing, sales and service processes to become more customer oriented. The transformation of processes may have an effect on the human beings carrying the various sales, service and managerial roles. Thus it is evident from the above that successful CRM implementation is an overall effect of various business processes along with the people involved and technology. This forms the basis of the Research for the dissertation study. (hypothesis and Research question)
According to Nairn (2002), in 2000 The Data Warehousing Institute commissioned a team of academic researchers to conduct a global survey among 1,670 CRM users from a range of industries and sizes of organization, the research concluded that:
Nairn (2002) reports that organizations in the survey believed that CRM was a crucial and integral part of their long-term business planning process. Nairn (2002) says this was supported by the findings of work by AMR Research which found that CRM was no longer a question of “if”, but a question of “when”.
3.2 Birth and Growth Of CRM
3.2.1 History of CRM:
Managing the customer has been in business practices ever since the concept of business was started. Every business wants to satisfy its customer and fulfil their needs in order to gain the customer's loyalty and thereby retain them. In the early days this basic concept of managing the relations with the customers was not so hyped up and the various benifits of it had not been much written about. In the recent year, however, much has been written about customer management strategies and also on its benefits to the companies. More and more organisations are adopting the CRM concept for realizing its benefits.
Customer Relationship Management (CRM) is one of those magnificent concepts that swept the business world in the 1990's with the promise of forever changing the way businesses small or large interacted with their customer bases. The study of CRM emerged as a key research stream in the early 90's coinciding with which, the term CRM began to be widely used (Ling and Yen, 2001, Xu et al, 2002, Buttle, 2009). According to Light (2001), CRM evolved from business processes such as relationship marketing and the increased emphasis on improved customer retention through the effective management of customer relationships.
In the beginning…
The 1980's saw the emergence of database marketing, which was simply a catch phrase to define the practice of setting up customer service groups to speak individually to all of the company's customers.
Advances in the 1990's
In the 1990's companies began to improve on Customer Relationship Management by making it more of a two-way street. Instead of simply gathering data for their own use, they began giving back to their customers not only in terms of the obvious goal of improved customer service, but in incentives, gifts and other perks for customer loyalty.
This was the beginning of the now familiar frequent flyer programs, bonus points on credit cards and a host of other resources that are based on CRM tracking of customer activity and spending patterns. CRM was now being used as a way to increase sales passively as well as through active improvement of customer service.
3.2.2 Chronology of CRM Literature:
In 2005 Ngai (2005) undertook a review of academic literature on CRM to provide a comprehensive bibliography and proposed method of classifying the literature. A range of online databases were searched to provide a comprehensive listing of journal articles on CRM.
Ngai (2005) found that papers and research on CRM fell into five broad categories that included (1) General. (2) Marketing, (3) Sales, (4) Service and Support, and (5) IT and IS. A further 34 sub-categories were also identified. The most popular areas covered by the papers were in the sub-category of CRM management, planning and strategy; and CRM general, concept, and study followed by papers in software, tools and systems; data mining, knowledge management, and e-commerce. The distribution of articles according to their year of publication from 1992 to 2002 as reviewed by Ngai (2005).
As presented in 3-1 above, the output of CRM research increased significantly since 1999 with a total of 191 publications found for last three years of the study (2000-2002), representing 93 per cent of the total (Ngai, 2005). This study provides an evidence that the acknowledgement received by CRM was increasing year to year and is recently increasing at a faster rate from 2000.
3.3 Defining CRM
3.3.1 Challenges in Defining CRM:
Much debate exists with CRM academics and business practitioners as to what CRM is, how it works, what it does and whether it works. The first step in discussing the nature of CRM is to attempt to define it. CRM originally stood for Customer Relationship Marketing, changing subtly but importantly to Customer Relationship Management in about 1998 (Nairn, 2002).
Explaining the meaning of the CRM acronym is achieved quite easily, however, presenting a concise definition is a little more challenging. One of the key problems in defining CRM is that managers and writers use the CRM term broadly to describe all forms of transactions between customers and their suppliers (Knox, Maklan, Payne, Peppard, & Ryals, 2002). The level of confusion within business regarding a CRM definition is expressed well by McKeen (2003) as follows:
“When asked to describe CRM, one focus group member claimed that, "CRM is a philosophy about how customers will be treated by this organization. CRM is the overall process of marketing, sales, and service within any organization.” To IBM Global Services, CRM is "any effort undertaken to improve customer service" For others, CRM is software that manages customer interactions with an organization. It became abundantly clear from our focus group that the number of definitions of CRM equaled the number present at the table. At the highest level it was agreed that CRM focuses on the relationship between an organization and its customers. Beyond that, little agreement was forthcoming (McKeen & Smith, 2003).”
