What Tools Does an Organization Use to Manage Customer Relationship Management?
By Thuriya Sai
IS 378 – Project Management
Prof. Maynard Grant
Table of Contents
Marketing Metrics' Usage 3
Generative Learning Orientation 6
Deplorables of CRM 9
This paper aims to investigate customer relationship management (CRM) and the vast array of attributes it can mobilize such as generative learning orientation of customers performance, marketing metrics usage as a predictor for CRM, the implications when implementing the system, and the advantages and disadvantages of the system.
CRM is defined as a firm's application for creating relationships with their customers while also maintaining current relations by meeting their needs through a unique customer service that is catered to the individual. The definitive objective of CRM is to create a continuous relationship between a firm and its most profitable individual customer. Not all customers can be viable by a firm's CRM program, thus, the firm must identify the level of customer value and firm's value for each customer. When the program has identified its target customers, the development of a customized solution of their product/service to continue the ongoing relationship in an effort to grow their profitability and loyalty is in full effect (Best, 2013).
Findings from the research reveal that CRM must be diligently implemented and fully integrated into the business to take advantages of the system entirety. Research by Dennis Herrhausen and Marcus Schogel from Management Decisions (2013) finds that generative learning influences on customer performance which is directly correlated from the interaction of CRM capabilities which is why they emphasize a well-established generative learning orientation will result in creating, retaining, and flourishing a long-term relationship with customers. It also revealed that firms became fruitful as the result of the implementation, but there are still implications as to whether the firm's values, beliefs and philosophical orientation underlying its CRM program is consistent with the demands according to Li Ling-Yee from the Industrial Marketing Management (2010). Though the firm's most profitable and valued customers may benefit from CRM, we also have to consider the disadvantaged customers (those non-favored and unprofitable by firms) which the research by Nguyen and Simkin from the Journal of Consumer Marketing (2013) will try to uncover.
Marketing Metrics' Usage
CRM performance can be determined by the use of marketing metrics within an organization that factors in the strength and weakness of the impact. Maarketing metrics can be described as the collection of data on marketing campaigns, channels, treatments and customer response in order to account for the effectiveness of customer relationship management activities (Ling-yee, 2010). This buzzword had received popularity from both the practitioner and academic community. The practitioners of marketing (marketing specialist, and marketing managers) tend to use the word to push their marketing team through accountability by producing measurable data and return on investment (ROI). The academic community tends to have a prolific and extensive reasoning for their interest. There conclude that marketing metrics can be described through five theoretical attributes. (1) Past information in marketing programs is a fundamental portion of refining future strategy and execution. (2) Contracts between corporate and marketing management are strengthened with documents pertaining to marketing metrics. (3) Measuring of numerous dimensions in marketing metrics is essential in performance data. (4) ‘marketing sensing' which refers to the receptiveness of sensing market data. (5) Marketing metric has no relations to any recent of future financial performance even though many organizations are acknowledging the significance of marketing metrics (Ling-yee, 2010).
This research study was conducted at trade shows mainly due to the nature of organizations that part-take in trade shows make sure of marketing metrics in CRM systems. At the system level, an accomplishment of vendors in trade shows must willingly create and establish business relationship with other vendors or buyers. At an interaction level, relationship building between buyers and vendors is the main essence of trade shows which is the reason the study focusses on the area of industry (Ling-yee, 2010). In terms of how a typical trade show would proceed, the efficiency of trade show attendee involvement does not just take place on the duration of the show, but also at pre-show planning, at-show implementation, post-show follow-up activities, and finally the evaluation stage (Ling-yee, 2010). Creating customer loyal and retaining lasting remembrances is the one major distinctive factor that trade shows create. The attendees chance to personally encounter and experience the brands hands-on which create emotional and psychological setting is their form of marketing and live communication between vendors and attendees. The usage of CRM is still concentrated in market segmentation and isn't used to its full potential advantage of customizing unique product offerings based on information of the individual customer and that is very alarming to companies and their current approach.
The study argues that value-creating CRM activity is in action once there are concentration and engagement with key accounts that are strategically customer focused approach. Also, two key features: customer value-based organizational culture and processes and the relationship with marketing metrics is part of what the study hopes to expand with existing studies. Lastly, we will determine whether implementing amongst marketing metrics and CRM performance is contingent until integration setting (Ling-yee, 2010). There are two objectives in this study: (1) to explore any direct outcome of customer value-based organizational culture and the development of using marketing metrics. (2) Is to assess whether some firms are more successful than others in utilizing marketing metrics data to attain high levels of CRM performance.
