Technological Advances in CRM
Customer relationship management has had a new turn with technology. Some view CRM as having a call center for support, but in fact it is much more than that. Customer relationship management is not solely calling to make sure the product or service offered was delivered correctly. It is not being there from just nine to five, but being available whenever a customer needs to be available. Some organizations do have twenty -four hour call support but technology has lead us into a new era of satisfaction. There are a growing number of channels that an organization can interact with its customers (Frow 2005).
If an organization has adopted an intranet of information it is possible for customer relationship management to become even more extensive. If software has been adopted for information to be found on each specific customer, it is possible for other members of an organization to help retain relationships even further. The efficiencies created by deploying an intranet framework for you to hang your business processes on, multiplied over your locations and employees, cannot be underestimated (Abbott 2005). There are many employees that may work in specific departments of organizations. If a warehouse of information is kept for all employees it is possible for other employees that may not work directly with a certain customer to recognize a service or product that may better their organization before another sales representative. If this were to be true a customer would be more apt to rely on a business due to the fact they can recognize their needs before it is evident or too late.
It is also possible for technology to provide the necessary analytical tools that an organization may need to determine what is best for the customer. It is an employees duty to report to the customer any information that will help or hurt the organization of the customer. This, after all, can hurt or help the firm providing the information. Providing relevant employees with access to updated and integrated customer information should be a priority for firms practicing CRM. An analytical tool can also offer an organization a way to profile a customer. More specific software application packages include analytical tools that focus on such tasks as campaign management, analysis, credit scoring, and customer profiling (Frow 2005).
Not only does CRM enable employees to analyze data it enables them to contact and organize information outside of the company. A true CRM system allows your sales team to work outside the company firewall, enables your customer service team to see every e-mail and phone transaction any customer as has with your company, allows your company to forecast and direct marketing efforts at the special needs of customers to better support your bottom line (Abbott 2005). Being web-based can help any one person stay in contact effectively and efficiently. Being organized in such a manner can cut out the time of searching for old records or finding the person a customer may have talked to the first time they contacted the organization. The use of CRM technology is expected to boost the ability of an organization to sustain profitable customer relationships by enabling information to be integrated and shared smoothly, thus facilitating more efficient and effective firm-customer interaction, analysis of customer data, and customization of responses (Jayachandran 2005). This is true for Verizon Wireless, being a customer of this organization it is very helpful that every phone call and transaction that has taken place within the organization at any of the store locations is recorded. This not only cuts down on the employee work time it cuts out the frustration of standing around wasting the customers’ time. This in turn will help retain the customer base because our fast paced society does not have the time or patience to deal with an unorganized organization.
It is also necessary to make sure web sites are always utilized with up-to-date information. Having a web site enables any customer in any part of the world to acquire knowledge of the products and services an organization offers. It is essential to make sure a web site is not full of clutter or confusing, this again can deter customer satisfaction. Customers like things that are self explanatory and very accessible. Being accessible is key. Having the right information to build a relationship is essential. Provide enough information for a customer to be interested. There are some sites that require information such as a name, telephone number, and or address to be entered before certain information can be accessed. This may help build a relationship because employees will be able to give a follow up call to produce new customers. That follow up call could possibly lead to a relationship that will then need to be retained.
A web site can also offer customer retention processes. If it is not necessary for a customer to talk to a representative everyday it could also be possible that services be provided through the Internet. An example of this could be online ordering. If an organization orders a standard number of products on a certain date this can be accomplished through a well-organized web site. This may be more convenient for customers that are located in different time zones. Electronic Selling, the twenty-first-century’s version of the field order taker, certainly requires an automated database and account system (Ahearne 2005).
These web sites that can offer a wide array of information and processing also need to be updated and taken care of regularly. It is essential to know the health of a website. If a web site were to fail at any given moment unknowingly this could be disastrous for an organization and its customers. Customers may come to depend on the Internet based services that are offered, and if they are to not be available this can cut the trust and reliability from a relationship. It is true that software to monitor these cases of disaster is costly, but not at all too costly for the cause. The application communicates the amount of data your network interface cards are sending, how much random access memory you’re utilizing, how much disk space you have left and how many central processing unit cycles you’re revving (Abbott 2005).
Technology has helped every industry move forward into a new dimension of management. Restaurants can produce meals in a more efficient and time managed process, hospitals can find any relevant information on a patient, and more. It is not surprising that the right software can help manage people and organizations in a more efficient manner. The information management process provides a means of sharing relevant customer and other information throughout the enterprise and “replicating the mind of the customer” (Frow 2005).
