Theoretical Perspectives of Customer Relationship Management and Marketing Mix - Essay Example

Theoretical Perspectives Relationship Management (CRM) and Marketing Mix AFFILIATION: Introduction to Customer Relationship Management (CRM) Customer Relationship Management, commonly referred to as CRM, is defined as the customer-oriented approach of a business that comprises of analysis, planning, controlling and co-ordinating of the relationship between a company and its customers; the relationship is developed and nurtured by means of various state-of-the-art technologies required for the information gathering and database maintenance processes (Buttle, 2008). According to Siems (2010), it is viewed as the combination of three key elements i.e. customer strategies, technology and business processes; when these three aspects are taken into account, an organisation can get an in-depth information about its customers and achieve even higher levels of customer loyalty and increased profitability. The primary role of CRM is to engage each customer in a valuable exchange of dialogue that will help a company to customize its product or service offerings in ways that will ensure that the customers are attracted, cordial relations with them are developed and they can be retained for long time by offering them appealing and attractive packages of high quality and innovative preferred offerings on an ongoing basis (Yim, Anderson & Swaminathan, 2004). CRM allows the companies to emphasize on the areas that are important for the customers by monitoring their behaviour as it gives insights about their varying needs, demands and preferences. When a valuable pool of data is gathered, an organisation can successfully offer a service to its customer that exceeds his/her expectation level; in order to make successive progression, the company will have to employ the mechanisms that will improve the service excellence such as using multiple communication channels like sales and marketing. Theoretical Perspectives of CRM and Marketing Mix Since CRM is an organisation wide strategy, it is important that its business strategy comprises of a specific target market that it will be focusing on for attracting the customers, developing long-term relations with them and then taking adequate measures to make them loyal to the company for a long period. According to Kim, Zhao and Yang (2008), the essence of CRM theory has its origination from three important notions of marketing management i.e. relationship marketing, customer orientation and database marketing. As the Information and Communication Technology (ICT) has enhanced, all three marketing views are merged together in the CRM model (Roberts, Liu & Hazard, 2005). As the customers are exposed to unlimited marketing activities by various companies, reaching them by using traditional mass advertising mediums has become an outdated concept; the only way to gain access to the target market’s attention is by making an effective use of the CRM activities (Buttle, 2008). Although in some cases, the companies have faced severe losses because they developed their strategy on the basis of wrong data but such mistakes can be avoided by ensuring that appropriate research methods are used for researching the customer’s preference so that analysis will provide beneficial results for the company’s CRM strategy (Li, XU & Li, 2005). There is no concrete definition available for understanding the concept of CRM as it has been defined by many researchers in different ways. For instance, Buttle (2008) defined the concept of CRM as an overall process used by a firm for the creation and maintenance of customer relationships that are profitable by fulfilling the promise of delivering excellent customer value proposition and satisfaction. This definition has more emphasis on the marketing aspect that focuses on value creation and customer satisfaction. On the other hand, Becker, Greve and Albers (2009) gave a more technical perspective definition of CRM by stating that it is a strategy used by an organisation that relies heavily on the information technology. IT is used by such organisations to assist them in providing a detailed, genuine and integrated perspective of the customers which can ensure that all business processes and interaction with customers provide support in effective maintenance and enhancement of the relationships that are equally favourable for both parties (customers and organisation). In addition to these two specific perspectives of CRM, there is one more aspect which is most commonly cited by the marketing management researchers i.e. integrated perspective of CRM that ensures that there is a good blend of technological and business perspectives so that all factors required for proper and effective implementation of CRM are adequately planned (Hutt & Speh, 2007; Palmiater et al., 2008). Broadly speaking, there are two theoretical perspective of CRM i.e. technical or technological perspective and business i.e. customer-centric perspective. From technical aspect, CRM is important both for operational and analytical purposes that implies that proper systems need to be implemented in the organisation so that they can provide proper foundations for the analysis of different customer segments. On the contrary, the business perspective of CRM emphasizes that the relationship marketing should be integrated with the marketing mix (product, price, place and promotion) so that valuable outcomes are achieved i.e. customer satisfaction, loyalty and value creation (Siems, 2010). According to Buttle (2008) and Siems (2010), CRM is a result of an effective blend of both technological and business innovation; CRM is successful when all vital and crucial perspectives of individuals are compiled together and then taken into consideration when developing the marketing strategy. It implies that IT and marketing should be properly aligned within the organisations so that the CRM efforts designed for the customers will prove to be beneficial for the organisation. In order to make a successful progression in the dynamic business environment, it is important that all organisational and strategic aspects are properly taken into consideration. CRM and Marketing Mix Since CRM is among the vital constituents of the organisational processes as it supports identification of the customers, knowledge creation, development of relationships with the customers and incorporating their demands in the company’s product or service offering, it will help in ensuring that the marketing mix is designed in accordance with the customer requirements (Palmiater et al., 2008). In the marketing world, ‘loyalty ladder’ is the most important concept for developing an effective CRM strategy that comprises of various stages through which a person passes to become a loyal customer from non-customer. According to Buttle (2008), the loyalty ladder has two versions that are useful in developing customer relationships. One perspective comprises of stages like a prospective customer tries the product, he becomes the customer after trial, then he makes repeated