Customer Relationship Management - Essay Example

CUSTOMER RELATIONSHIP MANAGEMENT 1. Introduction How well a company maintains its relationship with its customers may well determined its success. Knowing its customers and focusing on their needs enables a business to better deploy resources towards an effective outcome for everyone. Many believes that CRM or Customer Relationship Management is a new way of doing business as it enables the building of close relationships between the representation of a business and its customers. The following section investigates the nature of CRM and how does CRM accomplish its tasks. 2. Customer Relationship Management 2.1 What is CRM? CRM or Customer Relationship Management means different things to different people. Others believed that is a managerial philosophy closely linked with marketing (Stahl 2004, p.120) and for those group who believe that not all customers want a relationship with a supplier, omit the word relationship, preferring the term customer management. Some opt for the expression ‘relationship marketing’. However, whatever people think, CRM is obviously a ‘business practice’ (Buttle 2004, p.3). According to Stahl (2004, p.120), CRM is the outgrowth of two recent trends across industries. First, customers in all markets have more choices and more power that ever before. Industry after industry managers agree that customers are setting the bar higher and what used to be considered satisfactory customer response in terms of products and services is not longer sufficient. The three factors driving this trend are increased competition, splintered markets, and product information proliferation. Second, new technology such as computing powers, databases, and data analysis technique has created an explosion of customer information, often at the level of a single transaction. This has exponentially increased an organization’s ability to track, understand, target, and form more lasting relationships with customers, down to the level of an individual customer. The CRM philosophy embraces the concepts of ‘mass customization’, literally a one-to-one approach to the marketplace. The combination of these two trends, more demanding customers and superior ability to track them at a micro level, has created a fertile environment where being ‘customer focused’ can be accomplished with a precision never before attempted. “CRM is a discipline approach to managing the most important relationship the company has- those with the customer” (Schultz p.173). 2.2 CRM and Marketing CRM builds on many of the traditional concepts associated with marketing, including segmenting the marketplace, targeting a specific group of customers, positioning the product or service in the customer’s mind, understanding the customer through research, and using marketing tactics such as pricing, promotion, distribution, and product to create an offering of unique value to customers (Stahl 2003, p.120). “The nature of business is changing” (Peel & Gancarz p.104) and the shift of power to customers mean that marketing departments must be nimble to stay ahead, certainly in terms of anticipating customer needs. Moreover, marketers need to embrace technologies that allow campaign spending to be justified because CRM is about accountability. Although enterprise-wide CRM systems may have grown out of database marketing. The very name ‘customer relationship management’ according to Baker (2003, p.582), implies that customers are a resource that can managed, like the supply chain and sales staff. Although CRM feeds off customer data, it is essentially neutral. It may be customer-focused in a marketing sense or it may be enterprise-focused, being employed to seek ways to save on customer service. It depends who is extracting actionable data and for what purpose. However, the fact that a common information system is being used throughout the organization is clearly advantageous (Baker 2003, p.583). 2.3 Building and Maintenance of Long-Term Relationship with Customer The focus of modern marketing is towards the building and maintenance of longer-term relationships with customers. According to Lancaster & Reynolds (2002, p.123), this long-term view of customer value and the buyer-supplier relationship is ‘relationship marketing’ or RM which was developed out of the more transaction-based form of marketing practiced by the majority of firms up to the beginning of the 1980s. RM was the precursor of CRM and it “the very bedrock of the CRM paradigm” (Lancaster & Reynolds 2002, p.122). The concept of relationship marketing was introduced into the literature by early researchers into customer care. It requires the building of trust between the organization and its customers. It also demands long-term loyalty between both parties of the exchange. CRM goes even further and involves managing customer/company relationships including the design and implementation of systems, procedures and plans for this process (Lancaster and Withey 2006, p.240). For CRM to have a long-term practicality and benefits, an organization has to believe in its underlying proposition of improving customer relations. Using innovative technologies to achieve this goal while containing costs is a fundamental challenge for every company that embraces CRM. For many organizations that adhered to the old ways of doing business, the move to a CRM strategy began with the realization that the customer, the market, and the competition had changed and would continue to change (Sharp 2003, p.203). Moreover, treating customers as ‘mass markets’ is no longer a viable business strategy, and success in business in the 21st