The challenge is presented in the similar yet often different CRM definitions that need to be considered and explored by academics and popular industry journal articles. Owing to these differing CRM definitions, an opportunity exists to construct a CRM definition and series of research questions for this case study methodology and research process.
3.3.2 What is CRM? A definition:
CRM is a highly fragmented environment and has come to mean different things to different people (McKie, 2000). One view of CRM is the utilisation of customer related information or knowledge to deliver relevant products or services to customers (Levine, 2000). As CRM evolves, richer definitions are emerging, with an emphasis on the goals, logistics and complex character of CRM.
According to Tan et al. (2002 p.84) faced with widespread global-economic technological and cultural change, organizations around the world are seeking to enhance the value and profitability of their existing customer relationships, while attracting new and profitable customers.
Various scholars have defined CRM from different perspectives. Parvatiyir and Sheth (2001, p.5) defined CRM as ‘a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value for the company and the customer'. Their definition further emphasised the need for integrating the various functions within an organisation to enhance ‘efficiencies and effectiveness in delivering customer value'. Others like Kincaid (2003, p.41) described it as ‘the strategic use of information, processes, technology and people to manage the relationship with customers across the whole customer cycle'. Wilson, Daniel, & McDonald (2002 p.194) describe CRM as a management approach that enables organisations to identify, attract and increase retention of profitable customers by managing relationships with them.
The latest attempt to define CRM is by Buttle (2009, p.15) who defines it as ‘the core business strategy that integrates internal processes and functions, and external networks, to create and deliver value to targeted customers at a profit. It is grounded on high quality customer related data and enabled by information technology'.
Wilde (2001) asserts that CRM is designed to create a unified view of each customer and make this information available throughout an organization so that processes from product development to delivering new services reflect the knowledge of each customer's history and what they want.
As demonstrated in above, CRM definitions and interpretation vary among academics, across industries, between organizations/industries and even across departments within the same organization. Although there are differences in defining the concept, there is common emphasis in the definitions on the importance of ‘viewing CRM as a comprehensive set of strategies for managing those relationships with customers that relate to the overall process of marketing, sales, service and support within the organisation' rather than as an independent stand alone initiative not linked to the firm's overall business strategy (Kotorov, 2003; Ngai, 2005).
3.4 Concepts, Models And Frameworks for CRM
3.4.1 CRM Models and Concepts:
There is no consensus on what constitutes key components of CRM although the process of planning, implementation and management of CRM is identified as a key issue that can impact on the success or failure of CRM (Almquist et al, 2002; Osarenkhoe and Bennani, 2007). Donaldson and O'Toole (2002) identify core components of CRM such as measuring customer satisfaction, investing in people, maintaining dialogue with customers, setting realistic targets, assessing performance and using relationship based interfaces.
3.4.1. 1] Anton (2002):
Anton (2002) puts forward the concept that CRM comprises of two components:
In Anton's (2002) Total CRM system, operational and analytical CRM combine to present and fully integrated CRM system. Anton (2002) states that when operational CRM is undertaken in conjunction with analytical CRM, that the total CRM system has a higher probability of providing customers with the services they want thereby offering them a higher return on investment on their purchase and use.
3.4.1 2] Buttle (2003):
According to Buttle (2003) there are three different perspectives on CRM as presented in Table 3-1 below:
Table 3-1 Buttle' s Three Major Perspectives on CRM
Level of CRM
A top down perspective on CRM which views CRM as a core customer-
centric business strategy that aims at winning and keeping profitable
A perspective on CRM which focuses on major automation projects such
as service automation, sales force automation or marketing automation.
A bottom-up perspective on CRM which focuses on the intelligent mining
of customer data for strategic or tactical purposes.
(Buttle, 2003 p. 3)
3.4.1 3] Plakoyiannaki & Tzokas (2002):
Plakoyiannaki & Tzokas (2002) present an axiomatic view of the CRM process as presented in the eight steps below:
(Plakoyiannaki & Tzokas, 2002)
As illustrated in 3-3 above, Plakoyiannaki & Tzokas eight building blocks of CRM are as follows:
1. Creating a corporate culture conducive to customer orientation, learning and innovation: a cultural focus that encourages processing and cross-functional sharing of information and knowledge appreciation is essential.
2. Making customer value a key component of the corporate strategy and planning process: goals entail profit orientation through customer, employee and stakeholder satisfaction, relationship building
3. Collecting and transforming customer data to aid strategic and operational decision making: the CRM process is fuelled by information flows, which contribute to customer insight generation.
