Overview of customer relationship management

EXECUTIVE SUMMARY

Customer Relationship Management (CRM) can provide the foundation on which a organisation builds a successful long term relationship with its customers. Many organisations execute CRM to create value but it is widely critised that a lack of understanding has led to failure of developing CRM strategy for maximum advantage. Research conducted will show philosophical, strategically and technological views to demonstrate various CRM concepts. Organisations need to select the right CRM application tools to implement the best customer relationship management; however this is provided that the organisation has the correct organisation strategy, culture and leadership. CRM is recognised as entire organisation process as it has an impact on all organisation activity and is not recognised a single project. It is important that existing customers are correctly considered to be more valuable than acquiring new customers. The building of strong sustainable customer relationships is not easy however technological advances have led to better use of integration techniques which are used to manage and retain existing customers.

The report will evaluate issues surrounding the use of technology to implement best CRM practices and also the impact on information use for CRM. Models are used in this report to help demonstrate how CRM is practiced. The report will give a clear idea of the successes and difficulties faced when adopting CRM initiatives and will identify to what extent CRM is the best solution for all organisations. Finally, the report will prove that success of an organisation relies on the efficiency of the organisations CRM processes. Recommendations at the end of report will suggest the best practices to achieve critical success of implementing most effective CRM.

INTRODUCTION

In current economic conditions it is a basic requirement for a organisation to manage information. Anderson & Kerr (2002,p. 2) define Customer Relationship Management (CRM) as 'a comprehensive approach for creating, maintaining and expanding customer relationships.' It is vital that information is used effectively to acknowledge the customer needs. CRM is established for the improvement of the relationship between the customer and organisation. This improvement happens when a organisation establishes new relations with the new customers and also when it maintains its existing relationship with the customer. CRM existed in ancient times but only started to develop in recent years (Goldenberg, 2003). It is explained that the development is mainly due to technological advances. Although there are other factors which influenced the recent development of CRM. As a organisation strategy CRM effectively organisies organisation resources in the department of sales, marketing, finance and HR (Smith, 2009) This report will specifically look at the positive and negative impacts of Customer Relationship Management has upon the marketing function. Henneberg (2006, p. 2) develops the importance of marketing by stating that 'CRM as a concept is a well-research area of marketing theory. Since the 1990's the use of relational marketing approaches in consumer markets has found many managerial applications.' Furthermore it will take a detailed look at the use of technology and organisation strategy.

SECTION 1 - USE OF TECHNOLOGY

EXPLAINING:

'Customer Relationship management (CRM) is a core organisation strategy that integrates processes, functions and external networks to create and deliver value to targeted customers at a profit. It is grounded on high quality customer data and enable by Information Technology (IT)' Buttle (2004,p. 34). Raab, et al. (2008) expands on this by stating that organisation carries on their existing organisation by finding the appropriate methods, technology and then delivering them to the customer in the best ways preferred to the customer's requirements. This mainly includes the data which assists the organisation to know valuable information required for marketing the product to the customer. Information produced for purpose of CRM consists of customers behavior towards the organisation, transactions made from sales, web used by the customer for purchasing the product and contact of the customer for informing them about the new product and keeping relationships. Software technology helps the organisation to analyse the data for marketing products and also for finding out which product is more preferred by their customer in the market (Smith, 2009)

Software technology allows the organisation to analyse the data and keep the relationship with the customer. This form of technology assists the organisation to advertise their products online and also assists selling of the product through this software. In the contrast hardware technology is used for storing all kind of data used by the organisation about its customer. Hardware is described as a 'client-server with mainframe for data volumes' by Mutch (2008,p. 92).

IMPACT OF INFORMATION USE:

It is stated that it is vital that data that has occurred and interpreted for information use has been incorporated using usage of information technology, information systems and information communication technology when considering CRM as a technology (Mutch, 2008). CRM has developed in last decade due to the technology used in it. The increase of acceptance in CRM technology in organisation is due to the concepts of marketing orientation (Kohli, Jaworski and Kumar, 1993). Technology has become important for organisation to store data and using this data to form the strategy of the organisation. Surveys are one of the methods used to collection information; this form of research helps organisation to develop marketing software which is used in advertising products to the customers. The use of web technology and use of software as a service provider records all the transactions of the sales in the customer data. This data is used so information can be found out about the usage of product from the customer. The organisation can use the usage data to make any strategic changes to its product. Ultimately, the organisation will produce the product to its customer needs which will therefore build its relationship with the customer.

Information is the data which has a kind of relevance and purpose that helps the organisation to analysis the data in a meaningful way (Davenport, 1997). Data which is collected is the information which is obtained from the customer about their personal view of product and their expectation from the organisation. Managing this data is important for the organisation because this assists the organisation to get into touch with the customer and to maintain the relationships. It is fundamental that marketing data which has been collected is of a qualitative nature. This is significant because the data collected will be used to produce the companies marketing strategy.

