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The role of customer relationship management

Paper Type: Free Essay Subject: Marketing
Wordcount: 3681 words Published: 1st Jan 2015

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This chapter is aim to detailed out the general references to the available literature that has been carried out by the author in the selected topic of research i.e. customer relationship management (CRM). Kotler (1997) revealed that “traditionally, business have employed transition marketing, that is the 4Ps of product, price, promotion and place”. However, Gummesson (1999) further acknowledged that “over the past decades, it has been argued that businesses across all sectors should move toward supply chain management and most recently, interactions, relationship and networks”.

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In modern economic revolution, the customer relationship management has evolved as a topic of serious discussion among the academics and marketing practitioners for the best part of the past two decades. However, it was only during the last decade of the 20th century that this kind of relational strategies gained a wider followings with the extensive debates began to dominate the marketing arena and also dominate major talking point in business management.

The topic of customer relationship management was frequently dominating the

subject of dedicated practitioner conferences, academic journals and articles, major publications, international journal of consumer relationship management and specialist marketing magazines.

According to Butte (1996) and Gummesson (1999), relationship management has became the basic academic and practitioner texts by major marketing writers. Choo Meng Kong (2006), on the other hand, emphasize the marketing philosophy from the macro perspective i.e. the customers, with appropriate paradigm in managing a relationship between the organization and its customers.

2.2 DEFINITIONS OF CRM

Customer Relationship Management (CRM) is on the tip of a lot of business tongues these days, of those hoping to break through into a new and better way of doing business. CRM is the broad category of concepts, tools and process which starts with the customers and moves out from there. This approach encompasses the capabilities, methodologies, and technologies that support an enterprise in managing customer relationships.

The general purpose of CRM is to enable organizations to better manage their customers through the introduction of more reliable systems, processes and procedures. It is adopted as a strategy that is being conceptualized to learn more about

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customers’ needs, wants and behaviors in order to develop stronger relationships or bonds between an organization and its customers. Basically, good customer relationships are the heart of a business success. In this context, there are many technological components to CRM. However, to talk about CRM in its primarily technological terms could not generate the wholeness of its idea.

The more useful way to discuss about CRM is to treat it as a strategic process that will helps an organization or a business entity to better understand its customers’ needs and wants and how those crucial elements could be met with and would enhance its bottom line at the same time. This strategy depends on the ability of the organization in bringing together lots of pieces of information about customers, sales, marketing effectiveness, responsiveness and market trends, so that the said organization can “sell” or market its products and services in a more effective and efficient manner.

Traditionally, CRM focus was driven towards the transaction processing and helping

customers obtaining quicker access to data and information. However, this approach would not optimize customer relationship because by merely working faster does not improve the quality of solutions and does not enables companies to develop a deeper, long lasting relationship with customers.

The focus of CRM today is different from its approach of yesterday. Not only more organizations recognizing that CRM is a business strategy rather than just another IT project, but many are realizing that there is also a “C” or “customer” in the term of

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CRM. It emphasizes the ability of organizations to look from the outside in i.e. from the customer’s perspective, rather than looking from the inside out i.e. from the organization’s perspective.

Stanley (1999) outlined that “in every case, these businesses have achieved long-term success by implementing strategic customer care, with a long term focus, enabling them to take advantage of the profitable web of relationships that can be develop over time”.

The major themes of today’s CRM evolve around customer experience management,

innovations, customer loyalty, reengineering customer processes and customer analytics. Therefore, the general idea of a performance driven CRM is that it could helps businesses utilizing their technology capabilities and human resources to gain

insight into the behavior of customers and the values that lies within those customers.

As put forward by Patricia Seybold (2001), “you’re no longer in control of your company’s destiny. Your customers are. Thanks to the internet and to mobile wireless devices, customers are now armed with new, more convenient tools with which to access our business (as well as those of our competitors) around the clock and around the globe. Since customers now have more choice and more control, building deep relationships with customers is really the only guarantee of the future earnings so long as you can maintain their trust and continue to deliver value through innovations”.

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With an effective CRM strategies much focus towards the performance driven approach, a business strives to increase its revenues by the following efforts and strengths :

providing services and products that are exactly what your customers want

offering better customer service

retaining existing customers and discovering new ones

helping sales staff close deals efficiently

cross selling products more effectively

The above-stated elements would definitely sound very encouraging but this surely doesn’t happen by simply buying software and installing it into the management’s computer systems. In order to ensure that CRM to be truly effective, an organization must first understand who its customers are and what their value is over a lifetime. The said organization must then determine what the needs of its customers are and what is the best way to meet those needs. For example, many financial institutions keep track of customers’ life stages in order to market the appropriate banking products like mortgages or deposits accounts to their customers at the right time to fit their needs and wants.

Next, the organization must look into all of the different ways information about customers comes into a business, where and how this data is stored and how it is currently used. One company, for instance, may interact with customers in a myriad

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of different ways including mail campaigns, web sites, brick-and-mortar stores, call centers, mobile sales force staff and marketing and advertising efforts.