4. Appreciating, identifying and nurturing knowledge creation, dissemination and use within the organisation: companies embrace CRM, they realise that employees need to be introduced to new processes, knowledge and technologies and develop a mindset and skills for relationship building
5. Developing clear market segments and customer portfolios: CRM enhances the efficiency of market segmentation .
6. Defining, developing and delivering the value proposition: Ultimately, customer insight is translated to product and service offerings and delivers constantly differentiated treatment
7. Using campaign and channel management as part of the value proposition: CRM replaces the broadcast mentality of traditional marketing; it relies on a two-way information flow and attempts to reach customers with appropriate information and tailored messages and through different possible channels.
8. Measuring performance at each stage of the process to navigate decision making: The justification of the CRM system is anchored in future performance and is often hindered by the lack of proper measures integrating several activities of the organization.
3.4.2 Framework for Study:
This study is aimed at the identification and evaluation of critical factors and benefits in the implementation of CRM. The study operationalizes the items and builds a research framework describing their relationships.
3.4.2 1] Payne & Frow (2005)
Payne & Frow (2005) claim their conceptual framework for CRM helps broaden the understanding of CRM and its role in enhancing customer value and, as a result, shareholder value The author's framework is presented in 3-12 below.
As presented in 3-4 above, Payne & Frow (2005) identify five key cross-functional CRM processes as follows:
1. A strategy development process: requires a dual focus on the organization's business strategy and its customer strategy
2. A value creation process: transforms the outputs of the strategy development process into programs that both extract and deliver value. The three key elements of the value creation process are
a. determining what value the organization can provide to its customer
b. determining what value the organization can receives from its customers
c. maximizing the lifetime value of desirable customer segments.
3. A multi-channel integration process: takes the outputs of the business strategy and value creation processes and translates them into value-adding activities with customers.
4. An information management process: concerned with the collection, collation, and use of customer data and information from all customer contact points to generate customer insight and appropriate marketing responses.
5. A performance assessment process: covers the essential task of ensuring that the organization's strategic aims in terms of CRM are being delivered to an appropriate and acceptable standard and that a basis for future improvement is established.
Mendoza, Marius, Perez & Griman (2007) highlight that most organizations perceived the CRM concept as a technological solution for problems in individual areas, accompanied by a great deal of uncoordinated initiatives. However the authors argue that CRM must be conceived as a strategy, due to its human, technological, and processes implications, at the time an organization decides to implement it. To test this hypothesis the researchers worked to propose, justify, and validate a model based on critical success factors (CSFs). The model was confirmed by a set of 13 CSFs with their 55 corresponding metrics; these factors covered the three key aspects of every CRM strategy (1) human factor, (2) processes, and (3) technology; providing organisations with a global focus and propitiating success in the implementation of CRM strategy.
3.5 CRM Success And Failure:
In this section a literature review of emergent CRM success or failure factors are presented. The factors have been summarized in the next section. Change, the role of IT and human-centred issues and CRM strategy are the main research objects in this dissertation.
A CRM implementation may be seen as successful if it meets the expectations of the adopting company (Yu 2001).
Rigby et al. (2002) point out four factors affecting successful CRM implementations negatively: firstly, the implementing of CRM system before a business strategy (=customer relationship marketing strategy) has been created; secondly, rolling out CRM before changing the company's organization. The authors maintain that a CRM roll-out will succeed only after the organization and its processes – job descriptions, performance measures, compensation system, training programmes and so on – have been restructured in order to better meet customers' needs. The key business processes, that relate to customers, from customer service to order fulfilment, have to be changed first. Thirdly, “assuming that more CRM technology is better”, by which Rigby et al. (2002, p. 104) mean that “customer relationships can be managed in many ways, and the objectives of CRM can be fulfilled without huge investments in technology simply by, say, motivating employees to be more aware of customer needs”. Fourthly, relationships are two-way streets. “You may want to forge more relationships with affluent customers, but do they want them with you”? Fail to build relationships with customers who value them, and you are bound to lose these people to a competitor. Rigby et al. (2002) conclude that successful CRM depends more on strategy than on the amount you spend on technology, and they point out that you will also need to effectively lead and manage change.
3.6 CRM Failure Issues:
Another important aspect of CRM are the well documented failures in CRM implementation. Evidently, an increasing number of diverse organisations are adopting CRM yet surveys are beginning to highlight the potential risks. Though CRM systems are proving an incredibly popular choice for implementation, success is proving illusive.
