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Abstract:

“The main aim of this report is to give a brief explanation of what CRM is

and what constitutes CRM. In addition this report also examines what the

benefits and limitations are of implementing CRM applications. Types of

CRM and how they are used to gain competitive advantage in the market is

going to be explained after defining what CRM is. Benefits of implementing

CRM applications is going to be categorized and explained using appropriate

models so that the reader can have a clear understanding about how

organizations can gain competitive advantage through this process. The

reasons behind CRM failure is also going to be categorized to point out the

mistakes which are usually made when implementing CRM technologies.

Furthermore, two business cases are going to be introduced to give an

example of how the whole process of CRM should or should not be executed.”

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Table of Contents1.0-Introduction...........................................................................................................................................4

2.0-Definition of Customer Relationship Management............................................................................4

2.1-Figure – The CRM Continuum............................................................................................................5

3.0-Types of CRM........................................................................................................................................5

3.1 Operational CRM.................................................................................................................................5

3.1.1 Sales-force Automation.............................................................................................................5

3.1.2 Marketing Automation...............................................................................................................5

3.1.3 Customer Service Automation...................................................................................................6

3.2 Analytical CRM...................................................................................................................................6

3.2.1 Figure – Feedback Loop............................................................................................................6

3.3 Collaborative CRM..............................................................................................................................7

3.3.1 Figure – Architecture of a general CRM system.......................................................................7

......................................................................................................................................................................

4.0- Benefits of CRM....................................................................................................................................7

4.1 Customer Satisfaction and Loyalty......................................................................................................7

4.1.1 Figure – Expectations – Disconfirmation Model..............................................................................8

4.2 Cost Reduction and Increased Profit....................................................................................................8

4.3 Better Customer Insight.......................................................................................................................8

4.3.1 Figure – The Customer Journey.................................................................................................9

4.4 Organization Example 1......................................................................................................................9

5.0- Why CRM Projects Fail.....................................................................................................................10

5.1 Implementation Missteps...................................................................................................................10

5.2 Inadequate Planing.............................................................................................................................10

5.3 Lack of Change Management............................................................................................................10

5.4 Lack of Leadership............................................................................................................................11

5.5 Organization Example 2....................................................................................................................11

6.0 Conclusion............................................................................................................................................11

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7.0 References.............................................................................................................................................12

1.0 Introduction

Relationships between customers and suppliers have always existed since the start of trade and also were equally important as it is today. However the term CRM (Customer Relationship Management) was only introduced in the 1990’s, in conjunction with the new technologies introduced which enabled the CRM implemented companies to organize, automate and synchronize business processes. As information systems were started to be introduced to the business world, the importance of gaining competitive advantage (Porter, 1985; Porter and Miller, 1985) in the market has boosted. In the year 1993, Siebel Systems, Inc. was founded by Thomas M. Siebel and Patricia House to serve the industry with alternative solutions by providing software for Customer Relationship Management and Sales Force Automation (SFA) systems. Siebel Systems, Inc. took advantage of the growth of e-commerce and was named the fastest growing company in 1999 (FundingUniverse, 2010).

Today, applying information and communication technologies to manage customer relationships is crucial in every field of business. The importance of CRM applications and information management can also be resembled by the number of employees employed (105.000) by Oracle Corporation (ADVFN, 2010), the number one supplier of information management software and the second largest independent software firm in the world (FundingUniverse, 2010).

2.0 Definition of Customer Relationship Management

The term CRM (Customer Relationship Management) was born when the changes in the market has led to customer-centric understanding of business. CRM can be defined as “a business strategy that maximizes profitability, revenue and customer satisfaction by organizing around customer segments, fostering behavior that satisfies customers and implementing customer centric processes” (Buttle F., 2009, P.19). Although the term CRM is defined mainly as a business strategy to gain profitability, CRM is not just a marketing strategy. It is a method of reorienting a business enterprise to achieve better customer profile, thus maximizing the profit of the enterprise and avoiding the “commodity trap” along the way.

