THE INFLUENCE OF CUSTOMER RELATIONSHIP MANAGEMENT ON THE SALES OF PRODUCTS

CHAPTER TWO

REVIEW OF LITERATURE

INTRODUCTION

Our focus in this chapter is to critically examine relevant literature that would assist in explaining the research problem and furthermore recognize the efforts of scholars who had previously contributed immensely to similar research. The chapter intends to deepen the understanding of the study and close the perceived gaps.

Precisely, the chapter will be considered in three sub-headings:

• Conceptual Framework
• Theoretical Framework

2.1 CONCEPTUAL FRAMEWORK

CUSTOMER RELATIONSHIP MANAGEMENT

Customer relation is the process by which companies promote customer satisfaction and customer loyalty. Obtaining satisfied customer is a goal oriented process (Pesämaa, Hair, Fredman, 2008). The goal is specifically that most customer relation programs build long-term relationships. The program is typically two folded: in which one identify those in which the customer keeps buying the product or service and secondly those recommend it to others (Reference for Business, Encyclopaedia of Business, and 2nd edition). CRM thus refers to utilizing extensive strategies and engineering to find, obtain, and cultivate advantaged customers, and hence maintain long-term partnerships (Sin et al., 2005). Aggarwal (1997) and Claycomb et al. (1999) defined CRM as activities that manufacturers practice for understanding customer demands and improving customer satisfaction. Joo (2007) heed customer-centred approach is a critical success factor for businesses and furthermore Ranjan and Bhatnagar (2008) argue CRM guides organizations to focus on their customers. A good CRM strategy can increase sales by improving relationships with customers, thus enhancing customer loyalty (Huang and Lin, 2005). The acceleration of R&D efforts and the development of internal innovative capabilities are no longer sufficient to cope with the increasing cost, speed, and complexity of technological developments. In recent decades, there has been unprecedented growth in corporate partnering and an increasing reliance on various forms of external collaboration (Hagedoorn and Schakenraad, 1992; Gulati, 1995). Empirical studies have established that customer integration increases a company’s potential for innovation (Urban and von Hippel, 1988). Customer relationship management (CRM) has generally been assumed to enhance competitiveness for an organization, as well as to have a positive impact on corporate innovations. Among its many advantages are: early customer integration leads to a stronger relationship with the partner, a better understanding of market needs, fewer errors in the early development process, and a better product quality. Customers can provide first-hand information regarding their needs, can help create innovative ideas for new products, and provide feedback regarding concepts and prototypes (Bruce and Biemans, 1995). Customers are no-longer playing the mere role of end users. Their role in the whole value chain has become more and more prominent. However, there is still much debate over exactly what constitutes CRM. In fact, many scholars have claimed that the precise meaning of CRM is not always clear in the literature (Nevin, 1995; Parvatiyar and Sheth, 2001). For example, at a tactical level, CRM may mean database marketing (Peppers and Rogers, 1995) or electronic marketing (Blattberg and Deighton, 1991). At a strategic level, CRM may mean customer retention or customer partnering (Peppers and Rogers, 1993; Vavra, 1992). At a theoretical level, CRM may mean an emerging research paradigm in marketing (Parvatiyar and Sheth, 2001).This study focuses on the five most popular CRM activities listed by Lin et al.(2010): information sharing, customer involvement, long-term partnership, and joint problem solving.

EVOLUTION OF CUSTOMER RELATIONSHIP MANAGEMENT

The roots of CRM stem from the relationship marketing theory. Relationship marketing is the process of identifying, developing, maintaining, and terminating relational exchanges with the purpose of exchanging performance (Palmatier, 2008). According to Labus and Stone (2010) CRM is not just a software. In the past, CRM was often seen as a quick fix information technology project proposal implemented by consultancies. Mack et. al., (2005) claim that CRM evolved from total quality management in the 1980s. Schmitt (2003) identifies the origin of the customer orientation movement in 1990s, whereas Newell (2003) recognizes the strategic and technological focus of CRM. According to Chen and Popovich, (2003) The United States software vendors took up relationship marketing to market CRM systems. Labus and Stone refers to the continued usage of relationship marketing terminology, whereas Payne and Frow (2005, p.85) claim that CRM has “its roots in relationship marketing”. Later, Payne addresses the significance of change management in achieving positive CRM outcomes. Therefore, CRM thinking has evolved over the last decade, but there are differences of opinion as to how. However this term has been changed according to time as CRM and it’s still a new marketing concept to business strategies in Malaysia especially for small businesses. Referring to Chen & Popovich, (2003) in The United States of America now it has been an advance in technology which uses enterprise software technology compared to CRM, while it is not a new concept in marketing. During the mid-year of 1990s, the first CRM surfaced were information technology vendor and practitioner community (Coltman, 2007). Moreover, Drucker (1954) argue that customers relationship could been traced since 1950s and customers should be the foundation of an organization and the very reason for its existence. In the recent years, several factors have contributed to the rapid development and evolution of CRM. The rapid evolution of CRM technologies in organization has been created strong relationships and enhances customer value to improve motivation and the instruments (Day, 2003). In many industries in the world, this intermediation process has become the advent of sophisticated computer and telecommunication technologies that allow producers to directly interact with end customers (Parvatiyar & Sheth, 2001). As a concept of CRM, it covers many activities to increase close interaction with customers. For example in different industries such as airline, banking, insurance, computer software, household appliances and consumables use CRM as a fast changing tool in the nature of marketing and consequently making relationship become popular (Parvatiyar & Sheth, 2001).