Managing CRM
In an organization it is essential for an organizational culture to be set. The management system represents the organizational climate, which comprises the structure and incentives that motivate behaviors consistent with a culture (Jayachandran 2005). When the management of an organization is able to set the tone to customer relationship management, employees will be more willing to focus attention to the production and retention of customers. This is a type of top down management emphasis. Higher levels of management must lie out a descriptive plan for CRM and the implementation through the employees. The direction of each employee should be structured around the needs and wants of the customers. A customer-centric management system should consist of structural aspects that ensure that organizational actions are driven by customer needs and not by the internal customers concerns of functional areas (Jayachandran 2005). The needs of the customer should drive all employees of an organization to accomplish the expectations of the customer. Fulfilling any expectations will help in building a future relationship for first time customers, and will keep the respect and trust of repeat customers.
Another issue of CRM management is how accounts are managed. We assume three methods of account management: territory management, key account, and a collaborative or value chain model (Ahearn 2005). Geographic management can be either problematic or beneficial for an organization. Territory management helps allocate each employee to the necessary time for each customer. It enables each account to be managed on the basis of profitability. Territory management can be problematic when a sales intensive organization is trying to develop customer relationship management to its value adding resources. A sales intensive organization can require too much time to be devoted to the production of new customers, while not focusing on the retention process. One can make the argument that CRM technology and strategy can benefit territory management because of the sheer number of accounts in a territory that must be managed through a process of assessing and allocating resources to more profitable accounts (Ahearne 2005). Geographic distribution can work with the right technological services to determine which customers should be focused on in a more detailed manner.
In a key account system the twenty-eighty rule is allocated. This simply means that twenty percent of customers will provide eighty percent of organizations profits. A key account system seems ideal for the implementation of a CRM system (Ahearne 2005). This type of account management will help focus sales representatives to the accounts that will provide the most revenue to an organization. In this type of system it is essential for employees to become very knowledgeable with customer expectations, needs, and wants. Customer information can help a sales representative understand more of what the customer’s organization requires to become successful. When a sales representative focuses on primary accounts the customer information will not be as hard to manage. Information processing can become tedious and time consuming when equal time is spent with all accounts. This can then lead to misunderstanding and confusion between the sales representative and the customer(s).
The last system is a collaborative system in which supply-chain partners, customers, and support people all provide input and data on the selling and buying situation (Ahearne 2005). This situation can become very intense. The time and dedication to this process is ultimately necessary for the success of the system. This method requires much collaboration and good communication. It is essential for employees in this type of situation to be highly qualified to deal with the input from all areas of the process.
It is also necessary for management to identify which type of selling will be most beneficial for the customer and the organization. Because of CRM an a growing emphasis on selling the way the customer wants to buy, today’s sales organizations are using a variety of selling methods in their selling, including the traditional field sales force, team selling, electronic selling, and contact centers, and evolving sales structures that include part-time salespeople, cross-selling by sales divisions, sales support personnel, supply-chain personnel, and organizational partners.
In a number of articles team selling has been labeled as the most common strategy to sell. Team selling can offer a number benefits. With this type of selling comes the need for an extensive knowledge base. This type of selling not only requires the team to understand the product in a very extensive manner but it also requires a team to understand the customer more. This effort also needs to understand the individuals on the team the communication they have with the customer. In this type of selling it is beneficial to have a system where information can be better managed for the employees to access any relevant information at any time in the selling process. With multiple people now responsible for customer relations within an account, a system automating account information is necessary to give all participants updated knowledge (Ahearne 2005). It is impossible for the members of a team to be together all the time. Transactions with customers can take place at any time when members are not together or unavailable. A system where the information can be entered and explained would help enable the team to be on the same basis for the next meeting with a customer.
Creating Value
Customer relationship management is not just getting to know and understand the customer. It is adding value to the products and services that organizations offer. The value creation process transforms the outputs of the strategy development process into programs that both extract and deliver value (Frow 2005). When creating value for a customer it is essential to also realize that an organization is creating value for itself. When determining what customers an organization should take on the organization should ask what it can do for the customer and what the customer can do for the organization.
The value the customer receives is depicted by what the organization is willing to offer. There is now a logic, which has evolved from earlier thinking in business-to-business and services marketing, that views the customer as a co-creator and co-producer (Frow 2005). In this new understanding of the customer’s position in an organization customers should be viewed as internal customers. In this sense customers do not take a back seat to decisions, knowledge, and understanding of the organization providing the service and product. In a situation when a customer becomes part of the decision making process it is necessary that communication be made on a regular basis. It is the organizations position to keep a customer informed in all aspects of the decision making process. Communication will help building a relationship for future transactions.