Implementing CRM to a company is a very complex issue as the content of the term is still being confused by many enterprises. According to the quotations from Insight Technology Group, The CRM Institute, %60 of the CRM projects end in failure (Pedron, C., 2009). A variety of approaches are used to define CRM, which are pictured in Figure 2.1, both in a narrow perspective and broad perspective to achieve high efficient implementation of CRM to business enterprises.

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Figure 2.1 - The CRM Continuum

Source: Adapted from Adrian Payne (2005)

3.0 Types of CRM

Customer Relationship Management is classified into several types as listed below:

3.1 Operational CRM

Organizations invest huge amounts of money in operational CRM systems to facilitate fast and efficient customer interactions. However, their success in delivering customer-centric business processes is still a question at hand. Operational CRM is the technology strategy of managing and interacting with customers across channels (Datamonitor, 2004). These channels can be defined as business processes such as sales, marketing and customer service automations.

3.1.1 Sales-force Automation

SFA automates companies sales force management tasks. With the implementation of sales methodology, sales-force automation (SFA) can be configured according to a specific organization or industry. SFA software’s enable companies to take advantage of opportunities which comes at hand through sales forecasting, generally using transactional histories. In addition, product customization software’s assist the organization, especially when the product is complex, to design and price customized products.

3.1.2 Marketing Automation

Organizations which rely on their sales for their profitability use the marketing automation (MA) tool to save both time and assets. MA software involves accessing up-to-date information and automating them in a way which suits the company best. Applying technology to the marketing process allows companies to use customer-related data to enable unique communications and customizing their way of business accordingly.

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3.1.3 Customer Service Automation

Customer service automation (CSA) helps organizations to manage customer service processes via appropriate technology. The primary goal of CSA is delivering superb customer service. Achieving this aim is not a simple process. To achieve this, CSA coups with customer demands more effectively and quickly. Concurrently with providing effectiveness to organizations, CSA assists organizations to gain greater service productivity and to make the most of improved customer experience. CSA software’s are used in numerous fields, for instance contact centers, call centers, web services and field services. With the proper IT infrastructure, CSA can be the difference between success and failure in an organization.

3.2 Analytical CRM

Interrogation of data; with the assistance of data mining applications, such as sales, financial and marketing data, can be used to enhance customer and company value. The goal of analytical CRM is to satisfy customer’s needs parallel to the financial obligations of the organization. However, most of the business enterprises priority these days is to build more and more revenue. The issue of customer satisfaction should be taken more seriously. Without analytical data concerning the customer, operational CRM struggles to function properly and work effectively. After the analyzation of customer data, the relationships with customer can be widened by acquiring new customers. In addition, the length of the relationship with your top customers can be extended. The secondary aim of increasing revenue is also achievable by the transformation of minor customers to highly profitable ones, with the assistance of customer related data.

Figure 3.2.1 – Feedback LoopSource: Adapted from SAP (2001), P. 14

The data collected from customer transactions and relationships must be made available to relevant employees and systems, to utilize and optimize the process flow within the organization. To empower your employees and add value to the organization, a model similar to Figure 3.2.1 should be applicable. If

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the customer knowledge is implemented correctly into the system, in conjunction with the feedback loop, the results can be expected to be superior.

3.3 Collaborative CRM

Collaborative CRM is used to share collected data between various departments of an organization to achieve better insight into customer needs and improve customer experience. Collaborative CRM also enables different organizations to share the valuable information they shelter along the supply chain to serve customers more effectively. Organizations, employees and customers benefit from collaborative CRM through the same channel: improved customer experience. The opportunity to communicate feedback on quality, value and dependability allows companies to improve their services and surpass customer expectations. As it can be seen on Figure 3.3.1, collaborative CRM constitutes the interface of the service provider to customers.

