Effects of Implementing CRMs in Business
With the current competitive business environment, organizations are putting their best feet forward in an attempt to keep an edge in the market if not to secure an extra customer in the constant race to increase their profits. They are committing resources for the sole objective of acquiring, retaining and ultimately ensuring a growth in their client base. Such is the role of Customer Relationship Management (CRM), which refers to the technological application in methodologies and tools that are aimed at helping a business manage its customer relationship in an organized manner (Ward, 2004).
CRM processes provide businesses with the information they need to know about their customers thus ensuring that they provide the highest level of customer service and satisfaction to the most profitable customers. In light of the above, this paper will evaluate the effects of implementing Customer Relationship Management (CRM) in businesses. Prior to the current advancement in technological advancement, the separation of the producers from the consumers of their goods or services was as a result of the natural outcome of the industrial era.
Producers did mass production but used middle men to reach the consumer, thus the consumer and the producer were often separated. On the other
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According to the writings of Gaurav, a discipline known as “Relationship Marketing” focuses on the relationship between the various stakeholders, summarizing the various variables linking them as Trust, Cooperation, interdependence and power, shared technology, social bonds and commitment (Gaurav, 2007). With corporate objectives, mission statements and vision statements, the role of ensuring customer satisfaction is no longer the responsibility of the marketing department alone but rather, is addressed at all levels and by all departments.
Gaurav reckons that in industrial marketing, relationship is built over time with increasing experience, reduction in uncertainty and greater commitment. He believes in quality and service in marketing with focus on customer satisfaction and value (Gaurav, 2007). The better the value delivered by the organization, the better the relationship and the two are inseparable. Whatever school of thought, customer acquisition and retention are the bases of Relationship Marketing.
Application of technology notably in CRM can be seen as the latest approach towards Relationship Marketing, as it is a comprehensive strategy that aims at achieving a collaborative relationship between an organization and its customers. CRM integrates the functions of sales, customer services as well as goods and service supply chains that enhance greater efficiency in the delivery of customer service.
It can then be seen as the marriage between the advancing technology and customer orientation that nurtures the bond between an organization and its customers, bringing the dream of enjoying such a long term relationship with a customer, especially the profitable ones to a reality. CRMs are therefore not an end but a means to the end of achieving success in the field of marketing. Conceptual Components of a Customer Relationship Management (CRM) Advances in technology have made businesses to focus much of their attention on issues concerning E-business and E-commerce.
Such encompass the various activities that are carried out with the help of computer networks such as the inter and intra organizational commerce and transactions that take the form of two businesses transacting (B2B), businesses and their consumers (B2C), businesses transacting with governments (B2G) and so on. According to an article in the Journal of Computer-Mediated Communication on “The impact of CRM on customer loyalty”, networks, especially the internet have a big potential as a tool for conducting business and related business management activities (Lawson-Body & Limayem, 2004).
The article further reckons that CRMs are among the leading technological approaches in business that have been adopted and with initialization, establishment, maintenance and the development of both successful and long term relationships. One of the conceptual components of CRMs is the promotion of customer loyalty which in turn can ensure mutual benefit to both the customer and the organization or the service developer who are in the effort to acquire a large and a loyal customer base as possible (Lawson-Body & Limayem, 2004) .
According to Limayem and others, the first step toward this is client prospecting, which refers to the various aproaches that business use to locate, attract and track new customers. To this effect,many organizations have put up databases that contain detailed and interactive data relating to clients and their prospects. In some intances, the concept of CRM is understood to be on an increasing scale, shifting from a customer prospect, client and suporter through to a partner.
Client prospecting therefor plays a major role, being the first step towards the linkage between customer acquisation, customer retenton and the benefits that accrue thereafter. Having initialized the relationship with customers, the next component of a CRM deals with how to maintain them and enhance the growth of the relationship. According to the recordings of Lawson-Body and Limayem, the relationship between a business and its customers represesnt the cornerstone of a Customer Relationship Management, and this concept further leads to customer loyalty.
Further, the two writters have it that there has been a shift in paradigm, and the ralationship between a business and its customers can be seen as a unit of value, probably explaining the concept of shares. The next conceptual component of a Customer Relationship Management is its interactive management nature. This component aims at tranforming the prospective component first into a real customer. He is further tranformed into not just a customer but an effective, profitable and an active customer.
This is enhanced mainly through inclusion of channels of feedback that are important and core as far as interactive managemnt is concerned. Lawson-Body and Limayem in their article “The Impact of Customer Relationship Management on Customer Loyalty” acknowledge feedbacks as the best way for a business to keep in touch with its customer needs (Lawson-Body & Limayem, 2004). To manage a person even in real life often calls for managing their expectations as well. CRMs therefore equally enhance management and understanding of customer expectations.
