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Abstract
This paper seeks to explore the impact that Customer Relationship
Management (CRM) has on the retail business industry and how it relates to
the key stakeholder in the relationship; the customer. Another aspect covered
by the paper is assessing the challenges faced by the industry, and how
developments are being undertaken to overcome these.
Concept
Since consumers are the primary reason that businesses exist, marketing has
become the core component for successful management of the organization.
For most businesses, marketing can account for almost 50% of the product
sale price, provided services such as distribution and promotion are
accounted for in this.
For any business to succeed with its consumers, they need to establish a
working relationship that understands the customer. One way of doing so is
by implementing CRM. The term CRM is used to define the tools and
methodologies used by an enterprise to manage the relationships it has with
its customers. It forms the foundation by which a company brings sense to
the needs of customers and can analyse the future changes that could
develop. As knowledge is important in gaining competitive advantage in a
challenging market, companies make every effort to differentiate themselves
and retain customers, while reducing operational costs.
Objectives
The aims of this paper are:
Methodology
When conducting research, there are two approaches that can be used:
Quantitative and Qualitative. Quantitative research methods usually involve
large randomized samples, more application of statistical, and few
applications of cases demonstrating findings (Saunders et al, 2007). The
objective of quantitative research is to determine the covariance or
relationship factor between two variables or entities. Qualitative research
methods focus on providing a complete picture of the situation with the aim
of understanding of behaviour and inter-relations (Saunders et al, 2007).
For this study, the writer has chosen to go with quantitative research to
accurately collect the data as it allows for clear objectives to be defined for
research, eases the data comparison process, and allows for a quick and
cheap way to collect information.
The research for this paper was conducted through literature review, without
any empirical work being conducted. A large resource of written material
was used, which included books, magazine articles, academic journals, as
well as the websites of various companies.
1: Introduction
In the global business world, customers have become an important aspect of
success for companies, and their management is core to the fundamentals
that drive the organization forward. Large corporations have taken the active
step of investing heavily into various modes of relationship management,
also known as CRM.
The marketing concept takes an outside look and starts with a well-defined
market, focuses on the needs of customers, coordinates the marketing
activities which affect customers and generates profits by creating more
long-term Customer Relationships (CR) (Kotler et. al., pp. 409-10). Under
this concept, the paths to sales and profits are customer focus and value.
In the past, many companies could take their customers for granted as there
was a lack of alternative suppliers, or the choices available were as poor in
quality and service. There was also the possibility of strong growths which
allowed companies to forego on satisfaction levels. A company losing 50
customers in a given week will be satisfied if it gains 500 new ones anyway.
Operating on what is referred to as a ‘leaky bucket’ theory of business
(Kotler, et. al., pp. 405); the company believes that there will always be
enough customers to replace those defecting it.
This is why customer retention programs offer a powerful tool in the CRM
arsenal. An important feature for most companies, customer retention helps
the organization understand that the cost of acquiring a new customer is far
greater than the cost of maintaining a productive relationship with the
current one.
2: Literature Review
“A customer is the most important visitor on our premises. He is not
depending on us. We are depending on him. He is not an interruption on our
work. He is the purpose of it. He is not an outsider on our business. He is a
part of it. We are not doing him a favour by serving him. He is doing us a
favour by giving us an opportunity to do so.”
Mahatma Gandhi
Focusing on the customer has become a key factor for companies of all
sizes, especially with survival in the competitive world at stake. Customer
retention is particularly important to SMEs because of the limited resources
they have available to them (Hubert, 2002). Another aspect of CRM is that
knowledge of the customer and their traits allows for the easier acquisition
of new customers.
The essence of the information technology (IT) revolution, in particular the
online presence on the internet, is the opportunity for businesses to build
better relationships with customers. Companies have developed a greater
ability today to establish, nurture, and sustain long-term customer
relationships, by combining the abilities to respond directly to requests and
to provide customers with an interactive and customized experience.
