Customer Relationship Management - Term Paper Example

Essay Question RELATIONSHIP MANAGEMENT relationship management is a vast which covers the capabilities, methodologies, and skills that support and venture in managing customer relationship. The CRM is used to facilitate organizations to manage their customers by collecting the basic information and through the introduction of reliable systems, methods and procedures to enhance business and make it profitable. A successful plan of CRM calls for changes at all levels including policies and processes, employ training , marketing, system and information management and all aspects of business has to be customer driven. Many companies adopt CRM and they realise the fact that it takes more effort and costs more money to attract a new customer than to maintain an existing customer. This reason alone is sufficient for companies to invest more in CRM (Alberta efuturecentre, N.D.a). There are several ways in which companies initiate CRM. However the first step is common for most of them which is looking for prospective customers. This is followed by sorting process of qualifying prospects into customers and the faster this process the better the returns. Companies take the advantage of internet to expand their business. Good design of web and clear information provided will add to the profitability of the companies through expanding the customer base. After finding the customer it is important to find ways to add value to the relationship. There are several strategies adopted by the companies to build a long lasting customer relation. For example, one very successful company allows potential customers to register at their web site, download an industry related document. This process not only provides the companies with the basic information about the customer but also provides an opportunity to get to know the customer and build a good relationship. More sophisticated ways are used to build customer loyalty and strong relationships. Building customized or personalized sites for customers to use will provide both added services and give customers a reason to return regularly to e-business. In general if is observed that though it is easy to get customers to visit the website for the first time but it is difficult to get them come back. It is necessary to create value for the visitor to revisit ensuring good content such as unique articles about the industry or simply links to other sources of information. Another way to have customers return is to provide incentives or concessions for the second or subsequent purchases (Alberta efuturecentre, N.D.a). A higher level of customer satisfaction is the goal of relationship building. Customers look for the product performance and the satisfaction guarantee. Research show that companies try to match and realize customers’ expectation through product performance. It is critical for them to deliver such performance at higher levels as expectations increase because of competition, marketing communications, and varying customer requirements. Besides, recent research also shown that there is a strong and encouraging relationship between customer satisfaction and profitability. Hence, one must measure approval levels and build up programs that help to bring performance beyond targeted customer outlook. In order to achieve these goals one has to focus on improving customer service, frequency/loyalty programs, customization, reward programs and community building. Priority must be given to customer as they have more choices today. Projected customers are more valuable for a company. Frequency/loyalty programs give rewards to customers for repeat purchasing. But these have not been much successful and have three disadvantages such as they are expensive, mistakes can be difficult to correct as customers see the company as taking away benefits and there are questions about whether they work to increase loyalty or average spending behaviour (Wikipedia, 2006). Most of the companies today do business on a one-to-one basis. Products are designed specifically for a particular customer based on their requirement. The concept of mass customization goes beyond one-to-one marketing as it involves the creation of products and services for individual customers. This idea has turned customers into product makers rather than simply product takers. It is easier to do this for services and intangible information goods than for products. This is the time when the Web is used for both online and offline businesses to build a network of customers for exchanging product-related information and to create associations between the customers and the company. These networks and associations are called communities. The goal is to take a possible rapport with a product and turn it into something more personal and makes it more difficult for the customer to leave the company (Wikipedia, 2006). An effective CRM requires the process to be integrated end-to-end across marketing, sales, and customer service. Besides a good and effective CRM program require to: identify customer success factors, create a customer based culture, adopt customer based measures, develop and end-to-end process to serve customers, recommend questions to be asked to help a customer solve a problem, advice what to tell customer with a complaint about a purchase and track all aspects of selling to customers and prospects. When setting up a CRM segment for a company it has to identify what profile aspects it feels are relevant to its business, such as what information it needs to serve its customers, the customers past financial history, the effects of the CRM segment and what are the information not useful. Eliminating