The Concept of Customer Relationship Management - Essay Example

Relationship Management and Technology Introduction This paper aims to look into the concept relationship management in the context of the processes of the retail industry. The researcher also looks into the different technologies that the members of the retail industry apply in order to enhance the services that they render to their customers. Traditionally, retailers knew all their customers personally. They know what their preferences are and more often than not, are aware of what was happening in their lives, Because of the existence of this kind of relationship, the retailers could react quickly and formulate marketing strategies based on the needs of individual customers. In the same manner, they were also able to develop good relationships with their customers through the establishment of friendships and interactions. As a result, the retail industry revolves around the customer more than any other industry. Due to this, it is not enough to simply interact with the customers. Rather, they are expected to know them better These all changed, however with the growing chains and building malls and the continuous promotion of self-service. With these changes, more and more retailers have lost their contact with their customers. As a result, they are also simply losing the loyalty that the customers once entrusted upon them. Hence, more and more retailers are now trying to regain the loyalty they lost as they begin to value of their customers through programs incorporated within the idea of customer relationship management. Customer Relationship Management: An Overview Customer relationship management (CRM) can be defined as “a set of practices that provide a consolidated, integrated view of customers across all business areas to ensure that each customer receives the highest level of service” (Aryan Hellas Ltd. 2005). It is usually mediated by a set of information technologies that often aims to help in the creation of two-way exchanges with customers in order to possess an intimate knowledge of their needs, wants and buying patterns. Bendapudi and Berry (1997) 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”. According to them, CRM involves the integration of marketing, sales, customer service, and the supply-chain functions of the organization to achieve greater efficiencies and effectiveness in delivering customer value. These definitions emphasise that CRM is a comprehensive set of strategies for managing relationships with customers that relate to the overall process of marketing, sales, service, and support within the organisation. The following are the important players who are essential to customer relationship management within the organization: 1. Customer Facing Operations – The people and the technology support of processes that significantly affects the experiences of the customers and the organization. These may include different kinds of media such as phone, IM, chat, email, web and even face to face interactions. 2. Internal Collaborative Functional Operations – these are the people and technology support of the processes at the back office. Their activities usually affect the activities of those at the Customer Facing Operations which influence the establishment and maintenance of customer relationships. This usually includes: IT, billing, invoicing, maintenance, planning, marketing, advertising, finance, services planning and manufacturing. 3. External Collaboration Functions – These are the people and technology support of processes supporting a particular organization together with the enhancement of customer relationships which is then in turn, are affected by the organization’s relationship with their suppliers and/or vendors as well as other retailers outlets and/or distributors. This is considered the external network which supports the internal operations and customer facing operations. 4. Customer Advocates and Experience Designers – These are the creative designers of customer experience that meet the goals of the customers in delivering the value of the customer and profit recognition. 5. Customer and Employee Surveyors and Analysts – These are the people who are responsible in determining whether the relationship is growing or shrinking in values to the participants- either for the organization or for the customers. In the last 20 years, managing customer relationship has changed dramatically and became more complex due to development of internet, rise of super store concept and increase in customer mobility. As a result, marketing activities of organisations became more customer-centric(Berry 1995). The application of CRM technologies link front office for instance sales, marketing and customer service and back office such as financial, operations, logistics and human resources functions with the company's customer touch points (Bruhn 2002). A company’s touch points can include the Internet, e-mail, sales, direct mail, telemarketing operations, call centres, advertising, fax, pagers, stores, and kiosks. Often, these touch points are controlled by separate information systems. CRM integrates touch points around a common view of the customer (Bruhn 2002). Although CRM systems employ sophisticated technology, most importantly it is a business strategy. In the operational side CRM is used to gather data from various touch points about customers and in the analytical side CRM is used to make sense of this gathered data. The aim of the CRM is to identify and attract profitable customers, tying them to the company or product by efficient relationship marketing to guarantee profitable growth. That is because CRM offers a great platform for the acquisition of new customers in addition to gaining customer satisfaction and loyalty. Additionally, existing customer relationships can be used to drive sales via up or cross-selling (Bruhn 2002; Christopher, Payne and Ballantyne 1991). Loyalty programs also known as frequency programs are designed as a tool for organisations to develop and enhance customer loyalty (Christopher, Payne and Ballantyne 1991; Filip and Anghel n.d.). Since the early 1990s, organisations have been encouraging customer