Customer Relationship Management in Retail Industry : Capitalization on CRM

By January 17, 2018

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.

With time, CRM has been used to define strategy in an organization. According to Laudon & Laudon (2007:102) the adoption of information systems (IS) allows for a tighter linkage between suppliers and customers, and assists in the achievement of competitive advantage.

In order for CRM to be successful, it is essential that all components of an organization process be covered. This begins with the commercial strategy adopted by the organization, and moves into the improvement of the enterprise and its work design by adopting technical means. According to Hintze (2006), “the key of CRM is to create a truly customer-centric philosophy, and help every member in organisation to follow up this philosophy”.

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.

The equal treatment of customers by companies has needed a change of sorts. Compromising on the quality of service can lead to defection by customers, and hence, enterprises need to be able to understand what standard is required by each level of customer.

Best Customers First

Unless an organization is able to differentiate between the values of customers, it is unlikely that customer retention activities will hold no positive result. Businesses should treat their best customers with as much loyalty as they exhibit on the establishment.

Single View of the Customer

In a balanced service situation, the customer with lower expectations will likely end up being happier than those who are more demanding. This relates to the fact that more valuable customers can be enticing to competitors and thus prove harder to retain.

Optimizing ‘exchange of value’

A company’s knowledge on a customer is the key to optimizing the value of the relationship between the two entities. Meeting customers’ value expectations is the key to customer profitability, since it is value that creates satisfaction, which results in customer loyalty.

Tactics for Improvement

The most common cause of annoyance in customers is the time experienced in waiting for service. For organizations who wish to realise the satisfaction of high-value clients, it is important to give them some form of special treatment, that will allow their resulting level of acceptance to be higher, and thereby create a stronger line of loyal clientele’.

The correct targeting of promotions is also another way of ensuring customer satisfaction, since expectations can be managed to effectively identify the right time and channel.

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.

An organization needs to recognize the unique situation of a customer at any particular time. CRM systems can be used as tools to measure how various facets of a customer’s interaction with the business and how it affects the business.

Motivating Loyalty

To achieve customer loyalty, a business needs to address the following areas: the key services that of value to their customers, the incentives they can be offered in return for loyalty and the performance measures that need to be implemented so that incentives have the right effect.

It is important for a business to show commitment to the customer, by creating an environment that provides a valuable service and embodies a sense of accountability. It is important for the customer to feel like a part of the organization, and this can only be achieved if a positive perception is implemented by the business.

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.

Consumers: Selection and Positioning

According to Peelen (2005:25), a customer or client is defined as “the individual or group who are willing to buy products for sustained earnings of a business”. Meanwhile, according to Grönroos (2000:61), the effective customer is “a group of consumer who agrees to the values of corporate identity, service concept, and accepts to provide return for the corresponding products and services”.

The aim of CRM is to help organizations to manage their marketing and build up a better relationship with the customer. Some of the purposes that a successful CRM program includes are:

      • Improving customer satisfaction
      • Improving customer loyalty
      • Customer-oriented focus on demand
      • Improving sales

Management: Theory and Technology

Enterprise CRM programs are set up on the basis of technical support. According to Kumar and Reinartz (2005:192), the following technical tools are used in CRM programs:

      • Data warehouse technology
      • Data Mining Technology
      • Database System Technology
      • VOIP technology
      • Email and Internet technology
      • Wireless communication technology

The objective of these tools is to offer customers a variety of media to maintain communication with the organization. Additionally, they are also used to collect information about the customers and analyse the data for improvements in processes, services or products.

Focus on CRM technology and business application is important in the overall success of established processes for an organization. The collection and analysis of customer activity holds vital data that could result in the market strategy success for the organization. Additionally, CRM can help in the promotion of sales, and provide valuable insight for new product development and improvement, which could be used to retain and attract customers.

According to Dyché (2001:189), it is necessary to improve the six core competencies in the implementation of CRM, shown below:

      • Customer Value Management
      • Mining sales opportunities
      • Sales implementation
      • The collection and use of customer intelligence
      • Found that the potential value of customers (cross-selling)
      • Customer service and customer retention

The success and failure of a CRM program depends on the organization’s understanding of the underlying values and the concept of customer-centric concept.

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).

