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Effects Of Implementing CRM Systems

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Published: Tue, 06 Feb 2018

Effects Of Implementing CRM Systems And Its Strategic Issues In An Organisation

Introduction

Definition Of CRM:

Any organisation will profit from adopting a definition of what CRM means in strategic terms for their business and ensuring that this definition is used in a regular manner all the way through their organization.

One of the most important definitions of a CRM has been given by Davenport et al. (2001), stating that CRM systems are “all the tools, technologies and procedures to control, manage and improve or facilitate sales, support and related interactions with customers, and business partners throughout the enterprise”.

According with Siebel, (one of the mayor players in the CRM market) “CRM is an integrated approach to identifying, acquiring, and retaining customers. By enabling companies to deal with and coordinate customer interactions across several channels, departments, lines of business, and geographies, CRM helps organizations maximize the value of every customer interaction and drive superior corporate performance.”

Another concept about CRM, provided by John Wiley, author of the book “CRM unplugged”, is “CRM is not about technology, it’s about attracting and serving clients in more attractive ways”.

Introduction:

Many organisations in recent years identified the importance to become friendlier with the customers facing with increased worldwide competition. Therefore Customer Relationship Management (CRM) has risen to the agenda of many organisational strategies. Customer Relationship Management systems can be viewed as information systems meant to enable organisations to realise a customer focus. An increasing number of organisations are adopting CRM yet surveys are beginning to highlight the potential risks. Although CRM systems are proving an extremely popular choice for implementation. It is obvious that there is still a need for further observed studies of CRM but, only a few are available.

Now a day in the business market, management finds that customers are the central part of a business and that a company’s success depends on effectively managing relationships with them. So, one of the initial goals that management has its employees to achieve is based on a saying such as “the customers are always right,” “do whatever it takes to deliver your promise” or something similar. All objectives are decided to one crucial goal that is to make customers satisfy because they are the ones who keep the business run. Not too long ago, many companies did not consider this an important factor and often uncared for their customers with the result that many of these customers did not come back. Frequently, these objectives become constraints for businesses and their employees when they do not have suitable tools, equipment, or methods to achieve this goal. Now a day, technology provides to the businesses with systems that can help companies track customers’ communications with the firms and allow the firms’ employees to rapidly get back all the data about the customers. This idea is known as a customer relationship management (CRM) system and if used correctly, could improve an organisation’s ability to achieve the ultimate goal of retaining customers and so gain a strategic improvement over its competitors. (Gefen, D. 2002)

CRM can be interpreted as a process of digitizing a staff’s knowledge about his or her customers. This is because in a usual business process, customer relation staff would normally be required to remember their clients’ requirements, behaviours, tastes, preferences, etc. In real meaning, CRM focuses on building long-standing and sustainable customer relationships that adds value for both the customer and the organisation. (Daft, 2003).

CRM system is frequently incorporated with other decision support systems across all functional areas, such as (ERP) Enterprise Recourse Planning system, (EIS) Executive Information Systems, (SCM) Supply Chain Management System, and Product Life-Cycle Management Systems. By doing so, organizations can produce better management information in terms of planning, acquiring, and controlling across all channels and thus have greater products and services that direct to larger revenues and larger profits. CRM systems can also assist organizations increase their abilities to interact with their customers. This not only leads to improved quality but will improve the speed response to customer’s needs (Anderson, 2006).

By itself, CRM makes a required tool for business because it distinguishes an organization from its competitors with the knowledge resources about product ideas and the ability to identify and find solutions to customer’s issues. CRM can cut down the distance between customers and the organization, contributing to organizational success through customer loyalty, greater service, better data gathering, and organizational learning. Some have argued that customer satisfaction and loyalty is a science; however, Phelon (2004) takes it up a level by saying that “customer leverage is an art.”

CRM Classification:

Operational CRM:

Operational CRM is also called front office CRM which involves the areas where the customers meet directly and this type of interactions is called as touchpoints. A touchpoint is of two types, one is inbound e.g., a call to an organisation’s customer support hotline and the other is outbound e.g., an in-person sales call or an e-mail support. Operational CRM enables communications to and from customers but this doesn’t mean useful service. (Dyche 2001).

The benefits of Operational CRM are: It delivers personalised and well-organized marketing, sales and service through multi-channel collaboration. It also enables a 360 degree view of your customer while you are interacting with them. The people who are included in sales and service can access complete history of all the customer interaction with the company, regardless of the touch point.

