Customer Relationship Management

"CRM is the alignment of business strategy, organizational structure and culture, and customer information and technology so that all customer interactions can be conducted to the long-term satisfaction of the customer and to the benefit and profit of the organization." - Imhoff et al (2001).

Customer relationship management (CRM) is not just the application of technology, but is a strategy to learn more about customers' needs and behaviours in order to develop stronger relationships with them. As such it is more of a business philosophy than a technical solution to assist in dealing with customers effectively and efficiently. Nevertheless, successful CRM relies on the use of technology.

The current interest in CRM has developed with a combination of new technologies that enable companies to ensure better customer relationships. A good CRM strategy is vital. This is because there is increasing competition for customers, as well as the widespread realisation that customer retention and loyalty is just as important as customer acquisition. Another reason driving this renewed interest in CRM is the shift in the balance of power to customers. Better-informed customers are more aware of alternatives, and as customers become more informed consumers of services and products, customer expectations rise and change, and their sophistication increases, too. The research will therefore explore elements of the CRM framework and how this is utilised.

The study examines and provides a detailed analysis of Customer Relationship Management (CRM) with respect to its implementation in the organisations. The study investigates market trends, levels of its current practice, levels of successes and failures. In order to gain proper understanding of the subject matter research, a case study of British Gas in the utility industry will be discussed in detail. The study gives an insight of factors to the implementation of CRM in the utility industry. Thus, analysing the issues practically involved and raised in the implementation of the management system aimed at creating customer value, and also putting forward the experiences of the company in the same industry. Therefore, looking into the challenges created for the management, causes/factors associated with and resulting in the success/failure of CRM as a means of creating customer value, and overall experience of the companies attempting to implement CRM. The discussion therefore leads to a roadmap for successful implementation of CRM.

Introduction:

Customer relationship management can be stated as “the start of a dialogue with a customer”, which later on is converted into enterprise's profit and finally it means enterprise's survival in the competition. Thus CRM gets into the market as the system based on (implemented together with) information technologies frequently not evaluating advantages of direct communication of people.

Enterprises base their actions in the market not on “suspicions” or “experience”, but on knowledge that is acquired by analysing customer's data. However knowledge based activity of an enterprise is possible only when having processed the data on their basis motivated decisions to find, attract and keep customers are taken.

Customer Relationship Management (CRM) implementation has been a daunting and exhaustive experience for many organisations. Managers and decision makers find that there is no one 'fixed formula' to guarantee its success.

The management of customer relationships has become a top priority for many companies. In many competitive markets, businesses invest substantially in customer relationship management (CRM) implementation (Bohling et al., 2006). Lately, though, companies have become increasingly displeased with CRM implementations, as the majority of them are falling short of the expectations that precede them (Rigby, Reichheld, & Schefter, 2002; Zablah, Bellenger, & Johnston, 2004; CSO Insights, 2006) and are therefore considered failures (Gartner Group, 2003). This entitles the need for a research on the success factors for CRM implementation, which when considered can lead an organisation to implement CRM systems successfully.

In practice, many companies have focused on technological solutions for the customer database accompanied by software training programs (CSO Insights, 2006). However, successful implementation also requires changes in organizational structures, employees' motivation to make use of CRM, and sophisticated project management geared towards dealing with the changes initiated (Day & Van den Bulte, 2002). Academic literature has long argued that companies should actively engage in customer relationship management (Morgan & Hunt, 1994; Slater & Narver, 1995). Academic literature has primarily addressed the influence of single CRM activities, regarding either technological (e.g., Jayachandran et al., 2005), organizational (e.g., Sabherwal, Jeyaraj, & Chowa, 2006), or strategic aspects (e.g., Bell et al., 2002), on performance. However, CRM “requires a cross-functional integration of processes, people, operations, and marketing capabilities that is enabled through information, technology, and applications” (Payne & Frow, 2005, p. 168).This especially applies to interactions with support activities within the company (i.e., top management's providing CRM strategic support and employees' actually using CRM systems; Payne & Frow, 2005). According to Boulding et al. (2005, p. 161), little attention has been paid to people-related interactions.

Research Question: Aims & Objectives

“What Are The Critical Success Factors Of Implementing CRM In Organisations?”

CRM has been one of the prevalent topics in recent years in both academic theory and practice (Kumar, Lemon, & Parasuraman, 2006; Boulding et al., 2005). Nevertheless, companies complain that CRM implementations do not live up to their expectations (Rigby et al., 2002; Zablah et al., 2004). While the findings of existing research certainly underline the importance of CRM for companies' overall success, they do not capture the implementations' contribution with regard to the specific objectives of CRM. Provided that CRM is a cross-functional process that focuses on initiating, maintaining, and retaining long-term customer relationships (Reinartz et al., 2004), performance measures should account for different aspects of the process.

