The purpose of this paper is to analyze the application of the Customer Relationship

Management (CRM) in New Economy, which is characterized by the advancement in the

information technology. The impacts of the Internet on CRM are assessed in detail in order to
reveal the new opportunities and challenges related to CRM in the business settings. In addition,
this paper addresses the relationship between CRM and other Ecommerce applications, including
ERP, SCM and Data Warehousing. Such addresses indicate the role of CRM in the Ecommerce
arena. Based on the analysis, CRM's future implications in the Internet era to be discussed.

HEADNOTE
KEY WORDS AND PHRASES

HEADNOTE
Customer Relationship Management (CRM), Data Mining, Data Warehouse, Electronic
Commerce (E-commerce), Enterprise Resources Planning (ERP), Supply Chain Management
(SCM)

INTRODUCTION

With the development of information technology, oftentimes business jargons like ERP, SCM and
CRM are encountered while reading business journals and browsing online E-commerce reports.
In the E-commerce settings, these terms refer to components of integrated enterprise
applications: Enterprise Resource Planning (ERP), Supply Chain Management (SCM) and
Customer Relationship Management (CRM). ERP is being viewed as an internal system and the
backbone for all enterprise applications; CRM is a front-end application that enables connectivity
with customers in order to maximize customer satisfaction and minimize customer service costs;
SCM serves as the back-end application by linking suppliers, manufacturers, distributors, and
resellers in a cohesive production and distribution network.

From the value chain perspective, customer needs are the driver of a company's revenue and
customer delight is the only key for the company to success. No wonder companies will pour
billions of dollars into CRM solutions - both software and services. AMR Research projects the
market for U.S. CRM software market will grow from $5.4 billion in 2000 to almost an
inconceivable $16.8 billion in 2003. IDC and Cherry Tree & Co. forecast the global CRM service
revenue would increase from $49.1 billion in 2000 to $89.7 billion in 2003 (22).

Besides the inherent law related to the value chain, the Internet is also stimulating companies'
incentives to continue improving their customer relationship management. Today, no technology
topic is creating more of a stir than the Internet. The advent of the Internet has placed great
influence on how companies do business in that it broadens and facilitates the connectivity
among consumers and companies. The direct result of this influence is that companies are
confronting more and more intense competitions to retain and attract customers in the global
market. How can companies effectively carry out the customer-centric strategy in the Internet
era? The best solution is making CRM embrace the Internet technologies so as to provide
businesses with more effectively managed customer relationships through any direct or indirect
consumer channel.

t is certain that the Internet will continue to change the way customers and suppliers interact with
one another, in terms of speed and ease. This fact requires that the integration of Internet
technology into CRM activities occur at all levels throughout an organization. In the current
information age, only an Internet integrated CRM can effectively help companies move customers
to the center of the business circle, and thereafter maximize customer satisfaction and retention.
A new jargon - eCRM has been created to explicitly address the combination between the
Internet and CRM.

This paper firstly introduces the basic concept of customer relationship management. In this first
section, CRM's definition, elements, evolution and current status will be addressed. Secondly,
CRM's adoption and implementation will be discussed by prompting suggested elements and
recommended phases in company's transformation to the Internet integrated CRM. The third part
of this paper focuses on the Internet's impacts on CRM and CRM's role in the E-commerce
environment. The future implications of CRM and the conclusion are in the final section.

CRM: An Overview

What exactly is CRM and why is everybody so concerned about it? Before answering these
questions, we should understand the basic concepts of CRM, including its definition, types, and
components. In addition, a brief review of the evolution history of CRM will help us grasp the
rationale behind the pervasive acceptance of CRM in the business settings. We should also be
familiar with major CRM software vendors prior to the future discussion on the implementation of
CRM.

CRM: Definition
Even though CRM is one of the hottest topics in the Ecommerce environment, people have not
yet reached consensus on the precise definition of CRM. Here are some definitions prompted by
experts and analysts:

Customer relationship management is the implementation of customer-centric business

strategies; which drives redesigning of functional activities; which demands re-engineering of
work processes; which is supported, not driven, by CRM technology (28).

CRM concentrates on the retention of customers by collecting all data from every interaction
every customer makes with a company from "all" access points whether they are phone, mail,
web or field. The company can then use this data for specific business purposes, Marketing,
Service, Support or Sales whilst concentrating on a customer-centric approach rather than a
product-centric (6).

A CRM strategy has numerous aspects, but the basic theme is for the company to become more
customer-centric. This does not necessarily create a new revenue stream today or even
tomorrow. However, it will add customer loyalty to your business's bottom line (9).

... But what exactly is CRM? Simply defined, it is the process of acquiring, retaining and growing
profitable customers. It requires a clear focus on the service attributes that represent value to the
customer and that create loyalty (10).

Some definitions refer CRM to the implementation of business strategies or a business strategy
itself others view CRM as an information technology term. In order to eliminate the ambiguity, in
this paper we adopt the official CRMGuru.com definition:

HEADNOTE
ABSTRACT

HEADNOTE
The purpose of this paper is to analyze the application of the Customer Relationship
Management (CRM) in New Economy, which is characterized by the advancement in the
information technology. The impacts of the Internet on CRM are assessed in detail in order to
reveal the new opportunities and challenges related to CRM in the business settings. In addition,
this paper addresses the relationship between CRM and other Ecommerce applications, including
ERP, SCM and Data Warehousing. Such addresses indicate the role of CRM in the Ecommerce
arena. Based on the analysis, CRM's future implications in the Internet era to be discussed.

HEADNOTE
KEY WORDS AND PHRASES

HEADNOTE
Customer Relationship Management (CRM), Data Mining, Data Warehouse, Electronic
Commerce (E-commerce), Enterprise Resources Planning (ERP), Supply Chain Management
(SCM)

INTRODUCTION

With the development of information technology, oftentimes business jargons like ERP, SCM and
CRM are encountered while reading business journals and browsing online E-commerce reports.
In the E-commerce settings, these terms refer to components of integrated enterprise
applications: Enterprise Resource Planning (ERP), Supply Chain Management (SCM) and
Customer Relationship Management (CRM). ERP is being viewed as an internal system and the
backbone for all enterprise applications; CRM is a front-end application that enables connectivity
with customers in order to maximize customer satisfaction and minimize customer service costs;
SCM serves as the back-end application by linking suppliers, manufacturers, distributors, and
resellers in a cohesive production and distribution network.

