Customer Relationship Management - Essay Example

1. Introduction 1 Background The present marketing environment in the face of increasing global competition poses challenges with the rapid entryof innovative products and maturity conditions in certain markets. Technology has pervaded every field in any business today. Customer Relationship Management (CRM) is one such tool that integrates technologies and business processes to satisfy the needs of the customer (Bose, 2002). CRM has been defined as an interactive process that achieves an optimum balance between corporate investments and the satisfaction of customer needs to generate the maximum profit (Gebert, Geib, Kolbe & Brenner, 2003). CRM involves acquisition, analysis and use of knowledge about customers in order to sell more goods or services. It involves integration of technologies working together like data warehouse, website, intranet/extranet, accounting, sales, marketing and production. CRM warehouse contains all the information about customers, employees, products, sales, costs, inventory, shipments and other data sources (McKim & Hughes, 2000). It also amalgamates technology-oriented approaches such as computer-aided selling (CAS) and sales force automation (SFA). CRM data warehouse may take years to build and until it is up and running no returns on investment can be expected. 1.2 Importance of CRM Businesses recognize that customers differ in their preferences and purchasing habits. The CRM professionals understand that CRM has a distinctive focus and that it has the capacity to integrate customer information not only into the database but also into relevant communications delivered to the customer. In addition, McKim & Hughes report that CRM reduces operating costs, increases the propensity to buy, enhances the image of the customer and the company, adds value to the customer relationship and manages customer behavior to achieve profitable results. 1.3 Causes of failure It has also been observed that while CRM systems are proving to be a popular choice for implementation, only 30.7 percent of the companies studied had registered improvements in the way they sell to and service customers (Bull, 2003). It appears that companies generally underestimate the complexities of CRM, lack clear business objectives and invest inadequately in the provision of CRM software. At the same time, not all organizations are facing failure. Based on these findings, this report will discuss and analyze the role of a Customer Relationship Manager in a company. 2. Relationship Marketing To build good relationships with customers, it is necessary to serve each customer in his preferred way. This requires management of customer knowledge, which can result in high-quality relationships. Relationship marketing can be defined as an integrated effort to identify, maintain and build up a network with individuals. It also requires continuously strengthening the network for the mutual benefits of both sides through interactive, individualized and value-added contacts over a long period of time (Gebert et al.,). A customer-centric approach treats every customer uniquely and individually. This requires that the value of the customer is calculated over his entire relationship with the firm and not based on any particular transaction (Bose, 2002). Galbreath and Rogers (1999) cite the incident of a particular client who needed a mortgage to buy a new house. Despite opting for the company that had been handling his primary credit card, he had to keep feeding details which left him a disgruntled customer. Apparently the credit card department and the mortgage department used different computer systems and had no access to each other’s information. Such inefficiencies lead to a dissatisfied customer who would wait for an opportunity to defect to competition. This is where a holistic approach to customers is needed and the role of a customer relationship manager is to use the right tools and systems to effectively sell to, service and grow the customers. 3. Qualifications of an efficient customer relationship manager The customer relationship manager must have characteristics that are in alignment with the organization to better fulfill the goal of effective CRM. 3.1 Conversant with technology The CR manager has to be well versed with the technology that is being used. Technology can equip the managers with abundant and relevant information about the customers in order for them to provide better service. Galbreath and Rogers suggest that the CRM technology must be as central a part of the CRM equation as customers and employees are themselves. In the above example, had the technology been incorporated, and had the bank employed a customer relationship manager, they would have recognized that this was a valuable customer and the hassles to the customer could have been avoided. This of course requires that the manager is well-versed with the latest technology. Merely having the CRM is not sufficient. A thorough analysis of the business processes is essential reports Bose. Bull (2003) states that the success of CRM depends upon the extent to which the customer relationship manager is familiar with database technologies like data warehousing and data mining. Customer management has become critical to success as customers increasingly use digital technologies. Effective leadership is important in this areas as CRM involves business process change and introduction of new information technology. The technology of CRM and its benefits have to be clearly understood before the purchase of the system. If attempts are made to identify the benefits and target the customers after the purchase, the effectiveness of the package is lost. The software package will not be able to integrate with other enterprise applications. This may lead to duplication of tasks and maintenance of multiple systems with the prospect of data inconsistencies. Unless the customer relationship manager is well conversant with the CRM, its applications and benefits to the company before the purchase of the system, the company could end up paying additional costs for software configuration or abandon the software altogether and source w new package. 