century requires a new vision, a vision that demands changes in the processes, people, and practices with which the customer is involved. CRM is a comprehensive approach that includes integration of every facet of business that relates to the customer. The object of CRM is to create a long-term, mutually beneficial relationship with customers. It is a business and technology discipline that helps firms in the acquisition and retention of their most important and profitable customers. Companies cannot succeed or grow unless they can serve their customers with a better value proposition than the competition. Measuring customer loyalty can accurately appraise the weaknesses in a company’s value proposition and help to formulate improvements. Providing customers with ongoing value, satisfying to their individual needs, and ensuring they get what they want when and where they want it is critical in today’s dynamic and competitive market. If one company fails its customers, there is any number of rivals waiting to take over (Lancaster & Reynolds 2002, p.121). 2.4 Customer Care “Customer care is fundamental to the concept of CRM” (Lancaster & Reynolds 2002, p.123) and a company who trip up on customer service do so at their peril because they risk alienating the very constituencies they want to attract (Dyche 2001, p.52). For this reason, CRM projects begin with the goal of improving customer support. This is because if anything can affect a customer’s experience, it is the service or lack thereof. The Cooper and Lybrand study of customer care best practices in Upshaw & Taylor (2000, p.72), six companies were particularly effective in applying techniques of supply chain management to customer relationship management or CRM. These companies employed intranets, computer-telephony integration, data warehousing, and other enabling technologies to collect, integrate, disseminate, and thus leverage information throughout the organization – online, continuously, and in real time. Essentially, from the customer’s perspective, such an integrated approach to account management enhances not only the speed of customer service, but also its responsiveness and especially its accountability. The latter improvements are critical to creating the customer-perceived positive brand attitudes that drive loyalty to the master brand and create a strong brand community. Customer care is not undertaken as an altruistic exercise (Ace 2001, p.114). It is done to keep profitable customers and to enhance their value to the company. Customer care is therefore central to direct marketing. For instance, customer care provided the opportunity to make a service better and customer loyalty is profitable. According to Cook (2008, p.31), customers perceive service quality through every aspect of their contact with the company. It is therefore necessary for an organization to develop all aspects of its relationship with customers in improving the quality of its service. Customers often do not perceive the service they receive from an organization as a complete entity. It is the fine details of the organization’s relationship with the customer such as an incorrectly addressed letter, a lengthy delay in receiving an e-mail response, a service which turns out to be different to how it was originally advertised which forms customer’s impressions. “A service company has no walls” (Cook 2008, p.31) because for the customer, it is a transparent factory. Customers do not blame individual staff members for poor standards but the company as a whole. The CRM system is the central repository for all data related to the customer (Schultz 2002, p173). Many initiatives were started to move the organization towards the goal of excellent customer care. Companies restructured the service areas into front-office and back-office. They started to collect customer feedback for all departments and all customer groups. The logic behind the front-office-back-office split was that staff in the processing areas would be left alone to do the processing, and that employees who were good at dealing with customers would fill the positions in the front-office. Many companies recognize that it needed to implement a central CRM and workflow solution. A CRM that would deal not only with information gaps, but also with the task management aspects of customer care (Knox, Maklan, & Payne 2003, p.122). A study by the Cranfield School of Management in the UK according Wreden (2007, p.154), revealed that 50% of CRM projects do not produce results and, even worse, damage customer relationships 20% of the time. One Fortune 500 company tried four times to implement CRM but also failed. One reason for such difficulties, Wreden (2007, p.154) explained is that CRM is used mainly as a technological tool. But the ability to deliver customer value rarely comes packaged in a box. CRM can do little unless companies design and align processes to do business on customer terms. For CRM to succeed, business rules must be standardized, workflow optimized and organization data consolidated. Installing CRM as a technology without altering processes and organizational capabilities almost guarantees failure. Successful CRM is not based on identifying who is most vulnerable to a sales pitch. Neither is it about improving transactional efficiencies, such as enabling service representatives to make more phone calls. Nor, finally, is CRM, a technological lever to offload customers to automated system to reduce cost. This is because successful CRM systems according to Wreden (2007, p.154) share two characteristics. One is end-to-end customer care and the other is institutionalization of customer knowledge. End-to end customer care involves accurately and effectively handling customer orders from the initial sale through the last day of support. It builds customer equity by facilitating coordinated, consistent responses, speeding problem resolution and giving customers insights into order, shipping and service processes. It makes interactions more effective, not transactions more efficient. 