From the value chain perspective, customer needs are the driver of a company's revenue and
customer delight is the only key for the company to success. No wonder companies will pour
billions of dollars into CRM solutions - both software and services. AMR Research projects the
market for U.S. CRM software market will grow from $5.4 billion in 2000 to almost an
inconceivable $16.8 billion in 2003. IDC and Cherry Tree & Co. forecast the global CRM service
revenue would increase from $49.1 billion in 2000 to $89.7 billion in 2003 (22).

Besides the inherent law related to the value chain, the Internet is also stimulating companies'
incentives to continue improving their customer relationship management. Today, no technology
topic is creating more of a stir than the Internet. The advent of the Internet has placed great
influence on how companies do business in that it broadens and facilitates the connectivity
among consumers and companies. The direct result of this influence is that companies are
confronting more and more intense competitions to retain and attract customers in the global
market. How can companies effectively carry out the customer-centric strategy in the Internet
era? The best solution is making CRM embrace the Internet technologies so as to provide
businesses with more effectively managed customer relationships through any direct or indirect
consumer channel.

It is certain that the Internet will continue to change the way customers and suppliers interact with
one another, in terms of speed and ease. This fact requires that the integration of Internet
technology into CRM activities occur at all levels throughout an organization. In the current
information age, only an Internet integrated CRM can effectively help companies move customers
to the center of the business circle, and thereafter maximize customer satisfaction and retention.
A new jargon - eCRM has been created to explicitly address the combination between the
Internet and CRM.

This paper firstly introduces the basic concept of customer relationship management. In this first
section, CRM's definition, elements, evolution and current status will be addressed. Secondly,
CRM's adoption and implementation will be discussed by prompting suggested elements and
recommended phases in company's transformation to the Internet integrated CRM. The third part
of this paper focuses on the Internet's impacts on CRM and CRM's role in the E-commerce
environment. The future implications of CRM and the conclusion are in the final section.

CRM: An Overview

What exactly is CRM and why is everybody so concerned about it? Before answering these
questions, we should understand the basic concepts of CRM, including its definition, types, and
components. In addition, a brief review of the evolution history of CRM will help us grasp the
rationale behind the pervasive acceptance of CRM in the business settings. We should also be
familiar with major CRM software vendors prior to the future discussion on the implementation of
CRM.

CRM: Definition

Even though CRM is one of the hottest topics in the Ecommerce environment, people have not
yet reached consensus on the precise definition of CRM. Here are some definitions prompted by
experts and analysts:

Customer relationship management is the implementation of customer-centric business

strategies; which drives redesigning of functional activities; which demands re-engineering of
work processes; which is supported, not driven, by CRM technology (28).
CRM concentrates on the retention of customers by collecting all data from every interaction
every customer makes with a company from "all" access points whether they are phone, mail,
web or field. The company can then use this data for specific business purposes, Marketing,
Service, Support or Sales whilst concentrating on a customer-centric approach rather than a
product-centric (6).

A CRM strategy has numerous aspects, but the basic theme is for the company to become more
customer-centric. This does not necessarily create a new revenue stream today or even
tomorrow. However, it will add customer loyalty to your business's bottom line (9).

... But what exactly is CRM? Simply defined, it is the process of acquiring, retaining and growing
profitable customers. It requires a clear focus on the service attributes that represent value to the
customer and that create loyalty (10).

Some definitions refer CRM to the implementation of business strategies or a business strategy
itself others view CRM as an information technology term. In order to eliminate the ambiguity, in
this paper we adopt the official CRMGuru.com definition:

Customer Relationship Management (CRM) is a business strategy to select and manage

customers to optimize long-term value. CRM requires a customercentric business philosophy and
culture to support effective marketing, sales, and service processes. CRM applications can
enable effective Customer Relationship Management, provided that an enterprise has the right
leadership strategy, and culture (28).

Based on this definition, CRM is neither a concept nor a technological term. Instead, it is a
business strategy that aims to understand, anticipate, and manage the needs of an organization's
current and potential customer. Technological forces have impacts on CRM as a business
strategy and directly relate to the implementation of CRM.

CRM: Types

CRM allows a company to address all of the types of customers it serves at different points in
their life cycle. It also enables the company to choose the best marketing program that best fits a
customer's attitude and willingness to purchase its products and services. There are four types of
CRM programs that are listed below (10):
* Win Back or Save: This is the process of convincing customers to stay with the company they
are discontinuing service, or convincing them to rejoin once they have left. Time-sensitivity and
selectivity are two essential characteristics of this kind of CRM program.

* Prospecting: In order to win new, first-time customers, effective prospecting is necessary.

Segmentation, selectivity, and sources are three most critical elements of a prospecting program.

* Loyalty: it is most difficult to gain accurate measures on customer loyalty. Companies try to use
three essential elements: value-based segmentation, needs-based segmentation, and predictive
chum models to evaluate and encourage customer loyalty.

* Cross-Sell/Up-Sell: By identifying and offering complementary products (cross-sell) or enhanced

products (up-sell) that a customer would like, companies can increase "wallet share," in other
words, the amount the customer spends with the companies.

The four different CRM programs can be summarized in the following Table (Figure 1).

CRM: Components

Today's CRM applications address almost all aspects regarding the contact and relationship with
customers. A successful CRM applications integration should incorporate at least three basic
components (22).

* Marketing Automation: Marketing automation applications optimize an enterprise's marketing

process, with the objective to target markets with the highest potential value. These applications
help companies effectively plan and execute marketing programs through managing customer
and market profiles, identifying target markets, generating leads, selecting appropriate contact
media (i.e., mail, phone, email, print ads, etc.), and tracking initial customer contact efforts across
these channels.

* Sales Force Automation: Sales force automation applications manage and optimize a
company's sales cycle, increasing its productivity by accelerating the contracting process and
improving revenue velocity. These applications also facilitate improved communications between
the sales force and management.

* Customer Service & Support: Customer service and support applications are originally used to
automate such functions as order tracking and account status checks. Powered by information
technology, today's customer service and support applications are capable of receiving and
tracking customer requests and feedback from a variety of communication channels. By
documenting all post-close interactions with customers, company can maximize customer
satisfaction and retention while minimizing customer service staff.