Analytical CRM:

Analytical CRM is also called as back office or strategic CRM which involves the customer actions that takes place in front office. Analytical CRM needs technology that total customer data and provide analysis of the customer data to progress managerial decision making and actions. Analytical CRM involves large amounts of cross-functional information and this information is stored on a data warehouse. The analytical CRM is based on the technologies such as warehousing and data mining. In this, the customer database should be accessible from all the departments like marketing, sales and customer service. Analytical CRM forms the foundation for planning and evaluation of marketing campaigns and assists cross selling and up selling functionalities. (Adrian Payne 2005).

Collaborative CRM:

Collaborative CRM is said to be an approach to the CRM in which there are many departments such as sales, marketing, and technical support share the data which they collect from interactions with the customers. For example we can say customer feedback is a main aspect for customer satisfaction and loyalty since the customer feedback gathered from a technical support department could inform marketing staff about the products and services that might be great help to the customers. The point of collaboration is to improve the quality of customer service which results in increase customer satisfaction and loyalty.

Source: Handbook of CRM: achieving excellence in customer managementBy Adrian Payne (2005).

Benefits Of CRM:

A right CRM implementation can benefit to the organisations as well as to the customers. CRM is a next wave of computer aided marketing because it is a way of doing business. Below are the some of the benefits that a CRM or Customer Relationship Management system can bring. Peck et al. (1999)

A major benefit from the Customer Relationship Management can be the development of strong relationships with the ongoing customers which can lead to:

  • Improved sales through better timing due to anticipating needs based on past trends.
  • Organisation can identify needs of the customers more effectively by understanding specific customer requirements.
  • Cross- selling and up-selling of other services and products by highlighting and telling alternatives or enhancements.
  • Organisations can identify the customers who are profitable and who are not profitable to the company.

Finally this could lead to:

  • The improved customer satisfaction and retention, showing that the organisation is having good reputation in the market place.
  • Increased value from the customers and reduced cost associated with supporting and servicing them, growing the overall efficiency.
  • Enhanced profitability by focusing on the most profitable customers so that the organisation ca more concentrates on the unprofitable customers dealing them with the more cost effective ways. Some other benefits which are mean to the organisations are:

Shared or distributed data: Now a day’s companies realize that customer relationships are very important on many levels, they begin to understand the need for data sharing throughout the organisation. A CRM system is an enabler for making informed decisions and follow-up on all the levels.

Cost reduction: The strong point in the CRM is making customers as their business partner and not just a subject. Because customers are doing their own order entry and are empowered to find the information they need to make a decision, less order entry and customer staff is needed.

Better customer service: The information related to the interactions to the customers is centralised, so the customer support department can really benefit from this because they have all the information they needed at their fingertips. No need to ask the customer for infinity times and no need to estimate. And mostly the customer can do this on their own because the CRM system is more and more able to expect the need of the customer. The experience got to the customer is greatly enhanced.

Increased customer satisfaction: If the customer feels that he is the most important part of the team instead of just a topic for marketing and sales, customer service is better and the needs are predictable. There is no question of customers are dissatisfied with the product or service.

Better customer retention: If a Customer Relationship Management system can help to fascinate customers then it can be said that this will increase customer loyalty, and the customers will come back to buy again and again which produce customer retention.

More repeat business: If the customers are pleased then we can repeat business. Initially customers are in a doubt of mind, if the service is good and if the customer is pleased he turns into loyal advocate to the business.

Purpose Of The Study:

The purpose of the study is to understand the CRM application strategies and their successful implementation to bring about maximum customer satisfaction. By doing so, we hope to make Customer Relationship Management applications more useful to the customers.

Research Questions:

With reference to the above stated research problem, “what are the factors effecting for a successful CRM implementation”? The following research questions have been posed to conduct the study to realize the purpose.

  • What are the benefits obtained to the customers from the CRM implementation?
  • What are the challenges for implementing Customer Relationship Management?
  • What are the factors that help in successful implementation of CRM? And
  • What are the risks involved in implementing CRM in the organisation?

Design/Methodology/Approach:

Thus, this dissertation deals with CRM introduction and effects of implementing CRM systems in an organisation in order to give an insight into the current issues and status of the technology. The literature review will analyze, examine and explore the benefits and problems involved in implementing CRM systems.

Structure Of The Dissertation:

Chapter 1: Introduction And Research Rationale

This part gives a brief introduction about the purpose of the thesis. It also details the rationale for doing the thesis and validity of the research. This part also states the aims and objectives of the research to be done.