The overall objective of this study is to present new insight into the methods that need to be followed in order to achieve the successful implementation of CRM. This research delves into specific profiles of Critical Success Factors for Customer Relationship Management implementation, and namely, customer-focused business strategy, CRM-friendly organisation structure, CRM-savvy organisation culture, CRM success measurements and top management commitment.

The aim of the research is to have an in-depth analysis and understanding of the various factors relating to the susses full implementation of CRM which not only includes technological aspects but also the adaptations brought about in organisation's structure n culture and the human aspect behind it. The aim is to have an analytical solution to the research question which as listed below.

What degree of interactions needs to be present between the people and the processes of CRM implementations?
What changes are required in an organisation for successful CRM implementation and its working?
What are factors that might shape and influence success or failure of CRM technology implementation in different firm settings?

Literature review

Focusing on customer processes requires knowledge of considerable extent. Companies have to provide knowledge that customers demand, process the knowledge that customers pass to the company and possess knowledge about customers. As a consequence, knowledge is considered a critical resource in the competition (Drucker, 1999; Davenport and Prusak, 1998, p. 13). The development of knowledge to support business processes is the task of knowledge management. Thus the application of KM concepts and technologies in the context of CRM is a relevant field of research (Romano and Fjermestad, 2003, p. 239).

To achieve their goal of providing a solution for the process of the customers, organisations need to focus on three sorts of knowledge in CRM processes (O¨ sterle, 2001). They make up what is considered to be customer knowledge.

They need to understand the requirements of customers in order to address them. This is referred to as “knowledge about customers”.

The information needs of the customers in their interaction with the enterprise require “knowledge for customers”.

Finally, customers possess knowledge about the products and services they use as well as about how they perceive the offerings they purchased. This “knowledge from customers” is valuable as it feeds into measures to improve products and services.

Customer Relationship Management (CRM) is a managerial philosophy that seeks to build long term relationships with customers. CRM can be defined as “the development and maintenance of mutually beneficial long-term relationships with strategically significant customers” (Buttle, 2000). The implementation of CRM is regarded as desirable by organisations due to the benefits that accrue from these strategies among their customers, such as greater loyalty and resulting profits. The focus of a CRM strategy is the acquisition, retention and overall customer profitability of the specific group of customers.

Acquisition of customers: this refers to the need of organisation to find new customers for their products. This means they are required to develop strategies to attract potential customers to purchase the product. The cost of attracting a new customer is estimated to be five times the cost of keeping a current customer happy (Kotler, 1997).

Retention of customers: organisations also need to focus on existing customers in order to ensure that they continue purchasing and continue supporting the product. Organisations can increase their profitability by between 20% and 125% if they boost their customer retention rate by 5 percent (Peck, Payne, Christopher & Clark, 2004).

Profitability: Customer profitability reflects the financial performance of customers with respect to all the costs associated with a transaction (Gordon, 1998). Profitability in the case of CRM is determined in the light of the lifetime value of the customer to the organisation, taking account the income and expenses associated with each customer and their respective transactions over time (Gordon, 1998).

Organisations that can implement CRM successfully are those that have a great deal of information concerning the customer and where there are differentiated needs among the customers (Kotler, 2002).

The success of any strategy is determined by the success with which it is implemented. Implementing CRM require that the organisation and the associated business processes be in place in order to facilitate its success (Brunjes & Roderick, 2002).

CRM systems appear to be built on the ideas of Relationship Marketing but the capabilities of the software are often not congruent with the concept - relationship Marketing must involve the whole organisation (Payne et. al. 1999).

In the marketing literature, the terms CRM and relationship marketing are used almost interchangeably (Parvatiyar and Sheth, 2000). For example, Berry (1983) defines relationship marketing as “attracting, maintaining and enhancing customer relationships.” Harker (1999) proposes the following definition: “An organization engaged in proactively creating, developing and maintaining committed, interactive and profitable exchanges with selected customers (partners) over time is engaged in relationship marketing.” Recently, by broadening the scope of relationship marketing and viewing it in a comprehensive management and social context, Gummesson (2002b) defines it as “marketing based on relationships, networks and interaction, recognizing that marketing is embedded in the total management of the networks of the selling organization, the market and society. It is directed to long term win-win relationships with individual customers, and value is jointly created between the parties involved.” On the other hand, Jackson (1985) suggests CRM to mean “marketing oriented toward strong, lasting relationships with individual accounts.” Payne (2000) asserts that CRM is concerned with “the creation, development and enhancement of individualized customer relationships with carefully targeted customers and customer groups resulting in maximizing their total customer life-time value.” Recently, Kotler and Armstrong (2004) define CRM as “the overall process of building and maintaining profitable customer relationships by delivering superior customer value and satisfaction.” Although the above definitions differ somewhat, they all indicate that the core theme of CRM and relationship marketing perspectives revolves around its focus on individual buyer-seller relationships, that these relationships are longitudinal in nature, and that both parties benefit in the relationship established. In short, from a firm's perspective, both the CRM and relationship marketing concept can be viewed as a distinct organizational culture/value that puts the buyer-seller relationship at the center of the firm's strategic or operational thinking.