CRM: History and Evolution

CRM technology is an evolutionary response to environmental changes. The analysis on how

CRM interacts with sales and marketing along time will help us understand where CRM
technology is going in the future. In his article Customer Relationship Management Myths,
Helmar Rudolph gives a brief history of CRM to show how CRM evolved with market changes
and customer empowerment (19).

1. Direct Mail: Companies sent mail directly to the customer. Originally the mails were based on
address lists that were obtained from many disparaged sources.

2. Direct Marketing: Direct marketing is a more sophisticated version of direct mail in that
companies mainly send mails to segmentalized customer groups. This method is still commonly
used nowadays, mainly through direct mail companies that specialize in mailing, printing, data
entry, graphic design and mailing lists.

3. CRM: Unlike direct mailing or direct marketing, CRM is not about selling but about reshaping
the relationship between the company and the customer. The core aim of CRM is that companies
do not necessarily sell more, but sell smarter. This will be achieved by improving the research
and development process to find out what customers need and more importantly what they don't
need.

CRM: Vendors

Through examining the situations of CRM application vendors, we can gain a good picture on
how CRM is being implemented in current business settings. To meet different business
demands for the CRM implementation, large players like Siebel, Clarify, and Oracle provide more
scalability and integration within their CRM applications, while there are also many small
companies who provide small ready-made functions to do specific tasks. For example Blue
Sky(R) helps to trace the users of a web site, Map Info(R) can tell where customers live.
Referring to the report CRM meet eCRM.AM: Vendor Review by Ashley Friedlein (8), four
companies account for the largest market share of CRM applications. They are Siebel, Oracle,
PeopleSoft/Vantive, and Nortel/Clarify. Their strengths and weaknesses are displayed in the table
(Figure 2).
What follows is a sample of some relatively small companies. Based on individual expertise, most
of their offerings focus on specific tasks.

* Onyx: Onyx has been regarded as a strong player in the midmarket arena. Onyx is completely
based on web architecture and uses portals through which users can access information and
applications. Its dependence on Microsoft technologies prevents it from entering the highest rank
(8, 29).
IMAGE TABLE 33

* MicroStrategy: MicroStrategy was very strong in providing professional services to support

business intelligence solutions, where the analytics capability is critical. More recently they
started to build up their own product line, which combines analytic and operational customer
relationship management capabilities and consolidates real-time inbound and outbound
interactions with customers (8).

* Vignette: Vignette is particularly dominant in the retailbanking sector by offering packaged

solutions, which enable personalization and multi-platform content delivery and management (8).

* BroadVision: Broad Vision offers an industry-leading package integrating e-commerce,

personalization, analytics, and content management. Its core product, One-to-One Enterprise,
serves not only specific markets including B2C and B2B market places, but also specific sectors
like financial services (29).

CRM: ELEMENTS AND PHASES FOR IMPLEMENTATION

Organizations often believe the solution to their problem is new or better technology. To make
things worse, software and hardware vendors claim that their product is the most versatile and
flexible, one that will meet organizations' current as well as future needs. This kind of
misunderstanding may lead to public bickering between solution suppliers and their customers
when things go wrong.

Important Factors for a Successful Implementation

To achieve a CRM strategy, an organization cannot rely exclusively on a system solution. Six
factors are required to implement a CRM program effectively.

* Customer-centric strategy. A customer-centric strategy should be established first on the

corporate level in the CRM as a business level strategy, which must be based on and consistent
with the corporate strategy. To make the customercentric strategy workable, effective
communications across the whole organization are needed.

* Commitments from people. The more commitments from people across the corporation to the
transformation of business strategy, the more likely CRM implementation succeeds. The
commitments are psychological as well as technological. People should not only be willing to
carry out CRM strategy, but also grasp necessary technological skills for the enhanced business
procedure.

* Improved or redesigned process. It is not inherently difficult to identify the processes that need
to be involved in implementing CRM. The difficulty lies in gaining organizational buy-in,
developing measurements to assess the effectiveness of new processes, and implementing
technology to support and enforce its use. The improved or redesigned process should
concentrate on minimizing the time it takes to execute a particular marketing activity and reducing
the interdependencies among the marketing functions.

* Software technology. CRM software can record business transactions, create operations-
focused database, facilitate data warehousing and data mining, provide decision-making support
and marketing campaign management tools. Companies should select the appropriate CRM
software packages to meet specific corporate customer relationship management needs as well
as enable the combination with legacy enterprise applications like the ERP system.

Infrastructure. With the advancement of information technology, business data communication

and business computing are running in distinctive forms. Effective CRM implementations require
suitable corporate infrastructure. This infrastructure includes network setting up, storage and data
backup, computing platforms, and web servers. All of this hardware must not be isolated from
each other. Only effective corporate infrastructure integration can provide solid support for the
CRM implementation.

Critical Phases for Successful Implementation

Lots of case studies have shown that the "Big Bang" method is a very risky way for businesses to
implement Ecommerce applications. One of the latest examples involves Nike. Nike attempted to
blame their poor financial results on a new SCM system from i2 Technologies, but analysts
attributed the unexpected outcome of Nike's SCM implementation to the "Big Bang"
implementation. A phased implementation would be more cautious and would enable system
debugging and correcting. Some critical phases for a successful CRM implementation are listed
below (20).

1. Researching problems and identifying objectives;

2. Establishing and communicating customer-centric strategy;

3. Planning and making preparations;

4. Redesigning work processes and consolidating corporate resources;

5. Choosing the right software and CRM solution;

6. Finalizing and continuously improving.

Phase 1 - Researching problems and idenqf3dn objectives

1. Research what lies behind the customer relationship based on specific industry analysis.

2. Identify the existing and potential issues in managing the customer relationship.

3. Decide how the CRM would work to realize the objective to maximize customer satisfaction
and minimize customer retention costs.

4. Define the method of information flow, demand exchange, and data exchange.

Phase 2 - Establishing and communicating customer-centric strategy:

1. Develop a customer-centric business strategy at the corporate level and communicate the
strategy across the whole organization.

2. Gain support from top management and establish commitments among people.

3. Set up organizational priority based on problem identification, and make people in the
organization understand the importance of such priorities.