participation in a proliferation of loyalty programs in which consumers are offered incentives in exchange for repeat business (Fitts 2008). By enrolling in organisational-sponsored loyalty programs, customers receive benefits such as monetary discounts, the ability to join customer clubs, organizational newsletters, or prizes. Based on the assumption that loyalty programs result in increased customer loyalty (Fitts 2008), organisations have encouraged customers to enrol in sponsored programs. As a result, 70 percent of today’s consumers participate in an organisation-sponsored loyalty program (Jan n.d). However, even though organisations have placed a great deal of importance on improving customer loyalty via loyalty program membership, defection rates among satisfied customers, who are presumed to be a firm’s most loyal customers, remain high (Fitts 2008; Jan n.d.). Customer Relationship Management in the Retail Industry Great service keeps customers loyal due to the highly competitive nature of the retail industry. As a result, as mentioned in the earlier parts of the paper, the customer is generally running the entire store. Due to the increasing number of fickle customer, fierce competition, rising expectations and declining profit margins of this particular industry, more and more businesses give importance to the establishment of an effective way of managing customer relationships (NamSing 2007). In managing customer relationships effectively, SAP AG (2002) recommends the inclusion of the following: Firstly, customer engagement support wherein accurate segmentation strategies and personalized marketing programs are developed and formulated. In the same manner, these processes include the gathering of information needed for support product, pricing, placement and other promotions. In the same manner, other devices and programs related to customer relationship management. They also assure that these are in accordance with what the customers really need in lieu with current trends. Secondly, an organization must also give importance to business transaction support wherein they focus upon the empowerment of employees to actively participate in meeting the demands of the customers. In the same way, they must also be able to provide a consistent view of the different customer information at every point of contact. This also gives the organization a chance to treat preferred customers appropriately. In conclusion, they are encouraged to cross-sell and up sell activities based on the history of each and every customer. Thirdly, fulfilment support is also necessary. In making every interaction a positive one, orders should be efficiently through direct links to the supply of the organization’s chain management solution. In the same manner, collaborative forecasting with the distributors and vendors are also highly encouraged. With this, they are able to prevent out-of-stocks and ensure that products are delivered on time. Last, but definitely not the least is customer service support which is essential in ensuring the efficiency as well as the professionalism of a customer-interaction agenda. Through this, one could address and resolve claims, complaints, and returns wuickly and efficiently. This also allows service issues to be addressed on time and at the same time, promises customers with convenient options such as self-service choices over the World Wide Web wherein the retailers could also track the histories of their customers and with this, be able to develop programs to ensure the latter’s loyalty. SAP AG (2002) mentions that one of the reasons why customer relationship management is very important to the retail industry is due to its ability to generate higher and more sustainable profits. Through customer relationship management, sales revenues increase through the use of multichannel marketing campaigns. Also, this enables the delivery of promotions which aim to address the needs of the consumers and of course, their purchase behaviours. In the same manner, it also allows for the boosting of profits because of the efficiency in managing the customer and business-partner relationships. Customer relationship management also helps in managing the customer life cycle. Through this, organizations are guaranteed with an intimate profile of each and every customer and provide personalized service in each of the stages of this relationship. Finally, it is through this that organizations give each of their customers voice and recognition no matter what channel they choose. It is also through customer relationship management that an organization could mine their knowledge base as it helps them to understand the different market trends, customer demographics and individual customer behaviour which could then turn their strategies regarding sales and marketing into action. Another issue related to customer relationship management is gaining leading-edge capabilities which provide business partners with access to the latest customer information. In the same manner, this also generates customer trust as it allows the development of the product and the promotional programs to be matched with the needs of the buyer. Trust is built through superior service, smooth handling of returns and exchanges and consistent messaging. The effective management of relationships with customers have a positive effect upon one’s brand. One could build their brand through the protection and the increase of value in the brand through stronger awareness, greater market share and of course, increased customer loyalty. Enhancing Customer Relationship Management in the Retail Industry According to Varley and Rafq (2004) interactions between retailers and customers generates vast amount of information and with the help of recent technological developments retailers started to use this information in identifying the changes happen in consumers’ behaviour. In fact, this gave opportunity for the retailers in retaining their customers as well as increasing their loyalty (Sorce 2002). By stating recent technological developments Varley and Rafq (2004) referred EPOS (electronic-point-of-sale) systems. In these systems retailers are able to collect wide variety