Some successful examples of CRM implementation by retailers include Wal-Mart, Tesco and Boots etc. The example of Wal-Mart is highlighted below:

“There is a story that a large supermarket chain, usually Wal-Mart, did an analysis of customers’ buying habits and found a statistically significant correlation between purchases of beer and purchases of nappies (diapers in the US). It was theorized that the reason for this was that fathers were stopping off at Wal-Mart to buy nappies for their babies, and since they could no longer go down to the pub as often, would buy beer as well. As a result of this finding, the supermarket chain is alleged to have the nappies next to the beer, resulting in increased sales of both.” (Onetel.co.uk, 2009)

Utilizing CRM, Wal-Mart was able to collect detailed customer information, and then create a flexible and high-speed supply chain IT system for effective business strategy. The model adopted by Wal-Mart model amalgamated the enterprise resource planning (ERP) and with a strong communication medium to create a hybrid system that could allow it effectively understand the trends being adopted by the consumer. From the above case study, Wal-Mart was able to quickly reflect on the consumer demand, linking it to production and following up with the development of a customized product according to customer needs. This is identical to the model used by ASDA in the United Kingdom, acquired by Wal-Mart. While the general perception may be that the organizations are focused on price, the actual benefit of employing IT systems in collaboration with CRM systems is to systematically understand the customer, and market according to the developing trend, growing the consumer-base steadily.

The implementation of CRM helps an organization to compete both in service and quality. According to Freeland (2002:118), the key point of CRM is that it helps organizations win customers enhance stable relationships, utilising appropriate time, money and resources of the organization.

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.

4: Analysis and Conclusions

The purpose of Customer Relationship Management (CRM) is to give organizations the ability to manage their customers in an efficient and effective manner (Wikipedia, 2009). This is achieved through the introduction of systems and procedures that are reliable, especially when it comes to any form of interaction with customers. The hi-tech world that we live in requires organizations to modify their business processes along with installing software that will make the CRM system more effective. However, assuming that a CRM system on its own will be the key to success is wrong.

Organizations need to understand that technology is merely the starting point, with the importance lying in embedding customer focus into the culture and procedures of the company, especially in order to gain competitive advantage in the industry and market.

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.

Since system customization is a costly exercise, organizations should take into account the future needs that could develop, and design CRM systems that are configurable to changing business demands. This will allow the business to reap optimized value from its customer, while keeping in-sync with the organization’s short and long-term goals.

Timing is everything in an effective CRM program. Knowing about the customer and their habits helps a business identify the right time and product to ensure that the system produces the results that help the productivity of the business. Also, a business should give due importance to the regular monitoring and refinement of various processes, so that the organization can retain optimum performance in all aspects.

The CRM process is divisible into the following:

  • Profile the Market: This refers to the grouping of customers based on their different characteristics. Segmentation of customers can be done on the interaction that they have at the time of sales or the way they wish to be informed of upcoming products or events. The creation of a profile for each customer allows for a systematic flow to be embedded in the CRM process design.
  • Design Communication Strategy: Communication with clients can take several formats. With multiple modes at the disposal of the business, it is important that the right one be selected in order to have a stronger and positive response from the consumer. The choice depends on the nature of the business and the message being imparted, but the mode could be print, mail or electronic.
  • Implement Strategies: Any strategies designed by the organization should fit within the culture and the operational processes. Once this fit is determined, the strategy should be implemented. As an example, the strategy could be linked to the sending out of direct mails that have been prepared for introduction of a new product. As a CRM strategy, it is essential that staff who deal with customer are well-informed of the segments and the strategy, so they can be ready to pass the information to customers, or direct customers in the right direction. Where customers have been classified for a particular level of service, this would require more organizational entities to remain in the loop, in order for the strategy to be effective.
  • Evaluate Results: At the end of the implementation, it is important for the company to assess the effectiveness of the strategy. In terms of any campaigns, this could be in the form of numbering the performance of various aspects of the process, by both the customer as well as an internal individual of the organization. This data helps in analysing the changes that should be adopted for future strategies.