Phase 3 - Planning and making preparations:

1. Produce the implementation schedule based on the outcome of researching phase. Confirm
the feasibility of CRM implementation.

2. Retrain people to become more literate on the new information technologies, which will be
integrated into the new CRM implementation.

3. Prepare the legacy enterprise applications for the integration with new CRM application.
4. Form implementation teams, which should consist of people from different departments such
as Marketing, Sales, and rr. Sometimes professional consultants are needed.

Phase 4 - Redesigning work processes consolidating corporate resources:

1. Redesign the functional activities based on whether they add value to customers.

2. Change departmental roles and responsibilities to streamline the customer relationship

management.

3. Based on re-engineered work processes and redesigned functional activities, reassign the
corporate resources, including human resource and technology resource.

Phase 5 - Choosing the right software and CRM solutions:

1. Evaluate and decide the vendor for the specific CRM solution. The solution should have
features like stability, flexibility, user-friendly interface, easy-to-upgrade, easyto-expand, and good
onsite support.

2. Modify CRM applications to meet company's specific requirements, and integrate with legacy
enterprise applications such as ERP.

Phase 6 - Finalizing and continuously improving

1. Construct software components into a CRM system, supported by the applications vendor and
consultants.

2. Build prototypes for systematical tuning. These prototypes are used to verify different
implementation strategies and to ensure that the system is tuned so that it can handle the volume
of transactions after it is placed in production.

3. Provide training to both employees and customers who have the access to CRM applications,
document and store properly the system information and project implementation.

4. Make the performance measures align to redesigned processes and assign them to specific
individuals for monitoring and assessing. Conduct pilot test program to verify and test the
functionality of the whole system.

5. Install the system and new equipment, and put them into operation throughout the
organization, and the Internet if necessary.

6. Align with the software vendor and consultant closely to debug the system in a timely manner.
ROLE OF CRM IN THE EC ERA

From the business perspective, CRM evolves along with the market changes and customer
empowerments. On the other hand, effective customer relationship management in current
business environment calls for a good understanding on the role of CRM in the E-commerce era.
In this section, we will examine the relations between CRM and the Internet, ERP, SCM, Data
Warehousing respectively.

CRM and the Internet

HEADNOTE
ABSTRACT

HEADNOTE
The purpose of this paper is to analyze the application of the Customer Relationship
Management (CRM) in New Economy, which is characterized by the advancement in the
information technology. The impacts of the Internet on CRM are assessed in detail in order to
reveal the new opportunities and challenges related to CRM in the business settings. In addition,
this paper addresses the relationship between CRM and other Ecommerce applications, including
ERP, SCM and Data Warehousing. Such addresses indicate the role of CRM in the Ecommerce
arena. Based on the analysis, CRM's future implications in the Internet era to be discussed.

HEADNOTE
KEY WORDS AND PHRASES

HEADNOTE
Customer Relationship Management (CRM), Data Mining, Data Warehouse, Electronic
Commerce (E-commerce), Enterprise Resources Planning (ERP), Supply Chain Management
(SCM)

INTRODUCTION

With the development of information technology, oftentimes business jargons like ERP, SCM and
CRM are encountered while reading business journals and browsing online E-commerce reports.
In the E-commerce settings, these terms refer to components of integrated enterprise
applications: Enterprise Resource Planning (ERP), Supply Chain Management (SCM) and
Customer Relationship Management (CRM). ERP is being viewed as an internal system and the
backbone for all enterprise applications; CRM is a front-end application that enables connectivity
with customers in order to maximize customer satisfaction and minimize customer service costs;
SCM serves as the back-end application by linking suppliers, manufacturers, distributors, and
resellers in a cohesive production and distribution network.

From the value chain perspective, customer needs are the driver of a company's revenue and
customer delight is the only key for the company to success. No wonder companies will pour
billions of dollars into CRM solutions - both software and services. AMR Research projects the
market for U.S. CRM software market will grow from $5.4 billion in 2000 to almost an
inconceivable $16.8 billion in 2003. IDC and Cherry Tree & Co. forecast the global CRM service
revenue would increase from $49.1 billion in 2000 to $89.7 billion in 2003 (22).

Besides the inherent law related to the value chain, the Internet is also stimulating companies'
incentives to continue improving their customer relationship management. Today, no technology
topic is creating more of a stir than the Internet. The advent of the Internet has placed great
influence on how companies do business in that it broadens and facilitates the connectivity
among consumers and companies. The direct result of this influence is that companies are
confronting more and more intense competitions to retain and attract customers in the global
market. How can companies effectively carry out the customer-centric strategy in the Internet
era? The best solution is making CRM embrace the Internet technologies so as to provide
businesses with more effectively managed customer relationships through any direct or indirect
consumer channel.

It is certain that the Internet will continue to change the way customers and suppliers interact with
one another, in terms of speed and ease. This fact requires that the integration of Internet
technology into CRM activities occur at all levels throughout an organization. In the current
information age, only an Internet integrated CRM can effectively help companies move customers
to the center of the business circle, and thereafter maximize customer satisfaction and retention.
A new jargon - eCRM has been created to explicitly address the combination between the
Internet and CRM.

This paper firstly introduces the basic concept of customer relationship management. In this first
section, CRM's definition, elements, evolution and current status will be addressed. Secondly,
CRM's adoption and implementation will be discussed by prompting suggested elements and
recommended phases in company's transformation to the Internet integrated CRM. The third part
of this paper focuses on the Internet's impacts on CRM and CRM's role in the E-commerce
environment. The future implications of CRM and the conclusion are in the final section.

CRM: An Overview

What exactly is CRM and why is everybody so concerned about it? Before answering these
questions, we should understand the basic concepts of CRM, including its definition, types, and
components. In addition, a brief review of the evolution history of CRM will help us grasp the
rationale behind the pervasive acceptance of CRM in the business settings. We should also be
familiar with major CRM software vendors prior to the future discussion on the implementation of
CRM.

CRM: Definition

Even though CRM is one of the hottest topics in the Ecommerce environment, people have not
yet reached consensus on the precise definition of CRM. Here are some definitions prompted by
experts and analysts:

Customer relationship management is the implementation of customer-centric business

strategies; which drives redesigning of functional activities; which demands re-engineering of
work processes; which is supported, not driven, by CRM technology (28).