In the present world, most organisations are availing the benefits of the
process by implementing CRM (Bose, 2002). Companies who accumulate
large amounts of customer data and support a niche market avail most of the
benefits of CRM. In contrast, those companies who have limited interaction
with customers are less likely to be at advantage by using CRM, as they
remain prone to customer turnover.
Customer Orientation
Customer orientation is basically a business philosophy that defines the
ultimate goal of an organisation to be the fulfilment of customer needs for
the purpose of maximising business profits. In the current age of
competition, maintaining business advantage is becoming increasing
difficult. The change in the outlook of management on the placement of
customers has been propelled by accelerating technological developments,
which have shortened the product life cycle and made it necessary to
innovate in order to sustain a level of superior performance.
Characteristics of CRM
CRM has four characteristics (Xu et al, 2002):
Elements of CRM
Customer Relationship Management is a combination of people, processes
and technology that combine to understand a company‘s customer. In order
for CRM to be successful, the seamless integration of every aspect of
business needs to be established.
3: Findings
Enterprise resource planning (ERP) is used for the achievement of back-
office automation of commercial strategy and is used in conjunction to the
principles of CRM. In the past, CRM normally was referred to as the
software used to help enterprises with customer relations. More recently, the
focus has moved from the customer contact management aspect to more the
sales force automation software (SFA), as well as the integration of
knowledge management solutions.
Customer Satisfaction
Organizations are required to be more radical with their strategies, as the
market becomes ever more aggressive and competitive. This is emphasized
by the fact that such strategies help the organization retain quality customers
and bring more long-term value to the establishment. When considered
against the backdrop of an economic downturn, this becomes ever more vital
to the organization since the loyal customers are more likely to continue
their relationship with the business, than new ones.
Customer Loyalty
Loyalty is used in business to describe the faith that a customer exhibits to a
company and its products, meaning that the customer repeatedly returns to
do business with the company, without the need to re-consider price or
delivery service.
The steps taken by any business to achieve customer loyalty can vary
depending on the industry it is involved in. From determining the target
audience, to understanding the needs, from developing the strategies and the
focus of identifying special attention; all rely on an organization’s readiness
to accept the responsibility to protect its image and bring stability to the
overall environment.
Impact on Retailer
The implementation of a CRM system can help a retailer in understanding
the customer, enhance the relationship as well as predict potential behaviour
and sales; all forming an effective way of managing the client-retailer
relationship (McKenzie, 2001: 143).
Non-achievements of CRM
CRM applications can be used to enhance productivity, improve decision-
making, and streamline call centre operations (Iyer and Bejou, 2004: 67).
However, it is illogical for any organization to think that it can achieve the
completion of all tasks using this system.
CRM relies on the sales staff to perform tasks like following up with clients
and closing sales, while it remains a component of the market structure. The
success or failure of the transaction depends on the skills of the staff. Also,
since CRM applications are based on historical data, they cannot predict the
future. Rather, they offer projections based on the collected data to highlight
areas that could become possible changes in trajectory. Lastly, CRM systems
are not complete solutions to every any crisis that an organization may face.
They are designed to assimilate with an organization’s existing culture, and
amalgamate with established processes. CRM is not a fool-proof method of
establishing business sustainability if innovation and change is not
implemented.
From the initial point of creating viable relationships with customers, to the
retention and growth activities, CRM plays a dynamic role for any business.
It is ever more important in time of downturn, as it offers avenues for a
business to utilise to in order to gain further attention from the consumer-
base, while relying on the loyalty of the established customers to see it
through.
Technology and Process
The success of CRM is not solely on technology, but reliant on the
integration of various processes. While technology should be strategic and
cost-effective, it should provide the flexibility and growth options for long-
term opportunities of the business. An important factor that must always be
considered for any form of network linkup is security, as that is adamant in
respect to protecting the core functionality and the resources of CRM.
The focus of this paper is on the CRM process when it comes to roles that
are facing the customer. The perspective in discussion is the building of a
common view of the customer from all business channels and sharing the
information gathered with relevant functions. At any time, it is imperative
that the information be managed in a systematic and coordinated manner so
that the organization’s relationship with the customer can be managed
efficiently.
