In the traditional approach to the business assets represent cash, securities and other tangible assets. The term also covers intangible assets like goodwill, patents and the like. However the modern day business concept regards ‘customers’ as one of the important assets that contribute to the increase of shareholders’ wealth. Being an intangible asset the customer relationships and the associated value to the business has not been keenly observed and sustained by many businesses. This is so because often it becomes difficult to quantify the customer relationships and their purchase intentions in precise numbers due to the nature of these phenomena.
The necessity to improve upon the performance of customer relationships as an asset has given rise to the concept of customer relationship management. Recently firms have started investing large sums of money in integrated set of CRM tools and functionalities being offered by leading software developers and vendors to gather large amount of information and to store them for further analysis. It has been found that firms that have deployed efficient CRM applications are better equipped to make use of the stock of knowledge on the customer movements and behaviors to enhance the utility of their customer support processes.
In addition the deployment of effective CRM applications and techniques make the firms more familiar with the efficient management of data evolved in the process of initiating, maintaining and terminating customer relationships. This familiarity to the data management also enables the firm to become more competitive and they are better able to leverage the data collected for customizing their product offerings and quicken their responses to customer needs (Mithas, Krishnan and Fornell 2005). This paper presents an analytical report of the factors that affect the implementation of CRM in any organization. The factors are defined and it is also shown as to the ways in which these factors positively or negatively affect the implementation of CRM successfully.
Customer Relationship Management (CRM) – an Overview
CRM covers strategies, processes, people and technologies involved in any organizational context, while dealing with its customers. The term ‘customer management’ encompasses the management of customer relationships in a holistic way. This implies that the supplier-customer management relationship needs to be established and maintained throughout the product life-cycle; from the time the enquiry for purchase is floated from the customer side till the delivery of long-term support of the product to the customer.
The relationship is to be maintained at all phases of sales including the service to the product as the customer will consider placing the order for next purchase at the same time he receives the support and service for the products already supplied by the vendor. It is vitally important that the customers feel satisfied by both the quality of the product as well as service since by this the vendor firm can any objection on the part of the customer to purchase the products again from the same vendor (Ragen 1997).
Even though, CRM has a wide recognition as an important business approach no universally accepted definition seems to have been evolved. However, the concept of CRM can be viewed from four different perspectives.
- Analytical CRM – enables organization to classify customers into different segments based on services and products that fit the buying profiles of customers more appropriately
- Operational CRM – deals with relationship issues where the customers’ personalized needs and preferences are analyzed with a view to broaden the organizational response to meet the changing needs and preferences of the customers
- Collaborative CRM – has the purpose of offering knowledge and tools to the organizational members with intent to boost the sales through every available channel
- eCRM – (the focal point of this paper) enables the organization to collect and store customer related information at all touch points within the company so that such information can be made available to organizational members within the company and among external business affiliates through Internet (Mark and John 2005).
Electronic Customer Relationship Management (eCRM) being a sales force automation tool, has become an important business tool which enables organizations to deliver their services and information swiftly and efficiently. Further it also facilitates customers to enter into transactions via online and wireless platforms in addition to the traditional channels of doing business. eCRM should in fact be viewed as a combined force of hardware, software, processes, applications and commitment from the management (Jerry and Nicholas 2003). eCRM is to be considered more as a strategy rather than software that possesses the power of mass-customization of customers. Chen and Hong-Mei (2004) observe that eCRM is able to influence the customer preferences through factors like changes in organizational culture, business process reengineering, improved technological infrastructure and changes in employee behaviors towards customers.
Failure of CRM
Despite several advantages CRM carried, the concept has not been found proliferate after the year 2001 as before because of failures in the implementation of CRM applications. For an organisation to move ahead of the competition, they need more than meeting the presumed wishes of customers. They must strive to increase customer relationship value in every encounter they have with the customer. This is realised when organisation adopt the methodology that involves collaborative and cooperative relationship in particularly, people-to-people relationship with the individual customer. According to Greenberg (2004)
“Customer relationship management is not about hard and software, it is about the ‘people’. Specifically, it is about sales, services, helpdesk and marketing people sharing information about customers. Armed with more complete, timely information, these people can make better decision and, ultimately, keep customers coming back to buy more products. At its core, CRM is an important business methodology that helps companies quickly align their products, services, marketing message, and sales approach with customer needs and expectations”. (Greenberg 2004)
In essence, by achieving better understanding what gives customer greater value with closer interaction through intimate relationship, the organisation is effectively relationship driven. Hence, the building of relationship strategies that aims to enhance value for both the customer and the organisation, resulting in a win-win situation is the key objective of Customer Relationship Management – CRM. This basic objective has not been thoroughly understood by most of the organization that wished to practice CRM through customized software applications which led to the failure of the implementation of CRM.