purchases to become a client and then finally an advocate. Other version of the ladder is that a consumer is barely satisfied after first trial, and then he/she becomes a frequent purchaser, then an evangelist and then an owner with a shared responsibility like a partner. With the help of the loyalty ladder, an organisation can ensure that it undertakes right marketing activities to attract and retain the customers. The best example of loyalty ladder is observed in Tesco; its loyalty program is known as Tesco Clubcard. When a customer does any transaction, the card is scanned to record the details about the customer; it shows that it has a highly effective system for customer database. The store then sends coupons to the customers in accordance to their purchasing habits so that they can take advantage of money saving options on their important products. By employing such an effective CRM strategy of loyalty ladder, Tesco is adding value to the customer’s shopping experience on an ongoing basis. For instance, when Toyota introduced economical cars meaning low priced cars to meet the demands of the middle class people, it was a big failure for the company as its loyal customer’s perceived reduction in the quality of the company’s products and started switching to other companies. In order to recover from the loss, the Toyota Company had to call back its economical cars and run ads on Television emphasizing that no compromise is made on the quality of its cars. The car dealers had to increase efforts to gain back the trust of its loyal customers and within a span of a year, the company was able to regain its original position in the market. Similarly, when Unilever realized that its Sunsilk customers were unhappy with the shampoo packaging, it instantly launched new packaging in about a month to meet the demands of the customers. In order to create a new image in the customer’s minds, it engaged in various CRM activities such as organising events like fashion shows, getting the product endorsed by the leading celebrities and allowing the customers to avail free hair wash opportunities. Hence, when effective CRM activities are designed, only then the companies are able to attract the customers, develop cordial relations with them and retain them for long period of time. Likewise, Disney World has created a distinctive image in the market by developing an effective CRM strategy; it has enhanced the experience that it provides to the customers by offering a complete range of options that will meet their expectations. The company has developed an appropriate mix of product and service offering, promoting its brand by using word-of-mouth and celebrity endorsement advertising, giving customers the value for money, created a whole world of animation for the customers, employed well-trained staff for enhancing the customer value and implementing right processes by providing consistent quality of services to the customers. After sales service is an important area for all organisations as it is important for them to ensure that they are in easy reach by the customers when they need the assistance of the professionals (Li, Xu & Li, 2005). For instance, Standard Chartered has made the policy that all queries of customers should be resolved within ten minutes of their call; if the issue is of higher level then it should be addressed in no more than two hours; the personnel are available 24/7 to provide their help and have been successful in increasing their market share and reducing the number of complaints received by the bank. Therefore, CRM plays an important role in satisfying the customers and meeting their expectations by providing them an excellent service. In order to have a successful implementation of CRM in an organisation, there are four key areas that should be present in its business operations so that it can effectively develop cordial relations with its customers i.e. people, strategy, technology and processes (Hutt & Speh, 2007). According to Roberts, Liu and Hazard (2005), the successive CRM implementation process encompasses four key features i.e. keeping a close focus on the key customers, developing effective CRM plans in accordance with the customers’ requirements, proper knowledge management processes so that information can be stored and used appropriately and applying technology within the organisation that supports CRM based strategies. Conclusion Since an organisation’s success is largely determined by the processes that are employed to develop cordial relations with customers that help them in developing products and services in accordance to the market demands, it is important to ensure that all appropriate and effective mechanisms are in place that will support proper development of CRM strategy. It is vital for the organisations to first develop customer-centric work environment so that everyone is sharing same values and beliefs; this is the most common mistake found in various organisations i.e. lack of customer-centric approach in the company (Buttle, 2008). It has become important for every organisation to develop a CRM strategy on the basis of accurate and up-to-date information about its respective customers so that it is able to enhance its performance in the market. When information about the customers is collected on an ongoing basis, it helps a company to monitor its performance and unleash any unmet needs and demands of the customers. References Becker, J.U., Greve, G., and Albers, S., 2009. The Technological and Organizational Implementation of CRM on Customer Acquisition, Maintenance and Retention. International Journal of Research in Marketing, 26(3), pp. 207-215. Buttle, F., 2008. Customer Relationship Management. 2nd ed. Oxford: Butterworth-Heinemann. Hutt, D. and Speh, T., 2007. Business Marketing Management: B2B. 9th ed. Ohio: Thomson South-Western.  Kim, C., Zhao, W. and Yang, K.Y., 2008. An Empirical Study on the Integrated Framework of e-CRM in Online Shopping: Evaluating the Relationships among Perceived Value, Satisfaction, and Trust based on Customers’ Perspectives. Journal of Electronic Commerce in Organizations, 6(3), pp. 1-19. Li, C., Xu, Y. and Li, H., 2005. An empirical study of dynamic customer relationship management. Journal of Retailing and Consumer Services, 12, pp. 431-441. Palmatier, R.W., Scheer, L.K., Evans, K. R, and Arnold, T.J., 2008. Achieving Relationship Marketing Effectiveness in Business-to-Business Exchanges. Journal of the Academy of Marketing Science, 36, pp. 174-190. Roberts, M., Liu, R.R., and Hazard, K., 2005. Strategy, Technology and Organizational Alignment: Key Components of CRM Success. Journal of Database Marketing & Customer Strategy Management, 12(4), pp. 315-326. Siems, F., 2010. Extending the Life Event Cycle to Relationship Marketing: New Implications or Products and Services, International Journal of Business Research, 10(2), pp. 81-96. Yim, F.H., Anderson, R.E. and Swaminathan, S., 2004. Customer Relationship Management: Its dimensions and effects on customer outcomes. Journal of Personal Selling & Sales Management, 24(4), pp. 265-280. Read More