CRM meaning, CRM architecture and the core benefits of CRM

CRM meaning, CRM architecture and the core benefits of CRM

Chapter 3

3.1. Literature Review

The two previous chapters provide the background and the problem discussion of this study. In this chapter, the author review earlier studies within the purposed research area, having as aim to provide relevant literature in the field of CRM. The author will analyze the meaning of CRM and how it is involved in a software project life cycle.

In addition, the author will highlight the importance of CRM implementation in an organization and the valuable benefits that proceed from it. Finally, the author will examine the factors the lead a software enterprise to have a frustrated CRM and point out the problems that occur due to it, and give solutions in order to improve CRM and achieve customer’s satisfaction.

3.2. Understanding the meaning of CRM

For many years, the organizations have focused much of their effort on cutting costs and improving of their effectiveness. They have attempted to update internal processes such as logistics and finance, but the management effort concerning the customer into activities, such as sales and marketing, has often deferred.

As markets strengthen and suppliers become more efficient in delivering products and services it becomes harder to be competitive and strong. What differentiates one product from another similar? At the same time, as the quality of the products and services improve, customers’ expectations increase the same.

That gives to the customer the ability to switch supplier with easiness and becomes harder and harder for the organizations to keep their loyalty.

The spirit of Customer Relationship Management is about knowing your customers and the way they want to be treated. CRM is about customer knowledge, not about a complex and dynamic software. CRM can have many definitions and a wide range of scopes, but it can also be easy and simple as managing your actions and keeping your promises.

Customer Relationship Management is a strategy used to learn more about customers’ needs, wants and expectations in order to develop stronger relationships with them.

The effective CRM can be defined as the key for business success, while it is a business philosophy which places the customer in the heart of the organization’s culture, processes and actions. There are many definitions about CRM that have been developed all these years.

According to Ko et al. (2004), CRM is defined as the integrated customer management strategy of a firm to resourcefully manage customers by providing customized goods and services and maximizing customers’ lifetime values. Kincaid (2003) characterizes CRM as “the strategic use of information, processes, technology, and people to manage the customer’s relationship with the company across the whole customer life cycle.”

According to Swift (2001), CRM is also defined as “an enterprise approach to understanding and influencing customer behavior through meaningful communications in order to improve customer acquisition, customer retention, customer loyalty, and customer profitability.”

The quality of customer service is determined and evaluated by the customer, and this affects the desirability of a relationship with the organization. Customer service creates the moments of truth with the customer, and these service encounters need to be managed by the organization (Payne, Christopher, Clark & Peck, 2001).

The aim of CRM is to help the organization to get insight the customers’ behavior and the value of them, so as to increase their loyalty. The goal of CRM is to achieve a competitive advantage in customer management and ultimately increase profit levels (Gartner Group, 2005, 2006).

It is general believed that attracting new customers costs five times as much as keeping or managing existing ones, which means that existing customers contribute five times more sales than new customers do (Seo, 2001).

The crucial point of a CRM approach is the acquirement, maintenance and generally customer profitability of a particular group of customers:

Acquirement of customers: this refers to the need of organization to find new customers for their products. This means they have to develop strategies to attract potential customers to buy the product. The cost of attracting a new customer is estimated to be five times the cost of keeping a current customer happy (Kotler, 1997).

Maintenance of customers: organizations also have to focus on existing customers in order to make certain that they keep on purchasing and persist supporting the product.

Organizations can raise their profitability by between 20% and 125% if they improve their customer retention rate by 5 percent (Peck, Payne, Christopher & Clark, 2004).

Profitability: Customer profitability reflects the financial performance of customers with respect to all the costs related with a business deal (Gordon, 1998). Profitability concerning CRM is defined in the light of the lifetime value of the customer to the organization, taking account the profits and expenses related with each customer and their particular dealings over time (Gordon, 1998).