Expectations are often accompanied with questions and complains, and according to an article by Isight on “Customer focus, Expectation and loyaalty”, complains and questions from customers should often be regarded as free information (Customer Focus, Expectations and Loyalty, 1999). As such, the two should be used to build more knowledge regarding customer expectations, and therefore guide future decisions that could help win the customer loyalty. Empowerment, both for employees and customers is also one of the components of a CRM.
Empowerment can be looked at as the strategy that an organization uses to encourage and reward employees who show initiative, make creative and valuable initiatives as regards assisting customers solve their problems. Infact, Lawson-Body and Limayem report that they are yet to come across an organization or a business that has already achieved high customer loyalty without first fostering the same on its employees. Further, they note that most employees prefer to deal with only the regular customers, as they are well aware of the business preocupations and therefore make achievable demands.
CRMs therefore try to address this issue by equiping the business as a whole with the information on what challenge the employees handling non-regular customers face(Lawson-Body & Limayem, 2004). Equally important in CRMs is the conceptual component of partnering. This is said to be achieved when businesses work closely with their cuustomers and as a result add the desired qualities by their customers to their traditional goods and services. This partnering results into a human like relationship in which the business works to serve the customers and hence loyalty between the two.
At even higher levels of partnership, a business could assign a representative to a customer such that the representative handles the desires and product needs of the particular customer at a closer personal level. An example of personalization could take the form of distribution of customized e-mail to a client regarding any cahanges say on physical address or even some product features (Lawson-Body & Limayem, 2004). A clear distinction should however be made between the conceptual components of a CRM and marketing mix. The earlier is mutual while in the latter, the business takes an active role while the customer takes minimal initiative.
Additionally, the main concern in the marketing mix is the market as a whole while CRMs aim at growing relationships at the lowest customer levels (Kumar, 2008). Lastly, the objective of all the said components is to ensure customer loyalty, that is evidenced by a repeated purchaes of products and services from the given business. As an example, frequent fliers database is a good example of a valuable information for an airline company. It contains some wealth of information about its customers and mainlythe frequent fliers.
According to Syed, a careful selection and implemention frequent flyer application would compliment and provide a firm foundation for the implementation of an iarline CRM effort as well as initiative. As illustrated in the diagram below, loyalyty and frequent flyer programmes provide a sustainable and renewable ompetitive advantages often via ontinous innovation, service differentiation and what is often referred to as cost leadership. As such, programs lie at the heart of the airline CRM strategy, thus providing a solid platform for healthy and growth of their customer relationship (Syed, n. d).
The summary can be represented as shown in the figure below. Source: Syed Once a business has a loyal cutomer base, it is able to devote its attention and resources to other growth related matters. Loyalty is therefore considered as the final result of effective CRM systems and often implies more profit (TNTSolutions, 2010). This is what this reserch will link to the physical technological application of CRM computer systems and therefore evaluate the effects of such systems applications to a business, as CRMs are widely implemented strategies that are implemented through use of technology and can be summarized as shown in the figure below.
Source: TNTSolutions Positive Effects of implementing Customer Relationship Management As stated else where in this reserarch, the main of a CRMs applications is better understanding and serving of the existing customers and at the same time developing servuces fir the new ones. It is the kowledge of customers that big organization are trying to replicate when they invest in Customer Relationship Management softwares. Such softwares have made the collection of data relatively straight forward for large organizations such as banks and supermarkets.
The concept has therefore become bound with information technology, and as Business link, a government supported network targeting the small and medium Enterprises (SMEs) puts it, CRM is much of a business attitude as opposed to a technical solution (Trapp, 2007). The same has been proved by the conceptual components of a Customer Relationship Management discussed earlier. It should however be noted that CRM can not be lookedat purely in terms of technology, but again can not be introduced into an organization without atleast some technology.
After all, it is only technology that enables the key aspect of a CRM notably to integrate all the means and channels through which, companies communicate with their clients such as e-mails, telephones and the internet (Trapp, 2007). In his writing, rogger further recons that many companies in a variety of industries are now enhancing their Customer Relationship Management and Supply Chain Management (SCM) capabilities with predictive analytics and hence enjoying market leading both in growth an performance.
Though many reserchers warn that there are many challenges to Customer Relationship Management implementation, and that organizations implementing the technology must be prepared to first breakdown and have a boundary between activities that were once segregated such as sales and marketing from those inclined to Supply Chain Management such as supply and logistics, the idea is that business are thereafter able to align their forces of supply and demand more accurately and thus become more responsive.