Another reason for the failure of CRM is that the companies have not carried out a complete thought process for the implementation of an effective CRM by aligning it with the overall business strategies and evolve a successful CRM model. In the case of certain other companies, they tend to focus to a large extent on technology and ignore the importance of gathering data and improving the skills to manage the data and information gathered on the customers and their preferences. It may also be the case that the organization would have set their CRM objectives without a firm basis by assessing the current status of the organization with respect to its capabilities to adopt changes and the receptiveness of the customers to different ways of being managed.
A major reason for the failure of CRM initiatives is that most of the companies do not have the skills to put a comprehensive CRM plan to be pursued by the organization. This may be due to the reason that the firms do not have any experience of working extensively on the CRM models. The failure of CRM may also be caused by a wrong selection of the partners who are expected to support the project or the organizations try to undertake too many CRM initiatives at the same time.
Factors affecting CRM Positively
The foremost requirement for implementing a successful CRM is to understand the objectives of introducing CRM in any organization. CRM is about
- finding the right customers,
- once the right customers are found taking measures to get to know them,
- putting all efforts to grow the values for each other and
- retaining the business from the customers in the most effective and efficient way.
This requires a clear understanding the real opportunities implying that the business should strive to differentiate between the customers who can contribute more to the profitability of the company. After identifying these customers the company should spend time and efforts in conducting extensive research in assessing the needs of these niche customers, the factors that can motivate them to do more business and the ways in which they would like the company to engage with them. Here it is important to consider the factor of emotional loyalty, since apparent behaviour loyalty would often lead to inertia and customer dissatisfaction after sometime which is detrimental for the business growth of the company.
Critical Success Factors
It is also necessary to understand that a wide range of functionalities remain attached with the customer management like sales, service, marketing, manufacturing, logistics, back-office support, partner companies, HR, finance and several other internal organizational processes. Therefore successful CRM involves taking into account an enterprise-wide view encompassing all these functionalities and positioning the required actions designed in such a way that they improve the total CRM model. Chen & Hong-Mei (2004), based on their empirical study have identified six major factors for the successful implementation of CRM. They are:
- champion leadership,
- internal marketing,
- knowledge management,
- business-IT alignment,
- system integration and
- cultural/structural change.
The results of the study showed that large companies were able to take better care of their customers through the strategic intents of eCRM. Medium sized companies use eCRM as a better communication tools and smaller companies as a market place to expand the customer base.
Design Decisions relating to CRM
The organization’s focus should be centred round the development and pruning of areas that will seriously impact the customer experience. However care should be taken to administer process re-engineering tools and techniques as these at times may turn to be more inward focusing operations losing the customer perspective. This would more often stifle the good business practices hitherto followed by the organization and absorb most of the energy of the organization. It is considered wise that companies focus on providing the fundamental transactions with the customers mostly error-free. This can be accomplished by simplifying the steps being taken by the company in respect of customer management and making them more easy for the staff dealing with customer service. Cunningham, Song and Chen (2006) have prescribed the guidelines for the companies for the selection and evaluation of CRM data warehouse and other related technologies. With a proper data warehouse model and the accompanying technological facilities the companies should be able to perform an efficient CRM profitability analysis, market trends, overall lifetime value of the customers, effectiveness of market channels, and product-wise profitability. The results of such an analysis would enable companies to arrive at decisions about customer-specific strategies.
Culture has an important bearing on the organizational success. Organizational culture matters because culture is “a powerful, latent and often-unconscious set of forces that determine the employee’s behavior and the collective behavior of the organization” Since culture forms the basis of determining the mode of operating the business processes, ways in which goals are determined and reflects the values of the leaders, it assumes a greater significance in the organizational performance (Brendler 2006). For the purpose of this study the dimensions of organizational culture and its impact on CRM has been considered. The organizational culture is exhibited by the senior executives of any organization. The people who are involved in the development of new businesses by establishing relationships with the customers being the sales representatives are part of this group. Bentum and Stone (2005) observe that without an appropriate cultural foundation CRM initiatives are not likely to yield the desired results. Integrating a variety of sub-cultures is at the root of ensuring the success of CRM implementation. The authors also observe that evolving a CRM culture is a continuous leadership task at all organizational level.
As a part of an effective CRM the organization should develop and introduce multi-level information technology systems to
- support the integrated customer management business model that encompasses all the salient aspects of CRM,
- enable making people efficient to discharge functions relating to CRM,
- manage the customers efficiently,
- provide measures that will pinpoint the influence on the profitable customer behaviour and
- build a sensible roadmap to CRM so that the information gathering and planning is aided.
