In today's world, Firms realize that it is in their commercial interest to acknowledge the existence of diverse groups of customers with wide variances in behaviour, needs, and responsiveness to marketing. ECRM consists of attracting, maintaining and enhancing customer relationships within organizations using IT. The overall goal is to endeavour to effectively manage differentiated relationships with all customers and communicate with them on an individual basis. The challenge is to offer information on the right topic, in the right proportion, and at the right time that addresses the customer's specific needs.
Implementation of next generation CRM Systems is one of the major challenges being faced by today's firms - be they pure play or click n mortar. Firms are in a need of an effective and an efficient CRM system to manage their business. In the past, firms have ducked the CRM issue or used ad-hoc solutions. However, it is now the time to use the advanced technological setup available, to revolutionize CRM for firms. In this research proposal, I would like to combine various organizational theories to define the organizational unit to be considered for CRM implementation. The research question here is 1) what are the strategic intents of firms in adopting ECRM? Then I would like to work on the intricacies of combining Web 2.0 technologies, service oriented architecture and open source framework to build an organizational CRM implementation model. The research question here is 2) what are the net benefits realised from ECRM by firms across industries? Then, the last question is 3) what are the feasibility issues involved in terms of the business and implementation? It appears that the new technological developments would help realise a Web based Collaborative Framework for next generation Social CRMs. This research proposal would be an interesting and a very promising endeavour in that direction.
Given the dizzying pace of technological change, widespread commoditization of products and escalating competition, firms are finding it difficult to create and then sustain their competitive advantage. Simultaneously, customers have become choosier, demanding, and sophisticated (Galbreath, 1998). These issues, coupled with the rise of the Internet, have profoundly impacted how firms interact with their customers (Parvatiyar & Sheth, 2001). In this scenario, it is hard to distinguish CRM and ECRM, since both of them make extensive use of digital technology and media. According to Chaffey and Smith (2008), "Ultimately, ECRM cannot be separated from CRM, it needs to be integrated seamlessly. However, many organisations do have specific ECRM initiatives or staff responsible for ECRM. Both CRM and ECRM are not just about technology and databases, it's not just a process or a way of doing things, it requires, in fact, a complete customer culture."
ECRM can be defined as a business strategy which utilizes digital communication technologies to manage interactive customer relationships and maximize sales to existing customers through optimization of long term customer value and encouraging the continued usage of online services. It expands the traditional CRM techniques by taking advantage of the radical opportunities presented by the worldwide web, by integrating technology from new electronic channels, such as web and wireless technologies into pre-existing applications in the firm wide CRM strategy. The traditional CRM is inadequate in addressing multichannel customer relations while the new ECRM would support marketing, sales and service. There has been a perceptible increase in integration of CRM and ERP systems. Combining all channels across all areas in a firm is critical for business.
Retaining customers has overtaken cost effectiveness and competitiveness to emerge as the biggest worry for today's managements. Ensuring customer loyalty requires far more than staid web interfaces given the complexity of markets, high competition and threat of new entrants. Rise of Internet has also given birth to the world of E-Commerce and its myriad opportunities. Now customers have to maintain both online and offline presence and ensure they are both well-presented because it has been long established that it costs more to obtain new customers than to retain existing ones. As a result of these multiple changes happening, customers are on the whole better informed and thus less likely to be loyal as businesses can't keep up with their expectations.
ECRM functions endeavour to provide an all-in-one marketing, sales, commerce, and customer support services to the firm in the form of a simple personalized web interface. To be truly effective, an ECRM infrastructure must present employees with a single view of the customer, despite where and how they have been communicating with the firm and which ECRM functions they have been using. Today ECRM refers to an integrated view of the business - a view of the company and its parts as a connected whole rather than small stand alone applications (silos) of activity. ECRM is a crucial business process and can be modular in the sense of how one buys and implements it. Successful functioning of the organization is attributed to the effective flow of information and management of resources internally and externally. However, different firms will have different organisational and customer relationship needs, widely varying cost structures and risks (Small and Medium Sized Enterprises (SMEs) VS. Big Firms (Bluechips) and hence, their respective ECRM systems need to reflect this reality.