Figure 3.3.1 – Architecture of the general CRM system

Source: Adapted from FIDIS (Future of Identity in the Information Society)

4.0 Benefits of CRM

An organization can benefit from CRM in a variety of ways if it is implemented efficiently to fit the organizations interests. Excellent customer service is CRM’s primary aim. Whilst maintaining better customer service, the organization which is implementing CRM should also avoid high costs. In the long run, an organization with excellent customer service and low cost is likely to gain high reputation amongst its rivals. The ways in which an organization can benefit from the implantation of CRM is as followed:

4.1 Customer Satisfaction and Loyalty

CRM technologies coordinate how organizations collect and use customer data. This data is used to better anticipate customer buying habits and effectively respond to customer demands. The most common way of measuring satisfaction is to compare customer experience with their expectations, as can be seen in

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Figure 4.1.1. Loyalty on the other hand, is measured by reference to customer purchasing behavior and purchasing intention.

Figure 4.1.1 – Expectations- Disconfirmation Model

Source: Adapted from Oliver (1980)

Effectiveness in meeting customer expectations ensures customer satisfaction and results in customer loyalty (McMahon, T. 2003). The question is: can customer satisfaction augment while the organization is operating cost-effectively?

4.2 Cost Reduction and Increased Profit

Low cost is an important asset for all business enterprises. However, to pull off cost-effective management, organizations have to be customer-centric. Communication barriers have to be eliminated to access up to date information about customer buying habits and behavior so that employees across all departments can be more proactive when responding to customer needs. In addition by analyzing payment history the most profitable customers may easily be recognized. Furthermore, the accurate prediction of sales within the organization can provide the flexibility to fine-tune expenses (Angelos, S., 2010)

4.3 Better Customer Insight

Over time, the relationship deepens between the customer and the organization, resulting in mutual understanding between customers and organizations. As a result suppliers become better qualified to satisfy customer needs. Consequently, revenue and profit streams from customers become secure. The evaluation of the customer status is shown in Figure 4.3.1, starting from the status suspect until the customer reaches the status advocate.

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Figure 4.3.1 – The Customer Journey Source: Adapted from Francis Buttle, 2009

4.4 Organization Example 1

Near the end of 2007, the global broadband and telecommunications company Verizon Communications Inc., realized that a major overhaul was necessary to improve the medium business market. Verizon was facing stiff competition from cable providers and new ip-based entrants. Countering the aggressive competition in the market and accomplishing growth required a deeper customer insight. Considering the tough market conditions Verizon decided to implement business analytics SAS has introduced to provide a more customer-centric approach. After the implementation of CRM, Verizon gained capability of redefining the medium business customers in less than three months time. Verizon segmented its mainstream and top customers into micro segments, in an unexpected way by grouping different businesses in an innovative way. In succession, this enabled Verizon to find the right solutions for each customer segment. They also interviewed the most successful sales representatives in the field to confirm that the software they are using contains all the pertinent data required. This interview enabled Verizon to model the finished product according to the most successful sales representatives opinions. The customer focused solutions of CRM resulted perfectly, thanks to the new analytic models and micro segmentations. Finally, instead of limiting itself to a single criterion, Verizon analyzed multiple variables such as types of business. They then, matched the information with their existing information to be able to customize their prices by market. Adopting CRM was a big leap for Verizon; they can now deliver solutions, enabling the customers to meet their business objectives. Even in 2009, during the global recession, Verizon’s medium business market had a flamboyant year thanks to the analytical solutions of CRM.

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5.0 Why CRM Projects Fail

CRM is a key part of the commercial world indeed. In fact, according to International Data Corporation’s predictions, CRM SAAS (Software as a service) market is expected to reach 40.5 billion dollars. If implemented correctly CRM can boost both customer satisfaction and profits. However, success is a lower possibility than failure. Research shows that most of the CRM attempts end up with failure. According to Forrester’s report in 2009, under %50 of the CRM projects fully meet expectations (Krigsman, M., 2009).