2.5 CRM and the Internet The Internet has been both a benefit and an inconvenience for customer relationship management (Iyer & Bejou 2004, p.4). It is important to understand the CRM is both a business approach to improved management of customer operations and a collection of technologies to assist in automating those operations. This is a critical distinction that many early adopters failed to realize. By treating CRM primarily as a technology, they focused only on a secondary aspect and unknowingly reduce the significant strategic value it can deliver (Bligh, Turk, & Porter 2004, p.7). The Internet has certainly been one major source of change. Now that customers are now much more in control, the importance of building strong customer relationship has great increased (Kincaid 2003, p.57). There are two key areas in which the Internet has impacted the way companies do business. Increased access and globalization which have raised customer expectations both on and off the Internet. Elimination of direct customer interaction by automation has changed the way businesses deliver experience, but customer requirements about the quality of that experience have not changed. The Internet provides an unprecedented ability to deliver information, goods, and services to businesses and consumers. Customers are able to get information and do business whenever they want from wherever they can get connected. The Internet has made more information available to customers, giving them much more knowledge than they ever had before. Although it is possible for companies to get information about customers surreptitiously over the Internet, this is not CRM. Because building loyalty according to Kincaid (2003, p.58), depends on building trust. Therefore, abusing customer privacy is not the way to achieve trust. The Internet has effectively eliminated country boundaries. Before the customers only have access to local products, terms, and pricing. A company’s geographic business silos were not visible and did not cause many problems. It only becomes a big issue until customers could go online themselves and see all the internal disconnects. Customers now know about the fragmentation affecting many companies, and they have begun taking advantage of business silos. One company discovered that many of its global customers were shopping around the company’s website to find the cheapest ‘country’ price. The customer would then place all of its global orders in that country. Not only was the company losing money, they knew that this practice actually made them look dull and ineffective to their customers (Kincaid 2003, p.59). 3. Conclusion Customer Relationship Management is primarily a business practice and closely aligned with modern marketing and customer care. CRM was born out of the need to compete and build a market for a product. CRM promotes direct selling and effective management of relationship between the company and its customers. In CRM, marketers need to embrace a technology that focuses on building and maintaining long-term relationships with customers and promotes accountability. They should realize the ‘mass marketing’ approaches are no long viable. Customer care is fundamental to the concept of CRM and central to direct marketing. The advent of the Internet brought marketing challenges to companies and building strong customer relationships becomes more critical. CRM therefore is an essential requirement to any business to survive. 4. Bibliography Ace C. 2001. Successful marketing communications: a practical guide to planning and implementation. Butterworth-Heinemann, UK Baker M. J. 2003. The marketing book. Butterworth-Heinemann, UK Bligh P., Turk D., & Porter M. E. 2004. CRM unplugged: releasing CRM's strategic value. John Wiley and Sons, US Buttle F. 2004. Customer relationship management: concepts and tools. Butterworth-Heinemann, UK Cook S. 2008. Customer Care Excellence: How to Create an Effective Customer Focus. Kogan Page Publishers, UK Dyché J. 2001. The CRM Handbook: A Business Guide to Customer Relationship Management. Addison-Wesley, US Iyer G. R. & Bejou D. 2004. Customer Relationship Management in Electronic Markets. Haworth Press, UK Kincaid J. W. 2003. Customer Relationship Management: Getting it Right!. Prentice Hall PTR, US Knox S., Maklan S., & Payne A. 2003. Customer relationship management: perspectives from the marketplace. Butterworth-Heinemann, UK Lancaster G. & Reynolds P. 2002. Marketing made simple. Butterworth-Heinemann, UK Lancaster G. & Withey F. 2006. Marketing fundamentals: 2006-2007. Butterworth-Heinemann, Italy Peel J. & Gancarz M. 2002. CRM: redefining customer relationship management. Digital Press, US Schultz G. 2002. The Customer Care and Contact Center Handbook. American Society for Quality, US Sharp D. E. 2003. Call Center Operation: Design, Operation, and Maintenance. Digital Press, US Stahl M. J. 2003. Encyclopaedia of health care management. SAGE, US Upshaw L.B. & Taylor E. L. 2000. The masterbrand mandate: the management strategy that unifies companies and multiplies value. John Wiley and Sons, US Wreden N. 2007. Profit Brand: How to Increase the Profitability, Accountability & Sustainability of Brands. Kogan Page Publishers, UK Read More