CRM concentrates on the retention of customers by collecting all data from every interaction
every customer makes with a company from "all" access points whether they are phone, mail,
web or field. The company can then use this data for specific business purposes, Marketing,
Service, Support or Sales whilst concentrating on a customer-centric approach rather than a
product-centric (6).

A CRM strategy has numerous aspects, but the basic theme is for the company to become more
customer-centric. This does not necessarily create a new revenue stream today or even
tomorrow. However, it will add customer loyalty to your business's bottom line (9).

... But what exactly is CRM? Simply defined, it is the process of acquiring, retaining and growing
profitable customers. It requires a clear focus on the service attributes that represent value to the
customer and that create loyalty (10).

Some definitions refer CRM to the implementation of business strategies or a business strategy
itself others view CRM as an information technology term. In order to eliminate the ambiguity, in
this paper we adopt the official CRMGuru.com definition:
Customer Relationship Management (CRM) is a business strategy to select and manage
customers to optimize long-term value. CRM requires a customercentric business philosophy and
culture to support effective marketing, sales, and service processes. CRM applications can
enable effective Customer Relationship Management, provided that an enterprise has the right
leadership strategy, and culture (28).

Based on this definition, CRM is neither a concept nor a technological term. Instead, it is a
business strategy that aims to understand, anticipate, and manage the needs of an organization's
current and potential customer. Technological forces have impacts on CRM as a business
strategy and directly relate to the implementation of CRM.

CRM: Types

CRM allows a company to address all of the types of customers it serves at different points in
their life cycle. It also enables the company to choose the best marketing program that best fits a
customer's attitude and willingness to purchase its products and services. There are four types of
CRM programs that are listed below (10):

* Win Back or Save: This is the process of convincing customers to stay with the company they
are discontinuing service, or convincing them to rejoin once they have left. Time-sensitivity and
selectivity are two essential characteristics of this kind of CRM program.

* Prospecting: In order to win new, first-time customers, effective prospecting is necessary.

Segmentation, selectivity, and sources are three most critical elements of a prospecting program.

* Loyalty: it is most difficult to gain accurate measures on customer loyalty. Companies try to use
three essential elements: value-based segmentation, needs-based segmentation, and predictive
chum models to evaluate and encourage customer loyalty.

* Cross-Sell/Up-Sell: By identifying and offering complementary products (cross-sell) or enhanced

products (up-sell) that a customer would like, companies can increase "wallet share," in other
words, the amount the customer spends with the companies.

The four different CRM programs can be summarized in the following Table (Figure 1).

CRM: Components
Today's CRM applications address almost all aspects regarding the contact and relationship with
customers. A successful CRM applications integration should incorporate at least three basic
components (22).

* Marketing Automation: Marketing automation applications optimize an enterprise's marketing

process, with the objective to target markets with the highest potential value. These applications
help companies effectively plan and execute marketing programs through managing customer
and market profiles, identifying target markets, generating leads, selecting appropriate contact
media (i.e., mail, phone, email, print ads, etc.), and tracking initial customer contact efforts across
these channels.

IMAGE TABLE 21
FIGURE 1

* Sales Force Automation: Sales force automation applications manage and optimize a
company's sales cycle, increasing its productivity by accelerating the contracting process and
improving revenue velocity. These applications also facilitate improved communications between
the sales force and management.

* Customer Service & Support: Customer service and support applications are originally used to
automate such functions as order tracking and account status checks. Powered by information
technology, today's customer service and support applications are capable of receiving and
tracking customer requests and feedback from a variety of communication channels. By
documenting all post-close interactions with customers, company can maximize customer
satisfaction and retention while minimizing customer service staff.

CRM: History and Evolution

CRM technology is an evolutionary response to environmental changes. The analysis on how

CRM interacts with sales and marketing along time will help us understand where CRM
technology is going in the future. In his article Customer Relationship Management Myths,
Helmar Rudolph gives a brief history of CRM to show how CRM evolved with market changes
and customer empowerment (19).

1. Direct Mail: Companies sent mail directly to the customer. Originally the mails were based on
address lists that were obtained from many disparaged sources.
2. Direct Marketing: Direct marketing is a more sophisticated version of direct mail in that
companies mainly send mails to segmentalized customer groups. This method is still commonly
used nowadays, mainly through direct mail companies that specialize in mailing, printing, data
entry, graphic design and mailing lists.

3. CRM: Unlike direct mailing or direct marketing, CRM is not about selling but about reshaping
the relationship between the company and the customer. The core aim of CRM is that companies
do not necessarily sell more, but sell smarter. This will be achieved by improving the research
and development process to find out what customers need and more importantly what they don't
need.

CRM: Vendors

Through examining the situations of CRM application vendors, we can gain a good picture on
how CRM is being implemented in current business settings. To meet different business
demands for the CRM implementation, large players like Siebel, Clarify, and Oracle provide more
scalability and integration within their CRM applications, while there are also many small
companies who provide small ready-made functions to do specific tasks. For example Blue
Sky(R) helps to trace the users of a web site, Map Info(R) can tell where customers live.
Referring to the report CRM meet eCRM.AM: Vendor Review by Ashley Friedlein (8), four
companies account for the largest market share of CRM applications. They are Siebel, Oracle,
PeopleSoft/Vantive, and Nortel/Clarify. Their strengths and weaknesses are displayed in the table
(Figure 2).

What follows is a sample of some relatively small companies. Based on individual expertise, most
of their offerings focus on specific tasks.

* Onyx: Onyx has been regarded as a strong player in the midmarket arena. Onyx is completely
based on web architecture and uses portals through which users can access information and
applications. Its dependence on Microsoft technologies prevents it from entering the highest rank
(8, 29).

IMAGE TABLE 33
FIGURE 2

* MicroStrategy: MicroStrategy was very strong in providing professional services to support

business intelligence solutions, where the analytics capability is critical. More recently they
started to build up their own product line, which combines analytic and operational customer
relationship management capabilities and consolidates real-time inbound and outbound
interactions with customers (8).

* Vignette: Vignette is particularly dominant in the retailbanking sector by offering packaged

solutions, which enable personalization and multi-platform content delivery and management (8).

* BroadVision: Broad Vision offers an industry-leading package integrating e-commerce,

personalization, analytics, and content management. Its core product, One-to-One Enterprise,
serves not only specific markets including B2C and B2B market places, but also specific sectors
like financial services (29).