TECHNOLOGY-BASED CRM.

Technology-based CRM Technology-based CRM involves manufacturers using computer technologies to facilitate various CRM activities and actively offer technology assistance to customers, including data storage, data mining, and CRM software systems (Sin et al., 2005). It is well-recognized that information systems and technology support product innovation. Dyche (2001) suggested that manufacturers should apply information technology, such as online data analysis, data mining, customer information systems, and service centres, to understand and communicate with their customers. Technology enhances the intelligence competence of CRM greatly. Accurate customer data is essential to successful CRM performance (Abbott et al. 2001). Companies grows the capability to collect, store, analyze, and share customer information in ways that greatly enhance their ability to respond to the needs of individual customers and thus to attract and retain customers (Butler, 2000). CRM technologies can help companies to understand the customers more coherently and comprehensively, and to better organize internal data to reduce service costs, help salespeople close deals more efficiently and improve the targeting of marketing programs. With the assistance of technology, companies are also interacting more directly with customers through social media, using them to collect and assess ideas and evaluate offers. By capturing massive amount of market intelligence, manufacturers are able to provide quick responses to customer requests for new product innovation. On the other hand, as customers use internet-related technologies to manage their relationships with suppliers, it is more likely for them to participate in the product innovation process. Moreover, CRM software systems enable companies to provide greater customization with better quality at lower cost. It also helps staff at all contact points serve customers better. Many customer-centric activities would be impossible without appropriate technology (Sin, et al., 2005). Therefore, we propose technology-based CRM has a positive effect on product innovations.

ROLE OF CRM MANAGERS

Customer Relationship Management is the newest and the most innovative innovations of recent time in order to provide better service to customer. CRM is always a helpful tool for the management and customer service stuffs which cope up with customer concerns and issues. CRM involves accumulating a lot of data about the customer. And when all the data of customer are being captured, it is then used to facilitate customer service transaction by making the information needed to resolve the issue or concern readily available in order to deal with the customers. Thus, it results in satisfying more customers, which means more profitable business and more resources available to the support stuff. In addition, customer relationship management system is a great help to the management in deciding on the future course of the company. CRM is also vital and the most important to help out the top management because it provides crucial data like customer satisfaction efficiency service by the frontline crews. A piece of customer relationship management software will also be able to generate the needed reports for product development or new concepts. Furthermore, this system will also be a great help for the top management in deciding the company‘s future course of action, whether it involves phasing out one of the products on the shelves or making adjustments to one of the products sold. CRM system‘s generated reports are also invaluable to your advertising and marketing planners,as they will be able to pinpoint which ideas and which don‘t. CRM system is the main reason where you will be able to release to release advertisements or plan marketing campaigns more in tune with your target market as well as the target audiences. CRM also leads to more responses to your advertisement and a more effective marketing campaign. However, it might not be easy as it seems to produce successful integration of CRM Customer Relationship Management system in your company. It might give you an insight, why CRM systems fail in companies because most companies it difficult and they fail to prepare for CRM review systems. By doing this, means that most companies fail to integrate all the departments that needs to be shared the information for it, to get the effective results. Furthermore, CRM units scattered all over the company‘s departments is often more effective than just making one big CRM department. This will ensure that each department will get the information and data that they need. In order to expand your business a CRM review system plays the important role. Through CRM systems, which are capable of handling enormous amounts of data, apart from that, it will also help you a lot in coping with increased numbers of customers and data. With a CRM customer relationship management installed and properly utilized, and by doing this, it assures all data will be maximized and also ensures that your business will be successful and your customers a lot more satisfied than before.