Moreover, when fully effective, a CRM is able to improve the internal processes within the organization in addition to personalizing the organizational external relationships. Through data integretion, increased customer retention and effective response in the market place, the software impacts on the business in various ways (SoftwareGuide, 2010). The first impact of effectively implementing a CRM is increased revenue and hence more profit. Once a company has implemented a CRM software solution that matches its strategies and objectives, the management is then able to develop a long term plan for increasing the sales and hence more revenue.
According to SoftwareGiude (2010), the software makes it possible and easy to make sales and forecast data is immediately available. This therefore informs decision making in that it is now possible to decide on where to cut costs, what levels of inventory to stock or what discounts may be allowable to customers. According to Business Link, these increased sales are additionally as a result of better timing and therefore anticipating needs based on historical trends (BusinessLink, n. d).
Further, CRM systems for marketing, otherwise called marketing automation do help the marketing teams. According to TNTSolutions, a key marketing capability begins with competitive positioning spilling over to brand strategy, multichannel campaigns including emails, search, social and other media. Marketing automation also encompasses other capability for managing customer loyalty, collateral and internal organizational marketing resources (TNTSolutions, 2010). Marketing automation can be represented as shown below.
Source: TNTSolutions According to the recordings of SoftwareGuide, CRM implementation also results into improved capture of sales leads. When are able to generate a large amount of leads, then can then increase their sales and hence their revenues. CRMs often come with automated work flow capabilities that may even include set timers. CRM software therefore enables sales persons to view sales leads which later disappear when such leads are transformed to customers.
They further create specific sales territories and hence sales and marketing staff can manage their activities with concise reports from CRMs, with effective and targeted marketing communication that are often tailored to suit certain specific needs (SoftwareGuide, 2010). This coupled with improved customer profiling and target marketing, an approach that ensures that CRM software is able to capture the client details such as their outstanding balances, any pending orders as well as payment history ensures that an organization understands and is therefore in a position to serve its customers better.
According to Honeycomb, marketing, especially through the use of DataCentres makes it possible for organizations to profile their customers based on unlimited criteria such as through the individual customer profile such as location, age, products bought, how often they make purchases, which market campaigns they have been included in as well as how they respond (Honeycomb, n. d). Honeycomb therefore suggests a marketing strategy referred as closed loop marketing, which entails the creation of an environment of communication programs between businesses and their customers.
All the interaction as well as calls to action can be tracked and therefore all activities assessed on a return-on-investment bases, thus creating brands while at the same time shifting perception. Honeycomb’s closed loop marketing with DataCenter strategy can be summarized as in the next figure. Source: Honeycomb Further, CRM software implementation results to flexibility, mainly trough scalability. Scalability is particularly an important factor for the expansion of small ad medium sized business (SMEs) who would want to develop various customer offerings but do not wish to, or have not enough resources to commit to this.
With CRMs such as SalesProCRM, they come with a package that requires no software installation on such user’s computer and thus giving the users a chance to build up their systems to match their needs (Ward, 2004). It is also noteworthy that some CRM software vendors often allow small business to rent licenses and then let the CRM vendor manage and maintain the software application. This lets the small businesses free to concentrate on their core business.
Once the business has expanded and would like to expand their CRM capabilities, the vendor can then issue a user license which requires annual maintenance through licensing fees, which gives the company greater sense of security, as vital customer data is from then on maintained by their internet protocol network. Other options include software solutions for small businesses that use web based applications to share their data such as Microsoft outlook or ACT (SoftwareGuide, 2010). These help businesses to integrate their CRM solutions to their business objectives and long-term plans thus lessening their administrative efforts.
Improved customer service delivery is also another impact that results from CRM implementation in business. CRM software include customized access to centralized customer data and other items such as e-mail templates that allow CRM associate customers and their details, to b communicated easily. They also ensure easy communication with the business when such customers need assistance on either services or products. Such customer details are often captured from point of sale terminals, point of sale systems or other sales and purchases data (Trapp, 2007).
Another effect of CRM implementation is the increased selling and up-selling chances for already existing customers. According to SoftwareGuide, businesses make more money when they are able to retain their customers through loyalty as opposed to burning up their resources trying to secure new customers. With sales leads and other customer data from call centers, business surveys and other research or enquiry, all coupled with existing customer data, customer representatives and sales teams can offer expended services to the business customers (SoftwareGuide, 2010).
Among the key benefits of CRM use is the access to information that is useful in decision making in an organization. With a CRM software implementation that contains a competitor tracking function, the management as well as the sales personnel can access those reports, trends, measures the competitor capability, track sales processes and in return evaluate their business performance with the competitor as a benchmark. According to TNTSolutions, CRMs can even enable access to important resources such as brochures, white papers and even reports belonging to a competitor (TNTSolutions, 2010).