CRM systems link up each of these points. This collected data flows between operational systems (like sales and inventory systems) and analytical systems that can help sort through these records for patterns. Company analysts can then peruse through the data to obtain a holistic view of each customer and pinpoint areas where better services are needed.

Customer relationship management is a corporate level strategy which focuses on creating and maintaining lasting relationships with its customers. This is an enterprise system, it is meant to spans throughout multiple departments in an organization. Virtually, all departments within a corporation have at least some indirect access to customers, or customer information.

Therefore, the goal of CRM is to collect all these information in a central repository, thereafter to analyze them then and make them available to all departments. For example, a company’s call center may have a “screen pop,” a small application that is connected to the phone system. This application, which is a type of CRM, automatically senses who is calling, and by the time the agent answers the phone, produces a screen on the computer that lists important information about the caller, such as what they have purchased in the past, what they are likely to buy in the future,

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and what products the company may have available that would go well with what the customer has already bought.

This “screen pop” is made up of several bits of information from different databases; it may draw on information from the accounting department to show the agent what their current balance may be; it may draw on information from the sales department to show what has been purchased recently, and it may draw on information from the credit department to show the agent what terms can be offered.

2.3 EVOLUTION OF CUSTOMER RELATIONSHIP MANAGEMENT (CRM)

The evolution of CRM or Customer Relationship Management has been continuing rapidly ever since its first incarnation on the business scene in the early 1980s vis-à-vis the form of applications that ran on a number of platforms such as IBM mainframes, DOS-base standalone PCs and UNIX servers. Although these platforms were initiated along the lines of glorified contact managers, the initial applications did established the stage for a rush of innovation to provide sales people with the

technology to increase their efficiency and effectiveness.

In the early 1990s, the CRM world started to embrace customers via client-server based architecture that dealt with a number of the scalability and reliability shortcomings of the previous generation of systems.

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The late 1990s evident the advent of a new delivery method for CRM that treated software as a service and has made it more viable for small and medium business market place. This method was referred to as Application Service Provider based CRM which has allowed those small and medium businesses to access CRM functionality without the need to deal with a myriad of technology issues associated with maintaining systems in-house.

Evolving through the span of time, more CRM projects are generating positive returns

in terms of increasing sales, improvement of performance and effectiveness of organization’s sales activities.

2.4 CRM VISION

The basics of CRM include a business strategy that focuses on developing a close and

retaining the long lasting relationships that exist between the organization and its customers. There is, therefore, a compelling need for a CRM vision that addresses many of the issues with which the organizations typically struggle for. These issues

evolve around the following phenomenon :-

(a) what is the target customers?

(b) how to deal with increasing channel fragmentation among customers?

(c) how to deal with media complexity in customer communication?

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(d) what is the most appropriate level of CRM integration to be in place?

(e) what is customer insight and how to use it?

(f) how to handle “unprofitable” customers?

Ray McKenzie (2001) states that “in fact, there is a big gap between a CRM visions and the reality of implementation. A bottom line conclusion : the increasing amounts of moneys being spent on CRM are not being consistently translated into business values”. The CRM vision statement, therefore, should be seen and served as a reference point for everyone within the organization or the internal customers, as well as those from outside of the organization or the external customers. It is something around which the whole organization can rally on as well as referred to.

Therefore, without a strong commitment being put in place to this CRM vision, the whole organization will wander without purpose and create the departmental silos which would also misdirect the organization’s corporate investment and employees will become unfocused.

A CRM vision could not be created as a bottom-up initiative, but should be produced and fine tuned by senior management level of the organization. It must also be revisited, at least on a yearly basis. Elizabeth Kearney and Michale Brandley (1990) states that “customer relations and customer service awareness needs to permeate the entire organization and be integral to the behavior of every employee. More simply,

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customer relationship management must be everyone’s job”.

The CRM vision, therefore, should be compatible and in line with the organization’s current as well as future customer base. In respect of this, an on-going research in terms of customer needs as well as the environmental scanning have to be carried out before this CRM vision statement being produced.

2.5 CRM – PERFORMANCE DRIVEN STRATEGIES

Jean Withers and Carol Vipperman (2003) spell out that “prioritize different strategies if you find they fragment youe efforts, and those of your associates, to serve clients”. Their further exploration also revealed that the meaning and importance of these strategies are always responding to the clients needs as well as desires.

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A performance driven CRM strategy aims at finding out which customers that the organization would like to have or acquire and also how to get them in the market place. It is described as performance driven as it has well defines what the organization knows about its customers and what it like to know. Organizations implementing CRM strategies should develop the framework of being performance driven in addition to becomes customer minded. These strategies would ensure that the entire organization work towards the common goal of achieving its CRM vision besides providing added value to its customers as a whole.