DUTIES OF CRM MANAGERS

1. Planning and delivering CRM strategies across the company encouraging customer retention and customer loyalty.
2. Deciding on the CRM platform structure and architecture ensuring it works seamlessly
3. across the organization and captures all required information at key points in the customer life cycle.
4. Customer Journey Mapping analyzing touch points with the organization and maximizing
5. commercial opportunities.
6. Working closely with all departments to ensure the CRM works effectively for all aspects of the company.
7. Overseeing direct communications with customers through the CRM.
8. Monitor and maximise customer lifetime value strategies ensuring maximum profitability.
9. Ensuring the database is segmented effectively for targeted marketing activities.
10. Overseeing the migration of all direct communications to lower cost mediums such as SMS and email.
11. Developing testing strategies for all aspects of the CRM to ensure the most effective approach for the company and its products.

RESPONSIBILITIES OF CRM MANAGERS

Customer relationship management consultants provide independent advice on solutions for managing customer service and customer relationships. Their aim is to help clients improve customer satisfaction with a consequent impact on revenue and profitability. Consultants achieve this by helping clients select the right CRM solution and providing project management and training services to ensure successful implementation. Risk

Consultants can help you reduce the risk in implementing CRM by identifying success factors and focusing on any issues that might put a project at risk. Their experience in deploying CRM solutions in other organizations enables them to advise on best practice and develop recommendations that make the best use of your people and your resources. Analyze

A CRM consultant analyzes every aspect of your customer relations. Consultants use analytic tools and processes to identify the interactions, channels and people who have the greatest impact on the quality of your customer relationships. The aim is to help you transform every aspect of customer experience and enhance customer satisfaction.

Solution

Consultants help you select CRM software packages that automate aspects of customer service and help your team to improve performance. Consultants select the package on the basis of best fit with your business objectives and your budget. They work with your information systems team to install the software and integrate it with your existing information systems.

Change

As part of the implementation, consultants take responsibility for planning and delivering any necessary training. The training is at two levels: to ensure that staff can use the software; to develop personal customer service skills to complement the CRM technology. Good consultants recognize that technology and training alone cannot deliver good customer relationship management. They identify any business processes that need to change and identify other actions to transform company culture so that all employees focus on quality customer service.

Opportunities

With CRM technology, consultants can help you identify opportunities to improve specific aspects of customer service. They establish metrics for the important customer service activities and set targets for improvement. Measuring performance before and after the CRM implementation helps you to calculate return on investment on the project.

THE COMPONENTS OF CUSTOMER RELATIONSHIP MANAGEMENT

Customer relationship management consists of different components including key customers, customer relationship management organization, knowledge management, and technology. This categorization is derived from this fact that the successful customer relationship management is resulted from four areas including strategy, employees, technology, and process. Also it is should be remembered that it is possible to achieve a competitive advantage through coordinating these strategic areas (Salomoun et al,2005).

Key customers focus

The identified customers are defined as the ones that the information is accessible for recognizing and contacting them in the company. Also key customers includes the identified ones that provide more values for company through providing more profits, active long-term relationships, powerful leadership for the company (Akroush, 2011) .

CUSTOMER RELATIONSHIP MANAGEMENT ORGANIZATION

This means fundamental changes in the organizing methods of business processes. Based on the customer relationship management, main dimensions of successful organizational organizing include organizational structure, organizational resources commitment, and human resources management commitment. Contacting the individuals is the most difficult stage in customer relationship management process. Internal marketing plays the most important role of customeroriented and customer services delivery in every organization. Internal marketing is resulted from interaction between human resource management and marketing (Akroushetal, 2011) .

Knowledge Management

In today‘s competitive world, knowledge is considered as one of the competitive factors in global economy. It is necessary to consider the customer as another important factor in order to enter today‘s dynamic market successfully. Customer knowledge management refers to acquiring, sharing, and developing the customer knowledge among employees for making profit to the organization and customers. In order to improve the organizational efficiency and effectiveness, insure from delivering desirable products and services to the customers and acquire their satisfaction, it is necessary to manage the organization‘s knowledge about customers. Therefore, it can be concluded that knowledge management is an integrative part of customer relationship management (Salomoun et al,2005).

TECHNOLOGY DEVELOPMENT OF EVERY ORGANIZATION

in information technology area improves its capability in collecting, saving, analyzing, and sharing knowledge about customer. This leads to increase the organization‘s capability in responding the customers‘ needs and maintaining them. The customer values analysis and services personalization, that are the results of advances in information technologies revolting from traditional approach to the integrated marketing systems, can be accessible through customer information system and automation of customer support processes. Customer relationship management refers to the information-based technologies that utilize information technologies for creating relationships with customers.