Rise of CRM systems
E-business and E-commerce present extraordinary opportunities for growing revenues through a combination or all of improving customer experience and developing market channels. This also offers firms an opportunity to affect improvements in their supply chain and procurement systems. To be successful in the brave new world of e-business, firms have to reconsider and adapt their business models, which have to progress from being production centric to being 100% customer centric. The biggest differentiating factor in the eyes of customers today is the firm which they perceive as delivering the most value to them. This leads to improved sales, customer loyalty and retention times. Thus the fundamental aim of any CRM system is to maximize the lifetime value of a customer to the organization (Kalakota and Robinson 1999, Peppard 2000, Peppers et al. 1999).
Why CRM makes Business Sense
Seth Godin (1999) notes that while research used to show we were assailed by more than 500 marketing messages a day, the arrival of the web and digital TV has now increased it to over 3000 a day. From an organization's viewpoint, this leads to a dilution in the effectiveness of their messages to their customers. They are grappling with the question of how they can make their communications stand out from the rest. From the customer's viewpoint, time is seemingly in ever shorter supply; customers are losing patience and expect reward for their attention, time and information. Firms use CRM systems to build better and profound relationships with their customers. A good CRM system reflects that firm's ability to adapt its behaviour towards a particular customer depending on the information the customer provides and the data it already has. Reichheld and Sasser (1990)'s research demonstrated that the largest returns are generated only in the later years of a customer relationship. According to Bothe (1996), finding one new customer costs five to seven times more than retaining one current customer. Also, according to Reichheld, Markey, & Hopton (2000), profit increases are directly proportional to the length of a customer relationship. Thus, the underlying principle of CRM is that existing customers are more profitable than new customers
Godin refers to the traditional approach as interruption marketing. Permission marketing is about seeking the customer's permission before engaging them in a relationship and providing something in exchange. The classic exchange is based on information or entertainment - a B2B site can offer a free report in exchange for a customer sharing their e-mail address which will be used to maintain a dialogue, while a B2C site can offer a newsletter with valuable content and offers. ECRM systems not only contribute to improving customer service but are also vital in that they contribute data towards furthering the analytical capabilities of the firm. The CRM infrastructure is ultimately responsible for any growth in customer value and inspiring loyalty among customers (Dyche, 2001).
Organizations are more likely to be successful if they focused on attaining and maintaining a share of each customer rather than a share of an entire market (Peppers and Rogers, 1995). Firms want to achieve successful ECRM installations because any prospects of achieving higher return on investments and increases in loyalty hinge on its proper implementation (Scullin et al., 2002.) Romano and Fjermestad (2001-2002) opine that a good ECRM system would draw economically valuable customers to the firm while warding off any invaluable ones.
CRM and Relationship Marketing
Sharma and Sheth (2004) have stressed the importance of a shift in the trend from mass marketing to what is now popularly called as customer centric marketing. They note that e-channels can have advantages in terms of delivering relevant messages and offers to customers at relatively low cost. The conventional marketing concentration has shifted to customer retention from acquisition (Gronroos, 1994). Building and sustaining customer relationship are the order of the day in both research and practice (Jackson, 1985). Management strategy has clearly evolved from "marketing mix" to "relationship marketing" (Gronroos, 1994). In contrast to traditional transactional marketing, where the primary objective is to make a one-time, immediate sale to a customer, relationship marketing stresses on the importance of building relationships which will eventually lead to improved retention and long-term customer loyalty. (Jackson, 1985; Dwyer and Shurr, 1987; Gronroos, 1994).
Relationship marketing is used to build long-term relationships distinguished by mutual cooperation and the use of social and structural bonds (Mowen and Minors 1998). ECRM should not be considered as a technology or a business issue alone, it is in fact a confluence of both business and technology that helps firms attain and maintain their most profitable clients. Any design of an ECRM system ought to factor in the entire customer buying process, from pre-purchase to purchase to post-purchase and then after-sales service, and the unique types of communication necessary at each of these stages (Rust and Lemon 2001).
