Customer Relationship Management Systems CCT 225 Final Assignment Group Members: Owen Plamenco - 996428085 Mariam Olagunju Atim Ukoh - 995645672 Reem Aziz - 996239379 Functionality Customer relationship management (CRM) systems are used in the information industry to help organizations manage and focus solely on customer relationships in an organized way through the use of different methods, software, and the internet (Williams, 2006). More specifically, the successful implementation of CRM systems enables organizations to study the behavior & needs of customers, predict future purchasing patterns, and discover new ways in which they can add value to their customers’ needs. Ultimately, effective use of CRM systems leads to the development of lifetime relationships among organizations and their customers which, in turn, results in a more competitive advantage as it is much easier to retain customers than it is to attract new ones (Sharp, 2003). Before an effective CRM system can be established, planning is necessary to assure the successful use and should be done accordingly following these twelve steps: 1. Develop business objectives. 2. Prepare detailed plan of action. 3. Build in stages. 4. Provide strong leadership. 5. Implement and follow through. 6. Enlist senior management member to support project. 7. Create an integrated business design. 8. Establish a customer driven development process. 9. Learn through action. 10. Generate early wins. 11. Focus on activities that create economic value. 12. Establish two-way flow of communication. (Sharp, 2003) Following these twelve steps are just guidelines as to what direction a company may take in terms of launching a CRM system within their organization. Different steps can be added or taken away to fit the needs of the organization. Customer relationship management systems contain three key components- customer, relationship and management. According to Gray and Byun, CRM can be viewed as the following triangular figure: Sour ce: http://www.crito.uci.edu/papers/2001/crm.pdf (Gray-Byun, 2001) In CRM, these three components are all connected but the customer is the focal point of the system. Customer can be defined as the source of income and future for an organization. Since customers are very unpredictable, CRM is viewed as the marketing strategy to manage such relationships. Secondly, relationship is the interaction among companies and their consumers. Relationships can range in duration and CRM is involved to ensure long-lasting affiliations are made so that it mutually benefits both parties. Finally, management refers to the involvement of senior management and all employees to successfully implement a CRM system within an enterprise (Gray-Byun, 2001). In terms of hardware/software requirements, CRM systems require technology that is capable of storing large amounts of customer information in an organized manner that will allow an organization to analyze, access, and manipulate that information when they please. Four main areas of technology that are required for CRM systems are: 1. Data warehousing- technology that enables organizations to gather and store large volumes of consumer data that can be accessed, analyzed, and manipulated to provide important information on customer databases. 2. Database management systems (DBMS)- databases designed by designers, administrators, and application developers which are used by employees and other automated users to manage customer data. The capability of DBMS depends on the data model, number of users, data volume, and the processing environment. 3. Data mining- process of taking large volumes of unknown data and using that to make business decisions. 4. Business analysis software- software associated with analyzing business matters (Sharp, 2003). These are the main technologies used in effective CRM systems. Other software/hardware requirements include simple technologies such as computers, the internet, and other computer applications. In terms of labour requirements, CRM systems require designers and developers to design the different databases and components associated with CRM. Once this is accomplished, it takes the effort of an entire organization, from upper management to first-line employees, to assure the proper use and function of the CRM system within the company. Thus some labour is required to successfully implement such a system. Customer relationship management systems were first introduced in 1993. At the time, there were two major markets for the system- Sales Force Automation (SFA) and Customer Service (CS). These are two different sectors that provide similar services with slight differences. SFA was designed to support salespersons in managing relationships with customers via contacting management, forecasting, sales analysis, etc. On the other hand, CS is an after sale appreciation/activity to satisfy customers via call centre management, field service management, etc. However, today there are an additional two markets in addition to the ones above: Sales and Marketing Management (SMM) and Contact & Activity Management (GrayByun, 2001). In the beginning, sellers of CRM systems included Brock Control, Sales Technologies, Aurum, Scopus, Vantive, and Clarify. Following these vendors included Oracle, SAP, and several others (Gray-Byun, 2001). Today, there are several companies offering CRM products and/or services. The following figure, from “Customer Relationship Management Systems Handbook” By Duane Sharp, shows a list of vendors with CRM products and/or services: Figure 2. List of vendors with CRM products or services Source: http://library.books24x7.com.myaccess.library.utoronto.ca/book/id_5437/viewer.asp?bookid=5 437&chunkid=0878328438 (Sharp, 2003). The figure above also includes specific details of what each company offers. Based on those details, we can see the similarities and differences between the offerings of each