There are four factors that companies should reflect on deeply, based on
various marketing literatures:
Benefits of CRM
The primary benefits of CRM include significant improvement to the
marketing techniques, as well as better chances of customer retention and
growth in market share for the business. By ensuring that the system targets
customers with high-value propositions that satisfy their needs, CRM
improves marketing tools used by an organization. Upon improving its
product offerings, a business gains the ability to retain its customers and
establish a sense of loyalty between each other. However, it is important for
better service to be maintained over time, which generated enough positive
marketing from word of mouth to help establish a significant level of growth
in the market.
Capitalization on CRM
The benefits of CRM are not limited to any one department of a company,
but rather flow across the various units and functions of the business. Firms
should make an informed decision of offering customers solutions that are
designed to fulfil their needs, and not simply developed to be a quick sale.
By creating relationships with consumers, firms can gain the ability to
access improved interactions with their target audience and gage the needs
of the customer.
The quality of products offered by any business is directly linked with the
relationships that it has with its customers. Hence, it can be stated that
there is value to be added to a business from relationships.
Due to the different nature that exists in each relationship, CRM offers
the flexibility of fine-tuning the system to be able to respond to the needs
of all. It is essential that every member of an organization understand the
customer in order to make consumer loyalty a reality for the business.
The CRM tools provide businesses to gain further efficiency from their
resources, and work towards new models of customer relationship, which
can transform the company into a stronger, understanding entity.
Price of a product or service is only one of the aspects that could affect the
bottom line of consumer’s decision. For the continuation of any relationship,
consumers evaluate the current and past performances of the firm, as well as
incorporating the expected performance from the future. This is why CRM’s
integration with the core business activities is important for an organization,
as it allows the business to cater for the expectation that customers will have
and incorporate it within the future strategy. If a customer believes there is a
benefit, real or perceived, of doing business with a vendor they may be less
likely to stop doing business with them.
Customer Profitability
Another benefit of a successful CRM implementation is the ability to
analyse customer profitability. This is the term used to define the right
customers, as well as to convert average customers to ones from which the
business can derive a profit.
It is not easy to track the cost of the services an organization performs for
customers, despite the importance that it holds. One of the reasons behind
this is the variance in expectations that each customer brings to the
relationship with the business. Some customers demand more time and
services than other customers. Organizations must be able to determine
when a relationship is costly; however, potential customer relations should
also be considered.
Value-Oriented Marketing
The crux of value-oriented marketing is not in collecting data about
customers through various modes and systems, but in ensuring that the
information extracted is of importance. The collected data is utilised by an
organization to establish the allocation of its resources, as well as determine
the best way in which to improve the experience that a customer has with an
organization. Additionally, incorporating a strategy that understands the
needs of the customer is important, especially if there is a concentrated
market.
Conclusion
CRM has become a key element in the modern marketing world in recent
years. Across the world, companies of various sizes have adopted and
implemented CRMS systems to help in establishing a competitive business.
At the same time, the increased level of competition in the market has
resulted in it being harder for companies to acquire new customers, as well
as retain those who have an active and sound relationship with the firm.
As discussed earlier, it has been recorded that the cost of keeping an existing
customer happy is far less than that of acquiring a new one. But the
maintenance of a relationship with an existing customer requires the
organization to be dynamic. The automated CRM system plays a critical role
in such cases, by allowing for more processes to be made efficient and more
effective than those already in effect.
The social bond that an organization creates between itself and its
customers is the foundation of the relationship that could result in long-term
benefits to both parties. The term ‘social bond’ refers to the friendly
companionship whose properties are incorporated by the organization in the
relationship. Interpersonal interactions between people within the
organization and customers strengthen the linkage and decrease the
likelihood that the customer will want to switch providers; thus, efforts that
focus on such bonds will help in increasing the level of customer loyalty.