CRM: ELEMENTS AND PHASES FOR IMPLEMENTATION

Organizations often believe the solution to their problem is new or better technology. To make
things worse, software and hardware vendors claim that their product is the most versatile and
flexible, one that will meet organizations' current as well as future needs. This kind of
misunderstanding may lead to public bickering between solution suppliers and their customers
when things go wrong.

Important Factors for a Successful Implementation

To achieve a CRM strategy, an organization cannot rely exclusively on a system solution. Six
factors are required to implement a CRM program effectively.

* Customer-centric strategy. A customer-centric strategy should be established first on the

corporate level in the CRM as a business level strategy, which must be based on and consistent
with the corporate strategy. To make the customercentric strategy workable, effective
communications across the whole organization are needed.

* Commitments from people. The more commitments from people across the corporation to the
transformation of business strategy, the more likely CRM implementation succeeds. The
commitments are psychological as well as technological. People should not only be willing to
carry out CRM strategy, but also grasp necessary technological skills for the enhanced business
procedure.

* Improved or redesigned process. It is not inherently difficult to identify the processes that need
to be involved in implementing CRM. The difficulty lies in gaining organizational buy-in,
developing measurements to assess the effectiveness of new processes, and implementing
technology to support and enforce its use. The improved or redesigned process should
concentrate on minimizing the time it takes to execute a particular marketing activity and reducing
the interdependencies among the marketing functions.

* Software technology. CRM software can record business transactions, create operations-
focused database, facilitate data warehousing and data mining, provide decision-making support
and marketing campaign management tools. Companies should select the appropriate CRM
software packages to meet specific corporate customer relationship management needs as well
as enable the combination with legacy enterprise applications like the ERP system.

* Infrastructure. With the advancement of information technology, business data communication

and business computing are running in distinctive forms. Effective CRM implementations require
suitable corporate infrastructure. This infrastructure includes network setting up, storage and data
backup, computing platforms, and web servers. All of this hardware must not be isolated from
each other. Only effective corporate infrastructure integration can provide solid support for the
CRM implementation.

Critical Phases for Successful Implementation

Lots of case studies have shown that the "Big Bang" method is a very risky way for businesses to
implement Ecommerce applications. One of the latest examples involves Nike. Nike attempted to
blame their poor financial results on a new SCM system from i2 Technologies, but analysts
attributed the unexpected outcome of Nike's SCM implementation to the "Big Bang"
implementation. A phased implementation would be more cautious and would enable system
debugging and correcting. Some critical phases for a successful CRM implementation are listed
below (20).

1. Researching problems and identifying objectives;

2. Establishing and communicating customer-centric strategy;

3. Planning and making preparations;

4. Redesigning work processes and consolidating corporate resources;

5. Choosing the right software and CRM solution;

6. Finalizing and continuously improving.

Phase 1 - Researching problems and idenqf3dn objectives

1. Research what lies behind the customer relationship based on specific industry analysis.
2. Identify the existing and potential issues in managing the customer relationship.

3. Decide how the CRM would work to realize the objective to maximize customer satisfaction
and minimize customer retention costs.

4. Define the method of information flow, demand exchange, and data exchange.

Phase 2 - Establishing and communicating customer-centric strategy:

1. Develop a customer-centric business strategy at the corporate level and communicate the
strategy across the whole organization.

2. Gain support from top management and establish commitments among people.

3. Set up organizational priority based on problem identification, and make people in the
organization understand the importance of such priorities.

Phase 3 - Planning and making preparations:

1. Produce the implementation schedule based on the outcome of researching phase. Confirm
the feasibility of CRM implementation.

2. Retrain people to become more literate on the new information technologies, which will be
integrated into the new CRM implementation.

3. Prepare the legacy enterprise applications for the integration with new CRM application.

4. Form implementation teams, which should consist of people from different departments such
as Marketing, Sales, and rr. Sometimes professional consultants are needed.

Phase 4 - Redesigning work processes consolidating corporate resources:

1. Redesign the functional activities based on whether they add value to customers.

2. Change departmental roles and responsibilities to streamline the customer relationship

management.

3. Based on re-engineered work processes and redesigned functional activities, reassign the
corporate resources, including human resource and technology resource.

Phase 5 - Choosing the right software and CRM solutions:

1. Evaluate and decide the vendor for the specific CRM solution. The solution should have
features like stability, flexibility, user-friendly interface, easy-to-upgrade, easyto-expand, and good
onsite support.

2. Modify CRM applications to meet company's specific requirements, and integrate with legacy
enterprise applications such as ERP.

Phase 6 - Finalizing and continuously improving

1. Construct software components into a CRM system, supported by the applications vendor and
consultants.

2. Build prototypes for systematical tuning. These prototypes are used to verify different
implementation strategies and to ensure that the system is tuned so that it can handle the volume
of transactions after it is placed in production.

3. Provide training to both employees and customers who have the access to CRM applications,
document and store properly the system information and project implementation.

4. Make the performance measures align to redesigned processes and assign them to specific
individuals for monitoring and assessing. Conduct pilot test program to verify and test the
functionality of the whole system.

5. Install the system and new equipment, and put them into operation throughout the
organization, and the Internet if necessary.

6. Align with the software vendor and consultant closely to debug the system in a timely manner.

ROLE OF CRM IN THE EC ERA

From the business perspective, CRM evolves along with the market changes and customer
empowerments. On the other hand, effective customer relationship management in current
business environment calls for a good understanding on the role of CRM in the E-commerce era.
In this section, we will examine the relations between CRM and the Internet, ERP, SCM, Data
Warehousing respectively.

CRM and the Internet

If it weren't for the Internet, there wouldn't be CRM as we know it today. Through Internet
technologies, data generated by the customer can be easily fed into marketing, sales, and
customer service applications. The success or failure of these efforts can now be measured and
modified in real time, further elevating customer expectations. In the world connected by the
Internet, CRM has become a requirement, not a competitive advantage. The impacts of the
Internet on CRM can be summarized in the following table (Figure 3) (7).