While building a relationship it is not only the customer that retains value. The organization will also benefit from such a transaction. Customer value is the outcome of the co production of value, the deployment of improved acquisition and retention strategies, and the utilization of effective channel management (Frow 2005). For an organization to acquire value from a customer the organization must first decide how profitability differs throughout the customer base. After relationships have been built customers can be retained in many different ways. The economics of customer acquisition and customer retention and opportunities for cross selling, up selling, and building customer advocacy must be understood (Frow 2005). Being able to cross sell through the organization can add great value to profitability. Once a relationship has been built a customer is more willing to buy other products or services that a company may offer after expectations were already met. If all expectations of the customer were met through the organization then it is possible that a customer will be more willing to purchase an item that may be more of a capital expense. Up selling and cross selling both are products of the respect and trust a customer has for an organization. Customers will begin to depend on the advice and service that organizations provide.
Retaining of customers is one of the best ways to acquire value in the long run. Customer retention represents a significant part of the research on value creation (Frow 2005). Customer relationship management helps sales representatives identify the prospective customers that will be more willing to create long-term partnerships and relationships. Managing customers in an appropriate manner will help a partnership to realize the potential to add value for a “win-win” situation. The value creation process is a crucial component of CRM because it translates business and customer strategies into specific value proposition statements that demonstrate what value is to be delivered to customers, and thus, it explains what value is to be received by the organization, including the potential for co-creation.
Measuring ROI
For every investment that a corporation makes the sole goal of that investment is to make some sort of return. Measuring return on investment in customer relationship marketing can become somewhat complex. The process for analyzing and optimizing customer profitability can become quite complex as the number of possible campaign combinations increases and the analysis is directed at smaller and smaller segments of customers, eventually reaching individual customers (Lenskold 2004). Return on investment is just more proof that customers need to not only be managed to create long-term profitability but to also realize the most profitable customers.
Customer relationship marketing can be measured qualitatively as well as quantitatively. A company should first look at the potential of customer experience. They must measure how well a customer will be assisted through the purchasing process and after the process. It is important to recognize what the customer sees as important and measure how to provide it. Through a qualitative analysis an organization should be identifying the needs of the customer.
Marketing dialogue will be essential to change the thought process. The marketing dialogue, which represents the exchange of information intended to change attitudes, expectations, and behaviors. This dialogue is very important because this may change the mind of a customer. The dialogue is what explains that an organization understands the needs and wants of the customer. The context of the dialogue must be measured in a qualitative manner also. How effective will it be? Does it show empathy to the needs of the customer? In an ideal world, the marketing dialogue would influence the acquisition of new customers, and the actual customer experience would be unique and exceptional enough to retain and grow customer value (Lenskold 2005).
According to Lenskold there are three different ways to view ROI for customer relationship marketing. To apply marketing ROI at the customer level, it is necessary to have reasonable marketing ROI processes in place at the campaign level, including a corporate ROI threshold (or hurdle rate) at which the company will fund marketing programs (Lenskold 2). When independently assessing each customer's profitability it is necessary to realize the individual gain it will bring to the organization. To substantiate the investment the ROI threshold must be surpassed.
The incremental approach to analysis identifies what a factor is dependent on or influenced by. This analysis will be able to identify the pros and cons of a situation by weighing both the positives and negatives of a campaign. Incremental ROI assessments help to protect against decisions based on ROI figures that represent the average of high performing marketing efforts blended with low-performing marketing efforts (Lenskold 2005). A cross-selling effort is a good example of how incremental analysis works. The incremental approach would analyze the lower cost of advertising, but would also identify the possibility of the long- term relationships not being built. This is then compared to the marketing threshold.
The aggregated ROI approach analyzes the total profitability. This approach assesses the total return compared to all activities that were directed to customer gaining and retention efforts. The efforts that are to be measured are those in which have been collectively acquired from all areas of an organization of a period of time. Aggregated ROI analysis prioritizes total collective profitability ahead of independent campaign profitability, creating new opportunities to gain additional profits from existing marketing activities (Lenskold 2005).
In a more qualitative manner return on investment should be measured as: ROI= Incremental Gross Margin- Marketing Investment / Marketing investment (Lenskold 2005). We must keep in mind that it is not essential that we maximize ROI, however, we must maximize profits. This profitability is maximized when a return on investment is projected as promising. Assessing the numbers is easy but it is also essential to measure the aspects the customer wants. Without understand the customer these measures can be thrown off. An organization can provide a substantial amount of capital to push CRM but if the customers were not assessed this capital will be lost. The insight provided through the independent, incremental, and aggregated ROI analysis will only be effective if decisions are coordinated around the centralized view of the customer-to-customer segment (Lenskold 2005).
An organization can learn the needs and wants of a customer by utilizing the information they are willing to offer. In a relationship there are give and takes on providing information. An organization must be willing to provide relevant information to the customer to help when assessing what needs to be done through marketing. After assessing the needs and wants through the customer and number assessment if the marketing strategies look promising it is key to invest. A 2004 International Date Corp. study of more that thirty large U.S. and European organizations found that fifty-seven percent of the respondents achieved a positive return on investment from CRM systems within one year, and ninety-three percent achieved a positive ROI within three years (Aldhizer 2004). A competitor at some point will replace an organization that waits for change.