The components of CRM Based on past related literature (Crosby and Johnson, 2001; Day, 2003; Fox and Stead, 2001; Kalustian et al., 2002; O'Halloran and Wagner, 2001; Paracha and Bulusu, 2002; Tiwana, 2001) I hypothesize that CRM is a multi-dimensional construct consisting of four broad behavioural components: key customer focus, CRM organization, knowledge management, and technology-based CRM. This is in accord with the notion that successful CRM is predicated on addressing four key areas: strategy; people; technology; and processes (Fox and Stead, 2001), and that only when all these four work in concert can a superior customer-relating capability emerge (Day, 2003). For a business to maximize its long-term performance in such aspects as customer satisfaction, trust, return on sales, and return on investment, it must build, maintain, and enhance long-term and mutually beneficial relationships with its target buyers. We will discuss each component and then describe our research methodology along with the findings from our analysis.

Research methodology:

The research methodology includes the type of data and also the approach which will be taken to collect the data and analyze it. Ideally choosing both the method of research is a wise thing to do but it also risks the research topic as it widens the parameter of the project.
The methodology that will be used as part of the research will consist of a mix of both primary and secondary data. The primary data will be collected by a questionnaire, which will have a structured format allowing the results to be efficiently analysed. To aid this process I will review the possibility of conducting a web based survey to significantly increase the sample size. The questionnaire will focus on the objective relating to the managers opinion about whether they believe that the CRM success depends not only on the technology but also the human capital involved in it and the overall organisational environment and will also look whether they agree with some of the ideas mentioned in some of the literature. The target audience for the questionnaire will be managers, CRM experts, organisation employees involved, project managers, marketing executives etc.

Also the research will have a descriptive purpose because as part of the research I will undertake a case study of British GAS which is a reputed utilities provider in the U.K . This will be completed because this organisation being in the utilities industry has a lot of customer interactions and requires to maintain them throughout, and for this purpose CRM has been implemented. The data will be collected mainly using sources found on the internet, library and by writing to them to find out their opinions. The limitations of this particular case study are that if I fail to get a response from British GAS the majority of information I use will be derived from websites and to ensure accuracy I will use websites that have official links.

Research Methods and analysis

There are various methods of collecting qualitative data, Participant observation, action research, interviews and focus groups, diaries (reflexive and photographic), narrative, metaphors, secondary sources.

The methods that are chosen as appropriate and which fulfill the research parameter are Participant observations, Interview and questionnaires and Secondary sources. These methods help to observe and also note the actions of the organisation which helps in understanding the decision making process depending on the various information gathered about the customers.

Secondary sources help us to understand the data collected so far and how useful it has been in the particular field and wherever there is a missing link that link should be fulfilled by gathering that information and applying it in the research work.

The data which will be collected will later be analyzed using the SPSS - data matrix format which will help in sorting the data according to the need and answering all the research question and finding out the final answer of the research done. The SPSS system uses diagrams, bar diagrams, comparing it to various group findings and then analyzing the data according to the format that is required.

Limitations of Research Topic

Limitations should be kept in mind. First, given that this study was composed of observations and understanding, additional empirical research is necessary to support the results presented and to test their generalizability. Secondly, it should be kept in mind that the implementation of CRM is a dynamic process. Since we have only captured data at a single point in time, future research should focus on analyzing CRM from a longitudinal perspective rather than a cross-sectional one.

The study represents an attempt to build and test a conceptual framework of CRM. The findings will therefore be indicative rather than conclusive. It would be useful to further assess the generalizability of the CRM model developed in this study to other business environments, for example, the adoption of CRM in other nations, such as the USA and European countries. With more replicative and creative research, a more comprehensive conceptual framework related to CRM can be developed in the future.

It is important to contrast a firm's degree of CRM as assessed by internal information (e.g. managers' responses to questionnaires, as we have done in this study) with the firm's level of CRM as perceived by its customers, competitors, and distributors. This is possibly another challenging area of future research in CRM.