Metzner (2001) reports research that cites CRM failure rates of between 50 and 90 percent. Citing a recent survey of 30 Fortune 1,000 companies, the author found that less than 50% are realizing expected objectives. Shackleton (2003) reports indicate a 60-70 per cent failure rate in CRM implementation, stating it is possibly due to unreasonable expectations being set.
Cleary (2001) reports from market research firm Gartner Group that up to 60 percent of projects to install CRM systems fail. In addition, Connolly (2001) reports that in the InfoWorld CRM Survey 35.4 percent of respondents said their CRM software met or exceeded their expectations, however, 18.8 percent felt their expectations went unfulfilled.
Nairn(2002) states that evidence from a variety of sources has shown that from 1998 satisfaction with CRM systems has remained consistently low. Zablah, Bellenger, & Johnston (2004) research demonstrates the extent of alignment between the three constituent elements of a firm's CRM program (employees processes and technology) influences end user acceptance of CRM technology. The authors highlight that process gaps within CRM programs generate cognitive dissonance among end users, and that the level of dissonance generated ultimately determines whether individuals will adopt or resist the new technology.
One study of 202 CRM projects found that only 30.7 per cent of the organisations said that they had achieved improvements in the way they sell to and service customers (Dickie, 2000). However, it is clear that not all organisations are facing failure. First Manhattan are just one of the many examples of diverse companies highlighted by Newell (2000) that have applied CRM methods and experienced success.( pdf Strategic _issues _in )
3.6.1 Additional Reasons for CRM Failure:
1. Implementing CRM before creating a customer strategy, rolling out CRM before making the requisite organisational transformation, assuming that more CRM technology is better and stalking instead of wooing customers (Kale, 2003 p. 48).
2. Not integrating or aligning the underlying business processes and information systems (Eichorn, 2004).
3. The quality of the data collected and databases, the people who work with customers, either in using the information or in dealing with customers on the basis of implementing it, and the tendency of management to assume what is planned is implemented (the management myth) (Nancarrow, et al., 2003).
4. Failing to address the factors most closely associated with CRM success i.e. people, processes and day-to-day customer management activity (Wright, Stone, & Abbott, 2002).
5. CRM being driven by information technologists rather than marketers (Cuthbertson & Laine, 2004 p. 291).
6. Bad data, politics, IS and business users can not work together, lack of a plan, CRM is done for the organisation, not the customer, a flawed process is automated, Training is ignored. (Gomolski, 2001).
7. Most executiv es simply not understanding what they are implementing (Rigby, et al., 2002).
As discussed, CRM failure is a very serious issue. High expectations, lack of senior level/ top management Commitment, insufficient resources, lack of staff commitment, poor change management, top managers ignoring the Business process re-engineering, jumping into CRM investment without a prior strategy formulation, and over reliance of technology to solve issues of inadequate process and practices are some of the major contributing factors leading to CRM failure. Some of these issues were present in the case study organization.
In the financial sector Ryals and Payne (2001) conducted an extensive investigation into the adoption and use of CRM. They found support for several factors being potential barriers for successful CRM deployments. Lack of skills in building and using the system were frequently mentioned as a major barrier to the implementation of CRM. Failure to understand the benefits of a marketing database was also seen as a barrier. Functional boundaries in the form of the business unit managers not willing to cooperate, often because they had a proprietorial approach to the customer, were mentioned as a barrier to the implementation of CRM. Furthermore, measurement and reward systems were mentioned as barriers, too. (Crm dissertation pdf) (CRM failure)
3.7 Success Factors For Successful CRM implementation
3.7.1 Organizational Change:
It may be noted that a prevailing theme in most of the references quoted above is change. Change is mentioned in the form of a need to transform the organization to become more customer focused. Change is also seen as a necessary prerequisite to make the selected relationship marketing strategy work in practice. However, change - including its many forms, and not forgetting emergent change (Markus and Robey 1988), too - has as a potential factor affecting successful CRM.
From the discussions and reasons listed in the above sections for the failure of the CRM implementations, it is evident that one of the factors responsible for it is that the organization has not been able to alter its business processes and adopt new ones according to the requirement of the customer focused strategy. Before a CRM system is implemented in an organization a customer-centric CRM strategy needs to be planned and this strategy requires a lot of rearrangements in the present organization structure and culture. For the successful implementation of the CRM systems change is important in the way the business processes work and also sometimes in the structure of the organization. Thus, seeing change as an important aspect of CRM implementation and reengineering of processes are considered to be the success factors for CRM implementation.