BUILDING LOYALTY

While building customers loyalty, this involves costs. Thus, companies should be careful in building customer loyalty in relation to costs to be incurred. Five levels of investment in customer relationship building are briefly examined below:

a. Basic marketing- The salespersons who sells the product.

b. Reactive marketing- The salesperson sells the product and encourages he customer to call if he /she has questions, comments or complaints.

c. Accountable marketing-The salesperson phones the customer to check whether the product is meeting expectation. The salesperson also asks the customer for any product or service improvement suggestions and any specific disappointments d. Proactive marketing- The salesperson contacts the customer from time to time with suggestions about improved products uses or new products.

e. Partnership marketing- The Company works continuously with its large customers to help improve their performance.

It should be noted that all these activities involved costs. Therefore, companies should carefully compare the costs and the benefits in terms of profits and sales-volume to be derived from such activities. Notwithstanding, most companies practiced only basic marketing when their markets contain many customers and their unit profit margins are small. For instance, Boeing works closely with American Airlines to design airplanes that fully satisfy American requirement. An increasing essential ingredient for the best relationship marketing today is the right technology. These days, companies are using email, websites, call centers, databases, and database software to foster continuous contact between company and customers. For example: The discount brokerage service Ameritrade provides detailed information to its customers, which helps to create strong bonds. It provides customized alerts to the device of the customer‗s choice, detailing stock movements and analyzes recommendations. The company‗s website permits online trading and provides access to a variety of research tool (Keller and Kotler, 2006).

This is similar to alerts sent by Nigeria Airlines remaining their customers about their booking with the such airlines. Similarly, MTN also alerted their teeming customer on their credit usage. To achieve this, these mobile telecommunication companies maintained databases of their customers

FORMING GOOD CUSTOMER RELATIONSHIP

According to Berry and Parasuraman as reported by Keller and Kotler (2006) three retention building approaches have been identified, namely: a. Adding Financial Benefits- The financial benefits that companies can offer are frequency programs and clubs marketing programs. Frequency programs are designed to provides rewards to customers who buy frequently and in substantial amounts. For example, Mobile Telecommunication Companies in Nigeria used this promotion strategy through rewards of bonuses and other various gifts to their frequent users of their products Frequency programs are seen as a way to build long tern loyalty, with these customers, potentially creating cross-selling opportunities in the process. It should however be noted that the first company to introduce an frequency programs gains the most benefit, especially if competitors are slow to respond. After competitors respond, frequency programs (FP) can become a financial burden to all the offering companies, but some companies are more efficient and creative in managing FPs. Many companies have created club membership programs. Club membership can be open to everyone who purchases a product or service, or it can be limited to an affinity group or to those willing to pay a small fee. Although open clubs are good for building a database or snagging customers from competitors, limited membership clubs are more powerful for long term loyalty builders. Fees and membership conditions prevent those with only a fleeting interest in a company‗s products from joining. Those clubs attract and keep those customers who are responsible for the largest portion of business. Some highly successful clubs include the following: Ikoyi club, Lagos-Nigeria; Apple- Apple encourages owners of its computers to form local apple-user groups. The user groups provide Apple owners with opportunities to learn more about their competitors; Hardley-Davidson: The world famous Motorcycle Company sponsors the Harley owners group (H.O.G), which now numbers 650,000 members in over 1,200 chapters. The first time buyer of a Harley Davidson Motorcycle gets a free one-year membership. The company also maintains an extensive web site devoted to H.O.G, which includes information on club chapters, events and special members – only section.

Adding Social Benefits

Company personnel works on cementing social bonds with customers by individualizing and personalizing customer relationship. In essence, companies turn their customers into clients. Donnelly, Berry and Thompson as reported by Keller and Kotler (2006) observed that customers may be nameless to the institution; clients cannot be nameless.

Adding Structural Ties-

The Company may supply customers with special equipment or computers with special equipment or computer links that help customers manage orders, payroll and inventory. A good example is McKesson Corporation, a leading pharmaceutical wholesaler, which invested millions of dollars in FDI capabilities to help independent pharmacies manage inventory, order-entry processes and self space. Another example is Milliken and Company, which provides proprietary software programs, marketing research, sales training and sales lead to loyal customers.

ELEMENTS OF CRM

customer knowledge

The customer service function in your company represents the front office functions that interact with your customers. These are the business processes that allow your company to sell products and services to your customers, communicate with your customers with regards marketing and dealing with the after sales service requirements of your customers. Each interaction with the customer is recorded and stored within the CRM software where it can be retrieved by other employees if needed.

campaign management

The sales team approach prospective customers in the hope of winning new business. The approach taken by the sales team is often focused in a campaign, where a group of specific customers are targeted based on a set of criteria. These customers will receive targeted marketing materials and often special pricing or terms are offered as an inducement. CRM software is used to record the campaign details, customer responses and analysis performed as part of the campaign. The technology requirements of a CRM strategy include the following building

blocks.

i. A database for customer information.

ii. Operational CRM requires customer agent support software.

iii. Collaborative CRM requires an interactive system.

iv. Analytical CRM requires statistical analysis software as well as software that manage any specific marketing campaigns.