Relationship marketing strategy has proved useful in elucidating the concept of locking in customers (Barnes, 1994; Turnbull and Wilson, 1989; Palmer, 1995), customer retention (Berry, 1983), database marketing (Copulsky and Wolf, 1990; Treacy and Wiersema, 1993), and intimate customer relations (Barnes, 1994). Conversely, these 3 viewpoints are criticized because they lack what Rowe and Barnes (1998) termed as "recognition of mutuality and special status". As a result these methods are not likely to result in warm, cherished, long-term customer relationships. Concurrently in the IS domain, there have been vigorous discussions on the role of technology infrastructure on implementation of relationship management (RM) bundles (Jutla et al., 2001), customer information systems (CIS) (Mentzas, 1997; Wells et al., 1999), customer database management systems (CDBMS) (El Sawy and Bowles, 1997) and knowledge management applications.
The challenge for any firm is to communicate with customers at the right time, in the right way and with the right focus (on the apt themes) in order to effectively manage the relationships between that one customer and the multiple products or services it offers (Calaminus et al. 2001, Keefe 2001). Crosby and Johnson (2000a) state that one of the most significant problems with CRM software offerings today is the lack of flexibility that allows for customized integration and updating. This may be one of the leading causes for the high failure rate common in CRM installations. One reason why most firms find it hard to implement an efficient CRM system could be due to their following too many voices of ERP and CRM vendors and thus permitting their often conflicting and divergent views to drive their approach in this crucial area. Some firms actually try to repackage a customer strategy to match a CRM package they have purchased rather than designing the strategy first (Rigby et al., 2002). Integration has emerged as a major hurdle in the implementation of CRM systems. Some go so far as to claim that this should be the biggest consideration when firms are choosing which CRM software to implement (Maselli, 2002).
Business and System Integration
Looking at two sides of an organisation - business and technology, we can see that innovations such as CRM on the business side have only been able to achieve such a phenomenal momentum due to rapid advances in software applications that support CRM Markus (2000). A wholesome customer data profile has to include transactional as well as non-transactional data so as to aid a firm in making a customer interaction eventful (Wells et al., 1999). Such integration lays the foundation for a simplified customer support system and helps to decrease transaction costs so that the firm can offer product differentiation as well as lower prices, resulting in enhanced competitive advantage (Rangaswamy, 1993; El Sawy and Bowles, 1997).
Both aspects - business integration and system integration - must be unified. Business integration which firms now implement through a combination of new management philosophies like Business Process Re-engineering (BPR), CRM and Supply Chain Management (SCM) must be achieved by systems integration which is carried out through applications like ECRM systems and CRM software. System integration creates tighter linkages between different computer based Information Systems and databases and provides a firm with its information infrastructure Markus (2000).
Types of ECRM
Dyche (2001) classifies ECRM systems into two main types of - a) Operational ECRM and b) Analytical ECRM. According to him, the domain of Operational ECRM is primarily the interfaces with customers, that is, their first points of contact with the firm. Customers can first come into contact with a firm either via a dedicated customer hotline or a written correspondence with the firm's customer service centre or directly with a sales agent at the Point of Sale (POS) or increasingly through e-mail and the firm's website. On the other hand Analytical ECRM is data intensive and generally needs technology to crunch the vast amounts of customer data collected by the firm or divulged by the customer through one of the multiple customer touch points. The rationale behind Analytical ECRM is to comprehend the multitude of demographics, purchasing patterns, seasonal-local variations in sales and other such external factors so as to construct new business opportunities through extensive research and analysis. The important thing to keep in mind is that an ECRM system is flexible (can take on multiple forms) entirely depending on the organization's objectives. According to Rigby et al. (2002), ECRM is not just about technology or superior software, it is more about bringing a firm's business processes into line with its customer relationship and marketing strategies.
Web 2.0 and Characteristics
The term "Web 2.0", coined by Tim O'Reilly in 2004 is commonly associated with web applications that facilitate interactive information sharing, interoperability, user friendly design and collaboration on the World Wide Web. Examples of Web 2.0 include web-based communities (MySpace), hosted services (cloud computing, google groups), web applications, social-networking sites (Facebook, Buzz, Orkut), video-sharing sites (Hulu, YouTube), wikis, blogs, mashups and other folksonomies. Web 2.0 hopes to facilitate creativity, collaboration, crowdsourcing, open innovation and sharing among users - it involves dissemination and creation of new information or new ways of looking at old information. A Web 2.0 site is interactive thus allowing its users to interact with other users or to change website content, in contrast to non-interactive websites (Web 1.0) where users were limited to the passive viewing of information that is provided to them. [Source: Wikipedia and O'Reilly Media (http://oreilly.com/web2/archive/what-is-web-20.html)]
Web 2.0 websites allow users to do much more than simply passively consume information. Web 2.0 has been often referred to as the "participatory or the democratic Web" because of its nature of bringing people together and enabling fast, effortless spread of ideas and information - so much more potential than Web 1.0. It builds on Web 1.0 and brought the Network-as—Platform concept to life, allowing users to run multiple applications directly through a browser. Many Web 2.0 sites encourage a culture of participation that urges users to add value by suggesting or making improvements to the site or any applications as they use it. Web 2.0 sites also offer feature-heavy, user-friendly interfaces ideal for consuming entertainment and other media (on Flash, Java platforms). Some of these sites also include social networking features. The concept of Web-as-participation-platform is revolutionary and many firms see business potential in engaging with their customers here.