3.3. The Customer Relationship Management architecture

The CRM architecture can be broken down into three groups: operational, collaborative, and analytical. Each of them has an important role in CRM strategy, and an organization that wants to success must understand the value of using these three categories effectively:

Operational CRM deals with the automation of certain processes in the organization.

When a contact is made with a customer, the information of this interaction will be automatically inscribed in a database, and the organization will be able to have all the considered necessary information of that customer when it is needed.

The next essential element of CRM architecture is analytical CRM. Analytical CRM deals with analyzing data that is collected by the organization. This information will be analyzed so that the organization can improve its customer service facilities.

By improving its customer service facility, the organization will be able to build stronger relationships with its customers and gain their loyalty, which can be translated as more profits.

There are many ways that analytical CRM can be used in order to achieve this. It can be used to make available essential information to customers in a short period of time.

Moreover, analytical CRM can evaluate the methods of sales, inventory, and profits in order to find new methods that are not consistent. Analytical CRM is also important when it is part of product development and risk management processes.

It is important for the organization to understand that analytical CRM is a continuing procedure and may there is the need to adjust its methods to this information that is examined through analytical CRM process.

The third important component of CRM architecture is collaborative CRM. This aspect is important because it gives emphasis on the contacts that the organization will make with its customers.

These contacts could be personal, or they could come through mediums such as telephone or mails. When contacts are made with customers, collaborative CRM allows the organization to present them helpful information, through a powerful form of communication that will use numerous methods and technologies.

Since the aim of CRM is to discover customer’s needs, wants and expectations and try to filled them, collecting and analyzing the information from the contacts with the customers will help to strengthen the relationships with the customers.

Customer relationship management may be the most dynamic solution in order to stop problems before they arise. Preventing problems is much easier and costs less than trying to solve them when they occur.

3.4. The core benefits of Customer Relationship Management

CRM researchers had assumed that CRM benefits varied by the type of the organization as the methods and technologies related to CRM were customized to specific organization processes.

Nowadays, however, the desired CRM benefits do not differ to a great extent across the organizations or countries, as had earlier been considered. Almost any business can benefit from a comprehensive approach to CRM, in a variety of ways:

For the organization: By collecting all the needed information in one available data base, a CRM system reduce the amount of errors an organization is possible to make in dealing with customers.

Knowing that addresses and contact information are truthful and managing service agreements to allow salespeople to have access to this information through the CRM system, they become more focused on delivering brilliant customer service and as a result to increase profits.

CRM can also automate communications and other functions of the organization. A CRM system can be programmed with auto responders that send information when requests are sent to exacting e-mail addresses and that from time to time send customers newsletters, new product information, reminders, relevant news and the like.

Because this is followed and managed by the system, it cuts down on the time it takes to keep customers informed about the organization. Because all these data are collected in one location, salespeople can easily manage quotes and estimates and view buying models.

For the customers: Customers benefit from CRM systems because of increasing efficiency and effectiveness of customer service. When a customer calls to place an order or receive assistance, he or she no longer has to wait for the “right” person to help, because anyone with access to the CRM system can provide assistance.

This increases efficiency and gain customer’s loyalty. The customer feels that the organization is close to him, knowing his needs, wants and expectations.

For the employees: A CRM system can help the employees by empowering them to help customers more professionally, which permits them to do their job better, limiting some sources of dissatisfaction and increasing job pleasure. Since employee-customer contacts and their results are often captured in CRM system, both employees and their supervisors can invest time on areas that need improvement.

Furthermore, CRM provides an early-warning system for employee effectiveness to avoid problems before it becomes embedded. The CRM system can bring to light clues to these conditions much sooner than an employee, who is busy trying to overcome the obstacles rather than change them.

For salespeople: CRM gives salespeople better and more convenient access to all the needed information. For marketing personnel, CRM offers an easier way to manage and track campaigns and other promotional movements.

For customer service employees, CRM provides direct access to customer information and contacts, allowing them to avoid possible problems before they develop into issues.

The following lists of desired CRM benefits were collected and summarized from recent CRM studies.

Table 1 : Summary of CRM benefits