Each of these can be implemented in a basic manner. Steps before Implementing CRM: Before implementing CRM certain basic steps with analysis should be followed. This analysis will help the users to identify various plans and the methods for implementation.

2.2 THEORETICAL FRAMEWORK

The Roots of Relationship Marketing

Marketing relationships as phenomena are probably as old as any trade

relationship. They have also been examined for considerably longer than the current discussion generally suggests. We propose that the current relationship marketing discussion is primarily derived from the four sources indicated in The choice of these research traditions as “roots” is based on our own earlier research and reflection (see Halinen, 1994; Möller, 1992, 1994), and on later suggestions by Brodie et al. (1997), Coviello et al. (1997), Gummesson (1996), Morgan and Hunt (1994), and Mattsson (1997). The selected traditions have emerged and developed within the marketing discipline, and they all put emphasis on the external relationships of a company, particularly on customerrelationships. As we see it, these four marketing traditions have contributed most to the shift from viewing marketing exchange as a transactional phenomenon to viewing it as on-going relationships. They have also given theoretical andpractical content to the relationship-marketing concept. Only a brief description is given at this point.

Commitment trust theory

Morgan and Hunt (1994) introduced one of the most cited theories in RM. They argued that trust and relationship commitment are the key mediators in the exchange between participants, which essentially lead to building a relational co-operation. The following sections discuss variables within this theory. Given the key role of trust and commitment, large part of the paper focuses on these two variables

Trust

The growth of various forms of relationship has put trust in a centre stage mainly because of the belief that trust is essential in establishing co-operative relationships (McQuiston, 1997; Handfield and

Bechtel, 2002). Interest in trust has generated a substantial amount of research from various disciplines such as economy (Williamson, 1993), psychology (Tyler, 1990), sociology (Granovetter,1985), and organisation (Mayer et al., 1995). While disciplinary differences exist, trust is a very complex construct with multiple meanings and dimensions. Delimiting the scope of trust is difficult and can be frustrating as the construct essentially is linked with other constructs such as opportunism, uncertainty and power. All definitions of trust suggest that trust involves one party having confidence in or relying on another party to fulfil its obligations (Anderson and Narus, 1990; Moorman et al., 1993;Morgan and Hunt, 1994; Nicholson et al., 2001; O’Malley and Tynan, 1997). Trust has been conceptualised in many ways. Many studies have conceptualised trust as a unidimensional construct (Anderson and Weitz, 1989; Morgan and Hunt, 1994; Jap, 1999; Garbarino and Johnson, 1999). Other studies begin by proposing trust as two-dimensional but practically find that trust emerges as a unidimensional construct (Geyskens et al., 1996; Doney and Cannon, 1997; Joshi and Stump, 1999; Nicholson et al., 2001). Other studies have a multidimensional approach to studying trust (Rodriguez and Wilson, 1995; Brashear et al., 2003; Miyamoto and Rexha, 2004; Johnson and Grayson, 2005). All these studies show lack of consensus regarding the most appropriate conceptualization and indeed ope-rationalizations of trust.

Relationship Commitment theory

Relationship commitment has been recognised in different literatures such as channel relationships, buyer-seller relationships, network theory and social exchange theory to play a central role in a longlasting relationship. Because commitment is central in successful relationship marketing, researchers focused their research on factors that influence the development and maintenance of commitment. Relationship commitment is known as an enduring desire to maintain a relationship (Dwyer et. al.,1987; Geyskens et al., 1996; Moorman et al., 1992; Morgan and Hunt, 1994). Relationship commitment is increasingly important as a focal point in marketing; as suggested by Gundlach et al., (1995, p. 78), commitment “may well become a focal point of explanation in marketing, as the discipline moves further away from the transactional view of exchange and embraces the relational view”. However, relationship commitment is a complex phenomenon and difficult construct that is poorly understood and subject to different forces (Kumar et al., 1995). Deeper understanding of the construct of commitment is prevented by the absence of a clear and complete definition of commitment. According to Fehr (1988, p. 557) “search for a definition of commitment carried out in psychology and other related disciplines has been marked with conflict, confusion, and disagreement”.Nevertheless commitment has been seen as the willingness or intention to continue maintaining the relationship into the future.