Customer Relationship Management - Coursework Example

?Rationale for pursuing CRM in retail relationship management (CRM) has been recognized as one of the most powerful marketing tools as retailers have experienced phenomenal increase in sales and profit maximization (Hassan & Parves, 2013). CRM has become a strategic imperative as it integrates internal functions of an organization. It improves shareholder value as it helps establish proper relationship with customer segments. Apart from establishing, maintaining and enhancing relationships, CRM also helps to terminate relationship with customers when necessary, to ensure objectives of all parties are met (Gronroos, 1996 cited in Boedeker, 1997). Quality of customer service is central to service marketing, which is possible through CRM. Quality of customer service can be enhanced when trust, commitment, communication, empathy and conflict handling are given importance in relationship building. These become important because relationship quality has significant influence on customer loyalty (Prasad & Aryasri, 2008). CRM is also about acquiring the right customer and not all customers. This is justified because 80 percent of sales are derived from 30 percent of the customers (Hawkes, 2003). Apart from identifying high value customers, CRM is also about managing the entire lifestyle of customers (Lambe, 2001). Retailers have to look beyond the transactions of the customer. It is equally important to derive information on how the customer became the customer as well as the interactions surrounding customer’s departure. These would help the retailers to better retain customers. Knowing of their life style implies that CRM should be able to anticipate and predict the future needs of the customers Suitability and effectiveness of CRM strategy of Tesco and Sainsbury Tesco’s Club card scheme generated information on pricing, customer services, merchandizing, promotions, media effectiveness, customer acquisitions and communications (Hassan & Parves, 2013). Tesco introduced several initiatives such as ‘one on front’ service to reduce waiting time at checkout, ‘my time’ was designed to offer women free knowledge about salons and spas apart from price discounts cosmetics, perfumes and designer clothing. Tesco also sends out magazines with exclusive offers to about 150,000 customers on a regular basis. Their tesco.com is also aimed at keeping in touch with their customers. The Nectar card scheme of Sainsbury is aimed at attracting more customers by having increased number of partners (Hassan & Parves, 2013). Sainsbury customers redeem their loyalty points and the retailer experienced the highest number of Nectar card users during Christmas 2011. Such redemption enabled the retailer to understand the potential customer base. Sainsbury also has a strong presence on social networking sites such as Facebook and Twitter. Sainsbury gathers information on customer experience which is lacking at Tesco. Both Tesco and Sainsbury have loyalty cards aimed at retaining customers. Boedeker (1997) however, contends that loyalty cards are based on the assumption that special offers and bonus points would be the only reason that customers would not deflect. Economic aspects are only one of the benefits that consumers seek. A study by Turner and Wilson (2006) found that customers at Tesco may be shopping more because of Tesco Club cards but they do not feel more valued because of these cards. This undermines the very purpose of CRM as no relationship has been built. The success of loyalty cards is not limited to enhanced sales or profits. Their card only promotes incentivized loyalty and no emotional loyalty has taken place as customers are not influenced by brands. Hassan and Parves also found that loyalty card holders at both Tesco and Sainsbury do not limit their shopping only within these two retailers. Possibly this could be because of weak value proposition and flawed design of the loyalty cards (Bayraktar, Yilmaz & Yamak, 2010). Also, the companies may not be able to analyze all of the data generated through the loyalty programs and utilize the information to enhance their offerings. Besides, most loyalty cards offer undifferentiated benefits. Even though retailers clam to be deriving mileage out of their CRM strategies and loyalty cards, Hawkes (2003) advocates that trends such as shopping frequency and growth in sales are counterintuitive and possibly reflect the misuse of price discounts. Customers perceive frequent shopper cards for price discounts and this undermines the very basis of CRM. Recommendations to improve relationship marketing Technological innovations have taken place in the field of CRM. Technology enables saving information about customer choices and budgets. Targeted marketing is essential because when customers receive information specific to their preferences, such communication is effective as it builds a feeling of trust. Data mining helps retailers to offer bundled products and services, adjust their logistic operations or payments systems. Both these retailers do not appear to have strategy to divest unprofitable customers, which is one of the perils of implementing CRM without a proper customer strategy (Rigby, Reichheld & Schefter, 2002). Focus should not be to offer price discounts but to enable customers to build an emotional relationship with the retailer and the brands it offers. Retailers could enter into “coalition lite” programs where three or more companies brand together to share expertise and expenses and at the same time offer enhanced value to their customers (Bayraktar, Yilmaz & Yamak, 2010). Most loyalty programs are identical and hence to be innovative, retailers should offer some unique and experiential rewards. Empathy and conflict handling are antecedents to customer loyalty. Frequent and effective communication is equally important in building relationships. Tesco customers have expressed that they do not feel valued which suggests that empathy is essential in building relationships. Conclusion Customer loyalty is not static and is relative. Customers are exposed to wide choices and hence CRM should aim beyond increased sales and profits. Technology should be used to implement targeted marketing and efforts should be towards relationship building and emotional bonding with brands. Customer loyalty is no indication of the success of CRM strategy. The non-productive customers should not be focused upon as it only depletes the resources. Customers need to feel valued and for such customers, possibly price discounts would hold little importance. Regular and effective communication could help establish a relationship of trust, and bonding would naturally occur between the retailers and their customers. No. of words: 1014 References Bayraktar, A., Yilmaz, E., & Yamak, O. (2010). Implementation of RFID Technology for the Differentiation of Loyalty Programs. Journal of Relationship Marketing, 9 (1), 30-42 Boedeker, M. (1997). Relationship marketing and regular customer cards: daily product retailing in Finland. Marketing Intelligence & Planning, 15 (6), 249–257 Hassan, A., & Parves, M. (2013). A Comparative Case Study Investigating the Adoption of Customer Relationship Management (CRM) The Case of Tesco and Sainsbury’s. International Journal of Managing Value and Supply Chains (IJMVSC), 4 (1), 1-10 Hawkes, G.F., (2003). Customer Relationship Marketing (CRM) in the U.S. Supermarket Industry: Current Status and Prospects. Food Industry Management, Cornell University. Retrieved from http://dyson.cornell.edu/outreach/extensionpdf/2003/Cornell_AEM_eb0302-72.pdf Lambe, P. (2001). Knowledge-Based CRM: A Map. Retrieved from http://greenchameleon.com/thoughtpieces/kcrm.pdf Prasad, J.S., & Aryasri, A.R. (2008). RELATIONSHIP MARKETING VERSUS RELATIONSHIP QUALITY & CUSTOMER LOYALTY IN FOOD RETAILING. Pranjana, 11 (2), 51-71 Rigby, D.K., Reichheld, F.F., & Schefter, P. (2002). Avoid the Four Perils of CRM. Harvard Business Review. Retrieved from http://202.120.148.199/Files/Avoiding+the +four+perils+of+CRM_Rigby.pdf Turner, J.J., & Wilson, K. (2006). Grocery loyalty: Tesco Clubcard and its impact on loyalty. British Food Journal, 108 (11), 958-964 Read More