Zikmund (2003) states that the purposes of a CRM system are to enhance customer service, improve customer satisfaction, and ensure customer retention by aligning business processes with technology integration
According to a survey by CRM Forum (in Rigby et al. 2002), when asked what went wrong with their CRM projects, 4% of the managers cited software problems, 1 % said they received bad advice, but 87% pinned the failure of their CRM programmes on the lack of adequate change management.( Pdf CRM dissertation)
As Rigby et al. (2002, p. 103) noted “installing CRM technology before creating a customer-focused organization is perhaps the most dangerous pitfall”. Goodhue et al. (2002, p. 82) maintain that “important components for successful CRM are the data infrastructure necessary to make data sharing possible and the organizational transformation necessary for an organization to take full advantage of the CRM capabilities”.
However, when a firm is implementing CRM and using IT in ways that can trigger major organizational changes, this creates high-risk, potentially high-reward, situations that Markus (2004) calls technochange (for technology-driven organizational change). According to Markus (2004) technochange differs from typical IT projects and from typical organizational change programmes and therefore requires a different approach. Markus (2004) further introduces the concept technochange lifecycle model consisting of four phases: idea generation, solution design, solution implementation and benefit capture. Furthermore a CRM process resembles the whole technochange lifecycle, where the process begins by idea generation (similar to a company's adoption of relationship strategy), then follows the solution design (equivalent to both the need to transform organizational processes to meet the strategic organizational capabilities, as the construction of the IT solution – the CRM system – itself), thereafter the solution implementation (the phase where the constructed CRM system is implemented in the organization) and finally the benefit capture (the phase where the benefits from the implementation and the results from the transformations take place; in addition to these the CRM system should be aligned with the adopted relationship marketing strategy). So, when considering successful CRM the argument is that one should investigate the whole CRM process from “idea generation” all through to “benefit capture”. (CRM dissertation PDF)
3.7.2 CRM and Business Process Reengineering (BPR):
CRM combines a related set of functions and business processes to enhance the performance of the organization as a whole (Laudon & Laudon, 2004; Chang, 2006). CRM systems require changes in sales, marketing, and customer service processes to encourage sharing of customer information; support from top management; and a very clear idea of the benefits that could be obtained from consolidating customer data. A CRM system implementation project is thus of sufficiently wide scope to be considered as an example of BPR. CRM systems are a relatively recent innovation so their requirements have often not been ‘built-in' to the existing organisational structure, which may need adjustment by a BPR exercise.(very impt pdf) Laudon & Laudon (2004) suggest that most firms implementing a formal CRM system need to transform their focus from a product-centric view to a customer-centric view, which requires some fundamental changes in the organization culture and business processes, notably a closer cooperation between the information systems and sales and marketing groups.
‘Business Process Reengineering has meant redesigning existing business processes and implementing new ones. Whitman & Gibson (1997) note that the need for fundamental redesign has increased with the rate of change in the business environment. Attaran (2004) asserts that the implementation of reengineering is not a free-form exercise, but requires specific steps to be performed in a particular order. BPR is ‘a customer focus, top-down management effort to establish breakthroughs in the performance of inter-functional processes' (Davis, 1993).
Hammer & Champy (1993) define Business Process Reengineering (BPR) as ‘the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed.' Spencer (1992) states that ‘BPR is promoted as a strong, customer based approach to improve productivity and quality through processes.'
Customers are viewed as an active group of partners in the effective implementation of CRM (Buttle, 1996 and 2009; Singh and Sirdeshmukh, 2000). This suggests CRM is a broad business strategic initiative which requires synergy among departments in firms (Crosby, 2002; Hansotia, 2002; Rigby et al, 2002; Chen and Popovich, 2003). The type of channels of distribution used by firms can have an impact on the planning, implementation and management of CRM (Hughes, 2006). Ward (2001) argues that where new channels are added to existing ones, the complexity of customer management increases since there are new structural issues which have to be dealt with in order to ensure that new customers are acquired and retained at a profit whilst existing ones are integrated into the new channels and kept satisfied.
In order to successfully implement the relationship marketing strategy, the existing CRM success literature suggests that a company needs to transform its core marketing, sales and customer service processes to become customer focused.
3.7.3 CRM Friendly Organization Culture And Top Management Commitment:
Hansotia (2002) says that defining what CRM means to the organisation, its scope and how it ties in with the organisation's mission and related strategies is without question the responsibility of the organization's Chief Executive Officer (CEO). CRM will not succeed if it is only the dream of middle management and senior management just pay lip service to it. It needs the full commitment not only of the CEO but all the CEO's direct reports. This is because, in almost every case, it will mean challenging current norms and practices and re-inventing the organization.