If incorrect data is used by the organisation for marketing purposes, it may have difficulties of understanding the customer's requirements and therefore they will struggle in building relationships with its customers. The information which is found now can be stored on computers as a data and can be used infinite amount of times by the organisation (Buttle, 2004). Information which is collected is structured into computer database in such a way that it can be broken down easily.

Information which is collected for the purpose of CRM is used for decision-making regarding the manufacturing of new product and launching it in to the market. The information which is collected for CRM can also impact customer service, finance, sales and human Resources management. Knox (2007) affirmed that Hierarchical Nature of Information, which explain that various data merge to form information which in written forms in to knowledge for the organisation and this information is included to get the valuable significance.

Information is the data which has been produced by the organisation for making decisions regarding the products and how to market their products. Information plays an important role in the development of marketing strategy. Managing information in large organisations is essential as they regularly collect vast amounts of information from the transactions of sales which can for a variety of purpose in the organisation (Sharp, 2003). CRM is the base for the technology used in collection of data which helps organisation to capture analysis and apply it in the organisation. The large amount of information which is collected by the organisation helps them to understand the requirement of the customer and then apply it to the decision- making in the organisation.

Knowledge in term means the understanding of the particular thing (Sharp, 2003). In regards to technology Goldenberg (2003,p. 171) states that 'Knowledge management technology helps companies to capture, organize, manipulate, and share explicit and implicit data'. In contrast Awad and Ghaziri (2004, p.33) state that 'knowledge is an understanding gained through experience or study'. It is the experience which builds the knowledge about the marketing of the organisation.

In CRM the understanding of meaningful information is released to the person to result in the knowledge of the customer relationship. The concept behind the knowledge management is of combination of people, technology and organisational process used in the best way to get the result (Awad and Ghaziri, 2004). CRM helps the organisation to find the most appropriate way for utilizing the knowledge and getting best results out of it. It is the mixture of all kind of data available for the organisation as it uses secondary resources. The main focus behind CRM in knowledge is to collect large amount of data and then finding out the best suitable data for the particular product for marketing (Awad and Ghaziri, 2004).

SECTION 2 - STRATEGY

CONTEXT

It is vital that organisations understand the importance of how CRM creates value for themselves and the customer. Equally organisation should know how to implement CRM effectively and strategically. These strategies should include affects of 'economic forces, technological advances, regulatory shirts and cultural changes' (Kirkby & Nelson 2002,p. 2). The first step of implementing strategic CRM should look at marketing methodology of collecting data, then converting useful data into information. Finally, this data can be converted into knowledge (Refer to Section 1).

In addition to issues address in the section below, other key issues include adaptation of technological advances and cost of implementing CRM into an organisation.

STRATEGY

CRM strategy is produced by data collected by the organisation. It is important that data collected by the organisation is carefully selected for usage and so inadequate data can be ignored. The data can be used to improve their existing strategy and ultimately this will be used to develop customer relationships. In regards to creating marketing databases, the selection of qualitative data is more important over quantitative data (Rose, 2009).

It is recognised that organisations invest huge amounts of capital in CRM projects and receive slow rates of returns. Organisation must recognise that investing in CRM projects are long term investments and returns on investments can only be seen over a long period. Pisello (2004) writes that reports published in 2003 showed that 8 out of 10 CRM projects fail to deliver ROI. On the other hand another report shown by Pisello states that seventy percent of CRM projects exceed original ROI expectations. When investing in CRM projects Schuster (2005, p. 65) recognises that it is essential to 'Ensure a good match between the organisation's needs and the software's capabilities is critical for success'. In addition to this, organisations should prepare their strategy by taking into consideration information regarding the market, their competitors and their products. Strategy helps organisation to make their future decision about their expansion in the market. Sharma & Iyer (2007) consider the importance of keeping up-to-date with other competitors when introducing CRM into their own organisations, however there studies have found that organisations are introducing CRM projects without planning its strategy in advance. According to Porter (1979, p.137) 'To establish a strategic agenda for dealing with these contending currents and to grow despite them, a organisation must understand how they work in its industry and how they affect the organisation in its particular situation'. An organisations CRM strategy should be developed so that it takes into consideration the customers needs and requirements. It is seen necessary that organisation strategy is aligned with the strategy for implementing CRM into an organisation. An organisation which wishes to be successful in implementing CRM should have an organisation goal of being more 'customer focused' over 'product focus' (Imhoff et al, 2001)

STRUCTURE

Earlier in this report it was recognised that in order to have any form of success at CRM projects, organisation strategies should be formed to promote CRM across all functional areas of the organisation. The structure of the organisation must be formed in such a way that CRM is easily understood and accepted thought-out the organisational hierarchy. At the top of any hierarchy should be an effective leader who can drive the implementation of CRM in the organisation. It is agreed upon by Chang (2007, p. 490) as it is stated that 'top management team is needed when the firm is constructing CRM'. This 'top management' should create 'new' cross-functional teams to help implement the use of CRM in organisations. Expanding on this Ryals & Knox (2001) believe that involvement should go as far as the CEO of the organisation.