company. Some similarities are several companies provide products for E-business/commerce and offer software associated with data warehousing and database management. Many of the companies are similar in the big picture and the only differences are some provide only CRM products and some are very specific as to what they offer as compared to others (Sharp, 2003). Information and data flow A Customer Relationship Management (CRM) System in an organization requires its staff to be in charge, actively monitor and analyze the information that goes into and comes out of the system while making positive decisions. “The people involved in any way with the customer have to be aware of those processes and preferably believe in those processes so that a seamless service can be delivered to the customer.” (JISC Cetis, CRM) Various individuals at various levels of the organization are responsible for contributing data into the CRM system; the customers are the main source for the information that is put into the system. They are the foundation for the CRM system. The second set of people responsible for populating the data for a CRM system are the front office and back office systems people. The front office systems people are workers in the sales department, marketing and the service department. “They are the primary interface to customers and sales channels; they send all of the customer information to the data warehouse” (Evans, Week 10). They deal with the sales and manufacturing, quoting, order-taking and marketing and service sectors of the CRM system. The back office systems people are “used to fulfill and support customer orders; they send all of the customer information to the data warehouse” (Evans, Week 10). They send information dealing with fulfillment support, call centers, inventory system, billing system and the customer support system. They are in the midst of the whole integration of a CRM system and can include people from the supplies department, manufacturing, logistics, finance and the HR department. The back office systems people enter information dealing with the operational activities surrounding the customer from different perspectives. They input information such as customer names, frequent purchases and order numbers to populate the CRM Data Warehouse, which is a logical collection of information, gathered from many different operational databases, used to create business intelligence and support business analysis activities and decision-making tasks (Evans, Week 4). The CRM data warehouse includes current and historical data from various sources. Data marts can also be used to categorize the information in the data warehouse according to each department. An organization not only has workers populating the CRM system data warehouse, it has people who rely on the information the CRM system produces. Top level executives and high level workers in charge of setting the strategic direction of the organization rely on the information that comes out of the CRM system. They receive all the information to provide a strategy for the organization. Below is a list of some high level workers as explained by Professor Max Evans: CIO – Chief Information Officer: Responsible for overseeing every aspect of an organization’s information resources. CTO – Chief Technology Officer: Responsible for overseeing both the underlying IT infrastructure within an organization and the user-facing technologies (e.g. CRM). CSO – Chief Security Officer: Responsible for the technical aspects of ensuring the security of information such as the development of firewalls, intranets, extranets, and anti-virus software. CPO – Chief Privacy Officer: Responsible for ensuring that information is used in an ethical way and that only the right people have access to certain types of information such as financial records, payroll, and health information. Source of job title explanations: Evans Max. Weekly Lectures: 2. University of Toronto. 2010. Additional Workers include: The Chief Executive Officer (CEO), Chief Operations Officer (COO), Chief Marketing Officer (CMO) and the Customer Relationship Management Manager. Also included in this list are marketing systems analyst, customer relationship analyst’s, business unit heads and head of sales. The head of a CRM project often reports to chief marketing officer (McKinsey. Pg 2). Knowledge workers rely on information provided by the CRM system to make effective decisions that positively impact the organization. “A Knowledge worker is a technology-literate knowledge worker who knows how and when to apply technology” (Tollison). These knowledge workers use data mining tools to help with structured1 and non structured2 decisions. Data mining tools are used to query information in the data warehouse. They manipulate information to support decision-making tasks. For example, a store may use data mining to determine what products elderly customers buy in August. Examples of data mining to tools are query-and-reporting tools, intelligent agents, multidimensional analysis tools, and statistical tools. These tools support the concept of OLAP (Online Analytical Processing). McCalla, Ezingeard and money explain that the failure for a CRM system lies in the CRM implementation, particularly from the perspectives of both the employees and customers interacting with such technologies. A possible solution to this is training staff to use CRM systems properly to guide decision making, and to involve all workers in various sectors of the organization at different levels of management. Process Flow Customer relationship management systems streamline several organizational processes, a few of which are listed below; Customer information quality Process Fit Targeted Promotion Customer service and support Sales Force automation Customer information quality 1 A structured decision involves processing a certain kind of information in a specified way so that you always get the right answer (Evans, Week 8). 