Customer Relationship Management- A Strategic Approach

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15th August, 2008

Abstract

Customer Relationship Management (CRM) held out a lot of promise in the mid-1990s, but a considerable number of failures caused concern about its usefulness. Though various researchers have analyzed CRM critically, a comprehensive framework for enabling a better approach to CRM is lacking. This paper presents the findings of various researchers and also provides the information about how this paper contributes to the purpose of CRM. This paper delves into the various critical aspects of CRM beginning with the `CRM Vision’ and then going into the `CRM Goals’ and the `CRM Implementation’ process. It analyzes the findings of other researchers and supports the arguments using examples of successful CRM implementations and presents a framework that can be used for a more strategic approach to it

Introduction

Customer Relationship Management (CRM) systems gained popularity in the late 1990s and into the new millennium, but its sales waned in the wake of increasing reports of companies failing to reap the rewards that had been envisaged. This led observers to comment that CRM was another overhyped IT investment much like Enterprise Resource Planning (ERP) (Rigby and Ledingham, 2004, p. 118).

Researches into CRM point out that 60-80 percent of CRM projects end in failure (Kale, 2004, p. 42). Consulting firms have also undertaken research into this aspect and mentioned that nearly 70 percent of CRM implementations have failed to deliver as promised.

Despite the failures, CRM is regarded as an important tool for “delivering revenue growth through improved customer experiences, retaining and growing existing customer bases, increasing customer acquisition rates and influencing the development of new product and services” (IBM’s Global CRM Study, 2005, p. 12). It has been mentioned that the success rate of

CRM can be increased from 15 percent to 70 percent, if a proper CRM strategy is adopted and CRM is `done right’ (Greenberg, 2001, p. 86). This paper delves into the critical issues concerning CRM and proposes a framework that can be used for undertaking a strategic approach to it. It is expected that the success rate of CRM can be enhanced using a strategic approach.

Literature Review

Though various authors have offered a number of definitions of CRM, the following definition is found most suitable for the purpose of this paper.

CRM Definition: CRM is a business strategy designed to optimize profitability, revenue and customer satisfaction by organizing the enterprise around customer segments, fostering customer-centric behaviors and implementing customer-centric processes (Gartner, 2004, p.

368).

Jain (2005, p. 275) proposed that profiling of the customer, ensuring satisfied employees and delivering superior value would help the cause of CRM. Studies of successful CRM initiatives have been undertaken to highlight the importance of the customer relationship cycle and its components (Rigby and Ledingham, 2004, p. 118). Harding et al. (2004, p. 27) pointed out the importance of redesigning of business processes and training of users before CRM implementation.

Methodology

The methodology adopted in this paper analyzes the issues concerning CRM and create a framework to enable a more strategic approach to it. In this analysis, the relevant findings of other researchers have been cited and the suggestions have been supported through evidence of companies practicing CRM.

The main sections under which the analysis has been undertaken are:

CRM Vision;

CRM Goals; and

CRM Implementation

The section on CRM Vision explains the importance of and need for formulating a suitable vision to give the right direction to the CRM initiative. `CRM Goals’ covers the relevant aspects of CRM, such as customer profitability, segmentation, personalization. `CRM Implementation’ presents the critical aspects of CRM, such as CRM orientation, issues in technology selection and fulfilment of CRM objectives (for example, sales force automation, cross-selling, etc.). The analysis under these sections is followed by a framework that shows how a strategic approach can be undertaken to CRM.

CRM Vision

The starting point for a CRM initiative is the CRM Vision. It should be noted that

Gartner (2004, p. 370) has designated `Vision’ as one of the eight building blocks of a successful CRM project. Tamoiuniene and Jasilioniene (2007, p. 69) explained vision in terms of CRM as the creation of a picture of what the customer-centric enterprise will look like to ensure that a competitive position can be created in the marketplace. Since the CRM implementation has farreaching impact, a well-considered vision and strategy are essential (Ribgy et al., 2002, p. 121).

Conclusion

This paper helps to illustrate that though a large number of CRM projects have failed to deliver the expected results, a strategic approach can help in increasing the chances of successful CRM implementation. The paper has shown the importance of aspects like CRM Vision and also highlighted the critical aspects of CRM Goals and the Implementation process.

References

Gartner Inc. (2004). Reaping Business Rewards From CRM: From Changing the Vision to

Measuring the Benefits. Gartner Press

Greenberg P (2001). CRM at the Speed of Light, Berkeley, Osborne/McGraw-Hill CA

Harding D, Cheifetz D, DeAngelo S and Ziegler E (2004) CRM’s Silver Lining, Marketing

Management 13(2), pp. 27-32

Jain S C (2005), CRM Shifts the Paradigm. Journal of Strategic Marketing, 13(4), pp. 275-291

Kale S H (2004), CRM Failure and the Seven Deadly Sins, Marketing Management, 13(5) pp.

42-46

Rigby D K and Ledingham D (2004), CRM Done Right, Harvard Business Review, 82(11), pp.

118-129

Tamoiuniene R and Jasilioniene R (2007), Customer Relationship Management as Business

Strategy Appliance: Theoretical and Practical Dimensions, Journal of Business

Economics & Management, 8(1), pp. 69-78

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