This ultimately will enable management to share and clearly outline future developments and visions of CRM of the organisation with its employees. In addition, Chang (2007) recognises that it is vital for transformational team-working to be used in organisations as this will improve communication between departments. It is equally important that restructuring of the organisation should be drawn up to strategically align with the new processes of CRM. A organisation which has been restructured for CRM should have 'an effective internal communication strategy' (Ryals & Knox,2001,p. 8). In addition, in the view of Culbert (2007) a separate 'project office team' should be made using senior staff of different functions in an organisation. This strategy would allow for various departments to be responsible for implementation of CRM which would directly report to the CEO. This form of convergence of departments could potentially assist in reduction of costs and increase productivity (Elliott, 1997).

ROLES

To take advantage of CRM as a strategy it is vital for any organisation to consider that CRM is a continuous process and not just a one off project. It is agreed by Sharp (2003,p. 14) that CRM needs to be 'strategically managed and integrated at all levels within an organisation by every employer.' This shows that it if an organisation wants to successfully implement CRM it is vital that adequate training is provided, correct recruitment of staff with appropriate skills and to ensure employees understand implementing CRM. Research suggests that employees are the key to building successful customer relationships and that's why it's important for individuals to have good competences to take advantage of CRM. It is crucial that training is given for success, and also that it is essential that any training carried out should be effective (Ali, 2007). It is also recognised by Ali that members of senior management are of the biggest influence on changing staff attitudes towards implementing CRM processes. Ali (2007,p. 44) acknowledges that 'senior management's own attitude and behavior towards customers and other organisation aspects has a direct impact on how other staff think and behave.'

Training should include making employees feel comfortable using new systems and technology which in turn will help them save time and effort. Additional training that could be given to employees could be on how to develop relationships with existing customers, improvement of personal qualities required to building customer relationships and teaching, techniques to handling difficult situations and customers. When an organisation is recruiting, ideally they would need individuals who have the right relationship skills to satisfy all customer demands. To maximize benefits of CRM any new recruited employees should be able to provide quality customer service as a basic skill. (Chen and Popovich, 2003) state that to keep employees motivated while implementing CRM, initiatives should be rewarded to customer-orientated employees.

CULTURE

Organisation culture is made up of many individuals who work towards one common goal in the interest of their organisation. CRM systems introduced by the organisation should be easy to use and be user friendly in accordance to Chang (2007). Chang also recognises that employees of an organisation may find it difficult to adapt to change when told to learn how to use CRM software. Other author's reflect that adequate training should be given to employees of the organisations so they learn to use new CRM software. Management of these organisations must stress to their employers that in the long term, the introduction of such software will make future work loads lighter. It is also agreed that it is vital organisation management should explain and share the reasons behind the implementation of CRM and how it can benefit customers and organisation.

According to Conlon (2003) organisations have to adapt to cultural changes which take place in order to keep up to date with CRM technology. The importance of senior management influence is again stressed in this section as it takes someone on an executive level that can demonstrate to its employees that the main purpose behind CRM is to deliver customer value. In addition, Conlon (2003) expresses this point further by stating that 'executive support is crucial to CRM successes.'

Finally, Conlon points out that CRM implementation as a strategy should be prepared as a long-term process and not for short-term.

CONCLUSION AND RECOMMENDATIONS

There are many critical factors which limit the success or failure of Customer Relationship Management. The success or failure of CRM heavily relies on the appropriate use of information found regarding its customers using CRM technology. It is essential that information is interpreted correctly to help meet the customer's expectations. Ultimately, findings show that organisations should ensure they use the best CRM tools available to them. Organisations who introduce CRM should recognise that they are taking part in a long term project and not a one off activity. Throughout the report it was widely found that implementing CRM requires drive from an effective leadership.

Recommendations are based on findings and conclusion which have been drawn out of the report. The following recommendations are used to advise organisation the best practices to achieve success of CRM.

  • Essential correct usage of CRM technology - Making sure CRM software is compatible with the organisations strategies.
  • CRM should be recognised as organisation wide activity and not singled out for departments (e.g. marketing).
  • Effective in management of customer information and appropriate usage of this information.
  • CRM should be seen as a long term business investment and organisations should not expect short term returns.
  • Adequate training should be provided to employees of the organisation who are involved in the process. All employees of the organisation should be made aware of the necessity of CRM.
  • Organisation being customer focused over product focused.
  • Powerful Management to drive CRM forward - Including the involvement of CEO's. Senior management should have a big influence on changing staff attitudes towards implementing CRM processes.
  • 'Shared values' of employees and the organisation in line to meet its customers needs.

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