Jerry and Nicholas (2003) review a general usability and resistance principle for building up a framework for analyzing eCRM implementations. The study emphasizes the strategies of usability and reduced resistance on the part of the employees. The hardware configurations and software applications should be conducive and user-friendly to enable a successful implementation of CRM. It is important that organization has to focus on the users and their needs. It has also to focus on the strategy for introducing technological support which is adequate and workable towards successful CRM implementation.
Value Creation for Customers
This strategy forms a key competitive advantage for a relationship driven organisation, as it differentiate itself from its competitors. It is the ability to understand clearly what the organisation can offer within it competency that will support the customers create value for themselves. Through close interaction and continuous exchange of information between the customer and organisation with the aim to uncover mutual benefits and opportunities are the important features for the success of the relationship. As an organisation wanting to enhance value for their customers, it has to do more than being close to the customer, it has to be “in the shoes” of the customer to really understand what constitute value to them and how objectives can be fulfilled.
When customer and organisation build relationship with the aim to create value for themselves, it is a continual process, not a one-off interaction. One of the key actions involves the synchronization of the customer and the organisation business processes to each other. This collaborative action creates significant competitive advantage for both parties. Value creation is realised by a relationship driven organisation as it practised the concept of managing from the perspective of both the customer and the organisation value system. Customer relationship management covers a broad spectrum of thoughts from product, customer and production or organisation.
Mark and John (2005) describe the ways in which the knowledge possessed by the customer can be acquired and the ways in which an analytical CRM can be developed in order to put to use the information and knowledge so gathered. The contents of the information mostly relate to the identification of the nature and behaviour of the customer and the pattern they follow with respect to their needs and preferences. It also explores how an organization can make use of its CRM applications to get access to customer information and disseminate it among internal and external users. Therefore the ability of the organization to have a CRM application that facilitates value creation is a must for successfully implementing it.
This paper brought out the major factors that affect the implementation of CRM leading to failure in its application. On the positive factors this paper identified the critical factors that ensure the success of the CRM implementation. It is also observed out of research that the design decisions of an organization in deciding the data warehouse and related technologies so that the organization would be able assess the customer information needs of the organization and access them without extra efforts. Organizational culture has also found to have serious positive impact on the successful implementation of CRM. The attitude of the senior management towards handling customer needs and making the entire organization adapt itself to the culture is an essential element to ensure success of any CRM implementation. Procuring and installing appropriate hardware and software which makes the information collection and dissemination easy and fast is another factor that guarantees success in CRM implementation.
The technology adapted for this purpose should prove useful and should not trigger any resistance from the users. Knowledge acquirement is one of the major factors that have a positive influence on the CRM implementation. The ability of the company to ensure value creation for the customers from the knowledge acquired from the customer is at the root of any successful CRM implementation. The organization should be in a position to keep up with the changes in the needs and preferences of the customers and meet those changes without any delay. This would eventually lead to creation of value for the customer and this is the essence of an effective CRM.
Bentum, Ralph Van, and Merlin Stone. “Customer Relationship Management and the Impact of Corporate Culture – A European Study.” Journal of Database Marketing & Customer Strategy Management 13, no. 1 (2005): 28.
Brendler, Bill. Why does Corporate Culture Matter? 2006. Web.
Chen, Qimei, and Chen Hong-Mei. “Exploring the Success Factors of eCRM Strategies in Practice.” Journal of Database Marketing & Customer Strategy Management 11, no. 4 (2004): 333.
Cunningham, Colleen, Il-Yeol Song, and P peter Chen. “Data Warehouse Design to Support Customer Relationship Management Analyses.” Journal of Database Management 62, no. 84 (2006): 62.
Greenberg, Paul. CRM at the Speed of Light, Essential Customer Strategies for the 21st Century 3rd Edition. London: McGraw Hill, 2004.
Jerry, Fjermestad, and Romano Jr. C Nicholas. “Electronic customer relationship management: Revisiting the general principles of usability and resistance – an integrative implementation framework.” Business Process Management Journal 9, no. 5 (2003): 572.
Mark, Xu, and Walton John. “Gaining Customer Knowledge through Analytical CRM.” Industrial Management & Data Systems 105, no. 7 (2005): 955.
Mithas, Sunil M S Krishnan, and Claes Fornell. “Why do Customer Relationship Management Applications affect Customer Satisfaction?” Journal of Marketing 69 (2005): 201-209.
Ragen, B Matthew. Customer Management: Orignis and Directions. 1997. Web.