3.2 Customer segmentation McKim and Hughes indicate that the customer relationship manager must have an idea who their customers are. Just assuming that customers range in a particular age group is not sufficient. He can use CRM as an opportunity to focus the marketing efforts by identifying which customer segments to emphasize and de-emphasize (Ryals & Payne). With the help of CRM customers can be segmented into different categories like affluent shoppers, senior shoppers, business women, women with children and young women. A good manager would aim different messages to each group with products and offers appropriate to the group (McKim & Hughes). Kutner and Cripps (1997) also agree that customers should be managed as important assets, not all customers are equally desirable as profitability varies, customers differ in their choices and sensitivity, and offerings can be customized to maximize benefits (cited by Ryals & Payne, 2001). Ryals and Payne cite of an insurance company that realized that customers who contacted them frequently and utilized their services a lot were not necessarily the desired customers. Hence segmentation is essential to segregate the valued customers or the gold customers as per McKim and Hughes. Newell (2000) contends that CRM helps to identify the right customer groups and then decide which customers to focus on (cited by Bull, 2003). The financial services sector has been the first to observe that not all customers leverage the same advantage to the company. The customer relationship manager must have the ability to distinguish between the transaction and relationship customers. Transaction customers are those that have no loyalty and are only looking for the best bargain. Relationship customers on the other hand are prepared to pay a premium price for a range of reliable services or goods. Relationship customers are less likely to defect if they continue to receive the same service quality. Such customers are also cost effective as they require less persuasion to buy the company’s products or services. While McKim and Hughes find that the top 20% customers bring in 80% of business, Bull says the top ten percent consists of customers with excellent loyalty and of high profitability for the organization. The role of the customer relationship manager is to retain these customers and offer them the best possible services which would avoid them defecting to competitors. Bull also insists that the middle group customers are high potential customers and efforts should be to retain them as well. 3.3 Utilizing information CRM manages knowledge for, from and about the customers. Knowledge for customers is generated in research and development and production. CRM manages knowledge transparency and dissemination of knowledge to customers. Knowledge about customers must also be transparent and its dissemination beyond the boundaries of the organization must be controlled. this knowledge can be transformed into competitive advantages and this is the responsibility of the customer relationship manager. Knowledge is expensive as knowledge explication takes time. Valuable knowledge from customers is gained at the service points and this requires analyzing the CRM processes. The role of the customer relationship manager exerts greater influence in utilizing this information for enhancing the sales. He must have the ability to use the customer information to the best advantage of the company (Ryals & Payne). This requires feedback mechanisms and controls to be in place. Marketing techniques like issuing certificates which need redemption is a sure way of attracting the existing customers. The customer relationship manager would ensure such a feedback and then create further segments of the existing customers based on their lifestyles, purchase patterns and preferences. As mentioned earlier, each customer has to be served in his own preferred way. Based on this information, communications can be customized. The data can be used to strengthen the relationship with the customer and increase customer value over time. At First Direct Bank data from a previous transaction is utilized in a proactive way in order to strengthen the relationship by personalizing a later transaction (Ryals & Payne). If a customer has once used the ATM, in a subsequent transaction, the call centre operator would check whether he had a satisfactory experience. It is thus the responsibility of the customer relationship manager to see that all relevant data about the customer is stored in a way that it is can be easily retrieved and used. Data of customers keep increasing but these have to be constantly collected, stored, analyzed and cleaned. The marketing professionals have plenty to gain from such data. CRM strategies are effective only if they deliver positive outcomes. Being customer-focused is not enough; the end result is important. The industry norm for delivering first-choice movies was around 80% but with the implementation of CRM, Blockbuster could analyze customer demand, improve stock availability of first-choice titles and managed to move ahead of competitors (Bull). Bose (2002) too agrees that information should lead to enduring management decisions and ultimately to higher customer satisfaction. This requires information about new product development, product changes, marketing mix factors, budgeting, scheduling and financing. All of these data need to be accurate, clean and organized but higher quality information may actually create poorer decisions. This can happen if the customer relationship manager does not have knowledge about the relationships among the variables. Hence the decision quality may degrade with higher information quality. Bose contends that training is essential both on the use of CRM and in the interpretation of information. Otherwise just pressing a few buttons could result in misleading information. 3.4 Organizational environment The customer relationship manager has the responsibility to ensure that the entire team acts in cohesion while the goals are in alignment with those of the company. Independent teams might compete with each other and this would lead to a fragmented approach to serving the customers (Galbreath & Rogers). This can be done by creating a proper CRM environment. It is the duty of the manager to facilitate a shared vision. Imposing a vision on the subordinates would amount to high-handed management. Once a vision has been agreed upon and developed, the manager has to continuously reinforce the vision. Bull (2003) observes that since leaders monitor the external environment of an organization, they are best placed to set the vision or strategic direction for CRM projects. The customer relationship manager has to exercise authority and control, empower the subordinates, monitor performance and motivate the key personnel. Not being able to create the vision or have a strategic direction for the project can have adverse consequences. An environment of action and learning has to be created. This requires empowering the subordinates, giving them the freedom to act, to try out their own ideas and be responsible for their own actions (Galbreath & Rogers). This is often difficult for a customer relationship manager but being a rigid authoritarian can thwart the learning process. It would fail to harness the spirit, enthusiasm and knowledge through out the organization. The right environment of action and