Customer Relationship Management: IKEA and HSBC - Case Study Example

Customer Relationship Management: IKEA and HSBC 1.0 Introduction: In the current age and time, customer relationship has grown to become a major part of almost every industry. Customer relationship Management, which is widely known as CRM holds an enormous importance in today’s competitive world. Various changes have taken place since the evolution of CRM and various definitions of CRM have come over a period of time. This paper aims at discussing the case of HSBC and IKEA and how these companies have applied customer relationship management into their daily processes. The paper will firstly provide a brief overview of the two organisations following which a clear detailed discussion of the customer relationship management will be made. The paper aims at discussing; the effectiveness of applying customer relationship management will be discussed as well. 2.0 Overview of Organizations: 2.1 IKEA – IKEA is a retail store which deals with products for home furnishing. The company operates with a strong vision which reads, “The IKEA vision is to create a better everyday life for the many people. We make this possible by offering a wide range of well – designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them” (IKEA, 2010). IKEA has been in the industry since 1954 and the company has seen an intense growth in terms of their sales and overall turnover each year. As seen on the website of IKEA, it is clear that IKEA has been working towards combining a good level of trends with good design at low costs and good functions. The company pays a lot of attention to the customers and their needs and this is evident from the fact that the company prints as many as 56 editions and 27 different languages for their catalogues. The company has been recognised for the excellent online shopping experience that it provides to the customers and also the care and attention that the company gives to the customers and their needs (IKEA, 2010). 2.2 HSBC - HSBC is recognised to be the world’s local band and the company has its head quarters in London. The bank is recognised to be one of the largest banking and financial services in the organisation and operates from over 8,000 offices in over 88 countries. The bank’s basic tag line is, “We are the world’s local bank” (HSBC, 2010). HSBC operates in countries and states of Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. The company’s shares are held by over 220,000 shareholders in almost 119 countries and territories and the shares are traded on the New York Stock Exchange. The organization is an internationally recognized organization and has been recognized for its advanced technology and also for the ecommerce capabilities. HSBC has also been known for the extensive range of financial products that the company deals with. HSBC has been able to reach out to millions of customers across the world and has been able to provide customers across the world with excellent banking and financial services (HSBC, 2010). 3.0 Customer Relationship Management CRM is a business strategy that has been built around the notion of being customer-centric. The main aims are to have optimum revenue by better customer satisfaction through improved contacts at each client touch point. This is possible by an improved understanding of customers, on the basis of their demographics and purchasing patterns and a better interface with the customer at all touch / contact points (Learn that, 2007). Customer relationship management has been defined in a number of different manners. A few of the definitions include, a) CRM means to alter strategies, business functions as well as operational processes with an aim to retain customers and increase profitability and customer loyalty (Pantazopoulos, 2007). b) “Making the Customer king is one way of improving sales. But a better one is making the right customer king. This discipline is called customer relationship management.” (McCabe & Wolfe, 2000). c) CRM means actively deepening one’s knowledge about the customers so as to meet individual customer needs (Beynon-Davies, 2004). d) CRM is comprehensive approach unifying all the points of customer interaction. In simpler terms, CRM revolves around the customers and all efforts are made to meet the needs of the customers at all times. This is clear from the figure below: Customer Relationship Management (ICON, 2010) Customer Relationship Management is based on three main components. These include, Customers, relationship and management. CRM happens to be a trial for achievement of a ‘single integrated view of customers’ as well as an approach with “customer centric view”. (Roberts-Witt & Sarah, 2000) Customer: As widely known, customer is the king because he is the single chief source of profit as well as development of the company. However, these days, not all customers are to be crowned as king since it is important to value more important customers higher, than the less important ones (Trepper, 2000). Hence, CRM proves to be a collaborative effort to identify the important customers and take a step further in maintaining relationship with them. The advent of information technology can offer the ability to differentiate and manage customers. CRM can be thought of as a marketing approach that is