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:

  • The building and managing of ongoing customer relationships remains the essence of the marketing concept. But organizations should not look forward to increasing the relationships on a quantity scale. Instead, the focus should always be on improving the quality of the existing relationships, and any new ones that may develop with time.
  • The concept behind relationships is that they evolve with distinct phases. Businesses should not view these or measure them as independent incidents, but instead focus on them as interdependent transactions that create their own dynamic system with time.
  • At each stage of an organizational process, a firm will interact with customers, and manage the relationship. It is important that the firm show a difference in each interaction and manage the relationships in a variety of ways. CRM systems allow companies to manage each stage of the relationship in a systematic and proactive manner.
  • With new procedures adopted by organizations, it is essential that the value of every relationship be independently assessed, in order for the firm to allocate different resources to each type of relationship.

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.

Some key attributes of creating good customer relationship are:

  • Giving time for the development of a relationship, through the utilisation of various activities that a company can provide to the customers.
  • Establishing a two-way communication medium. This reflects on the ability to offer a medium to listen to suggestions and complaints that a customer may have. Communication allows the organization to have a better understanding of the consumer, and develop a stronger bond with them.
  • 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.

CRM Retention Strategies

Customer retention is important, because it is cheaper to keep existing customers happy than to attract new ones. It is due to this reason that businesses continue to invest in CRM, as customer turnover cost can result in an overall loss for the business. For customers, the decision of engaging with any business comes down to the satisfaction and value that they can receive or expect to receive.

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.

Charles Schwab, the investment and financial company, embraces the notion of managing customer value (CRM Magazine, 2008). The company analyzed the method in which clients did business with them and anticipated emerging priorities that could develop. The organization’s customer retention improved due to their ability to understand ad project what customers might value in the future, having monitored their current behaviour. By utilizing technology to improve data mining and sales processes, the information was applied to establish marketing strategies that could entice potential customers.

The establishment of a communication channel is dependent on the importance that a company places on the relationship it has with its customers

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.

The customer relation process should include methods of determining the cost that each customer brings to an organization, in order to be able to calculate the value of the relationship and allow the business to focus on those which are more profitable than others. The concept behind such an analysis is to be a win-win situation for both the customer as well as the organization, as the elimination of transactions which are not feasible or of value to the organization would allow more focus to be made on the ones that do matter. Hence, customers who are symbolic to the effectiveness of the business would be given special attention and have stronger relationships with the company.

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.

Another aspect for the organization to consider prior to making any decisions is the future sales that a customer could bring in. This means that even if a current customer is high maintenance for the business, but is likely to generate larger volumes of trade with the organization, it is feasible for the long-term growth of the organization to retain the customer. Due to the multitude of options that must be considered, customer relationship management systems should be able to assist in determining pending and possible opportunities.

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.

For an organization, it is also important to recognize the opportunities of value, especially when a customer is prepared to pay extra for services or goods. In this case, there is a need for a more systematic approach to be adopted when information is collected about the customer. The collected information should be detailed and complete, as well as relevant to the need of the business. For example, the data from sales calls, customer service centre calls, internet usage, and all other points of contact can be put together to give the company a “360-degree view”. However, the data must be relevant, in order to properly represent the customer view. This is a continuous process, and part of a forward-looking strategy to anticipate the customer’s needs and wants, allowing the company to focus on future products and services that are likely to be demanded by the 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.

It is important for CRM processes to be implemented across all departments of a business, especially the sales and marketing ones which forms the core focus. In recent years, corporation have become attracted to a new ideology or market approach called customer value management. The aim of this process is to identify the value that can be delivered to a customer through processes and services running in parallel to the product offerings. This new approach encompasses a key idea of CRM which is to focus and understand the customer, and target the ones who bring more overall value to the organization, rather than simply going after larger volumes of clients.

In order for there to be a successful relationship, it is up to the company to perform a customer’s profitability analysis. This analysis allows the company to judge whether or not a customer is doing well against the set of products and services that are on offer, allowing an informed decision to be taken in regards to finding an ideal solution. It is also important for an organization to understand the variety of customers that it has relationships with, and therefore must accommodate when establishing new strategies or developing new products and services.

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.

A complete CRM system is a combination of each of these types of relationship strategies: value-added incentives, emotional bonding, an interactive dialog, customized and personalized treatment, and an eye towards the ethics of the situation. The key objective of a comprehensive CRM system is its ability to retain customers at each stage of the business life cycle.

Credit: Imran Hossain Rony – https://www.academia.edu/9847645/Customer_Relationship_Management_CRM_in_Retail_Industry