The Rise of Social Media and its Impact on Business
Business is moving online as a matter of necessity and not necessarily as a matter of choice. Senior management at most firms have realized the potential of web 2.0 technologies to fundamentally change the way people work. The use of the Internet as a channel for commerce and information presents an opportunity for business to use the Internet as a tool for customer relationship management (CRM). Despite widespread agreement that CRM has direct and/or indirect impact on customer satisfaction, sales, profit, and loyalty, the significance of ECRM and the various ECRM features in influencing customer satisfaction has not been well researched. As a result, interest in exploring these novel ways of working, data sharing, of working together to boost productivity and achieving business objectives has arisen.
Improvements in our ability to communicate always have an impact on the way we conduct our work and lives. Just as writing aided the development of society and the printing press drove democracy forward, web 2.0 will lead to an increasing dissemination of information among the public. Every time there is an increase in our communication capabilities, the resulting increase in speed, distance of contact and richness of our communications influences how we work and the way we organize. Ronald Coase (U of Chicago) won the Nobel Prize for Economics for his work illustrating how transaction costs influenced institutional structures. In "The Nature of the Firm" (1937), Coase investigated the effects communication costs on the organizational size and concluded that high communication or transaction costs encouraged bringing as many functions as possible within the organization (vertical integration).
Harold Adams Innis (U of Toronto) listed several changes that would occur due to a reduction in communication costs which accurately reveal the major trends of Web 2.0:
"Redistributing knowledge and, in doing so, shifting power Making it easier for "amateurs" to compete with "professionals," because access to knowledge substitutes for mastery of complexity Allowing individuals and minorities to voice ideas Reducing the advantages of speed that formerly accrued because some had knowledge before others Reducing the advantages of size that are based on the ability to afford high costs." [Innis, 1951]
Web 2.0 technologies allow people to network without stipulating how to and give rise to patterns and structure over time thus allowing multiple actions to transpire virtually and asynchronously. Also, sophisticated search algorithms allow people to find whatever data they seek quickly and accurately from an ocean of information. Collectively they present momentous enhancements in producing, sharing and sorting knowledge, while making it easier for public to harness new sources of innovation to find relevant resources. This power of extended collaboration represents the cutting edge of human productivity in this age (the ability to expend effort together without time or distance or physical resource constraints using ever-emerging new communication tools. Social media can be said to have become a critical component of serious business.
There is a lot of commercial activity on tools like Twitter which developed the concept of immediate information and real time communication and businesses are interested. Many big brands (Coca Cola to Best Buy creating a Twelp (Twitter Help) Force for Christmas '09) are sharing information with their customers. More importantly, local smaller businesses are getting a communication channel to people who come to their shop or restaurant for the first time. Web 2.0 enables two-way communication - that is its vital edge. It involves generating value not only from advertising but also from customer feedback.
The objective of customer relationship management (CRM) is to increase customer loyalty in order to increase profitability. CRM is aimed at improving all aspects of the level of customer service. CRM tactics can be based around the acquisition-retention-extension model of the ideal relationship between company and customer. In an e-commerce context, acquisition refers to gaining new customers to a company and converting existing customers to online services. To enable an online relationship it is important to profile customers to find out their needs and expectations and obtain an opt-in e-mail agreement to continue the dialogue. Marketing communications techniques to achieve acquisition, retention and extension include traditional online mass-media techniques and specialized online techniques such as search engine registration, link-building, e-mail marketing and banner advertising. Techniques for customer retention include the use of extranets, online communities, online sales promotions and e-mail marketing.