learning results in low attrition rates. Focusing the right employees on the right customers is critical to fulfill a CRM vision. There has to be synergy of achievement and fulfillment. This has also been observed by Ryals and Payne who found that in many organizations functional boundaries are barriers to change. There has to be synergy between IT and marketing. IT knows what can be done but does not know the marketing applications and marketing knows what they would like but does not how much of it is possible. This is where the role of the customer relationship manager becomes crucial. He is the bridge between these two departments. Implementation of IT is to be efficiently project-managed. Skill building in the employees is essential so that all members have the requisite skills which include hardware, software and project management skills. This multifunctional team should ideally be directly under the customer relationship manager and be physically situated between the IT and marketing departments. If this is not done, it could lead to overlapping projects in different departments which defeat the very purpose of CRM. A holistic approach to CRM is essential so that organization can coordinate and effectively maintain the growth of different customer contact points or channels of communication (Bull, 2003). At ELMS, the project team for implementing CRM was selected at random. Those that were excluded felt undervalued or felt they lacked influence. The sales engineers were not empowered. The customer relationship manager must not allow such a situation to develop as this leads to fear in the organization. The employees perceive that CRM would replace or de-skill their knowledge and contributions to the organization and result is staff redundancies. This can result when there is initial lack of communication or inexperience of the manager. The migration exercise is usually reliant on the key personnel for the codification of customer data. Delay in getting the support of the key staff can result in delay in the migration exercise and the time taken is much longer. If the employees are unable to cope with the migration process, if the front-office staff and the back office employees are criticized for complacency, it denotes the inefficiency of the customer relationship manager. Managing knowledge within the organization remains a challenge. It is a challenge for the customer relationship manager to ensure consistent flow of information and knowledge from the point of creation to the point of action (Gebert et al.,). 3.5 Apportioning of marketing budgets The investment on developing the CRM for a company is very huge and the customer relationship manager is responsible for the return on investment. The return on investment is not based on merely acquisition of customers but on retention of the customers. This requires segmentation based on lifestyles and purchasing habits. Segmentation can be based on how and when they shop and communications can be made accordingly. Shoppers can also be categorized as valued customers, regular shoppers, business professionals, sale shoppers, and occasional shoppers (McKim & Hughes). Such segmentation would help the manager to allocate and spend the marketing budget on the valued customers or those that bring in the maximum revenue to the company instead of equally allocating the budget. This way the customer relationship manager ensures the maximum returns on investment in technology. The total marketing budget is not increased but should be directed at the most profitable segments. To maximize the returns on investment, the manager would shift attention from attracting new customers to retaining existing customers (McKim & Hughes). The right strategy would be to spend less on unprofitable customers. The offerings should be based on the relative value of the different customers to the company. Such a customer relationship strategy is critical to attract, retain and cultivate. CRM is about identifying the best customers and maximizing the value for them by satisfying and retaining them (Ryals & Payne). Bull (2003) also agrees that customer retention affects the company profitability as it is more efficient to maintain an existing relation than to create a new one. 4. Conclusion CRM thus involves efficient handling at all stages. The role of the customer relationship manager begins even before the company purchases the software. The manager should be well conversant with the technology, the process, its benefits and application. This would enable him to derive the maximum benefit from the implementation of the CRM system. Merely knowing how to use the system and be able to generate information is again insufficient. Utilization of data is equally important or rather the most critical part of the system. Dissemination and analysis of information about the customer helps an organization to take effective steps in segmentation. This segmentation is valuable because the company knows where to lay its focus and how to maximize benefits. The customer relationship manager also has a role in empowering and keeping the key personnel motivated because it is the team work and cohesion that matters. The organizational environment is important for the success of the CRM system. Customer information helps to apportion the budgets when the key areas have been identified. Consistent flow of information has to be maintained from the point of origin to the point of action. The manager acts as the bridge between the IT and the marketing department and on him depends the success of the system. It is his responsibility to ensure that all operations with the organization are integrated and functional boundaries do not become barriers to implementation. References: Bose, R., (2002), Customer relationship management: key components for IT success, Industrial Management & Data Systems, 102/2 [2002] pp. 89-97 Bull, C., (2003), Strategic issues in customer relationship management (CRM) implementation, Business Process Management, Journal Vol. 9 No. 5, 2003 pp. 592-602 Galbreath, J., & Rogers, T., (1999), Customer relationship leadership: a leadership and motivation model for the twenty-first century business, The TQM Magazine, Vol 11 No. 3 pp. 161- 171 Gebert, H., Geib, M., Kolbe, L., & Brenner, W., (2003), Knowledge-enabled customer relationship management: integrating customer relationship management and knowledge management concepts, Journal of Knowledge Management, Vol. 7 no. 5 pp. 107-123 McKim, B., & Hughes, A. M., (2000), How to measure customer relationship management success, Journal of Database Marketing, Vol. 8, 3. pp. 224-231 Ryals, L., & Payne, A., (2001), Customer relationship management in financial services: towards information-enabled relationship marketing, JOURNAL OF STRATEGIC MARKETING 9 3–27 (2001) Read More