CRM failures can result in dramatic results when the cost of CRM is taken into account. In addition to the financial performance of the organization, it may also cause customer dissatisfaction. There are various reasons behind CRM failures. The main ones are implementation missteps, inadequate planning, lack of leadership and lack of change management:

5.1 Implementation Missteps

Implementing a CRM project into an organization takes time. Even though management might be keen on implementing the system as soon as possible, it is usually best to take time and deploy the new system in phases rather than rushing it. In addition, being prepared is very important for the IT team to be comfortable when the new system is installed on their network. Management should keep everyone in the organization as well; implementing CRM may cause big changes in organizations business strategy (CABC, 2010) Furthermore, starting a change control process is quite important to go over and consider changes after the implementation begins. Organizations who does not take precaution, is likely to fail when implementing CRM.

5.2 Inadequate Planning

After objectives are set, the critical planning stage usually becomes a problem for organizations of large scale. Many organizations try to achieve more than they can cope with, hence, they are unable to address vital changes regarding the business process. Mistakes like these are quite similar in most organizations when in the planning stage.

5.3 Lack of Change Management

The implementation of CRM affects the daily routine of an organization significantly. Without sufficient preparation, employees will be uninterested to the big changes CRM brings. Every business unit has its own competitive strategy within the organization and the attempt of adopting the same software package to each business unit can result in serious failure. Despite the financial benefits, every business unit within the organization’s role should be considered. CRM problems relating to structure of a company is quite common in the modern business world. If not well prepared for the change that CRM brings, organizations are likely to fail to coup with the innovation.

5.4 Lack of Leadership10

In many organizations, the senior managers often lose interest once the crucial decisions have been made; do not pay attention to the post-implementation operations. These kinds of leadership shortfalls usually result in failure. Even if the planning stage is processed flawlessly the senior managers should continue through the completion and beyond. The reason for this is that even after the implementation, if measurement procedures are not carried out, the organization will have no knowledge whatsoever about how the initiative is performing.

5.5 Organization Example 2

In 1999, Cigna Corporation, a world-wide healthcare company, was operating with IT systems that were nearly twenty years old. Hence, it was difficult to deal with the 120 million claims per year that Cigna were receiving using the old IT system. The CIO of Cigna, Andrea Anania, planned to gather up all the information from the old IT systems and develop an integrated system that could cope with customer transactions. The main aim was to provide consistent and quality service to all customers Cigna bared. When Andrea Anania announced her plans, business analysts wondered why such an important decision had come so late. However, instead of consulting professional business solution providers, she took 1400 employees from the IT department to form a team and invited the leading business consulted Cap Gemini Ernst and Young for the implementation of transformation. Anania and her team planned to install two separate platforms and then connect them for processing. The main goal was to speed up the processing of 120 million medical claims by using technology. However, things were not going according to plans at all. On January 2001, the insurance commissioner of Georgia obliged Cigna to a 300.000 USD fine because of the delay in medical claim benefits to doctors. After 2001, despite Andrea Ananias confidence, the customer service disheveled in a chain of mistakes, resulting in millions of unsatisfied customers. Cigna lost six percent of its members in 2002 alone. Later on, in October 2002, the management of Cigna accepted their failure in executing the project and analyzed the problems. The main reason they cited was a planning mistake. The cost of the implementation project exceeded the expectations the management. In addition, the timing of the economic benefits from the project was misjudged.

6.0 Conclusion

The increase of competition in the business world has led to the expectations of the customers to rise. The ability to satisfy the increasing expectations of the customers in the competitive market lies within implementing CRM. An organization which successfully installed CRM applications is likely to increase its sales and customer satisfaction. There is no doubt that CRM can increase the overall success of business. However, the adaptation of CRM is a daunting task. Most of the companies attempt of installing CRM applications to their organizations end with failure.

Regardless of the failure statistics, by taking the right steps, an organization can successfully implement CRM applications that suit their business flow. Taking advantage of the benefits and avoiding the facts that lead to failures can lead organizations to success. This report has briefly explained the types of CRM as well as its benefits and limitations to an organization.

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7.0 References

ADVFN. (2010). Oracle Corporation.

Available: http://www.advfn.com/p.php?pid=financials&symbol=NASDAQ%3AORCL [ Last accessed 19th October 2010.]

All Things CRM. (2010). The Advantages of Integrating CRM Software to Reduce Ongoing Costs. 