Customer extension involves better understanding of the customer through feedback on new product development and encouraging customers to increase the depth of their relationship by offering complementary products for purchase or increasing purchase frequency. Knowledge of online buyer behaviour, and in particular, the differing needs of the customer through the different stages of the buying decision can be used to improve CRM management. Customer service quality is important in achieving loyalty and the SERVQUAL framework can be used to consider how to use the Internet to achieve this.
SERVQUAL is a multi factor scale developed to gauge customer perceptions of service quality in service and retail businesses (Parasuraman et. al., 1988). The scale decomposes the notion of service quality into five dimensions as follows:
- Tangibles - Appearance of physical facilities, equipment, personnel, and communication materials
- Reliability - ability to perform the promised service dependably and accurately
- Responsiveness - willingness to help customers and provide prompt customer service
- Assurance - Knowledge and courtesy of employees and their ability to convey trust and confidence (Competence, courtesy, credibility and security of the service)
- Empathy - Caring, individualized attention the firm provides its customers (Access to organization's representatives, communication and understanding the customer)
SERVQUAL represents service quality as the discrepancy between a customer's expectations for a service offering and the customer's perceptions of the service received, requiring respondents to answer questions about both their expectations and their perceptions (Parasuraman et. al., 1988). The use of perceived as opposed to actual service received makes the SERVQUAL measure an attitude measure that is related to, but not the same as, satisfaction (Parasuraman et. al., 1988). Parasuraman et. al. (1991) presented some revisions to the original SERVQUAL measure to remedy problems with high means and standard deviations found on some questions and to obtain a direct measure of the importance of each construct to the customer.
Kettinger and Lee (1994) and Pitt et. al. (1995) were among the early adapters of SERVQUAL to the IS context. Their work sought to use SERVQUAL to measure the service quality of the IS function. Since this time, some concerns have been raised regarding the suitability of SERVQUAL to the IS context (Kettinger and Lee, 1997; Pitt et al., 1997; Carr, 2002; van Dyke et. al., 1999).
ECRM may be a comparatively new application but the study of system success and system failure is nothing new in the field of Information Systems research. Among the several frameworks which exist for deciphering an information system's success, the well tested and universally accepted DeLone & McLean IS Success Model is most apt here. After conducting more than hundred empirical trials for more than ten years, DeLone and McLean revised their initial model to group all individual and organisational measures into a single category called 'net benefits', which represents the final success variable in their model. Through this research proposal, the author aims to find out if there have been any 'net benefits' for firms with ECRM systems. If so, then what measurable concrete benefits have they seen materialize and which among these benefits are common cross different firms within an industry and which are common across diverse industries.
Using the DeLone & McLean IS Success Model would also help clarify the strategic intent behind a firm's adoption of ECRM. This is a crucial area of examination because it would help us in comprehending if there exists an implementation imitation effect in reality where-in firms simply followed the 'herd' and lacked any specific strategic objectives with respect to ECRM systems and associated investments. Investigating this occurrence may help in understanding some of the causes of ECRM systems' failure and their impact on the business. To sum up, the author aims to address the following three questions in this research:
- What is the strategic intent of a firm in adopting ECRM?
- What are the 'net benefits' of ECRM common across industries?
- What are the feasibility issues involved in terms of the business and implementation?
The prevalent view of ECRM now which has emerged recently is that it both a strategy as well as a technology. Despite this clarity, many firms still find it hard to make certain that their ECRM strategies are successful as it would entail navigating organisational changes, complex processes and rapidly evolving technologies. But all this is essential to support communications with customers in all channels. This research aims to investigate the effects of adoption of ECRM with Web 2.0 features in practice and discover the factors that aid/inhibit the ECRM system's sustainability. Owing to the significance and complexity of this issue, this research proposal seeks to undertake a broad survey of different ECRM functions currently in usage, to unearth the issues faced by ECRM managers in achieving success and an analysis of the expected versus realized benefits of ECRM implementation.