The individual level of customers as a performance indicator is what marketing metrics now the focus as compared to what was previously seen in marketing metrics as traditional performance measures such as market share, sales, and profits (Ling-yee, 2010). What this study seeks to understand is the evaluation of individual customer level performance, consumer behavior measuring usage, and consumer intermediaries when measuring marketing metrics at individual customer account level.
Two attributes can be assumed by the customer value-based theory that firms must have to be successful. (1) Firms must have a customer value-based organizational culture such as market orientation added with learning and adapting to the ever-changing needs of the customer's skills and (2) customer value-delivery process must be the central focus, thus organized themselves around it. This research suggested that handling of subsequent information from marketing metrics to increase the performance of CRM programs varies on the degree to which customer knowledge makes possible for improvement of customer-centric innovative product/service value proposition in light to changes in customer needs and wants (Ling-yee, 2010).
Figure 2 gives an overall view of what the existing research structure looks like defining the connections between the features of customer value-based firms, usage of marketing metrics, and performance of CRM programs (Ling-yee, 2010). To successfully achieve the objectives of CRM program, there are 3 main components, subcomponent, and two variables that contribute to the success. (1) Customer value-focused firms suggest that companies succeed in providing excellent performance by strategic use of information about their customers to lower cost, deliver faster, increase benefits and come up with a groundbreaking scheme for highly valued lifetime customers. (2) Customer value-based organizational culture suggests that the firm's principles believe customer relationship is an asset in creating value at an organization for sharing of information about customers and doing all things possible to provide their needs. (3) Customer value-based organizational process suggests that to create customer relationship, firms must be aligned with their organization, incentives and accountabilities. Marketing metrics is the subcomponent that contributes to the success of CRM program. It states that the collection of data from a marketing campaign, channels, treatments and customer response to account for the efficiency of CRM activities (Ling-yee, 2010). There are two variables that contribute to either the increase/decrease the value efficiency (VE) of the marketing metrics framework. (1) Marketing supply chain conflict (-VE) refers to inside fighting between marketing and supply chain team that weakens the efficiency of organizational cooperation for a successful use of marketing metrics that is essential for value creation of products and services. (2) Innovative value proposition (+VE) suggests that to achieve higher CRM performance, firms need to create an innovative value proposition to cater to market needs aside from information of customers already collected from marketing metrics. Figure 3 gives an overall in-depth detail of what each of the components in the usage of marketing metrics framework entails.
Customer Value Focused Firms
- Retain old customers while acquiring new customers.
- Increase customer loyalty while also increasing customer satisfaction.
- Increase higher share of profitable customer while decrease cost of customer service.
Customer Value Based Organizational Culture
- New product/service ideas from channel buyers are an important source.
- Products/services needed in the future are discussed with channel buyers in personal meetings.
- Restructure the IT abilities to back value making activities for channel buyers.
Customer Value Based Organizational Process
- To maintain the staff motivated in creating new products/services for customers, rewards and incentives are implemented by the management.
- Improvements on products/services are examined by teams that analyze customers' needs and wants.
- To reinforce the firms culture of customer centric thinking, staff are constantly trained in learning CRM programs.
Usage of Marketing Metrics For CRM
- Improvement of products/services.
- Company image as a loyal partner from the customers viewpoint.
- Customer involvement in new product/service development.
The firm's usage of marketing metrics to deliver personalized products/services and to boost the customers lifetime value cycle is the basis of customer value-based orientation. Incentive programs should be created to deliver rewards to the staff for retaining key customers through CRM activities. When constructing the framework of a CRM program and usage of marketing metrics, its emphasized the marketing-supply chain conflict is reduced to avoid any internal conflict of information between staffs. In consideration of the potential conflict between marketing and supply chain division, coordination of management and usage of information between the two internal divisions must be in unison to generate value proposition for the customer's ever-changing needs. Findings from this study conclude that even though the conflict of marketing and supply chain division deters the firm from achieving superior CRM program, the innovative value proposition reinforces the advantage of having a marketing metric knowledge orientation that assesses date of customer information to provide valuable product/services (Ling-yee, 2010).
The main conclusion of this research suggests that the management of firms should evaluate if the philosophy, beliefs, and values of the company and their use of CRM program is in align with the marketing metrics. To sustain a customer value-based organization culture, employees at the company should be consistently motivated. For the staff inside the company to be involved and encourage a customer value-based orientation, incentives, rewards, training, and education must be implemented, especially salespeople and other staff that are key players in regularly interacting with the customers.