Risks of CRM
This approach to retaining old customers and attaining new customers may seem easy to implement. This approach however, is not as easy at it may seem. Customer relationship marketing, like any other new strategy in an organization, has its pitfalls and risks.
One risk that may affect CRM is the customer. Customers are becoming more aware of the efforts of organizations through a CRM process. This awareness can cause a customer to become more inclined to modify the behavior they project. This in turn can hurt the organization providing the product or service because the full identity of the customer will not be explored. This all comes down to an issue of the customer trusting a firm. They need to feel that the firm is not operating just off protocol and standards set by the organization. For a customer to share relevant information then it is necessary that an organization prove the trust and respect it will provide to the customer. This can also account for customers that need retention. If customers are to lose trust in firms and believe that firms for purposes of exploiting them use their data, consumers will attempt to keep their data private or to distort the data (Boulding 2005). In this case the firm will be loosing added value. If a firm were to keep data private or distort the data needed to correctly assess the customer, the firm will incorrectly conclude evidence therefore reporting incorrect information.
A precursor to some of these trust issues is fairness (Boulding 2005). It is necessary to ensure the customer that fairness will always be taken care of. A firm does not provide internal information for use against them. It is the organizations job to make sure the customer understands that it is a partnership with equality. It is also an issue between customers. It is not correct to scatter from one customer to another when the first sign of profitability from one declines and rises for another. Customer attention needs to be focused in a fair and correct manner. Fairness also becomes and issue when a customer sees better service from a competitor. Organizations must always remember that competition is what can break an organization. To have a sustainable competitive advantage over other organizations it is necessary to provide the best possible service.
Another issue involving CRM is the knowledge acquired about competition. When underlying the CRM process in an organization it is relevant to identify any potential competitors. Firms should be market focused; that is, firms should focus on competitors, customers, and company capabilities (Boulding 2005). It is not only necessary to understand the customer, but it is necessary to understand the competitor. This task can get very tough because information could be limited to internal sources only. To create a CRM process in an organization without considering the competitor can be a means to an end of an organization. We believe that a failure to integrate competition into a firm’s CRM activities potentially puts it at serious risk (Boulding 2005). There is high potential for CRM to create high profitability in a firm by developing a sustainable competitive advantage over competitors. It is a hard task to identify ways to project such an advantage in this line of marketing. There are many elements that must go into such an effort. Customers, technology, information and etc are the milestones of creating a successful CRM program. Creating a sustainable competitive advantage is not something that can just be imitated from organization to organization. To create such an advantage it is necessary that a firm recognize new and innovative ways to keep themselves separate from other organizations in a positive light.
Coordination is yet another reason that CRM implementation can become tedious. It is essential for an organization to get employees to recognize their importance in the relationship building process. Employee involvement in the collection and dissemination of customer data show that this involvement is positively associated with good performance (Boulding 2005). Without the appropriate contact between employees and between employees with consumers CRM implementation will not be successful. Communication is the key to CRM. Without the appropriate communication it can put the expected revenues for the company at risk because the process will not meet the customer expectations. It is necessary to make sure employees are incorporated throughout the CRM process. They provide the information to the customers, and if the employees are uninformed the customers will also then be uninformed. Communication is an essential part of a business; it is an organizations job to learn how to communicate in a more efficient manner than the competitor. It is possible to do this through well-managed technology systems. We also note that the integration of CRM across both people and processes may be difficult to imitate and thus provide a source of sustainable competitive advantage (Boulding 2005). Risks can equal returns if decisions are made in a proper resourceful manner.
Conclusion
Customer relationship management is something that should be sought after in an organization wanting to excel. It is true that acquiring new customers will keep an organization growing, but retaining customers will keep the business going. Customer relationship marketing should be considered as essential as an accounting department. Customers are what a business needs to stay alive. And managing those customers in a more effective and efficient manner can create a long life for many businesses.
Customer relationship management is not the sole item to keep a business prospering, it however, needs to be correctly combined with all areas and people involved in an organization. Technological advances have made it more possible for information and communication available whenever it may be required. Keeping employees informed is another key aspect of proper CRM implementation.
With much determination and research CRM can be a profit building advantage for an organization. This profit needs to be measured qualitatively and quantitatively to understand the full potential an organization has. If the correct assessment has been performed it is possible for an organization to overcome any risks or pitfalls CRM may put forth. An organization must recognize that imitation will not create a sustainable competitive advantage. To be successful CRM needs to be implemented in a way exclusive to an organization.
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