of data regarding to popularity of their offerings, sales, stocks etc. Recognising the importance of EPOS system in collection of the data, retailers are started to introduce EPOS based loyalty schemes in which the retailers were able to collect the data about customers’ personal and demographic information as well as their product choices. In doing this, according to Varley and Rafq (2004), magnetic cards, which can be read electronically, are given to the customers and asked them to use those cards when they made a purchase each and every time. Customers are encouraged to scan their cards in each visit to store by offering them a point along with their amount of purchase. By doing so retailers became able to understand the shopping habits of their customers as well as meet with the specific needs and changing needs and wants of the customers. In fact customer cards enable retailers to convert raw data into learned consumer behaviour (Verhoef 2003) and thereby as the need of the consumers have met; it increases the loyalty among the customers towards that particular retailer (Dowling and Uncles, 1997). However, the ultimate objective of issuing these cards and introduction of loyalty programs is to increase the frequency of visiting stores, customer satisfaction (Worthington, 2000) and thereby to create customer loyalty (Kivetz and Simonson, 2002). According to Roehm et al. (2002) from the early 1990s retailers are trying to use these programs and nowadays investing heavily on these programs. In fact spending on the loyalty cards among the top European retailers is more than $1 billion a year (Strategic Direction, 2005). Vargas (2008) cites the following as the common frequent shopper programs being adopted by retailers so as to ensure an efficient management of customer relationship. The first example are punch cards which are perceived to be the most simple of all frequent shopper programs. With these cards, the consumer could present them at the time of purchase and receives either a punch or a stamp. Upon completion of the card, the customer could present it and redeem a free item or a discount. It is highly effective in terms of encouraging customers to patronize a business and continue buying from them to fill in the missing spaces in order to obtain their free item or reward. At the same time, this is often perceived to be the loyalty scheme with the lowest privacy risk. Loyalty schemes also take form in savings card which are very common amongst grocers. The card is generally used to obtain the buying habits of the customers but allows them to receive special discounts on certain merchandise in exchange. As a result, these cards are often perceived as the loyalty scheme with the highest privacy risk because of its tendency to capture the personal data of the owner. Rebate cards are also very common. Unlike the savings card, this type of program does not have a high privacy risk as it only tracks how much one customer spends on each visit. They also offer “points” that the consumer could accumulate as he or she continues to purchase from a particular store and could receive a store gift once his or her points meet the specified number. Lastly, loyalty schemes could also take the form of online profiles wherein the online retailers could keep a file of their customer’s personal data (Yi and Jeon 2003). The data often includes simple log-in information or the storage of credit card data at times. Based on the collection of this information, the retailers are able to track the purchasing activities of customers. Conclusion The importance of Customer Relationship Management in the retail industry has been underscored, stating that processes related to the former enable the members of the latter to ensure the satisfaction of their customers. In addition thereto, it is also believed that it is through Customer Relationship Management that the members of the retail industry keep their customers, thus ensuring higher rates of profitability. To ensure the effectiveness of the Customer Relationship Process adopted, this research has underscored the importance of applying recent technological developments. The application of these technologies may come in different forms which could help the members of the retail industry in the management of their relationships with their customers. References Aryan Hellas Ltd. 2005. Relationship Marketing: Understanding and Implementing the Concept. Athens: Aryan Hellas Ltd. Bendapudi, N. and Berry, L.L. 1997. Customers’ Motivations for Maintaining Relationships with Service Providers. Journal of Retailing, 73(1): 15-37. Berry, L.L. 1995. Relationship Marketing of Services – Growing Interest, Emerging Perspectives. Journal of the Academy of Marketing Science, 23 (4), pp. 236-245. Bruhn, M. 2002. Relationship Marketing: Management of Customer Relationships. USA: Prentice Hall. Christopher, M., Payne, A. and Ballantyne, D. 1991. Relationship Marketing: Bringing Quality, Customer Service and Marketing Together. UK: Butterworth-Heinemann. Filip, A. and Anghel, L. n.d. The Development of the Relationship Marketing Theory. Romania: The Academy of Economic Studies. Fitts, B. 2008. Importance of Relationship Marketing. Retrieved April 21, 2011 from http://www.makeloyalcustomers.com/relationship.cfm?id=carewithcards Jan. S. n.d. Customer Relationship Management for a Higher Level of Customer Service. Retrieved April 21, 2011 from http://www.articledashboard.com/article.php?id=60522. NamSing. 2007. Customer Relationship Management. Retried April 21, 2011 from http://www.articledashboard.com/article.php?id=69045 SAP AG 2002. mySAP CRM for the Retail Industry. Germany: SAP. Sorce, P. 2002. Relationship Marketing Strategy. NY: Printing Industry Center, RIT. Varley, R. and Rafiq, M. 2004. Principles of Retail Management (1st Ed.), New York: Palgrave Macmillan Verhoef, P. C. 2003. Understanding the Effect of Customer Relationship Management Efforts on Customer Retention and Customer Share Development, Journal of Marketing, 67. Yi, Y., and Jeon, H., 2003. Effects of loyalty programs on value perception, program loyalty, and brand loyalty. Journal of the Academy of Marketing Science 31 (3), 229-240. Read More