unwanted information can be a large aspect of implementing CRM systems (Wikipedia, 2006). Advantages of CRM One of the main advantages od CRM process is that it allows companies to collect and access information into one integrated database such as customers buying histories, preferences, complaints, and other data are generated so companies can better foresee the customers’ requirement. Never the less the main objective of CRM is to inspire greater customer loyalty. Web based CRM help to access information, reply to customer inquiries and in turn resolve and addressing customer issues. CRM create increased effectiveness through automation so that duplication is eliminated and processing of information is speeded up and requires less labour (people.clarkson.edu, N.D.). Today there is an increased marketing and selling opportunities since the companies have most information about customers whom they can target easily. CRM ensures deeper understanding of customers and also make sure that they are satisfied. Feedback from the customer can lead to new and improved products or services and it will also help to identify the most profitable customers. Further, CRM is a sound investment for the company’s future, delivering a faster return on investment in several important ways. Above all it makes the company build stronger relationships with customers, for higher sales and profits and it removes manual processes and makes more efficient the entire supply chain, reducing overall customer service costs (people.clarkson.edu, N.D.). All these can be done in a few minutes without wasting the time of customer or the companies. Disadvantages of CRM CRM is an expensive program. The main disadvantage of CRM is that the cost of implementation is very expensive. Besides the cost for training, upgrades, and maintenance are extremely high and the average implementation costs several million dollars. The time taken for training the employees to learn CRM may take long duration and even after learning, employees may be revert to old business processes rather than CRM. Too much of data from the customers may lead to confusion. All the information collected may not be use, as a result, time and money may be wasted. The CRM system application can be a failure if the business requirements are not correctly made to order. As a result of system failures the company may undergo significant financial loss (people.clarkson.edu, N.D.). from the customers point of view, there is feeling among some that CRM systems invades customer privacy and enable coercive sales techniques due to the large information companies have on customers. Some argue that the most basic privacy concern is the centralized database itself, and that CRMs built this way are inherently privacy-invasive. Role of the ecommerce web site in CRM Today every thing is possible with the wide network of internet. The growth of Internet-based organizations has brought the Internet to the front position and this has initiated a new scenario of customer management called ‘eCRM’. Even though the early Internet-based operations were mainly centred on sales or ecommerce, now the bigger picture is, once more, enterprise-wide (Rodgers and Howlett, 2000). The term ‘e-business’ concerns to each activity carried out over the Internet, whether it is a transaction or a service. It includes Web self-service, where customers are able to access information for themselves by interrogating intelligent automated systems on the Internet. Hence, the Internet offers another infrastructure for organizations to interact with their customers. Each organization now has to struggle with the impact of customer management over the Internet (Rodgers and Howlett, 2000). Since there are choices of suppliers with similar contributions, a customer will naturally choose the organization that is easiest to deal with. They may have a preference for dealing by telephone or e-mail, but they may be adequately Internet-conscious to find out information for themselves and conduct dealings over the Web which means they want to deal through different communications channels at different times. Such kind of multi-channel customer management is becoming more and more critical in developing a CRM policy. As a matter of fact, internet facilities are an essential factor when it comes to evaluating aids from CRM suppliers (Rodgers and Howlett, 2000). A large number of entrepreneurs are in view of self-service as a way of reducing direct contact with agents and improving efficiency. The Web self service provides large possible savings by encouraging visitors to find out answers for them. This comprises of pages showing the answers to frequently asked questions (FAQs). Large intelligent systems can search vast information bases for answers. Even as this process can filter out some queries, users can also assess live agents. This can be done indirectly by ‘call-me’ requests from the Web or online chat facilities. Today most of the web pages based on customer service engage in live debate with agents (‘chat’) while on-line. More and more, voice-over-Internet protocol technology will allow users to talk while on-line (Rodgers and Howlett, 2000). When a company looks into designing the Web sites the most important aspect one has to keep in mind is that it should attract consumers who are looking for CRM. When potential consumers arrive, Web sites must manage customers by considering their interest with targeted promotions, good navigation headings, and meaningful images. These draw customers deeper into the site and help them achieve their goals and as a result, the web sites goals. The features that engage customers are those that provide to the natural decision