Generative Learning Orientation
Creating, continuing, and enriching long-term relationships with customers are a firm's practice with CRM, but questions have been raised by marketers and academics of the performance effectiveness. There are growing suspicion of firms that integrated CRM systems if they have gain any value from it. Losses or no development in performance were found by 70% of firms that implemented CRM systems by a study from Gartner Group (2003). In light of the conflicting manner, this study by Dennis Herrhausen and Marcus Schogel from Management Decisions (2013) aims to study the direct and moderating effects of generative learning on customer performance.
The success of CRM lies in the firm's learning orientation which can be distinguished into two areas – adaptive learning and generative learning. (1) Adaptive learning arises within a group of familiar and unfamiliar limitations that expose the organization's expectations about its external and internal surroundings. (2) Generative learning appears when the firm is keen on inquiring long-held beliefs about its approach, missions, customers, capabilities, or strategy. The two areas of learning orientation make a significant difference for CRM. While adaptive customers or market-focused learning is an important and unspoken part of all CRM capabilities, generative learning has not been associated with CRM to date (Herrhausen & Schogel, 2013). This underperformance had made significant damages for the performance implications of CRM because the value that current customers seek from firms can change rather quickly and by substantial means. Countless customer relationship programs failed to notice these changes because they suggest a meager adaptive learning orientation. Subsequently, such programs target out-of-date customer needs, and their performance input may decline over the period.
Dennis Herrhausen and Marcus Schogel claim that generative learning – which involves discovering and learning new methods to achieve outcomes, important thoughts on communal assumptions, and questioning collective opinions that contribute to the success of CRM. Figure 4: Framework of Generative Learning in CRM
CRM capabilities refer to a firm's capabilities to create, sustain, and enhance long-term relationships with customers. The technology for operating CRM pertains to the vast storage of customer data with high tech infrastructure software to provide the necessary information needed to achieve the firm's goals. Generative learning orientation refers to where top management stresses the importance and encourages the improvement of innovative skills, the satisfaction of attaining knowledge, interest for new techniques of increasing performance, inclination for challenging work and reflecting thoughts and assumptions of the organization. Firms that incorporate generative learning orientation seeks to identify customer's needs and wants in order to deliver products/services that offer values to the ever-changing desires.
The lasting relationships with customers are created by the value offering scheme that leveraged customer satisfaction and loyalty. Level and constancy of net profit are expected to increase to firms that increase customer satisfaction, which is why there is a close connection that financial performance and customer performance are positively associated (Herrhausen & Schogel, 2013).
Data collection of this research consists of using direct mail survey in Switzerland to firms in consumer and business sector. The researchers argued that CRM plays a particularly critical role in a country such as Switzerland that is highly-developed and that also has a de-regulated market with high competition. They also argued that regardless of the industry and firm's specific market, they were more interested in direct or indirect effects of generative learning on customer performance (Herrhausen & Schogel, 2013).
Research from the study had mainly four theories to investigate. (1) If there is any effect CRM capabilities have on customer performance. And they've found that greater customer satisfaction, customer loyalty, and customer retention is achieved if firms have high CRM capabilities. (2) If customer performance and generative learning orientation within a firm have any relationships. Research finds that firms with distinct generative learning orientation recognize customers' varying needs and are capable to react by presenting offers and value propositions that perform the customer requirements which results in the rise of customer performance. (3) Are there any associations with CRM capabilities, generative learning, and customer performance. Study finds that firms with increased generative learning orientation will see numerous benefits from their CRM capabilities. Lastly, (4) states if financial performance is affected by customer performance. Results show that there is a high correlation between customer performance and financial performance.
Such example of a company that applied generative learning orientation with CRM capabilities within their firm is Dollar Shave Club. A niche monthly subscription company that delivers razors and grooming products to customers right at their homes. Their use of technology to understand their customers is the reason why Dollar Shave Club is the leading competitor in the personal grooming subscription industry. Janet Song – Senior Vice-President of Member Services says that "We don't respond to situations; we respond to people." Their integration of CRM capabilities internally in the company with customer help program and data mining allows them to deliver an outstanding customer experience. With over 1.5 million subscribers, their customers are not only satisfied with the brand but engage in a great connection with the company.
While there are many findings that were concluded, with every study comes with implications. (1) There is evidence of self-serving bias as the survey data relies on dependent and independent variables. (2) Only a single key informant on each firm was gathered. Restriction of key informant survey designs was the unavoidable certainty that was faced even when the study was following suggestions to improve data legitimacy and the informants were experienced. (3) A cross-sectional nature was apparent due to the inheritance from many firms of different businesses in this study (Herrhausen & Schogel, 2013).
