Managers Role in the Entire Process of Customer Relationship Management - Research Paper Example

 1. Abstract Customer relationship management is one of the most popular and most important topics in the field of marketing and overall business management. In the concept of customer relationship management is built around the two of most important aspects in the business, customer and relationship building. Both these aspects are thoroughly discussed in this paper. Moreover the paper also includes a proper analysis of customer relationship management in the context of different industry. 2. Section 1 Introduction ‘Customer relationship management’ has been one of the most widely researched terms in the world of business since the past decade. Over the years as the competition among business organizations has increased, more and more importance is given to the various aspects related to customers. Organizations have understood that if they are to sustain in the competition they have to create new customers and retain the existing ones. Management experts like Peter Drucker made statement like “the purpose of business is to create customers.” (Anderson & Kerr, 2002) It has also been found out that the only way to retain existing customers and to attract new ones is to identify and understand their needs and satisfy them in the best possible way. In this entire process, organizations have found out that it is very important to create and to maintain excellent relation with the customers. This understanding gave birth to the concept ‘customer relationship management’. According to Shanmugasundaram, “CRM is a process or methodology used to learn more about customers’ needs and behaviors in order to develop stronger relationships with them.” (Shanmugasundaram, n.d.) He also said that there are several technological aspects of CRM, but to see CRM strictly from the technological view point is a mistake. This paper discusses the various aspects of customer relationship management. It mainly focuses on the importance of relationship development in the context of customer relationship management. Relationship aspect is explained from both theoretical view point as well as industrial view point. In addition to this the paper also includes the methodology of the research. Moreover, data that are collected are thoroughly explained in the discussion part. Finally the possible managerial implications are discussed in the report. 3. Section 2 Industry Context Customer relationship management is found to be important in almost all the industries especially in banking, insurance, automobile, hotel and manufacturing industries. It is observed that financial service providers like insurance companies and banks have realized the significance of customer relationship management in the contemporary context. In case of banking sector ‘the idea of CRM is that it helps businesses, use technology and human resources, gain insight into the behavior of customers and the value of those customers.’ (Erdem & Hosver, n.d.) Proper implementation of CRM concept helps organizations to offer better customer services. CRM enables organizations not only to enhance the efficiency of the call centers but also to increase the effectiveness of the cross sell processes. Proper implementation of CRM also helps sales people to close the deals at a faster and it simplifies the sales and marketing processes. Financial service providing companies can ‘discover new customers and increase customer revenues.’ (Erdem & Hosver, n.d.). Proper execution of CRM system in bank enables the organization to have a clear picture of the existing customers and helps it to design both market driven as well as customer oriented financial products. According to the findings of the research conducted by Vlachopoulou, Manthou and Ioannidis, CRM helps banks to conduct reliable and extensive financial marketing research as well as efficient campaigns with the main objective of enhancing customer loyalty and attaining the targets regarding profitability (Zopounidis, 2002). It is found that a closed cycle of CRM can be established with the implementation of integrated CRM solution. According to Pound, “It manages the total end-to-end customer related process for a bank, collecting customer data, analyzing customer profile and life time value, supporting marketing decision making and optimizing the implementation of marketing campaigns, sales and customer service strategies across multiple channels throughout the bank.” (Zopounidis, 2002) The Customer Relationship Management process cycle in case of a bank is presented in form of a picture which is given below. [Source: Constantin Zopounidis] It is quite clear from this picture that in a CRM process, in the context of a bank, data related to customers are first collected then they are stored in data warehouse and then they undergo analysis. Based on the analysis, marketing strategies are adopted and actions taken. In the automobile industry also, CRM is practiced by all the important players. It is observed that players like ‘General Motors has powerfully strengthened CRM to secure prices.’ (Raab, G. et al. 2008). Renault is also found to be utilizing the integrated loyalty programs with the purpose of finding out which brands are likely to have a positive image. It is found that an integrated CRM system was ran by Daimler Chrysler. It was run through a European call center and it involved a loyalty program and a unified sales canvassing. In the auto industry CRM is used as an important instrument to battle with the competition (Raab, G. et al. 2008). As far as hospitality industry is concerned in the context of Customer Relationship Management, Christopher C Doyle has provided a clear picture. According to him “the CRM process in hotels is governed by the basic principle that good service does not guarantee customer satisfaction and satisfaction does not guarantee loyalty.” (Sheth & Shainesh, 2001) Such reason necessitates a strong customer relationship so that loyalty can be built. Customer relationship, in case of hospitality, is ‘governed by the moment of truth.’ (Sheth & Shainesh, 2001).Doyle opined that in case of hospitality industry, building relationship is not limited to marketing and sales personnel rather all the employees are associated with initiating and maintaining relationships with the customers. So, it is clear from the above discussion that CRM is important for almost all the important industries starting from automobile to hospitality. 4. Section 3 Literature Review According to Francis Buttle, “CRM is the core business strategy that integrates internal processes and functions, and external networks, to create and deliver value to targeted customers at a profit. It is grounded on high quality customer related data and enabled by information technology.” (Buttle, 2008) Gartner said that CRM is a “business strategy designed to optimize profitability, revenue and customer satisfaction.” (Kumar, Sinha, & Sharma, 2007) The famous PwC Consulting defines CRM as “a business strategy that aims to understand/appreciate, manage and personalize the needs of an organization’s current and potential customers.”(Kumar, Sinha, & Sharma, 2007) CRM doesn’t deal entirely with IT and it is reflected from the fact that CRM is referred to core business strategy which mainly focuses on creating and delivering value to target customers. CRM helps in dissolving the silo walls among various departments in an organization. Today, with the help of CRM; sales, marketing and service departments are aware of their interactions with the customers. Furthermore functions like finance and operations are allowed to contribute and learn from customer related data in a ‘customer relationship management’ driven organization (Buttle, 2008). In CRM, ‘R’ stands for ‘relationship’ and it is the most important aspect of the entire concept of customer relationship management. In Francis Buttle’s opinion “a relationship is composed of a series of interactive episodes between dyadic parties over time.” (Buttle, 2008) Theoretically episodes are named and time bound which means that they have a starting point and an ending point. In case of sales it is very much possible to figure out different episodes like making a purchase, making sales call, enquiring about the product, dealing with complaints, negotiating terms etc. (Buttle, 2008). Relationship development is one of the most important steps in the customer relationship management. According to Annekie Brink and Adele Berndt, after having a new customer, “relationship with the company can develop in two fundamentally different directions, depending on the level of customer satisfaction.” (Brink & Berndt, 2009) Firstly, if the company is capable of keeping a customer satisfied on a constant basis, he/she might become more loyal and every time he/she will choose the company’s product rather than competitors’ product. Another possibility is that the company is not being able to keep the customer satisfied for a long time and customer not only rejects the company’s products and services but also dissuades other existing customers from choosing the company. Annekie Brink and Adele Berndt identified ‘five stages of relationship development’ that are crucial for achieving customer loyalty (Brink & Berndt, 2009). In each of these five stages customers are named differently. These names are prospect, purchaser, client, supporter, advocate and partner. A prospect is a person who can be persuaded to purchase the product. Organization’s first job is to identify such potential customers. Such prospects must be made aware of the company’s offerings. The next phase is to turn this prospect into a purchaser. This is the first time when the customer would be using the company’s product. As a result excellent service is expected from the company. In the next stage the company has to try and make this new purchaser a client who will be purchasing regularly. If the company is able to satisfy the purchaser continuously, then it can be expected that he/she will become its client. “Even small mistakes or problems can create the dissatisfaction that can erode the trust relationship that is beginning to be forged in this stage.” (Brink & Berndt, 2009) At the next stage the client becomes a supporter who has placed his/her trust on the company’s brand name and service offerings. This supporter turns into an advocate who provides word-of-mouth support to the company. “With advocates the company has customer who are so committed that only a major violation of trust can erode the goodwill.” (Brink & Berndt, 2009) In the final stage, advocates become partners who are the most loyal customers of the company. 