2 A non-structured decision is one which there may be several right answers and there is no precise way to get the answer (Evans, Week 8). Customer information is very important to an organization because it helps determine whether or not the organization will be profitable. An organization manufactures goods for a customer and if they manufacture the wrong or irrelevant items then the company will lose revenue. Therefore, a customer relationship management system is necessary to collect the information that the company needs to better serve each individual customer. The CRM system collects information such as buying behaviours and trends. This information enables the company to manufacture appropriate goods for their segmented market. The information also helps predict future purchasing habits based on the previous purchasing habits that have been collected by the system. Process Fit Process fit is “the way in which the elements of a business process are uniquely integrated. Companies with good process fit have worked hard to integrate everything around a specific strategic focus” (Business process trends, 2010). In this case, the specific strategic focus is customer relationship management systems. The process fit in this situation deals with monitoring the customer interaction process, connecting to the sales channels and customizing market support processes. Customer interaction processes involves establishing a unique method for obtaining customer information, redesigning the information obtained, facilitating the interaction between the company and the customer and effectively distributing data. Connecting to the sales channel involves obtaining information about the purchases a customer makes and using that to predict consumer behaviour. Customizing the market support process involves analyzing the interactions made and making necessary adjustments to the market support system to accommodate the needs of the consumers. Targeted Market promotion The customer relationship management systems provide information for targeted market promotion. Targeted market promotion involves segmenting a group of individuals and promoting products to them based on the information they may have previously supplied. This information can be categorized based on the individual's purchasing habits. Customer Service and support Customer relationship management systems provide adequate customer service and support. Customer service and support involves attending to a customer's needs and providing necessary support to maintain customer retention in a company. Customer relationship management systems consist of a knowledge base that can provide basic information for customers when they contact the company. If a customer requires extra assistance, a customer representative would be available to assist them. Sales Force Automation Sales force automation tracks all the steps in the sales process. Some sales force automation systems list prospective customers for the sales team to get in touch with. This helps the companies predict what customers may be interested in purchasing based on information in the system. Organizations can still conduct such processes without a CRM system but it would not be as effective. Customer information quality may be displaced within an organization. The organization may have to resort to surveys from papers and individually plot graphs to attain customer satisfaction data for their product. This may be suitable for a small company and even but a larger company would face difficulties in obtaining quality and detailed information regarding their customers. It would also be difficult to target customers without the CRM system. As stated earlier, the CRM system is a knowledge-based system and contains detailed information about a customers purchasing pattern, which is determined automatically with the help of the system. However, without the CRM system, it may be difficult to gather information to segment the customers and appropriately cater to their needs and almost impossible to promote the right products to the right customer in a large company. Implementing a customer relationship management system would help increase the speed of access of information for the benefit of both the company and the customers. Customer relationship management systems are business intelligence systems and help improve the methods through which an organization operates. They provide a company with a competitive edge in the market. The presence of a CRM system results in better customer experience as well as improves customer retention for a company. The consumer experience changes due to the information they provide in the CRM system interviews. A company can focus on this information and utilize it to meet the direct needs of the customers in order to make them feel involved in the process of creating the products that are suitable for them. Implementation of CRM Systems Customer Relationship Management has become a primary business strategy in today’s customer-centric business environment. Not too long ago, the majority of companies adopted a product-centric approach and did not take the time to better understand their customers. The result is that many customers never came back. For this reason, customer relationship management (CRM) has become a critical consideration for all managers alike. Today, a company’s goals and objectives are directed at the ultimate goal of keeping the customer satisfied and advances in CRM technologies have equipped businesses with the appropriate tools for achieving these goals. However, CRM is more than just a technology – it is a strategic process. Like any business process, successful CRM must begin with the right kind vision and develop to encompass the goals, objectives, strategies and tactics of an organization’s business plan. The principal goal of CRM is to become