With respect to the great impacts of the Internet, the industry is recognizing three major trends
within the CRM movement (27). The first is that every business is becoming an information
business. Secondly, the need for effective direct marketing is becoming increasingly important.
And thirdly is a trend that relates to the recognized growth of what is known as "value exchanges"
or non-commercial interactions between customers and companies. Beyond these three trends,
CRM will continue to develop to reflect the potential impacts of the Internet. Given the fact that
currently less than 5% of unique visitors become customers through companies' websites, there
is a need for a better approach that is based upon an integration of the Internet technology and
CRM initiative.

CRM and ERP

Companies around the world are undergoing fundamental shifts in how they operate business
and interact with customers. During the mid-1980s and the early 1990s, many organizations
began restructuring and reengineering their business processes to cut costs and become more
efficient and competitive. Many companies turned to enterprise resource planning (ERP)
applications. These applications helped them automate and optimize their internal business
processes in areas such as finance, manufacturing, inventory management and human resources
and freed them from some of the tactical day-to-day operations of running a business.

IMAGE TABLE 56
FIGURE 3

Corporate focus since then has shifted from improving internal operations to concentrating more
on customers. People and businesses began demanding more attention and immediate service,
and smart companies are now adjusting their business practices by refocusing their efforts
externally. Because of such a need to concentrate more on customers, many companies are
turning to technology once again - this time to customer relationship management (CRM)
software. Like ERP, CRM solutions focus on automating and improving processes, frontoffice
areas such as sales, marketing, customer service and support.

CRM goes several steps further than ERP by helping organizations maximize customer
satisfaction and customerrelated resource utilization. Whereas ERP implementations can result in
improved organizational efficiency, CRM aims to improve organizational effectiveness by
reducing sales cycles and selling costs, identifying new markets and channels for expansion, and
improving customer value, satisfaction, profitability, and retention.

The integration of ERP and CRM must include low-level data synchronization as well as business
process integration so that the integrity of business rules can be maintained across systems and
workflow tasks can pass between the systems. Such integration also ensures that organizations
can perform business intelligence across systems.

CRM and SCM

CRM and Data Warehousing

As the volume of data held by companies has grown, the focus of database management
technology has shifted from data input to information output. A data warehouse consists of a
highly catalogued and structured organization of company data in a knowledge repository to
ensure that users, especially managers, have access to the right information at the right time. In
this respect, data warehousing represents a logical extension of decision support system models.

IMAGE CHART 67
FIGURE 4

CRM can benefit from successful data warehouse in that 1) data warehouse systems enable end
users to "mine" the historical data to identify trends and opportunities; 2) data warehouse systems
offer easier and more timely access to key information by making the fullest use of the data
resources, allowing a company to leverage the power of existing internal corporate data to
improve customer marketing

So a data warehouse should be the cornerstone of customer relationship management, but often
it is underutilized, misused, or misinterpreted in a CRM scheme because most users do not
understand how the two intersect. Ideally, enterprises could use the data in a warehouse to
match products with customer needs to perform more focused one-to-one marketing. In
addressing the implication of data warehousing on CRM, Terri Robinson gives the following
assessment:

Rarely does data travel seamlessly among the systems that support those efforts. For instance,
data from a customer query through a Web site should be merged with data received through the
call center or through customer visits. Moreover, any CRM plan should provide easy access to
data for everyone from sales staff to customer representatives, analysts and other appropriate
parties (18).

Summary

The CRM's role in the E-commerce setting, i.e., its relationship with the Internet, ERP, SCM and
Data Warehouse can be summarized in the following table (Figure 5).

IMPACTS OF CRM TO THE BUSINESS ENVIRONMENT

To build and sustain effective customer relationship management (CRM) in the age of E-
commerce, we should understand that the CRM is evolving with market changes and technology
development. Based on this fundamental understanding, we can examine the impacts of CRM on
customer and supplier perceptions, and on the behaviors of organizations so as to gain alignment
with traditional management programs. The following sections describe the fundamental impacts
of CRM in detail (17).

CRM's Impacts on Customers

How has CRM changed the way customers act? The CRM transformation has been taking place
concurrently in organizations worldwide. The CRM norms that organizations are beginning to live
by as sellers are the same expectations that they have as buyers. In other words, as
organizations become more educated and more adept sellers, they also become more competent
customers. Customer competency may become a competitive advantage, especially for value-
added resellers. Two customer competencies through CRM are:

IMAGE TABLE 77
FIGURE 5

Pushing Information. As customers in the new CRM culture, we expect our vendors to use their
technology to understand our needs. As customers, we can gain an advantage by becoming
adept at pushing information from our organization to our suppliers. The more information that our
suppliers know about our organization contacts, the products we have purchased from them in
the past, and our sales process, the better they will be able to provide products and services that
meet our needs. The challenge is in changing the individual and collective behaviors of the
organization insofar as most organizations hesitate to share information with suppliers.

Investigating. With the integration of the Internet and CRM, customers have the ability to look
inside their suppliers like never before. Being able to effectively and systematically investigate
what their suppliers offer and then using the suppliers' Web-based self-service capabilities,
customers may purchase products and services at a lower price, have greater control over
product configuration, and have access to a wider array of customer service options.

CRM's Impacts on Suppliers

In the CRM world, the customer is being treated as king. Customers' needs and motivations are
being analyzed thoroughly. As the demand on suppliers of goods and services will continue to
increase, we will be seeing fewer independent suppliers but numerous complex supply chains
and groups of suppliers clustering their products and services together to provide a seamless-
cost competitive service available whenever demanded, wherever desired, Due to the pervasive
adoption of CRM strategy, following competencies will be required for the suppliers.

Creating New Demand Chains. A key competency of customer-driven economy will be to create
new demand chains, to develop new business and customer relationships, and to combine the
best of a breed and change all this periodically. This will be manifested in a keen understanding
of marketplace dynamics and evolving new business structures and relationships: knowledge of
every aspect of a given industry and other facets of the economy will become critical.

Communicating Effectively. CRM strategy calls for effective communication back and forth to both
existing and potential customers so that the company can understand, anticipate, and meet
customer expectations. The ability to successfully communicate has become another critical
competency and will be a significant factor in corporate and individual success in the future.

Adopting Up-to-Date Technology. Through information technology, particularly the Internet, CRM
is tying the new suppliers to customers. In current competitive business settings, up-to-date
technology is being deployed as catalysts of change. A core competency will be to build
technology-based distribution, and e-tailoring capability to tailor services to customer needs on
the fly will be an engine for growth.