based on customer information (Wyner, 1999). Relationship: The interactions between the company and its clients involve a two-way communication relationship. The interactions with customers take place at several intervals - long term or short term. The customer relation and the repeated instructions help the study of CRM as results can be derived on the attitudes, demographics and more importantly on the buying behaviour of the customers (Evans & Moutinho, 1999). Moreover, the very essence of CRM lies in maintaining long lasting successful relationship with the customer. CRM at its core refers to managing the customer relationship and thereby increase business. Customer Lifetime Value (CLV) is one of the tools of managing customer relations and identifying potential prospects for long-term relationships with the company (Evans, et al, 2004). Management: Though the implementation and activities under CRM are carried through different marketing channels and customer touch points, this activity is more to do with the management. The data collected about customers through customer touch points is transformed into useful information that the companies can use towards better and improved business opportunities (Roberts-Witt & Sarah, 2000). “CRM revolves around change in the management pattern of the customer.” (Gray & Byun, 2001) Earlier CRM was not very well accepted. Historically, the various industries aimed at improving the infrastructure and systems, rather than focussing on the relationships with various customer segments. In recent years, the almost every industry has changed to a great extent and dramatically. Increased competition and rising customer expectations have pushed the companies to focus on CRM (McCabe & Wolfe, 2000). Today, revenue performance has become the central theme for CRM as organizations seek to achieve and maintain expected financial results. The companies are trying to know more and more uses of CRM today and finding out its profitability as well as the investment required in it. With the use of CRM, the companies are finding the opportunities for growth, its usage in strategic decisions, more revenue generation through cross selling and up selling as well as ways to acquire more customers faster and retain the existing customers giving rise to higher customer lifetime values (Evans, et al, 2004). The change witnessed in the CRM industry due to this has led to an inside-out perspective where in organizations are first able to have an inside out approach and see what is to be delivered to the customer and try to link their operations so as to have a predetermined impact (Trepper, 2000). Organizations first understand the customer and try to deliver them as per relevance fitting in their requirement. A lot of technology integration has also rendered the companies with better revenues (Beynon-Davies, 2004). Fujitsu Consulting conducted a research on the forces that drive the companies to aggressively pursue CRM and identified that there are three main forces, which include, a) the rising competition, b) the increasing churn in the and lowering loyalty and lastly the soaring costs that relate to the marketing and sales of the companies. 3.1 IKEA and CRM IKEA takes the customers very seriously and works each day to ensure that the customer needs are met and that customers get complete value for their money. With an idea coming in about customer-related processes, reengineering of service delivery quality and effectiveness has been done by IKEA which helped them eliminate avoidable activities, perked up out-of-date processes, and revamp actions that had failed to bring the desired outcomes (Ingrid, 2003). Hereby re-creating the procedure with a perspective of technological capabilities, the outcomes have become more effective. This has improved the customer satisfaction with better and faster processes in place (McCabe & Wolfe, 2000). CRM involves the integration of various services and emphasizes on building strong bonds with the customer. IKEA also adopts a cross functional integration approach to CRM by integrating sales, marketing and customer service in CRM initiatives (Raaen, 2000). These CRM initiatives have proved to be more successful when compared to those which target just one or two of these functionalities. In order to have a significant return on Internet-based CRM initiatives, IKEA also makes a cross-functional approach for the investment to pay-off (Editorial: Customer Interface, 2002, p16). The use of the customer relationship management systems within the company has allowed IKEA to develop and has also allowed the company to develop newer products which meet the needs of the customers and help the customers get items to their choice and tastes. IKEA has been through a wide range of ups and downs in the customers and their overall sales. The company however has been able to develop a more stable view of what needs to be produced and this helps in not only meeting the needs of the customers but also in reducing the costs for the company as well. 3.2 HSBC and CRM HSBC has also been one of the few banks and organisations that have implemented the customer relationship management systems effectively and have been able to develop online banking facilities for the customers to enable bettered overall customer satisfaction as