- 3.5. CRM objectives
- 3.6. The steps in the implementation of CRM strategy
- 3.7. Metrics of CRM effectiveness
- The customer’s life cycle and the CRM
- CRM meaning, CRM architecture and the core benefits of CRM
- Implementation of CRM strategy, Metrics of CRM effectiveness
- CRM: Strategy or technology? Knowledge requirements of CRM
- Involvement of CRM during the life-cycle of a project: case study
- The significance and the impact of CRM into the enterprise
Implementation of CRM strategy, Metrics of CRM effectiveness
3.5. CRM objectives
According to Burnett (2001) there are three categories in order to describe the objectives of CRM: cost saving, revenue enhancement, and strategic impact.
To be able to find out how organizations CRM objectives can be described in terms of the first category, cost saving, objectives from the following sources will be used:
- Decreased general sales and marketing administrative costs (Burnett, 2001)
- Reduce cost of sales (Greenberg, 2001)
- Increase sales representative productivity (Greenberg, 2001)
To be able to find out how organizations CRM objectives can be described in terms of the second category, revenue enhancement, objectives from the following sources will be used:
- Win Rates (Burnett, 2001)
- Better information for better management (Byon et al., 2002)
- Acquiring new customers (Kim et al., 2003)
- Secure service (Kim et al., 2003)
To be able to find out how organizations CRM objectives can be described in terms of the third category, strategic impact, objectives from the following sources will be used:
- Improved customer satisfaction rates (Burnett, 2001)
- Improve global forecast and pipeline management (Greenberg, 2001)
- Service helps organizations to delight customers (Ryals & Knox, 2001)
- Improving channel management (Kim et al., 2003)
- Establishing relationships with customers (Kim et al., 2003)
- Building an attractive virtual community (Kim et al., 2003)
3.6. The steps in the implementation of CRM strategy
Successful implementation of CRM requires specific actions on the part of the organization. The accomplishment of a CRM plan as proposed by Peppers, Rogers & Dorf (1999) comprises four steps: the identification of customers, the differentiation of service, interaction with customers and the differentiation among customers.
Step 1: The identification of customers
The identification of customers allows the organizations to select those customers that they are considered as being advantageously important and who they believe can add to the success of the organization.
These customers have distinctive needs and due to their value to the organization, will have products developed to meet these needs. It is important to identify and categorize these customers so as to select as much detail as possible in order to have a clear picture of the customers and their profile.
Having this information makes the organization able to determine the customers that have been with the organization for a long period and have developed long-term partnerships and those that have recently started using the products and services of the organization. It can be said that indentifying new and existing clients increase the level of customer service.
Step 2: The differentiation of service
The differentiation of service means that different customers receive a different level of service and a different product from the organization, depending on their value to the organization and their particular needs. This requires the organization to identify the most important customers and adjust service accordingly.
As the organization is aware of the value of each customer, service level can be adjusted consequently. Differentiate between the services offered to new and existing customers enhances the level of customer service.
Step 3: Interaction with customers
This step refers to the significance of interacting with the customer in relationship building efforts through a variety of communication tools and technology methods. This is essential as long as the relationship can only be developed and be continued only if there is efficient communication with the customers concerning their needs, expectations and desires.
That means that the organization has to develop methods of communication proactively with customers regarding the organization’s products and try to initiate dialogue with customers.
The customers with whom communication takes place are not necessarily all the customers, but only those that the organization concerns as being strategically important. These relations with the organization enhance the expectations of the customers regarding the service received as well as the value of the relationship.
Step 4: Customization of products, services and communication
Customization is approved by the organization in order to make assured that customer needs are met. It requires that the organization adapts its product, service or communication in such a way as having something exceptional for each customer.
Communication can be customized to concentrate on the specific needs and profile of the customer and organization also makes use of personalization as part of this process. Products can be customized according to the specific expectations that the customer has of the organization.
The intention of customization is to enhance customer satisfaction, and the loyalty that is demonstrated by customers. The relationships with the customers are stronger if customized service is offered according to each individual customer’s needs, wants and expectations.
CRM applications do definitely vary in their complexity and difficulty. Consequently, a CRM life-cycle has been planned to describe how companies move from product-centricity to customer-centricity. AIT (2001) recommends a 6-level conceptualization of the CRM development. At level-0, there is no CRM solution in process.
Customer data is possible to be stored in product with substantial replication. The most advanced CRM-appliance, at level-5, organizations can make valuable changes to the way they interact with customers based on the knowledge they have of their customer database, the market and the general business environment.
This is a true multi-channel organization with incorporated customer database, analytical know-how, planned business processes, and customized value suggestions. Figure 1 shows the AIT model.
3.7. Metrics of CRM effectiveness
Kim, Suh & Hwang (2003) recommend an application structure for evaluating CRM effectiveness. According to Kim (2003) there are some reasons why performance measurement is so influential in enhancing business.
Firstly, measurement removes the uncertainty and disagreement that enclose high-level strategic concepts.
Second, measurement provides the accurate language for clearly communicating at all levels about what the organization wants to achieve and how it is going to do in order to accomplish it. Third, measurement allows the continual assessment of organizational position on strategic objectives.
Last but not least, measurement not only improves the possibility but also speeds the rate at which change occurs. The four perspectives which evaluate the effectiveness of CRM are customer knowledge, customer interaction, customer value, and customer satisfaction.
3.7.1. Customer knowledge.
In order to implement the customer-centric business environment, organizations use data about their customers. A main problem is filtering, categorization, control, analyzing, and managing this data in order to extract information appropriate to CRM activities.
Technology learning is also essential towards understanding customers. It is necessary, therefore, to assess employee skills to use customer information successfully. Security is another crucial and significant factor when dealing with customer information. Many customers are concerned about the personal information that is enclosed in databases and how it is being used.
3.7.2. Customer interaction.
Many communication channels are developed to interact with the customer successfully. To manage various communication channels effectively, managers make an effort to monitor the business processes. The customer relationship can be reinforced by effective customer communication. Customer interaction has the following components:
- Contacts with organizational staff-front line and other
- Outbound contact management-mail, telephone, sales visits, and deliveries
- Physical service environment
- Transaction – price, value, and terms
Communication channels not only consist of classic communication channels such as letters, fax, and telephone but also include new methods such as call centers, service centers, Web sites, and virtual Internet communities.
Furthermore, organizations need to analyze the business process to estimate measures such as payment methods, delivery channels, and product multiplicity. Customer satisfaction can be increased by improving operational. Consequently, it is necessary to analyze such information as delivery time, response time, and product assortment.
3.7.3. Customer value.
Customer value describes substantial and insubstantial benefits gained from CRM activities, which help to organize the relationship with the customer effectively.
In order to determine the customer value, organizations need to analyze such information as marketing campaigns, number of maintenance customers, and net sales.
Customer profitability should be calculated, establishing a baseline and comparing new estimations to that baseline every so often. Calculating customer value potential and using it as a guideline will be beneficial in the future.
3.7.4. Customer Satisfaction.
Customer satisfaction is difficult to measure because it is hard to measure the satisfaction level. Measuring customer satisfaction offers an direct, significant, and objective feedback about customer preferences and prospects.
Among the four perspectives, the customer satisfaction perspective is the most essential because customer satisfaction is directly connected to an organization’s profits. Appropriate CRM practices can potentially impact customer satisfaction and can lead to improved customer maintenance.