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2.6 CRM SUCCESS

Choo Meng Kong (2006) stressed that “it became evident that there was a need to

transform marketing from a narrow set of functional skills based on the conventional marketing mix to a broader business orientation where delivery of superior customer service was a key objective”. In the implementation of CRM, therefore, the management of an organization definitely plays a vital role. It cannot be implemented without their cooperation. This is because CRM includes changes in long term aspects and the revision of long tem goals. These organizational objectives need extra scrutiny. It is also insufficient if employees involved in the CRM process alone pay due attention to it.

The management also needs to have a clear cut idea of CRM goals before it actually

implements it. It is important to note that short term achievements should not be regarded by management as indicative of long term gains. These changes can have varied impacts and it is but Managements responsibility to carefully weigh the pros and cons of such steps before its actual implementation.

Customer Relationship Management once a traditional customer strategy is now

making new strides. Organizations are trying very hard to ensure that CRM would be more appealing to the masses and vendors are endeavoring to come up with as many innovations as possible, in order to meet the requirements.

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CRM is blossoming out at every turn as the new CRM trends take shape and start to succeed. Old traditional methods of CRM are fast being left behind as companies try their best to cater to the client. Its latest trends include a profound integration with customer analytics, business intelligence etc.

Traditionally, CRM served mainly to collate customer data like profiles, order history etc. and served to maintain a relationship with the customer and the company. Now however, CRM has the potential to study the data available and offer predictive analysis as well. According to the new trends businesses can watch customers and then go on to suggest what products should be offered to them so that the maximum profit is secured.

CRM systems basics focus on the idea that customers hold the key to success and this is easily evident from their phenomenal impact on sales, marketing, and market trends .While choosing a solution it is important to scrutinize each vendor and make sure that the chosen solution contributes to organization goals.

CRM has a lot to offer most industries but it is the mode in which it is actually

implemented that holds the key to actual CRM success. It is the common misconception that technology comes before customer strategies but in reality it is the other way around. Customer strategies are the keystone to business activities and technology is the latter half.

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There can be such a thing as CRM collapse if the organization fails to do what it needs to in order to ensure success and use adequate management and other resources required.

The basics of CRM require a comprehensive study of the customer, collation of his data and provision of this data to the organization. It is imperative that organization employees gain access to this data especially those that are engaged in direct dealings with the customer himself. This collated data proves rewarding in that it is an insight into the customer and thereby provides the person / persons using it to find solutions to customer problems.

CRM is often being highly regarded as the business strategy that understands, anticipates and manages the needs of an organization’s customers. In this context, it is said to puts the customer at the focal point of the business. CRM can also improve an organization’s service to its employees and serve to add more customers, resulting in creating the competitive advantage for an organization as it stimulates growth and customer/employee retention.

Customer retention the assured by product of customer relationship management is one of the many benefits of CRM. It definitely helps to increase customer loyalty and brand retention. Customer Relationship Management ensures that customers are happy and that they keep coming back again and again thus contributing to long term profitability since CRM assists in improved customer service and support

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CRM implementation is essential in almost all the departments in the organization to have a complete view of each of their customers.

CRM would further enables an organization to make quick decisions and indulge in

personalized customer care. CRM manages to bring change into the organization and its business processes. It manages to achieve reengineering. CRM promises more effective reach and thus aids the sales and marketing department. It aids in providing for greater efficiency and also cost reductions. It accomplishes all this with an ever increasing dedication to efficiency.

CRM is definitely a better stand against global competition. For example, small and medium enterprises, while implementing CRM, have a greater advantage over large corporations as increasing the effectiveness of one employee can contribute significantly to the overall success of the organization. CRM offers great opportunity to provide better products for the customer and does this at cost savings. Reducing costs or keeping costs under control, therefore, can be termed as one of CRM’s main functions.

CRM improves ability to manage customer relationships and enhance customer satisfaction. CRM serves as the organization’s anchorage that boosts revenue. More and more organizations are opting for the customer centric strategy of the decade and those that opt to stay away from it will definitely face a disadvantage. In this context, organizations that fail to implement CRM will lose their competitive edge.

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CRM has generally helps to increase financial results in addition to the provision for management of a large quantity of customers. Charles (1999) explained that ” proper of relationship management would prepare the routes to reducing the costs of serving customers”. CRM also able to meet the needs of sales personnel as well as the marketing specialists in a single application because it provides immediate access to the information about the customer and product.

CRM would be able to improve an organization’s service to its employees and also to increase its customer base. There is a considerable reduction in mishaps in the organization with the implementation of CRM as it allows and encourages the business management to concentrate on new businesses.

CRM provides the most up-to-date information to end-customers at every possible place and at all times. It is, therefore, a prerequisite for today’s business.

Organizations in today’s market place simply cannot afford to bypass this customer

strategy in the quest to achieve their CRM vision.

Choo Meng Kong (2006) has further reiterated that “however, as for the relationship building in the long term; accountability, consistent and shared values such as mutual respect need to be established as a pre-conditioned for building trust at all levels to sustainable growth and development of a company and of the global community”.

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