Selecting the firms
Afore mentioned research questions will be studied through a broad pragmatic survey of 30 firms and further in-depth interviews of 10 firms. The process of selecting these firms will be done in four stages:
In the first stage, we identify at least 10 industries in which ECRM strategies are highly used. Some of these are likely to be retail, hospitality, financial services, telecommunications, software, consumer electronics and entertainment industries because it is common knowledge that all of these industries face severe competitive pressures with respect to customers and a lot depends on having better customer relationship management systems. Thus there is the possibility that they were among the early adopters of ECRM systems. 3 firms [1 small (revenue - 5million GBP), 1 medium (revenue - 10-15million GBP) and 1 large (revenue - 15-50 million GBP)] in each industry would then be arbitrarily chosen. Firms in each industry will be contacted for their cooperation in this survey. In this way, a list of 30 firms that already possess or will possess an ECRM system will finally be generated. To comprehend the firms' ECRM practices, they will be asked to self-report their implementation and usage of various ECRM systems (for example, if they have a web-based ECRM practice or not).
In the second stage, ECRM managers in each of the 30 companies will be asked questions pertaining to the ECRM project team size, duration of ECRM usage, ECRM investment, extent of usage, rate of usage, etc.
In the third stage, a single firm from each of the 10 industries will be chosen randomly for extensive interviews. Thus, a total of 10 ECRM project managers will undergo extensive interviews about their ECRM projects. These in-depth interviews may help answer the whys and hows of ECRM adoption and what benefits (if any) the ECRM systems have accrued for the firms. These may also help us analyze what the critical success factors (if any) are and what are the barriers preventing more widespread use of ECRM.
In the fourth stage, we critically analyze the effects of the feasibility issues (in terms of both business and technology) on ECRM survival. Implications for theory and practice can then be examined.
How to Collect Data
This research proposal foresees the use of qualitative methods like open ended in-depth interviews and quantitative methods like analytics on data obtained from responses. The process will be repeated with numerous respondents in each firm so as to attain triangulation of data and insights.
Discussion - Expectations and Risks
ECRM in spite of being classified as part of generic CRM presents a distinctive challenge in terms of assessing its benefits and its usefulness. Any benefits identified through this research may serve to identify their critical success factors as well.
Envisaged Benefits of ECRM from this research:
A social CRM system may result in the following benefits for organizations:
- Single view of Online and Offline Constituents
- Provides holistic View of the System
- Comprehensive Knowledge and Oversight
- Targeting more cost-effectively
- Lower cost through Personalization
- Increases depth, breadth and nature of relationship
- Achieve mass customization of the marketing messages
- A learning relationship throughout the customer lifecycle
This proposal studies CRM in a qualitative manner so any conclusions will also require being corroborated quantitatively acc to actual observations of ECRM implementation usage for overall substantiation. This would enable us to refine multiple concepts like the effectiveness of customer capture and retention as well as the optimal technology to be used in extensive detail. During the analysis of any customer relationship, measuring customer equity is difficult. Therefore, further research with supplementary firms in different industries and a comprehensive work on the causes for ECRM project success and failure may lead to results which can prove immensely beneficial to people who build and manage such ECRM systems. Ultimately, all of this research is intended to be conducted on a random selection of different firms in different industries. Further research in this subject area ought to be centred on an individual firm and an individual sector (like the soft drink industry) so as to reveal and scrutinize any commonalities and differences compared to this proposal.
The developments in IT and Web Services are causing an evolution of traditional Customer Relationship Management (CRM) systems as they undergo a fresh and radical modification. Enterprises will not only be able to facilitate improve integration of information with other enterprise applications and backend systems but will also enhance their analytical capabilities and thus achieve better results. Increasingly, Social Networking is gaining prominence and it presents firms with the potential of harnessing this vital data necessary for fostering deeper relationships with their employees and customers. ECRM enables firms to capture a single view of their customers in an interactive system along with their myriad viewpoints and worldviews. This is the reason many organisations are leaning towards incorporating the social networking aspects and other Web 2.0 features into their traditional CRMs. Web 2.0 is currently thought of more as a stage than a service because of its data integration capacity and immense interoperability. Concurrently, Social Networking is aiding firms to build robust relationships with their partners as well. This research proposal considers the feasibility of building a conceptual model of an ECRM System, with the combined characteristics of Web 2.0 including Social Networking added to a traditional CRM system. As with any decision with considerable resource implications, it is best for firms to perform a cost benefit analysis before ECRM investments are undertaken. This would present a new angle to the research on next generation CRM Systems and contribute to this vital development of CRM in the Web 2.0 Era.