well. The company uses all the knowledge gathered from the corporate data as well as that from the customer contact and these are used for data mining and have resulted in improved operational and sales performance (Ingrid, 2003). With the application of complex algorithms to the purchasing history and inquiry history, prediction of the individual demands of the customers has become possible. Pre-emption of potential troubles, up-selling as well as cross-selling is now easily possible for all customer-facing representatives (McCabe & Wolfe, 2000). HSBC has been able development of cross-functional integration along with support of data warehousing as well as sharing of roles and responsibilities has given a customized view of the organization and its services to the customer. This integration has been able to solve several support issues, sales calls queries and marketing inquiries and helped in building a better understanding of each consumer (Wood, 2003). It has facilitated better training of sales force, its automation and thereby allowed aggressive organizations to adjust their tactics to suit individual preferences. With integration, superior customer relationships have been built and customer satisfaction has become the responsibility of organization as a whole (Beynon-Davies, 2004). With one single view of the customer’s account history, it has become convenient for anyone to act in response to sales opportunities or handling support issues, and take suitable actions (Fisk, et al, 2000). In conclusion, both HSBC and IKEA work towards improving the overall effectiveness for the customers. A complimentary process to customer relationship management (CRM) has emerged – Customer Managed Relations (CMR). In this process, the customers are allowed to manage their accounts without the need to contact call centres. It is an established fact that, more the customer interacts with the company, the more loyal he becomes. But by giving him the power to manage his own accounts, the level of satisfaction is higher and hence he falls into the Loyalist category (Evans, O’Malley and Patterson, 2004). CMR and CRM are not alternatives; instead they are complimentary to each other. “CRM is about understanding the customer; CMR is about empowering the customer and letting them take charge.” (McCracken, 2002) 3.3 Benefits of CRM CRM facilitates having a right person at a right time to deliver a right thing in order to add value to customer service. Following benefits also arise in sales support. a) Sales performance improves considerably, b) Skills of the sales personnel are developed c) Sales plans can be realistically designed to give desired results d) Helps in identifying and retaining best sales talent. The study undertaken by McCabe and Wolfe (2000) has given a finding that three customer service capabilities form about 43% of the service and performance. These include the following: “a) An effectual billing system, b) Being able to attract and retain the best service talent, c) Being able to measure effectiveness of customer service” (McCabe & Wolfe, 2000). As seen in the above explanation, there is a clear connection between the customers and the CRM applied within a company. This can clearly be understood from the diagram below. Relation between CRM and Customer (Source: Grey and Byun, 2001) Identification, attraction and retaining the valuable customers begin by picking the correct CRM model. A study done by Andersen consulting has revealed the following details about CRM Practices followed and its outcomes. CRM plays a key role in defining and differentiating the products. It is studied and estimated that CRM performance can give about an average of 16% Return on Sale (ROS). However, it is also noted that all CRM capabilities do have equal impact on performance (Raaen, 2000). Customer Relationship Management is used for pricing products so as to deliver maximum returns. It is also useful for effectively making use of customer information and delivering optimum services. Using customer relationship management makes Planning easy and convenient and beneficial partnerships as well as strategic alliances can be taken up and evaluated. Finally, Customer Relationship Management also makes execution easier with the help of training and support (Mooney, 2007) 4.0 Conclusion Customer relationship management acts as a differentiator in the markets and allows the companies to improve their overall performance in the markets and against their competitors. New entrants are investing billions on hew high-capacity networks to have a part of market share. Companies now are required to find improved and more pioneering ways to get closer to their consumers (Ingrid, 2003). So there is a need to find a perfect differentiator apart from price, product and features. Here is where CRM makes a point amidst the sheer competition in the market (Mooney, 2007). Not concentrating on products as a differentiator, CRM enables improved pitching in for better service delivery and add to revenues, profitability as well as value in the minds of the customers. Hence it is clear how IKEA and HSBC have applied this to their overall working to help permit improved overall growth and good competition against their competitors in the specific markets. 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