more customer-centric and provide customers with a positive business experience by limiting negative interactions (Lecture slides). This approach includes understanding customer behavior and satisfying the needs and desires of individual consumers. A second goal of CRM involves targeting and maintaining relationships with profitable customers (ThuyUyen et al., 2007). This goal involves deliberately selecting key customers who are of strategic significance, as not all customers are equally profitable. Finally, third and fourth goals that businesses may have for implementing a CRM program is to deliver value to the customer and create a competitive advantage (ThuyUyen et al., 2007). A CRM program should be planned in a way that minimizes financial risk as opposed to being built with elegant capabilities, the latest version of the software or to serve the customer at any cost (Kirby, 2001). Rather, it should be practical, realistic and provide the capabilities that the users need. The next step towards successful implementation of a CRM program involves determining the systems objectives. Examples of such objectives might include understanding the customers’ needs and behaviors at all times and decreasing customer criticism by a predetermined and measurable amount (ThuyUyen et al., 2007). A third objective might involve motivating customers to initiate an increase in the annual revenue of the company (ThuyUyen et al., 2007). Lastly, a fourth possible objective could be to use technology to improve customer service, attract new customers through personalized communications and enable a greater degree of customer differentiation (ThuyUyen et al., 2007). The guiding strategies that organizations need to be aware of before embarking on a CRM project include identifying the target customer, choosing the most appropriate and effective channel of distribution and deciding on a brand value strategy (ThuyUyen et al., 2007). Before deciding to implement a CRM project, a company must understand the types of customer segments they will be serving as well as identify the nature of interactions with each segment that will generate the most loyalty among customers and profit for the business. This will help in achieving the CRM goals of customer loyalty and satisfaction. The second strategy involves the continuous evaluation of potential channels of distribution and provides an organization with a means of interacting with its customers and delivering value to them. This can also provide the company with a competitive advantage. Lastly, the brand value strategy contributes to the company’s ultimate goal of becoming more customer-centric by recognizing and understanding its customers’ wants, needs and behaviors. Branding is more than just a name, icon or slogan but rather it encompasses a customer’s interactions with the company, its products and services (Kirby, 2001). Relationships cannot be built without achieving a personality for the company. In relation to a CRM viewpoint, a strong brand must emphasize that the company’s product or service is better than that of competitors on a dimension that customers care about. Furthermore, promises made to customers by the brand should be true and should always be upheld by the company (Kirby, 2001). The tactics that organizations choose to implement their strategies and achieve their goals and objectives may vary from one organization to another. For example, one way of identifying the target customers is through the implementation and use of models of customercentricity (ThuyUyen et al., 2007). Customer-centricity or customer segment management is the process of segmenting groups of customers in a way that maximizes the long-term profit potential of the organization and benefits the customers (ThuyUyen et al., 2007). Another method that a company may employ to identify the target customers is to build a profit and loss strategy for each of its customers (ThuyUyen et al., 2007). By knowing the P&L ranking of each customer, the organization can better appropriate a corresponding level of service, pricing, discount and distribution (ThuyUyen et al., 2007). Employing the right tactic to segment the target customers is important for achieving the CRM goal of selecting key customers who are of strategic significance to the firm and achieving customer satisfaction. To implement the second CRM strategy of choosing the most effective channel, organizations must regularly evaluate the potential channels available to them and the efficiency of their choice. One way to compare the old and the new channels is through the use of the road-map matrix system (ThuyUyen et al., 2007). The road map matrix allows organizations to recognize the differences and opportunities between existing business models and the new relationships, roles and interactions of implementing a new channel (ThuyUyen et al., 2007). Advancements in technology such as the internet have allowed for the availability of multiple distribution channels and communication methods which can extend market coverage cost effectively. However, technology is only one part of channel management. The implementation of new channels requires effective leadership and an integration of different channels through the sharing of knowledge about customer relationships. An organization can use different channels to reach each of its market segments in order to achieve the goal of building profitable relationships with its customers. To achieve successful branding a company needs to find out “customers' needs, obtain feedback to improve services, provide adequate training to their employees about their brands, and sufficiently equip their businesses to live up to their brands” (ThuyUyen et al., 2007). By employing CRM initiatives, companies can move away from their obsession with advertising and begin to view branding as a more holistic endeavor. Through CRM, characteristics that were