Customer Relationship Management (CRM) is a concept that has as its focus a customer centric business culture. Galbreath and Rogers (1999) advocate effective leadership as a pre-requisite for CRM whereby top management take ownership and commitment of CRM and spread the message to all employees. [The failure to appreciate the fact that management's commitment is important for CRM success is just one of the reasons why so many CRM initiatives failed in the 1990s, and why Customer Relationship management programs are being re-examined and successfully reinitiated today. One of the key contributors to CRM's disappointing results then was managements' failure to appreciate that achieving success required more than simply using the “right tools.” It is critical to acknowledge that the right tools alone do not take the place of good management and commitment to success.] http://ww2.ultlead.com/CRM_Series/Part4_Burn_the_Boats.pdf
[The adoption of a customer centric organisational culture is important and is coming up in recent times. Most corporate objectives are significantly driven - directly or indirectly - by customer satisfaction. Aligning employee behavior with customer satisfaction is therefore paramount to achieving the desired state of alignment of employees with corporate goals. The concept of tying employee pay to corporate performance is well entrenched for all sales-related functions, and has growing traction in other “customer-facing” departments. Commission-based sales compensation inherently correlates to corporate financial objectives through direct top-line impact. Call centre operational cost and profitability is proven to be positively impacted when employees are rewarded for satisfying the customers that they serve.] http://www.gantrygroup.com/pdf/CustomerCentricCorp.pdf (Can Combine human factor and above culture together into culture topic)
3.7.4 Developing a customer strategy:
According to Newell (2001 p.84) CRM is customer-centric; meaning that while its objective is still to add profit to an organizations bottom line, it accomplishes that goal by concentrating on customer benefits and values rather than on what the organization wants to sell, thereby strengthening the relationship between the customer and the organization.
The basic precept of CRM is that it is cheaper to retain an existing customer than to acquire a new one. Not all customers are equally profitable and thus equally desirable, however, the essence of a customer strategy is to identify profitable customers. The most desirable approach to identify best customers is to identify those customers who have a high customer lifetime value (CLV) and to develop differentiated strategies for dealing with different CLV segments. (Intro n lit rev ebs pdf)
Colgate and Danaher (2000) investigated factors affecting customer satisfaction when implementing a relationship strategy. The authors pointed out that before embarking on a relationship strategy, a firm should be aware of the benefits and drawbacks of such a strategy. Based on earlier research and literature the following factors were found to be desirable prerequisites for making a relationship strategy more appropriate: internal marketing and employee empowerment, profitable target segments, a business strategy emphasizing service, sufficient levels of involvement, high experience or credence qualities (greater risk and uncertainty) and the ability to calculate relationship performance (Colgate and Danaher 2000). Another dimension is the ability to deliver the strategy successfully. CRM strategies are only effective if they deliver positive outcomes. It is no longer good enough just to say that you are customer focused, but it matters what you do.
3.7.5 The human being in CRM:
A common theme in the previous literature presented is that of CRM failure or success; emerging from this is the human component of this success-failure equation. Carl-Erik (2008) reiterates that CRM often fails to produce expected results, and goes onto state that when companies start to adopt relationship marketing strategies, there is often a need to transform the relevant marketing, sales and service processes to become more customer oriented. The transformation of processes may have an effect on the people carrying the various sales, service and managerial roles.
To maintain the competitive advantage in dynamic, competitive markets, firms have to adapt to changes in their trading environment. Strategy, training, policy, and structure all have to facilitate continued employee learning, to support the organization's continued success. Peel (2002 p.3) says that CRM is about people on both sides of an exchange understanding each other; it is also about deriving some form of utility satisfaction from that exchange.
The role of technology is meant to be that of enabler of the implementation of CRM as the human aspects remain the most significant part of CRM because CRM is about long term relationships between the firm and its customers (Law et al, 2003).The people working in an organization are very important in the process of implementing CRM and therefore it is necessary for the management to nurture their needs and also allow them to improve their capabilities to provide effective outputs. Some organizations believe in providing good training to their employees on the use of the CRM systems so as to have a good hold of it and also use these systems to their maximum use in dealing with customers and also providing good service to them. Employee motivation is also a few of the steps taken by organizations in increasing the effectiveness in customer satisfaction.
