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City University of Seattle
In Partial Fulfillment of the Requirements For the Degree of Master of science project management - June / 2008

CRM: Strategy or technology? Knowledge requirements of CRM

  1. The customer’s life cycle and the CRM
  2. CRM meaning, CRM architecture and the core benefits of CRM
  3. Implementation of CRM strategy, Metrics of CRM effectiveness
  4. CRM: Strategy or technology? Knowledge requirements of CRM
  5. Involvement of CRM during the life-cycle of a project: case study
  6. The significance and the impact of CRM into the enterprise

CRM Strategy or technology Knowledge requirements of CRM

3.8. CRM: Strategy or technology?

The term “customer relationship management” appeared in the information technology (IT) community in the mid-1990s. It is often used to describe technology-based customer solutions, such as sales force automation (SFA). In the academic community, the terms “relationship marketing” and CRM are often used interchangeably (Parvatiyar and Sheth 2001).

However, CRM is more usually used in the perspective of technology solutions and has been described as “information-enabled relationship marketing” (Ryals and Payne 2001, p. 3). Zablah, Beuenger, and Johnston (2003, p. 116) recommend that CRM is “a philosophically-related offspring to relationship marketing which is for the most part neglected in the literature,” and they conclude that “further exploration of CRM and its related phenomena is not only warranted but also desperately needed.”

A considerable problem that many organizations deciding to adopt CRM face stems from the great deal of confusion about what composes CRM. To some, it means direct mail, a loyalty card system, or a database, while others imagine it as a help desk or a call center.

Some say that it is about populating a data store or undertaking data mining; others consider CRM as an e-commerce resolution, such as the use of a personalization engine on the Internet or a relational database for SFA.

This lack of a broadly accepted and suitable definition of CRM can contribute to the failure of a CRM project when an organization examines CRM from a narrow technology point of view or undertakes CRM on a fragment basis. The meanings and definitions of CRM that different authors and systems use diverge noticeably, suggesting a variety of CRM perspectives.

A main characteristic of the CRM definition that the author wants to examine is its connection with technology. This is important because CRM technology is often incorrectly equated with CRM (Reinartz, Krafft, and Hoyer 2004), and a key reason for CRM failure is viewing CRM as a technology project (Kale 2004). Some definitions of CRM are the following:

  • CRM is an e-commerce application (Khanna 2001)
  • CRM is a term of methodologies, technologies and e-commerce capabilities used by companies to manage customer relationships (Stone and Woodcock 2001)
  • CRM is an enterprise wide initiative that belongs in all areas of an organization (Singh and Agrawal 2003)
  • CRM is a comprehensive strategy and process of acquiring, retaining, and partnering with selective customers to create superior value for the company and the customer (Parvitiyan and Sheth 2001)

Those definitions suggest that CRM can be distinct from at least three points of view: narrowly and tactically as a particular technology solution, wide-ranging technology, and customer centric. These perspectives can be described in the following figure (see Figure 1).

The importance of how CRM is defined is not only semantic. Its definition significantly influences the way an entire organization accepts and practices CRM.

From a strategic perspective, CRM is not merely an IT solution that is used to develop and grow a customer base; it involves an insightful synthesis of planned vision; a shared understanding of the nature of customer value; the consumption of the appropriate information management and CRM applications; and high-quality operations, execution, and service.

CRM has nothing to do with software. The role of the software is to store and collect the information, produce the reports, and develop the personalized communication.

Installing an expensive CRM product and then waiting for something to happen is a critical mistake. A CRM project never finishes, it needs to be constantly adjusted and refined to the needs of the organizations and the customers.

There are many technical components of CRM, but thinking about CRM in technical terms only is a huge mistake. Technological applications are only the tools in order to implement that strategy.

The most valuable way to think of CRM, in order to implement it successfully, is as a helpful process so as to collect important information about customers, sales, marketing effectiveness, and market tendencies.

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3.9. Knowledge requirements of CRM

As we already mentioned the human resources in software enterprises are composed of people with excellent technical skills. That factor may be the reason of failure of many CRM projects in software enterprises. Technical experts don’t have the appropriate managerial skills but it is commonly to put them into the CRM process.

Managing customer relationships requires managing knowledge for the customer, knowledge about the customer and knowledge from the customer. KM gets the role of a service supplier for CRM, managing the four knowledge aspects content, competence, collaboration and composition to please customer requirements within confirmed budget limitations.

To combine marketing, sales, and service actions, CRM has need of strong integration of business processes which engross customers. CRM processes are mostly formless and non- transactional.

Their performance is predominantly influenced by the underlying supply with knowledge about products, markets, and customers (Day, 2001, Garcia-Murillo, M. & Annabi, 2002, Schulze, 2000). CRM processes can therefore be considered as knowledge- oriented processes with the following characteristics which have a strong correlation: (Eppler, M., Seifried, P. & Röpnack, A., 1999)

Knowledge intensity: CRM processes require knowledge from heterogeneous, not necessarily computational sources, to pursue process goals.

Process complexity: CRM processes mostly have complex structures or even no clear structure at all. This implies that a high degree of knowledge is necessary for the execution of a process.

Knowledge flows in CRM processes can be classified into three categories: Knowledge for customers is required in CRM processes to satisfy knowledge needs of customers. Examples include knowledge about products, markets and suppliers (Garcia- Murillo, M. & Annabi, H, 2002).

Customer needs must be matched with the services and products available. Knowledge for customers is mostly generated in processes in the enterprise, such as research and production. Campaign management is responsible for collecting this knowledge and cleansing it according to the customer requirements.