5. Section 4 Methodology Prior to the start of the research, a proper plan was prepared and based on this plan the entire research was conducted. The primary objective of this research is to find out the importance of customer relationship management. The research also tries to identify the significance of relationship development in the context of customer relationship management. As far as technique is concerned, a deductive approach is followed. Data that are used in the research are secondary in nature as they are collected from the secondary sources. Secondary sources like books, journals articles are mainly used. Most of the data used in this research are collected from books. These books are accessed through internet and libraries. It is less expensive and much easier to collect secondary data as compared to primary data. This is the main reason for choosing primary data for this research. Since secondary data are generally qualitative in nature it is also analyzed qualitatively. 6. Section 5 Results – analysis of data Research has revealed that customer relationship management is one of the most important concepts in the present business environment irrespective the industry in which it is operating. It is equally significant in almost all the major industry starting from manufacturing industry to service industry. Proper implementation of CRM helps organizations to enhance the efficiency of the entire sales and marketing process. However in order to create new customers and to maintain relation with these new as well as existing customers, all the functions in the organization must co-operate with each other, so that the organization can understand the needs of the customers and serve them accordingly in the most profitable way. The relationship building with the customers is not an easy or a short term task; rather it is a long process starting from creating a relationship to maintaining the same over a considerable period of time. Six stages are involved in this entire process and each and every stage is important for the organization. In each of this stage, the organization needs to satisfy the customers before entering the next stage. However satisfying customer needs does not entail going to any length for doing so. Organization simply cannot afford to keep satisfying the customers on a continuous basis if there is no profit for itself. With it comes the realization that ‘customer satisfaction’ and ‘profit’ are not at the cost of each other but for the sake of each other. 7. Section 6 Discussion Customer relationship management is found to benefit almost all the functions in an organization. Nonetheless, it is perhaps most relevant in case of sales and marketing functions of the organization. Customer relationship management is often linked with relationship marketing. “The objectives of relationship marketing are to identify and establish, maintain and enhance, and when necessary, terminate relationships with customers and other stakeholders at a profit so that the objectives of all parties involved are met.” (Brink & Berndt, 2009) Both relationship marketing and customer relationship management are formed by a combination of technologies and strategies that make the relationship programs more powerful. It is true that CRM is mainly considered as a part of marketing and sales process, but it goes much beyond the traditional marketing, sales and customer service functions. According to David L. Kurtz, MacKenzie and Kim Snow “It requires a top-down commitment and must permeate every aspects of a firm’s business.” (Kurtz, Mackenzie, & Snow, 2009) 8. Section 7 Managerial Implications, areas for future research Managers play a major role in the entire process of customer relationship management. It is the managers who decide the various ways of collecting customer data, satisfying the customer needs, utilizing the existing customer related data and maintain the existing relationship with customers in the best possible way that will help the organization to make more profit. However managers need to know the manner in which such information can be effectively used for a long period of time because relationship management is not a short term process. Any wrong decision made at any of the six stages is likely to affect the entire process. Managers need to train the sales people who are directly involved in the interactions with the customers. Managers always have to keep in mind the cost associated with customer relationship management and make decisions accordingly. 9. References Anderson, K. & Kerr, C. 2002, Customer relationship management, McGraw-Hill Professional Brink, A. & Berndt, A. 2009, Relationship Marketing & Customer Relationship Management, Juta and Company Ltd Buttle, F. 2008, Customer relationship management: concepts and technologies, Butterworth-Heinemann Erdem, I. & Hosver, B. No Date, Customer Relationship Management in Banking Sector and A Model Design for Banking Performance Enhancement, [pdf] Available at: http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.130.9187&rep=rep1&type=pdf [Accessed on April 25, 2010] Kurtz, D. L. MacKenzie, H. F. & Snow, K. 2009, Contemporary Marketing, Cengage Learning Kumar, A. Sinha, C. & Sharma, R. 2007, Customer Relationship Management: Concepts & Application, Wiley-India Raab, G. et al. 2008, Customer relationship management: a global perspective, Gower Publishing, Ltd. Sheth, J. N. & Shainesh, G. 2001, Customer relationship management: emerging concepts, tools, and applications, Tata McGraw-Hill Shanmugasundaram, No Date, Customer Relationship Management: Modern Trends And Perspectives, PHI Learning Pvt. Ltd. Zopounidis, C. 2002, New trends in banking management, Springer Read More