Chapter 2: Literature Review

This part covers the literature on the CRM issues and its functions using journals articles. The existing function will be presented and the information regarding the subject will be outlined and analysed from the academic literature available.

Analysis:

This part analyses the data collected i.e. CRM implementation problems with an overview of the different departments. The current system will be critically reviewed and the effectiveness of the system will be evaluated. Each of the problems research issues is analyzed, interpreted, and the detailed findings are presented

Chapter 3:Research Methododlogy:

This part covers the process of research to be done and the research approach. It implies the selection of the method on how the research is to be done and the methodological consideration of the data collection, sample collection and the data analysis

Chapter 4: Data Analysis And Critical Discussion:

This part provides a summary of the findings and conclusions of the research objective and issues, discusses the contribution of the research findings to the literature and theory, reviews the implications of the findings, discusses the limitations of the research, and concludes with suggested direction for future research

Chapter 2

Literature Review

Background:

CRM: An overview

CRM: Customer Relationship Management is a process that manages the interactions between the organisations and its customers. In other words Customer Relationship Management can be defined as a Management process that looks to maximise the profits, to shareholders by developing and implementing the strategies to build the relationships of trust with high value customers and to create a sustainable differential advantage. (Newell, 2000)

In the current situation of business world there are many hand held devices and websites where the consumers trying to interact with the companies. There are some examples like direct marketing, call centres, advertising, and retail stores and also at home. At every interaction customer has an impact on the company and the brand name.

The main objective of customer relationship management is to better understand the customer needs and also maintain long term relationship with those customers. CRM systems allow businesses to build relationships with customers. Organisational thinking must be changed to meet the objectives of CRM. Firms believe they exist simply to produce a product or deliver a service. But the firms need to be customer centric. (Clemons 2000).

Even there are many definitions of CMR by different authors, the main idea behind the CRM concept it is the use of tools to document and maintain a relationship between the costumer and the company, incrementing the satisfaction of the costumer and creating loyalty to the company: it has been proven by many companies that is more profitable to maintain a customer in the long term rather that single sale customers.

Customer Relationship Management is a method designed to collect information related to customers, to collect the features of customers, and to apply those qualities in definite marketing activities (Swift, 2001). CRM is not a new method. Actually, CRM has continuously existed from the past. On the other hand, CRM has recently become the focus of attention. The backgrounds are as follows (Ahn, 2001):

Source: http://www.jscgroup.com/crm-call-centre-solutions.html Access 11/07/09

The relationship with customers is newly recognized as a key point to solidify competitive power of a company;

As companies procure large volumes of data related to customers, they can perform customer management more easily and efficiently using data warehousing, data mining, and other information technologies; and

The Web has opened up a new medium for business and marketing, and we can express customer actions in online into data. In other words, the scope of data to analyze behaviors of customers is extended, and the environment for one-to-one marketing has been enhanced.

Importance Of Crm:

The main task of Customer Relationship management is to gather information about the customers. And then the data is used to help the customer service transactions by using the information needed to solve the issues or concern readily available to those dealing with the customers. If the customer is satisfied then there will be more profitable business and more resources available to the support staff. Moreover Customer relationship Management is a great help to the management for a future way of a company. As mentioned, Customer relationship management need more data to work and these includes the customer name, address, date of transactions, pending and finished transactions, issues and complaints, status of order, shipping and fulfilment dates, account information and many more.

This information is important for the support staff to the customers for providing the answer that they needs to solve the issue without having to wait for a long time and not going to other departments. Moreover the customer service representative will also be able to see the previous concerns of the customer. (Lynette Ryals; Adrian Payne 2001) This is a great assist especially if the customer is calling about the same issue since the customer will not have to say again the story all over again. This takes less time to solve the issue causing higher productivity of the support staff.

Customer Relationship Management system is also important for the management because it gives the information like customer satisfaction and efficiency of service by the help desk people. This system is also important for the company’s future course of act, whether it involves phasing out one of the products on the shelve or making adjustments to one of the goods sold. The information provided by Customer Relationship Management systems is also invaluable to marketing and advertising people, as they will be able to identify which ideas will works and which do not.