Available: http://www.allthingscrm.com/crm-news/crm/the-advantages-of-integrating-crm-software-to-reduce-ongoing-costs/#more-730 [Last accessed 17th Nov 2010.]

Bligh.P., Turk.D. (2004), “CRM Unplugged – Releasing CRM’s Strategic Value”, Hoboken, New Jersey: John Wiley & Sons, Inc.

CABC. (2010). Implementing CRM. 

Available: http://www.mscrm-cabc.co.uk/implementingCRM_Implementation.htm [Last accessed 16th Nov 2010]

Contact Professional . (2010). CRM Technologies That Drive Customer Satisfaction. 

Available: http://www.contactprofessional.com/solutions/crm/crm-technologies-that-drive-customer-satisfaction-603 [Last accessed 19th Nov 2010.]

Data monitor. (2010). Operational CRM. 

Available: http://www.datamonitor.com/Products/Free/Brief/BFHC0651/010BFHC0651.pdf [Last accessed 18th Nov 2010]

FundingUniverse. (2010 a). Siebel Systems, Inc..

Available: http://www.fundinguniverse.com/company-histories/Siebel-Systems-Inc-Company-History.html [ Last accessed 20th October 2010.]

FundingUniverse. (2010 b). Oracle Corporation.

Available: http://www.fundinguniverse.com/company-histories/Oracle-Corporation-Company-History.html [Last accessed 15th November 2010.]

Francis Buttle (2009). “Customer Relationship Manager - Concepts of CRM.” 2nd ed. Oxford: Elsevier Ltd.

Krigsman. M. (2009). CRM failure rates: 2001-2009. 

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Available: http://www.zdnet.com/blog/projectfailures/crm-failure-rates-2001-2009/4967 [Last accessed 17th Nov 2010.]

Payne, A. (2005). “Handbook of CRM” , Oxford: Elsevier Ltd

Pedron C. (2009) Using the Dynamic Capabilities Perspective to Analyse CRM Adoption.

A Multiple Case Study in Portuguese Organizations. Thesis (PhD). Technical University of Lisbon

Available: http://www.repository.utl.pt/bitstream/10400.5/1144/1/Thesis_Cdpedron_June2009.pdf

[Lastaccessed 18th Nov 2010]

SAP White Paper. (2001). Analytical CRM. 

Available: http://www.sap.com/solutions/business-suite/crm/pdf/AnalyticalCRM_50046585.pdf [Last accessed 20th Nov 2010]

SAS. (2010). Verizon: Creating their own upturn. 

Available: http://www.sas.com/success/verizon.html [ Last accessed 17th Nov 2010]

Bibliography:

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1. Gentle M. (2002). “The CRM Project Management Handbook – Building Realistic Expectations and Managing Risk”. Great Britain and United States: Kogan Page Ltd.

Appendix 1:

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Siebel Systems, Inc.

Statistics: Public Company Incorporated: 1993 Employees: 6,000 Sales: $790.9 million (1999) Stock Exchanges: NASDAQ Ticker Symbol: SEBL NAIC: 511210 Software Publishers

Company Perspectives:

Siebel Systems, Inc. was founded in 1993 to address the growing need of organizations of all sizes to acquire, retain, and better serve their customers. Today, Siebel Systems is the world's leading provider of eBusiness application software, with more than 6,000 employees who operate in more than 30 countries and 100 offices around the world.

Company History:

Siebel Systems, Inc. began in sales force automation software, then expanded into marketing and customer service applications, including customer relationship management (CRM). From the time it was founded in 1993, the company grew quickly. Benefiting from the explosive growth of the CRM market in the late 1990s, Siebel Systems was named the fastest growing company in the United States in 1999 by Fortune magazine. With the growth of electronic commerce, Siebel formed strategic alliances and made several acquisitions to provide e-business solutions for CRM and related areas. One secret to Siebel's success has been its ability to form alliances; as of late 2000 the company had more than 700 alliance partners. Revenue for 2000 was expected to surpass the $1 billion mark.