Organizational change in general and the transformation of CRM processes in particular may have various effects on humans such as changes in expectations for competence levels, changes in reward system and changes in distribution of work. In their study of CRM success Fjermestad and Romano (2003) maintain that “the key reasons for successful CRM implementations were that the organizations focus on people and iterative, incremental approaches”. Organizational members have a tremendous impact on the customer knowledge management process: employees (particularly, boundary spanners like salespeople) possess substantial amounts of knowledge about individual customers and their needs and preferences (Zablah et al. 2004). The ability to harness such intelligence has been linked to the effectiveness of firms' interaction management efforts. The human touch is highly critical to effective interaction management: “employees' ability to leverage their understanding of individual customers and human behaviour often has a substantial impact on the outcome of exchange episodes” (Zablah et al. 2004, p. 483). In successful CRM culture users (salespeople, service personnel) gather and store essential information from crucial interaction episodes with their present and potential customers in order to collect into the CRM database information of customers' needs and wants. For instance, the implicit knowledge, which salespeople possess, can be made more explicit and thus help the organization to better utilize it. This knowledge may help the company in retaining its present customer relationships and enhance their profitability by enabling more targeted and effective cross-selling and up selling activities. I argue that for CRM to be successful a CRM system should be implemented and used in such a way that the users are empowered, motivated, committed and willing to utilize the CRM system for knowledge management. (CRM dissertation pdf)
The concept of Learning Organization is very well known since a few years and most of the organizations are adopting it recently to improve their capacity to take effective actions Kim (1993) Dixon (1994) defines organizational learning as ‘the intentional use of learning processes at the individual, group and system level to continuously transform the organization in a direction that is increasingly satisfying to its stakeholders.' Laudon & Laudon (2004) define organizational learning as the ‘creation of new standard operating procedures and business processes that reflect organizations' experience.' Daft (2004) considers a learning organization is an organization in which everyone is engaged in identifying problems, enabling the organization to continuously experiment, improve, and increase its capability (Daft, 2004).
The change of the marketing, sales and service processes may have an effect on various organizational tasks, roles and employees' job descriptions. The human beings carrying the roles of sales people, service persons or managers are affected. CRM initiatives have become strategic in many companies (Yu 2001). Markus (2004, p. 2) argues why using IT strategically to drive organizational performance improvements involves great potential impacts on “the users” (people, processes and organizational performance). Plakoyiannaki and Tzokas (2002, p. 233-234) talk about the importance of “learning capabilities” and “operational capabilities” like skills developed at functional and administrative levels. Chen and Popovich (2003, p. 675) introduce “people as critical components to successful CRM implementations”. Fjermestad and Romano (2003) suggest that usability and “resistance” would be factors affecting successful CRM implementations. Boulding et al. (2005, p. 155) note that “as little is known about how people issues connect to the success of CRM activities, we believe that this is an area worthy of researcher attention”. (Payne and Frow 2005, p. 167): “CRM can fail when a limited number of employees are committed to the initiative; thus, employee engagement and change management are essential issues in CRM implementation”. (crm dissertation pdf) (chk for human aissues analysis)
3.7.6 Role Of IT In CRM Implementations:
1] The role of information technology in customer relationship management
Technology can greatly assist companies in managing the data needed to understand customers, so that appropriate relationship marketing strategies can be developed (Ryals and Payne 2001). In addition the use of IT enables the necessary data to be collected in order to determine the economics of customer acquisition, customer retention and lifetime value. In order to facilitate improved retention and lifetime profitability, companies need to use the appropriate technology tools and are adopting customer relationship management approaches for assisting in implementation. Plakoyiannaki and Tzokas (2002, p. 229) define customer relationship management from a process perspective “CRM is an IT enhanced value process, which identifies, develops, integrates and focuses the various competencies of the firm to the ‘voice' of the customers in order to deliver long-term superior customer value, at a profit, to well identified existing and potential customer segments”.
According to Storbacka and Lehtinen (2001, p. 5) there are three cornerstones of CRM, namely customer value creation, viewing the product as a process and the provider's responsibility for developing customer relationships and offering its customers possibilities to create value for themselves. In line with Storbacka and Lehtinen (2001) Payne and Frow (2005, p. 168) point out that “from a strategic viewpoint, CRM is not simply an IT solution that is used to acquire and grow a customer base; it involves a profound synthesis of strategic vision; a corporate understanding of the nature of customer value in a multichannel environment; the utilization of the appropriate information management and CRM applications; and high-quality operations, fulfilment and service”.
Shoemaker (2001) states that as customers commence using multiple channels to interact with an organization, it becomes increasingly more difficult and more important to manage the customer relationship seamlessly. This is where CRM technology supports customer relationships at each of the customer's touch points, the areas where customers and organizations interact. Bhatia (1999, p. 3) defines CRM very much in-line with the earlier definitions: “CRM is a discipline and a set of discrete software and technologies which focuses on automating and improving the business processes associated with managing customer relationships in the areas of sales, marketing, customer service and support”.
Roberts, Liu & Hazard (2005) state that the role of technology in successful customer CRM implementation is a perennial subject of concern to marketers. In a review of CRM studies, the authors state that technology is a necessary but not sufficient factor in the ultimate success of a CRM system; other success factors include other marketing and organizational issues as key drivers.