Integration of CRM systems in an organisation is very important and this is not an easy task as it seems. Most companies fail to integrate CRM systems that need to share the information for it to be effective. A CRM system also helps in expanding your businesses. Because CRM systems are able to handle huge amount of data, this systems help you in coping with the increased numbers of customers and their data. By installing a CRM systems and if the CRM systems are utilized properly it can be sure that the business will be successful and your customers are lot more satisfied than before. (Adrian Payne; Pennie Frow 2003)

There are many reasons why Customer Relationship Management is important to the organisations and some of the reasons are given below:

One of CRM’s most important strength is that it organises and collects data of the customers and with this data one can analyze for the future opportunities for example by using the CRM data you can analyze the needs based to the customers such as what the customer’s needs but they aren’t buying. By using this information you can develop a sales strategy that will offer services in an attractive way even in cheaply difficult times. This includes package of new goods or services or products offering to the customers in an attractive price or with some incentives.

The other reason for the importance of CRM systems is every customer is important for the business but some of the customers are more worth than the others. By allocating the sales efforts accordingly, we can produce more profits per sales hour and also we can increase more sales. The CRM systems contain the tools for analyzing the customers so that we can classify the customers according to the sales. For example by using the CRM tools we can see which position are most profitable and which customers are expected to buy them.

Customer satisfaction is very important in the CRM systems because customer satisfaction involves two ideas: one is to keep the promises to the customers and the other is to meet their confirmed needs. For example if you promise to contact a customer on Tuesday and do not get back to him until Thursday, you not only reached the customer expectations but the company had delicately shows how much you value that customer. Similarly, CRM can be used to make sure that the company is meeting the customer expectations as fully as possible. This involves professional handling of after-sales contacts such as service calls, resolving customer issues or offering the customer the right product at right price.

At last, CRM is used to work the company’s sales and customer support representatives smarter because of the improved information at their finger tips which is used to maximize revenue.

http://www.insidecrm.com/features/crm-important-recession-082508/ Access 21/08/09

The Role Of Internet And Website In CRM:

The evolution of internet as changed the opportunity of building a customer relationship. The important thing is the search engine, it made easier to the customers to find online merchants and communicate with them. These merchants are then offering customers more efficient ways of ordering and receiving products and services. And also, the internet simplified bidirectional communication, for the first time offering a better way for consumers to communicate personal information to the merchant. By using the internet or website a customer needed to send only a application through cyberspace, which results in short delivery time, improved accuracy, and quite often a higher positive awareness. (Jill Dyché 2001)

Internet users realised that not having to go out of their way to buy what they want, and the simple is the process which results in customer satisfaction. In fact web offered customers options they hadn’t had with other delivery channels such as:

  1. 24-hour access
  2. Up-to-the-minute information for example stock levels, product features and prices
  3. The ability to research a product or merchant during a shopping trip
  4. Online customer support
  5. Online self-service
  6. Personalized content

In the past it takes lot of time to select a product for the customers but now by using the web version, the customer enters a key in his favourite search engine, which returns the web sites for several catalog window treatment firms. He chooses a company which contains a lot of options and prices. Before purchasing, he even browses more than a company of other window-ware web sites for additional prices and options finally placing his order in less than an hour. From this it clearly states that the web has made doing business easier than ever.

Source: (The CRM handbook: a business guide to Customer Relationship Management: August 2001, Addison-Wesley).

For Example The Loyalty Programs:

Companies in almost every industry are trying to use customer information to deal with the relationships. The creation of loyalty programs is one example. The airline industry gives the best examples of present initiatives. The Airline industry introduced the concept of loyalty cards long before anyone talked about CRM. It launched its advantage program in the year 1981 the term frequent flyer was introduced and loyalty marketing was changed forever. In earlier days of the airlines loyalty programs, American and United and the others who soon followed tracked little more than flight miles customer could accumulate for free award flights. Over the years as they have captured more and more knowledge about their millions of customers, the airlines have adopted the fundamental rules of CRM:

  • Get hold of individual information about customers.
  • Recognize what different customers are worth.
  • Treat different customers differently.

And this has done in an excellent fashion with the creation of valuable perks for the best customers.

Crm Technology:

Technology:

The word Technology is used differently by different people and gives different meaning. The role and impact of Technology in one’s personal and professional life is ever growing. Technology is used to meet the human’s need rather than just understanding the workings of the natural world, which is the aim of science. Technology involves planned way of doing things where it covers intended and unintended interactions between people and the products.

CRM Technology:

Customer Relationship Management is a combination of processes, people and technology that is used to understand an organisation’s customers. CRM is an integrated approach to manage relationships with the customers. Customer Relationship Management technology supports the main processes of customer relationship management so the organisations can understand or analyze or track its contact with the customers. CRM technology enables enterprises to collect, handle large amount of data relating to the customers, carrying out strategies based on this information.