Appendix 2:15

Verizon Communications

Verizon Communications Inc., based in New York City and incorporated in Delaware, was formed on June 30, 2000, with the merger of Bell Atlantic Corp. and GTE Corp. Verizon began trading on the New York Stock Exchange (NYSE) under the VZ symbol on Monday, July 3, 2000

Verizon's Formation: The Bell Atlantic - GTE MergerThe mergers that formed Verizon were among the largest in U.S. business history, culminating in a definitive merger agreement, dated July 27, 1998, between Bell Atlantic, based in New York City, and GTE, which was in the process of moving its headquarters from Stamford, Conn., to Irving, Texas. Prior to the merger, GTE was one of the world's largest telecommunications companies, with 1999 revenues of more than $25 billion. GTE's National and International Operations served approximately 35 million access lines through subsidiaries in the United States, Canada and the Dominican Republic, and through affiliates in Canada, Puerto Rico and Venezuela. (Access lines are the individual connections from a customer's premises to the phone network.) GTE was a leading wireless operator in the United States, with more than 7.1 million wireless customers and the opportunity to serve 72.5 million potential wireless customers.

Current Statistics:Verizon today is a global leader in delivering broadband and other wireless and wireline communications services to mass market, business, government and wholesale customers. At year-end 2009, the company had approximately 222,900 employees, serving customers in more than 140 countries. Verizon's corporate headquarters is located at 140 West St. in Manhattan, and it has a major operations hub, the Verizon Centre, at the former headquarters location of AT&T in Basking Ridge, N.J

Appendix 3:

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CIGNA Corporation

Statistics: Public Company Incorporated: 1981 Employees: 43,200 Total Assets: $95.09 billion (2000) Stock Exchanges: New York Pacific Philadelphia Ticker Symbol: CI

Company Perspectives: At CIGNA, we intend to be the best at helping our customers enhance and extend their lives and protect their financial security. Satisfying customers is the key to meeting employee needs and shareholder expectations, and will enable CIGNA to build on our reputation as a financially strong and highly respected company. We believe: Providing the customer with products and services they value more than those of our competitors is critical to our success. Talented, well-trained, committed and mutually supportive people working to the highest standards of performance and integrity are what make success possible. The profitable growth of our businesses makes career opportunities and personal growth possible. Profitability is the ultimate measure of our success.

Company History: CIGNA Corporation is an insurance and financial services organization focusing on employee benefits, with its healthcare operations being the largest of its units. In addition to healthcare, CIGNA offers the following products to its U.S. customers: group life, accident, disability, and dental insurance; pension, profit-sharing, and retirement plans; and investment management. Outside the United States, the company offers, through CIGNA International, individual and group life, accident, and health insurance and pension products. CIGNA developed its focus on employee benefits during the 1990s, when it beefed up its healthcare operations and divested its personal property/casualty insurance operations and its U.S. individual life insurance and annuities activities.

CIGNA Corporation was formed in 1982, when INA Corporation, with its strong position in property and casualty insurance, and Connecticut General Corporation, with its strength in life insurance and employee benefits, merged. The resulting corporation immediately became one of the largest international, publicly owned insurance and financial services companies based in the United States. CIGNA gained its preeminent position by combining some of the oldest and most important companies in the insurance marketplace. The oldest of its predecessor companies was Insurance Company of North America (INA), a company rich with tradition. INA was formed by a group of prominent Philadelphians in November 1792, in Pennsylvania's State House, where the Declaration of Independence had been signed just 16 years earlier. Connecticut General Life Insurance Company was incorporated in 1865. That company began to expand from its focus on life insurance and employee benefits almost a century later, when it acquired another company with a long history of its own, Aetna Insurance Company, in 1962. Significant acquisitions since the formation of CIGNA include the American Foreign Insurance Association (AFIA), acquired in 1984 to expand the international operations; EQUICOR-Equitable HCA Corporation, a major employee benefits provider, purchased in 1990; and Healthsource, Inc., a managed-care firm based in New Hampshire, acquired in 1997.

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