formerly considered beyond the scope of a brand become the pinnacles of the brand’s strength and result in achievement of greater customer value, building relationships and ultimately gaining a competitive advantage. The last tactic for an organization implementing a CRM program is to ensure that the implementation process is a strategic, organization-wide effort and not just a technological one or the responsibility of one department (The Economist, 2007). Technology is simply a tool that the organization can use to facilitate the segmentation, branding and targeting of customers. Every branch of the organization must understand that their actions reflect upon the company and affect the relationship with the customer. Success and Failure Stories The concept of Customer Relationship Management has been widely embraced by businesses. In practice and upon implementation, however, success stories are widely contrasted by accounts where CRM failed to meet the desired expectations. One study conducted in 2002 indicated that only 30.7% of organizations claimed to have achieved improvements in the way that they sell and service customers (Bull, 2003). A recent Giga Survey revealed that the reason for CRM failure is because “companies generally underestimate the complexities of CRM, lack clear business objectives and tend to invest inadequately in the provision of CRM software” (Bull, 2003). In September 1999, Hershey, the nations largest candy manufacturer announced that it would not be able to deliver its products to retail and warehouse shelves in time for Halloween. Hershey’s had recently implemented new CRM processes and technologies to better coordinate deliveries with its retailers (Bligh et al., 2004). The system was designed to allow Hershey to minimize its inventory costs, improve coordination between departments, measure promotional campaigns, set prices and more (Bligh et al., 2004). Despite the complexity of the system, Hershey decided on an aggressive implementation of the undertaking. The project ran behind schedule and affected Hershey’s ability to take orders and deliver products (Bligh et al., 2004). For this reason, even though inventory was plentiful, orders had not arrived and distributors could not fully supply their retailers (Bligh et al., 2004) Hershey’s failure to deliver its products during Halloween season resulted in a $100 million loss of sales and gave its competitors such an unexpected advantage (Bligh et al., 2004). Implementing CRM projects is a complex procedure that requires experienced managers capable of adhering to the processes, people and technology while upholding the initial CRM objectives. Hershey’s main mistake was that the company tried to implement such a complex technology and process too quickly. The management team focused too much on the gains in efficiency it would achieve from the technology and did not give the goals of the CRM initiatives - such as aligning the implementation of the system with the firm’s demand environment - their due consideration. For this reason, the time-consuming and expensive efforts of implementing the CRM system resulted in an initial loss in revenue and succeeded only in slowing the company down. A second mistake Hershey made was that they attempted to implement the entire CRM system across the business in one go, through plunge implementation. This put them in the situation of having to tackle too large a task in their attempt to satisfy too many areas of the firm. A plunge implementation across a firm as large as Hershey’s, especially during peak demand period was doomed to incur a huge loss. Hershey should have relied less on technology and more on a holistic CRM branding tactic, which would have included determining customer needs, obtaining feedback and providing training for their employees. This may have resulted in a more successful implementation of the CRM program. Hershey’s initial failure may be attributed to the fact that it was one of the first companies to implement the CRM program. However, CRM success stories are becoming more and more frequent. For example, Laurent-Perrier UK, a subsidiary of the Laurent-Perrier Group, the world renowned champagne house recognized that it needed to maintain close relationships with its regular customers (IBM, 2009). The company wanted their mobile sales team to be able to keep track of customer meetings, opportunities and contacts while they were on the road and implemented a customized CRM solution which it integrated within corporate email and calendaring (IBM, 2009). Laurent-Perrier adopted a user friendly customer management tool which offered a range of functionalities including a customer/company management database, an events management system and a contact reporting system (IBM, 2009). Laurent-Perrier was able to successfully implement the CRM system because it defined the goals and objectives it wanted to achieve before attempting to implement the system. The company was able to realize that CRM is not just a technology and that adopting a pre-existing system would take time and require employee training across the entire organization. Laurent-Perrier explored many options, including building a system from scratch, before working with Q:chi to develop a system that met their personal needs with regards to functionality and ease of use for their non-technical staff. Laurent-Perrier employed a parallel implementation process as they determined that they wanted a user-friendly system that worked in conjunction with their pre-existing system so that little or no end-user training was required. Furthermore, Laurent-Perrier was not implementing CRM in order to keep up with the latest business trends or partake in the latest software advancements, but rather to fulfill an observed need that would help the company keep track of customers and enhance customer satisfaction. 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