It is then circulated to the other CRM processes, mainly offer management, contract management and service management. CRM manages knowledge simplicity and distribution of knowledge for customers. Maintaining the balance between directness and accuracy is the major challenge of managing this kind of knowledge.

Knowledge about customers is accumulated to understand motivations of customers and to address them in a personalized way. This includes customer histories, connections, requirements, expectations, and purchasing activity (Davenport, T. H., Harris, J. G. & Kohli,

A. K, 2001, Day, 2000). The company needs to understand the requirements of customers in order to address them. Knowledge about customers is conceived mainly by offer management, service management, complaint management and contract management.

Main users of knowledge about the customer are campaign management and service management, because both of them personalize their services.

Knowledge about the customer must be translucent in the company; however its distribution beyond the border of an organization must be controlled, as knowledge about the customer can often be directly changed into competitive advantages. The progress of such knowledge is also expensive, because knowledge clarification is taking time and attention.

Communication management offers possibilities of gaining knowledge about customers automatically via electronic media. The issue of how much data about the customer a company can transform into knowledge is the vital challenge of managing knowledge about the customer.

Knowledge from customers is knowledge of customers about products, suppliers and markets. Within interactions with customers this knowledge can be gathered to feed continuous improvement, e.g. service improvements or new product developments (.Garcia- Murillo, M. & Annabi, H, 2002).

Finally customers gain many experiences and approaching when utilizing a product or service. This knowledge is valuable as it can be used for service and product improvements.

This “knowledge from customers” must be transferred back into the company. Knowledge from customers can be detained in related ways as knowledge about customers. Gaining knowledge from customers is based on the fact, that customers gain their own expertise while using a product or service and can be seen as equal followers, when discussing changes or improvements.

This aim is not commonly understood in the business world and its impacts poorly researched in academia (Garcia-Murillo, 2002). To make use of this knowledge from “outside experts” as change cause it must be transferred into the back end processes of an enterprise, such as the research and development process.

Even so valuable knowledge from customers is frequently earned at the service points, the company must check its CRM processes for their ability of serving customers.

CRM Strategy or technology Knowledge requirements of CRM

Managing these different knowledge aspects is one of the biggest challenges of CRM. The most important issue is how to collect, store, and distribute only the knowledge that is needed and not waste time and effort on collecting, storing and transferring useless knowledge (Davenport, T. H., Harris, J. G. & Kohli, 2001).

Especially important in the CRM processes the classification of potential customers as well as the detection of cross and up-selling opportunities with the accessible customer base. Although numerous companies are far highly developed in the execution of a continuous process for analytical CRM, the most of them still have difficulties in managing the related knowledge.

In particular, the challenge to make certain that a reliable knowledge flow from the point of development of knowledge about the customer (in marketing, sales, and service) to the point of consumption, where the knowledge has to be obtainable in sufficient structure and complication is far from being resolved.

Another issue of significant consequence is the management of customer service. One of the most important challenges remains the provision of the right knowledge for customer- service staff to manage inquiries in a sufficient timeframe.

Closely related to customer service management is the managing of customer complaints. Although almost all companies have developed a database for complaint management, most of them fail in the analysis and consumption of complaints for continuous improvement.

To achieve their goal of serving the customer the individuals performing in CRM must understand and address the customer’s processes ( Österle, 2001).

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The KM model as represented in this figure offers goals and aspects of knowledge, which support the management of knowledge in a business environment. The four knowledge aspects of content, competence, collaboration and composition allow the management of knowledge based on the characteristics and proportions with direct impact to the process performance.

3.10. Project Life Cycle and CRM’s contribution

As we already mentioned, customer relationship management is directly associated with the customer’s life cycle. The progress of CRM antedates the startup of the project, is comprised during the project implementation and continues long after project delivery.

According to Muench1, the development of a software project is described as a spiral model with four cycles and four quadrants as illustrated in figure 3:

  • Proof of concept cycle – capture business requirements, define goals of proof of concept, produce conceptual system design, design and construct the proof of concept, produce acceptance test plans, conduct risk analysis make recommendations.
  • First build cycle-derive system requirements, define goals for first build, produce logical system design, design and construct the first build, produce system test plans, evaluate the first build and make recommendations.
  • Second build cycle-derive subsystems requirements, define goals for second build, produce physical design, construct the second build, produce system test plans, evaluate the second build and make recommendations.
  • Final cycle-complete unit requirements, final design, construct final build, perform unit, subsystem, system, and acceptance tests.

The CRM’s involvement is crucial in all of these four faces during the project’s life cycle. The effective appliance of CRM can give the appropriate input for the project development and implement it according to customers’ requirements.

1 PMBOK 2nd ed., 1996,p.15

CRM involvement in all phases of the project can extremely contribute to the project success, especially to its efficient execution. Following Hyden (1976), who determined project’s life to start when the company draws up a contract with the customer, and it is dissolved at the end of the execution phase when the transaction is completed, Hadjikhani (1996) focused his research on the management of the relationship left with the customer after project end and the development and marketing activities after project selling.

His theory was that every project leaves sediment, and consequently studied cases focused on the phases before cooperation and after project completion. This position is also shared by Faulkner and Anderson (1987) who claimed that a project cannot be considered as isolated from previous projects; projects are connected to each other somehow.

The essential role of CRM into the project life cycle will be described analytically in chapter 4.

Figure 5: Representative Software Development Life Cycle, per Muenchimage5

Source: PMBOK 2nd ed., 1996

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