Although there have been many research on generative learning orientation on new product performance and market information, its relevance alongside customer relationship management had not had the same amount of consideration (Herrhausen & Schogel, 2013). It is drawn into a conclusion that firms that implement a generative learning orientation with their CRM program will entirely reap the reward of beginning new relationships, continuing current relations with customers, and improving long-term relations with customers.
Deplorables of CRM
The most profitable customer over their lifetime value is those that get the most attention by firms that can select to focus their marketing efforts. Because of this foresight, customers that do not fit into the profitable lifetime category will receive very minimal marketing budget devoted to the CRM platform's targeted strategy. This favoritism strategy that focuses only on the firm's profitable customers has led to the awareness of disparity among the rest of the marginalized and unprofitable customers. The consequence of satisfying a customer's need on an individual basis enacted an approach where one customer was catered with great service than another. This study by Bang Nguyen and Lyndon Simkon from Journal of Consumer Marketing (2013) main objectives are to explore the diaspora of advantaged (favored) and the disadvantaged (non-favored) customer perception in impartial and just treatment among retailers' CRM strategies.
Customers nowadays are increasingly aware through word-of-mouth and social media of marketing campaigns from major businesses that are gradually using their CRM schemes to target profitable customers. A rise in sales, profits, and development of relationship occur when firms offer products/services exclusively to favorable customers. Customers are in an essence are biased towards their own self-interest and would unthinkably attempt to increase their own outcome. Judgment leans to be biased to their own interest, which is why the two groups that face discrimination have different mindsets. In other words, if a customer is within the favored segment, he/she is more than content with their current situation as suppose to the un-favored customer that is not satisfied with his/her current situation.
The non-favored segment of customers is usually defined by firms as those that don't suit their demographics and are characteristically un-loyal shoppers. They are those that occasionally shop from time to time and usually for convenience and get the "short end of the of the stick" (Nguyen & Simkin, 2013). They are the customer that will have to have to spend more to receive the same product/service and the advantaged customers or receive less than the offerings the favored customers have paid the same amount for. A common misperception among firms is that the disadvantaged customer that are receiving less product/service than the advantaged customers are not aware of the discrimination. This belief by firms comes from the basis that customers who feel disadvantaged need a point of reference and comparative analysis. But as consumers have the ability to research and review products/services on social networking sites (i.e websites, blogs, reviews, social media), this has created greater transparency between both businesses and consumers. As a result, more and more customers are self-aware of what kind of treatment they received from businesses.
Fairness can be defined as a decision to which an individual makes is seen as sensible and tolerable. The perception of fairness is evident when a person compares their own outcome to someone else's outcome. Their comparative analysis may be of someone else or a segment of people. Dual entitlement theory states that a person has a certain level of expectation of what he/she is entitled to because of their current status. To put into perspective, a senior citizen may feel he/she deserved to receive a discount at a restaurant because of his/her age and is entitled to be given a discount. Another example would be an individual that is a military veteran felt he/she has an expectation to receive a military discount at a retail store.
There are also cases where people will consider their entitlement based on their knowledge, beliefs, and social standing in society (Nguyen & Simkin, 2013). Equity theory explains that the inputs and outcomes of individuals in a social exchange setting compare to other individuals. And if the individual perceived that he/she received was inadequate, an incentive to restore and balance equity is cultivated. Equity theory is regularly used in the context of salary in job motivations. The theory suggests that in a workplace environment where there are overpaid and underpaid employees, the latter might give less output to his/her work duties than the overpaid employees. Firms need to maintain their customers where they feel advantaged in their current state, while the customers that are disadvantaged and feel a need to restore lost equity has to be handled carefully to avoid exodus.
Nguyen & Simkin realizes that there are multiple meaning behind the term CRM since the research focuses on the perception of fairness among customers receives from CRM programs, this study focuses on offerings of the process. Perception of unfairness from customers is influenced by the tools utilized in marketing tactics and offerings by the firm. Which is why firms need to consider the importance of how they utilize their CRM offering as that is the only customers' point of reference to shape their perception. There are five processes that CRM programs must consider when maintaining a relationship: (1) Service quality, (2) Pricing perception, (3) Communication, (4) Customization, (5) Reputation.
Customers that have faced negative experiences are more likely to shape stronger impressions and adhere to be reputation sensitive (Nguyen & Simkin, 2013). To put into perspective, an individual that regularly shops at major retail store such as Nordstrom and had to experience unfair treatment and felt disadvantaged will not only create a strong impression on that business, but will also be more cautious and guarded when he/she shops at another retail store that uses similar practice and marketing tactics. Unfortunately, the disadvantaged customer will become more conscious of unfair treatment and would not purchase from the same store in the future. The reasoning is that the unfair treatment caused an increase in negative perception of the firm.