The techniques used by the Customer Relationship Management have been always around and made it possible for organisations and companies to apply the tools to number of customers at a time. There are some technologies used by the Customer Relationship Management are Database Technology, Interactivity and the Mass customization Technology.

Database Technology:

It is the ability to analyze and plan large amounts of data besides to the storage capacity.

Interactivity:

The interaction between the customers and the organisation using the websites, call centers, and any other means using internet or telecommunications.

Mass Customization Technology:

It is a computerized standardization enables company to break services or products into modules or templates. The all technologies together make possible for an organisation to connect in the activities of Customer Relationship Management.

Different Types Of CRM Systems:

CRM systems can be described as a technology based business management tool which is used to develop and control the knowledge to look after, maintain, and strengthen the relationships with the customers. The main functions of the CRM systems are to effectively segment customers, maintain long term relationships with the profitable customers, establish how to handle unprofitable customers, and modify market contributions and promotional efforts.

There are different types of Customer Relationship Management systems depending on the requirements for different levels of integration on the needs of the business. Some of the CRM systems are Sales systems, Call center and trouble ticketing and marketing systems.

Sales Systems:

This system includes all the systems that provide sales people, channels or customers themselves orders for new services. The main systems in the sales systems are sales force automation, point of sales and channel management systems.

Call Center And Trouble Ticketing:

This systems are the most challenging to integrate because of the more interfaces and more critical than any other systems. The main complicated issue is the timing and level of integration.

Marketing Systems:

This system is the easiest system in all the different types of CRM systems. It is a system of high performance, flexible platform that one can use to perform targeted personalised e-marketing using web or e-mail. The marketing system includes support for the content targeting, up-sell and cross sell capabilities, advertisements and testing, e-mail campaigns.

Difference Between Transaction Customers And Relationship Customers:

There is a lot of difference between the customers for example there are customers who are most profitable and at the same time there are customers who are not so profitable. A company focuses on those customers who are profitable and help in the growth of the revenue. The main idea that a company have a profitable relationship with all the customers and the targeting customers with a different product or service is already in action in most of the financial services such as banking, insurance, credit cards etc. At the same time it is less recognized in many other businesses sectors like manufacturing. Clemons (2000)

There is one method to identify the group of customers by the concept of distinguishing between transaction and relationship customers. Transaction customers are very much unpredictable and have very little loyalty, other than that related to obtaining the best price. Whereas Relationship customers are far more possible for loyalty as they are regularly prepared to pay a premium price for a range of consistent goods or services. (Newell 2000).

Once Relationship customers are recruited than they are less possible to defect, provided they go on to receive quality service and products. Relationship customers are also more cost effective than new customers because they are already well-known with, and need far less guidance to buy the company’s products or services. Peck et al. (1999) are among those who argue that for many organisations it would be beneficial to distinguish between the two types of customers and focus on relationship customers. He also suggests organisations to concentrate on the Relationship customers because they are the most profitable to the organisation.

According to Newell (2000) there are likely three different types of relationship customers and they are: the top, middle and lower groups. The first group that is the top group (top 10 percent) are the customers who are with excellent loyalty and of high profitability for the organisation. CRM is required to retain and propose them the best possible services and products in order to avoid them defecting to other competitors. Middle group customers (next 40-50 percent) are those delivering good profits and they are the customers who are possible for future growth and loyalty. The middle group of customers are the main probably giving some of their business to competitors. The main idea is to use CRM to target the middle group customers efficiently because they are the greatest source of probable growth. The last group is Lower group relational customers (bottom 40-50 percent) are slightly profitable to the organisations. In these some of them may have potential for growth but the cost and efforts involved in targeting such customers, effect the effectiveness of servicing existing relational customers in the remaining groups (Top and Middle groups). CRM should consider this group seriously and identify this group for the response required. Transactional customers add either nothing or have a poor effect on profitability. The agreement therefore is that CRM needs to identify transactional customers to assist organisations respond correctly.

CRM Functions:

CRM system supports all the stages of the interaction with the customers from order through delivery to after-sales service. CRM also covers the online ordering, e-mail, knowledge bases that can be used to generate customer profiles, and to personalize service, the generation of automatic response to e-mail, and automatic help. Rowley (2002). She also distinguishes the list of functions that might apply in a CRM application:

  • E-commerce
  • Channel automation software
  • Guided sell

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