Impacts of CRM on Business Organizations

Today's business world is in a tremendous status of flux in attempting to respond to the highly
dynamic and volatile marketplace. CRM, with its customer-centric focus, places customers' needs
first and involves three fundamental steps: 1) Understanding customers completely; 2) Aligning
organizational capabilities in order to better deliver what its customers may perceive as
heightened value; 3) Facilitating the immediacy of information availability both inside and outside
of the organization.
1. Impacts on Organization in General

In the evolution to CRM culture, major organizational changes may be necessary. Organizations
can no longer afford to be internally focused or composed of functional silos. Realtime information
flow and communication across the entire organization are operational necessities. Strategy is
driven by marketplace demands and organizations are striving to appear seamless to customers.
In other words although there are multiple points where the customer touches the organization, all
parts of the organization must have access to every piece of information relevant to each
customer.

While always important, interpersonal skills now become critical to an organization's success. The
ability to attract and retain customers is directly correlated to customer perception, and perception
is managed through the broad spectrum of communication. This new reality presents unique new
communication challenges.

In the new world of e-business, unpredictability is the norm. so anyone touching the customer
must be able to think on his or her feet. Employees must possess the ability to rationally handle
the situation without unnecessarily escalating it. Critical thinking skills are intrinsic to this process.

2. Impacts on Sales and Marketing Functions

The realization of a customer-centric strategy may necessitate fundamental changes in the

competencies of an organization's sales and marketing functions.

* Salespeople have more reliance upon a wide array of technology to keep abreast of changes in
the marketplace and identify trends leading to new business opportunities. This, in turn, demands
that they be technologically proficient and supplied with up-to-date hardware systems and
applications.

* Sales professionals need to possess a comprehensive knowledge of the organization's CRM

strategy and be absolutely clear on how their functions fit into this strategy. They must be part of
sales teams to represent the company.

* For marketing to function effectively in the CRM environment, it needs to provide highly
accurate information on potential customers and on potential opportunities. In this way,
salespeople can spend less time in non value-added tasks and activities and maximize the time
building and maintaining long-term customer relationships.

3. Impacts on Customer Service and Support Function

The customer service and support function likewise needs to undertake a significant
transformation toward CRM strategy. Service staff should be a part of the same system as other
members of the closed-loop sales processes. Customers' demand on prompt question answering
and problem solving necessitates not only up-to-date information for customer service
representatives, but also strong interpersonal communications skills. In many cases, customer
service is viewed as a good indication of the commitment to the customer.

CONCLUSION WITH FUTURE IMPLICATIONS

The CRM market has been experiencing explosive growth since 1997, and it will continue to do
so for several more years. The reason is simple: faced with widespread global-economic,
technological, and cultural change, organizations around the world are seeking to enhance the
value and profitability of their existing customer relationships, while attracting new and profitable
customers. As organizations begin embracing e-business in earnest, these driving forces behind
CRM will become even stronger. However, CRM is not the panacea for companies trying to
prosper in the new competitive environment. The study on its limitation will help us avoid
unnecessary expenses and efforts and tell us where CRM will be evolving (25).

CRM's Limitations

1. Even though system development methodologies can help standardize work and raise quality,
their use is not without risk. Methodologies that have been developed and work successfully for
ERP, distribution, or finance systems projects are not necessarily suitable for CRM. The validity
of these methodologies for CRM is still being tested.

2. Unlike financial systems (generally defined by FASB) and manufacturing systems (generally
defined by MRP 11), which have been standardized through years of implementation, the
processes used in sales, marketing, customer service, and other parts of the customer lifecycle
are less well defined. There is less of a recognized discipline and commonality across business
sectors and even between companies in the same industry. This directly results in the difficulties
when companies try to integrate horizontally or vertically their CRM and other ecommerce
applications.

3. The aspect of mobile systems is more specific to the implementation of CRM systems. But
present CRM software solutions do not support effectively the mobility and wireless connectivity.
So mobility and its demands for data synchronization become perhaps the last limitation for CRM
systems projects.
CRM Market Forecast

As businesses are eager to adopt CRM applications as the front-end tools to facilitate the
capture, consolidation, and analysis of data from existing and potential customers, the demand
for CRM applications is exploding and creating countless opportunities for both CRM software
and CRM services industry. Cherry Tree & Co.'s report has detailed market forecasts,
demonstrating the great potential in this industry (22).

1. CRM software market forecast: As shown in Figure 6, the CRM software market is expected to
continue expanding dramatically. The U.S. market alone is expected to grow at a compounded
annual growth rate of nearly 50% through the next five years, from $2.3 billion in 1998 to almost
$17 billion by 2003.

2. CRM service market forecast: The exploding demands for web-enabled CRM applications are
creating a myriad of opportunities for service companies to add value. As shown in Figure 7,
CRM-related services represent a growing opportunity. Gartner Group estimates that through
2004, 80% of enterpriselevel CRM initiatives will be outsourced to External Service Providers,
and IDC forecasts that the global CRM services market (including consulting, systems integration,
outsourcing, and training) will reach nearly $90 billion by 2003.

Conclusion with Future Implications

The Internet and CRM were destined to come together in order to provide a solution to
organizations seeking to enhance the way they service and support their customers. The CRM
industry has recognized that every business is becoming an information business, and the
effective direct contact with the customer for sales and support is becoming increasingly
important. Compared with other E-commerce and enterprise applications such as ERP and MRP
II, the CRM is still in its infancy. Therefore, many of the rules about CRM implementation are
being written and rewritten in a very short period of time. The way that companies undertake
CRM strategy, allocate resources and distribution channels, and decide the supporting
technologies for implementation and integration will change with the standardizing process and
the evolvement of technologies. In short term, CRM may succeed in specific industries such as
retail banking or financing service where both the companies and the customers are willing and
able to embrace the advantages from effective CRM implementation. Because of its infancy, the
borders of CRM as well as the players are expected to expand and change respectively. Vendors'
consolidation and merger will facilitate the concentration and standardization of the CRM industry.
This changing nature of CRM is further complicated by the rapid evolution of the Internet and the
differing types of business models it supports. Even though there is still much uncertainty, one
thing is certain, first mover effects lead to potential competitive advantages for early exercisers of
CRM, and those failing CRM implementations make good case study materials for MBA students.