The advantaged customers are more likely to identify the effect of customization more than the disadvantaged customers. Customization refers to the offerings by the business such as exclusive offerings only to customers in a top-tiered rewards program that is catered to a targeted group in a segment. The reason behind is due to that the advantaged customers who have already been exposed to receiving more customization and individualized treatment, their expectation to receive the treatment continues or increases. Because customization requires customers to be involved and communicative, the advantaged customer is engaged actively. On the flip side, because the disadvantaged customers received little to no communication or involvement with the firm, they're inactive and less engaged.
Influence on communication is highly perceived by advantaged customers as compared to disadvantaged customers. Communication perception refers to a rise in conversation and personalized experience from the customer involvement in knowledge sharing. A "win-win" situation for both the firm and customers as information about the customers is given and in return for customized offerings (Nguyen & Simkin, 2013). The reason why advantaged customers perceive communication influence highly is due to the favorable position of experiencing a high volume of communication with the firm. Their response to the communication is high because of the recognition that they benefited from having an open dialogue with the firm. Those that are receiving the "short end of the stick" will less likely create an atmosphere of open communication with the firm due to their perception of disadvantage. According to comparative analysis theory, when the disadvantaged customers discover that other customers received better communication with the firm, there is no motivation to improve communications. This further support the reciprocity theory that suggests exchange between the customer's information and firm's offering must be in balance.
Influence on service quality is highly perceived by advantaged customers as compared to disadvantaged customers. The advantaged customers whose benefiting from great service, are receiving the "long end of the stick." As suppose to the disadvantaged customers that had bad service, are experiencing the "short end of the stick." Because of the lack of quality service received by the business, disadvantaged customers are less than likely to return to the same service provider. Furthermore, if a customer discovers that another comparative customer had received better service, they're more than reluctant to interact with the provider any longer (Nguyen & Simkin, 2013). In worst cases, the disadvantaged customer will end the relationship with the provider so the same bad experience wouldn't happen again. Those that have experienced great service will expect even more as they have adapted to the level they're already receiving according to the dual entitlement theory.
Influence on price perception is highly perceived by advantaged customers as compared to disadvantaged customers. Because of the unjust treatment from the firm that will leave feelings of dissatisfaction to disadvantage customers, they will try to compensate by seeking other places to balance their monetary sensitivity. Because of the treatment they received, those that were mistreated will try to seek backlash by gossiping to vent their distress (Nguyen & Simkin, 2013). When the customer discovers that another comparative customer had received a lower price, a drive to seek better price develops.
To support in counteracting such detrimental outcomes of favoritism among customers, the current findings from this research recommends that better consideration of two key customer groups must be established in the CRM program. In a mandate to distinguish how customers cultivate a perception of inequity so that a capable CRM approach can be employed. Service, communication, and customization are highly perceived by advantaged customers in the CRM offerings. Prince and reputation are highly perceived by disadvantaged customers in CRM offerings (Nguyen & Simkin, 2013).
Roger Best from Market-Based Management (2013) framework on customer relationship marketing strategies best combats that theory of focusing on your best customer while also catering to lesser but still profitable customer through segmentation grouping. Figure 5 shows three distinctive approaches to three distinct groups of customers as defined by company value and customer value. Customer value refers to how they perceive benefits they derive from products, service, and brand surpass by a significant margin the cost of obtaining those benefits. Company value perceives higher stages of repeat consumption that spread over lengthier periods of time generate higher customer lifetime value (Best, 2013). Mass customization strategy refers to customers having the capability to custom build products to meet their specific needs while abstaining to there are still personal constraints and price consideration (Best, 2013).
With this study, a marketing manager can pursue a fairer approach to avoid the discrimination that customers may face with CRM programs. In order to retain the loyalty of their customers, managers must improve grouping of the customers and pinpoint which group needs more attention and take proactive steps. While disadvantage customers see the different treatment of customers wrong, advantage customers see nothing wrong in treating customers better than the others! They view that way because of their loyalty to the firm, they're entitled to better product/service than others. Particularly nowadays where personalized service is the norm, firms need to identify every change a customer makes to recognize their needs, their risks potentials, and their profit potentials to reduce the mishandling of CRM. Successful application of CRM entails the understanding of the level of effectiveness that each of the CRM offerings applies to different customer segments.
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