2] Operational IT CRM definitions:
A few of the CRM definitions with respect to IT point of view are discussed below :
* CRM IT is a process by which an organization maximizes customer information in an effort to increase loyalty and retain customers' business over their lifetimes; combining a progressive approach to gathering data with
advanced database and decision support technologies that help transform that data into business knowledge (Customer relationship management: The ultimate guide to the efficient use of CRM 2001 p 117).
* CRM IT is the business process, technology, and rules required to deal with a customer at various stages of the business lifecycle (Cunningham, 2002 p.6).
* CRM IT is a system that brings together information about customers, customer characteristics, sales transactions, marketing effectiveness, responsiveness, and market trends (Zikmund, McLeod, & Gilbert, 2003 p.3).
* CRM IT is the entire process of the utilization of information and information technology that enables organizations to more efficiently allocate resources to maintain or increase revenue or market share (Kudyba & Diwan, 2002 p.118).
CRM software applications not only facilitate the coordination of multiple business functions (sales, marketing, customer service and support) but also coordinate multiple channels of communication with the customer (e.g., face to face, call centre and the web) so that organizations can accommodate their customers' preferred channels of interaction. In order to manage a relationship with an individual customer, the company must be able to “see” the relationship with the customer as a whole. Seeing the relationship with the customer as a whole involves all the interactions the customer has with the firm, regardless of the channel the customer uses (Ryals and Payne 2001). However, as already stated, one of the common misconceptions is that CRM is an IT or IS initiative. In support of this Tiwana (2001 p.24) states that CRM is a business strategy, not a suite of software products.
3.8 Benefits of CRM:
During the past fifteen years there has been a growing interest in studying the economics of long-lasting customer relationships (Ryals and Payne 2001). Long-term relationships where both parties over time learn how to best interact with each other, may lead to decreasing relationship costs for the customer and for the supplier or service provider. A mutually satisfactory relationship may make it possible for customers to avoid significant transaction costs involved in shifting supplier or service provider and for suppliers to avoid suffering unnecessary quality costs (Grönroos 1994). Reichheld and Sasser (1990, p. 106) analyzed over 100 companies in twenty-four industries and found out that “served correctly, customers generate increasingly more profits each year they stay with a company”. Furthermore, Reichheld and Sasser (1990, p. 105) found out that “companies can boost profits by almost 100% by retaining only 5% more of their customers”, which was in their analysis the outcome of one company in the credit card industry. Colgate and Danaher (2000) have pointed out some advantages to the customer of relationship marketing (RM): customers receive psychological benefits such as familiarity, personal recognition and friendships; consumers may engage in long-term relationships to obtain discounts; customers may gain customization benefits as service providers tailor their services to meet customer's specifications and requirements. (CRM dissertation impt pdf)
3.9 Summary OF Literature Review:
The above literature review provides a broad based perspective on the use and challenges of implementing CRM in organisations. The surveyed literature has exposed varying perspectives related to CRM evaluation.
One view is that, CRM is an integration of technologies, business processes and people; therefore, the perceived success of CRM is subjected to the successful integration of these three entities. Whereas, a dominant stream of research has been devoted to discover the CSF where majority of the CRM practitioners believed that success of any CRM project is dependent on the successful management of these CSF. Few of such CSFs identified and emphasized in CRM projects evaluation case studies include: need for a strategic vision of CRM (Chen and Popovich, 2003), top management support (Chen and Popvich,2003), effective leadership (Bull, 2003), interdepartmental communication and coordination (Parvatiyar and Sheth, 2001), employees engagement and motivation (Chen and Popvich, 2003), integration with existing applications (Pan and Lee, 2003) and alignment with existing business processes (Chen and Popovich, 2003). In a similar study, Bull (2003) has investigated the issues ELMS Ltd. faced while CRM adoption and discovered that CRM project turned out be a failed project due to lack of management commitment, customer driven culture, in-house expertise and resources and a bad outsourcing experience, thus emphasizing on the fact that successful implementation of CRM is subjected to the successful adoption of the mentioned CSFs.
Even though, the above mentioned range of studies have successfully identified the areas which can cause problems during a CRM project implementation, but further information available on the root cause analysis of such problems is very limited. Therefore, a strong need has been raised in order to find out the reasons of ignoring such CSF's by analyzing the CRM project's implementation in different social contexts.
This dissertation seeks to make a contribution in this connection by expanding understanding of application and relevance of CRM at the organisations through establishing whether and how it is employed by firms successfully.