practice and time frame. In order to get the big picture of customer experience, Web site designers need to do customer research. One method for doing this is Open Web Research. This method provides precious data for improving customer acquisition. There is a lot of analysis a company need to take up in order to achieve successful CRM. Great Web sites actively research the complication of customer decisions and the customer experience. A single Web site is usually just one small part of a consumers online experience, and the Web is typically one small part of the overall decision being made. For Web professionals deep in the customer experience on their single site, its easy to adopt an extremely narrow view of customers. Nevertheless, the customers interests will be best served if one expands his outlook of them to include more than just their Web site experience (Moore, 2005). More over the web pages should be user friendly. CRM is basically a business attitude. Technology is the tool which allows the business objectives to be attained. Unless an organization is aware of the business drivers and the inferences of embarking on a customer management approach, no amount of IT knowledge will bring success. IT growths must be closely aligned to business needs. The fact to successful customer management is to build amalgamated view of each customer, drawing together data from a wide variety of sources, making it available in a significant format to business managers and users. The IT insinuations are vast because CRM will impact each system in the organization, in addition to the systems of suppliers and partners. The introduction of CRM systems is going to have strong impact on every job in an organization (Rodgers and Howlett, 2000). References Alberta efuturecentre, (N.D.a). Customer Relationship Management. [online]. Western economic diversification Canada. Available from: [Accessed 26 September 2006]. Moore, P. (2005). The Web Versus Real Life. [online]. CRMBuyer. Available from: < http://www.crmbuyer.com/story/46066.html> [Accessed 26 September 2006] People.clarkson.edu, (N.D) Advantages and Disadvantages of CRM. [online]. Available from: [Accessed 26 September 2006] Rodgers, K. and Howlett, D. (2000). What is CRM? A White Paper by TBC Research. Published by GoldMine Software (Europe) Ltd. Wikipedia, (2006) Customer relationship managemen. [online]. Wikimedia Foundation, Inc. Available from: [Accessed 26 September 2006]. Essay Question 2 SUPPLY CHAIN MANAGEMENT When a product moves from its manufacturing unit to the customers hands, it passes through a supply chain. In a traditional approach, no matter how good the product, the first step is to get the supply chain in order. Then in the next step a business must hire an experienced purchasing manager to aggressively deal with material and service providers so that costs can be brought in line. Finally it is the time for the companies to find dynamic sales and marketing personnel to drive finished product into the hands of the consumer. This was the trend of business in the past. Businesses maintain heavily push-driven, sequential supply chains, based on fundamentally adversarial relationships with their suppliers. Success was mainly depending on outmaneuvering, outperforming, and outwitting everyone perceived as competition. And this was a tedious process. If we look into the cost effectiveness of the traditional supply chain it can be seen that it is not cost effective as it often includes more than one company in a series of supplier-customer relationships. The traditional supply chain is often defined as the series of links and is a shared process that involve all activities starting from the acquisition of raw materials to the delivery of finished goods to the consumer. Raw materials enter into a manufacturing organization via a supply system and are transformed into finished goods. The finished goods are then supplied to customers through a distribution system. Generally several companies are linked together in this process, each adding value to the product as it moves through the supply chain (Alberta efuturecentre, N.D.b). Today as we all know that time is money and the effective management of time saves a good amount of money. in other words effective supply chain management is the act of optimizing all activities throughout the supply chain, and it is the key to a competitive business advantage. The fundamental enabler of supply chain integration is the fast and timely exchange of information between supply chain partners. This information may take the form of transactional documents such as purchase orders, ship notices, and invoices, as well as planning-related documents like demand forecasts or projections, production plans and inventory reports. It is this sharing and coordination of information and planning activities that can enable cost reduction, value enhancement, and the execution of advanced collaborative planning activities. The success of effective supply chain management is attributed to its applications like vendor-managed inventory (VMI), collaborative planning, e-procurement, shipment tracking and tracing, electronic order management, and bill presentment and payment can be built upon a core data exchange platform, enabling companies to reap true cost reduction and service improvement within their organization. E-commerce also allowed suppliers to automate the order taking process that was traditionally done manually, speeding up the process and wringing costs out of the system. Through e-mails, ordering patterns, and other on-line comments, they are now able to tailor their marketing strategy, to analyze marketing initiatives, and to react almost instantly to shifting market demands (Alberta efuturecentre, N.D.b). Supply chain management (SCM) is the combination of art and science that goes into improving the way companies finds the raw components it needs to make a product or service and deliver it to customers. SCM is the process of planning, implementing, and controlling the operations of the supply chain with the purpose to satisfy customer requirements as efficiently as possible both in terms of cost as well as time. Supply chain management spans all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of-consumption (Worthen, 2006). The following are five basic components of SCM. Plan – This is the strategic portion of SCM and is the most important of all steps. A strategy is essential for managing all the resources that go toward meeting customer demand for product or service. A big piece of planning is developing a set of metrics to monitor the supply chain so that it is efficient, costs less and delivers high quality and value to customers. Source – Choose the suppliers that will deliver the goods and services needed to create a product. Develop a set of pricing, delivery and payment processes with suppliers and create metrics for monitoring and improving the relationships. In addition, put together processes for managing the inventory of goods and services received from suppliers, including receiving shipments, verifying them, transferring them to the manufacturing facilities and authorizing supplier payments. Make – This is the manufacturing step. Schedule the activities necessary for production, testing, packaging and preparation for delivery. At this stage it is essential to metric-intensive portion of the supply chain to measure quality levels, production output and worker productivity. Deliver – This is the logistics part where the companies coordinate the receipt of orders from customers, develop a network of warehouses, pick carriers to get products to customers and set up an invoicing system to receive payments. Return – this is the most crucial and painful part of the supply chain. It is essential that companies create a network for receiving defective and excess products back from customers and supporting customers who have problems with delivered products (Worthen, 2006). If we look at the benefits of Supply-chain management, it takes a radical approach to procurement, with the aim of setting up long-term relationships with suppliers, so that leaner, value-adding and more efficient ways of working can be developed. Suppliers are encouraged to adopt similar relationships with their suppliers, and so on—ideally—down the tiers of supply. The practice of supply-chain management was pioneered by Toyota in Japan. This company was driven by the demand for faster times to market, quicker fulfillment of orders and lower costs. It was enabled by the rapid development of IT and globalization (MPA, 2002). Advantages & disadvantages of tools used in supply chain management The Internet is a unique medium that allows fast, two-way, secure communication. If we look at the fundamental difference between the Internet and electronic data interchange (EDI), essentially, the Internet performs the same function as EDI at a fraction of the cost. This technology has been around for more than 20 years. Furthermore, internet has capabilities that EDI does not possess. Some of them include real-time versus batch processing, transmission of unlimited data types including graphics, forecasts and computer-aided design (CAD) drawings, and an open, non-proprietary network. If carefully exploited, these Internet characteristics can lead to significant value creation. As the company expands its horizons, it becomes essential to identify potential sources of value from B2B e-commerce. A good starting point for this would be to think of the number of ways in which a company interacts with both customers and suppliers. These interactions can be categorized as one of the following: executing a transaction; determining optimal prices; discovering available supply and unmet demand; and supply chain planning for new and existing products. Thus, three distinct categories emerge where B2B e-commerce can be applied to extract value: Reduced transaction charges; improved market efficiencies; and enhanced supply chain benefits (Alberta efuturecentre, N.D.b). There are analyses a company needs to do in order to completely benefit for the system. A company has to identify the value created and the effort required for accomplishing the goals under each of these categories prior to making any investment in B2B e-commerce. The relative position of these categories will not be the same for all firms but will vary based on the supply chain strategy and competitive environment. A company need to tailor e-commerce implementation to support categories where the value created is high relative to the cost of implementation. Companies also incur transaction changes which are costs incurred during the process of completing a transaction. The cost associated with handling proposals and quotations, processing orders, staffing the procurement function, operating the call centre, and so on are included under this head. The major disadvantage with the traditional channels of communication such as phone and fax is that it require high staffing levels on both the buyer’s and the seller’s side. They also typically have high error rates because of multiple data entries. As companies move towards electronic processes, error can be minimized, fewer staff is needed to process orders, and order placement speeds up, leading to overall lower transaction costs. Given the high set-up cost and proprietary nature of EDI, many of the companies are reluctant to invest in this program and stick on to the traditional system. The Internet with its open access and lower cost of participation allows all participants the opportunity to reduce transaction charges. In addition, the Internet allows real-time processing and electronic data retrieval and storage, which are essential components to reduce order cycle time (Alberta efuturecentre, N.D.b). There are two ways in which market efficiencies can offer a company to extract value: firstly the price paid when soliciting bids from suppliers, and secondly through the ability to match surplus capacity in its supply chain with unmet demand. In both these instances internet offers an opportunity through aggregation of orders across all divisions of a company and makes it easier to bring in more potential suppliers for the bidding process (Alberta efuturecentre, N.D.b). This translates into a better price for the buyer because of increased volumes and greater competition. B2B e-commerce also provides a mechanism by which a company can move its demand across suppliers based on available capacity. Earlier days suppliers may have had idle capacity while original equipment manufacturers, with unfilled demand, were searching elsewhere. Hence the customer was not satisfied. A better matching of available capacity and demand provides value by improving the utilization of available capacity. When different stages of the supply chain plan locally without sharing information, the result is the “bullwhip effect”, whereby small fluctuations in consumer demand lead to large fluctuations at the manufacturer and supplier (Alberta efuturecentre, N.D.b). In some supply chains, orders to suppliers can fluctuate 10 to 20 times more than orders placed by the ultimate customer. The increased inconsistency leads to long supply lead times, excess capacity, high transportation and warehousing costs, large inventories and dissatisfied customers. B2B e-commerce can produce value in a supply chain at two levels. First, by increasing visibility across the supply chain, the Internet can help dampen the “bullwhip effect”. The resulting decrease in variability allows a supply chain to improve customer service while reducing costs. Second, the Internet can provide value from increased collaboration. For example, a major retailer in any part of the world and one of their key manufacturers increase visibility when the retailer shares point-of-sale data. In other words, collaboration is the ability of the companies to make decisions at different stages of the supply chain starting from the product design and introduction, pricing, production and distribution that will allow all partners to participant. However, the partners only realize full value when they use this information, along with capacity information at the manufacturer’s facilities to decide the best timing for promotions and resulting production plans (Alberta efuturecentre, N.D.b). If decisions are made independently, the retailer may run the promotion at a time when production costs for the manufacturer are the highest. Through collaboration, constraints on both sides are considered in determining a schedule that maximizes profits. There will be coordinated effort by all players and will result in effective sales and ultimate customer satisfaction (Alberta efuturecentre, N.D.b). In conclusion, e-commerce or electronic commerce is a new marketing channel, which can be used for business 24 X 7 X 365. It gives a global assess at a extremely fast rate. There is no need to wait weeks or months as it was in the case of traditional systems for a catalogue to arrive by post. Communications delay is not a part of the Internet / e-commerce world. The market in which web-based businesses operate is the global market. Today many businesses are already facing international competition from web-enabled businesses. The Internet makes it easy to shop around for products and services that may be cheaper or more effective than we might otherwise settle for. It is sometimes possible to, through some online research, identify original manufacturers for some goods - thereby bypassing wholesalers and getting the product at much lesser price. There are some disadvantages and constraints of e-commerce. For instance, it is possible to visit a local store and walk out with a compact disc or a bookstore and leave with a book. E-commerce is often used to buy goods that are not available locally from businesses all over the world, meaning that physical goods need to be delivered, which takes time and costs money. Physical purchase from a shop provides an opportunity to the customer to select the best piece or even reject a damaged piece. In some respects e-commerce purchases are made on trust. Returning goods online can be an area of difficulty. The uncertainties surrounding the initial payment and delivery of goods can be exacerbated in this process. Many issues arise - privacy of information, security of that information and payment details, whether or not payment details (eg credit card details) will be misused, identity theft, contract, and, whether we have one or not, what laws and legal jurisdiction apply. Nevertheless, internet is a boom to today’s businesses. It is up to the companies to make use of the present opportunity and build a strong and profitable business. References Alberta efuturecentre, (N.D.b). Supply Chain Management. [online]. Western economic diversification Canada. Available from: [30 September 2006]. MPA, (2002) Supply-chain Management. [online]. Major projects association. Available from: [30 September 2006]. Worthen, B. (2006) The ABCs of Supply Chain Management. [online]. cio.com Available from: [30 September 2006]. Read More