Information Management - Customer Relationship Management


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Information Management - Customer Relationship Management

  1. 1. 1
  2. 2. Abstract:“The main aim of this report is to give a brief explanation of what CRM isand what constitutes CRM. In addition this report also examines what thebenefits and limitations are of implementing CRM applications. Types ofCRM and how they are used to gain competitive advantage in the market isgoing to be explained after defining what CRM is. Benefits of implementingCRM applications is going to be categorized and explained using appropriatemodels so that the reader can have a clear understanding about howorganizations can gain competitive advantage through this process. Thereasons behind CRM failure is also going to be categorized to point out themistakes which are usually made when implementing CRM technologies.Furthermore, two business cases are going to be introduced to give anexample of how the whole process of CRM should or should not be executed.” 2
  3. 3. Table of Contents1.0 IntroductionRelationships between customers and suppliers have always existed since the start of trade and also wereequally important as it is today. However the term CRM (Customer Relationship Management) was onlyintroduced in the 1990’s, in conjunction with the new technologies introduced which enabled the CRMimplemented companies to organize, automate and synchronize business processes. As informationsystems were started to be introduced to the business world, the importance of gaining competitiveadvantage (Porter, 1985; Porter and Miller, 1985) in the market has boosted. In the year 1993, SiebelSystems, Inc. was founded by Thomas M. Siebel and Patricia House to serve the industry with alternativesolutions 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 thefastest growing company in 1999 (FundingUniverse, 2010).Today, applying information and communication technologies to manage customer relationships iscrucial in every field of business. The importance of CRM applications and information management canalso 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 independentsoftware firm in the world (FundingUniverse, 2010).2.0 Definition of Customer Relationship ManagementThe term CRM (Customer Relationship Management) was born when the changes in the market has ledto customer-centric understanding of business. CRM can be defined as “a business strategy thatmaximizes 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, CRMis not just a marketing strategy. It is a method of reorienting a business enterprise to achieve bettercustomer profile, thus maximizing the profit of the enterprise and avoiding the “commodity trap” alongthe way.Implementing CRM to a company is a very complex issue as the content of the term is still beingconfused by many enterprises. According to the quotations from Insight Technology Group, The CRMInstitute, %60 of the CRM projects end in failure (Pedron, C., 2009). A variety of approaches are used todefine CRM, which are pictured in Figure 2.1, both in a narrow perspective and broad perspective toachieve high efficient implementation of CRM to business enterprises. 3
  4. 4. Figure 2.1 - The CRM ContinuumSource: Adapted from Adrian Payne (2005)3.0 Types of CRMCustomer Relationship Management is classified into several types as listed below:3.1 Operational CRMOrganizations invest huge amounts of money in operational CRM systems to facilitate fast and efficientcustomer interactions. However, their success in delivering customer-centric business processes is still aquestion at hand. Operational CRM is the technology strategy of managing and interacting withcustomers across channels (Datamonitor, 2004). These channels can be defined as business processessuch as sales, marketing and customer service automations.3.1.1 Sales-force AutomationSFA automates companies sales force management tasks. With the implementation of salesmethodology, sales-force automation (SFA) can be configured according to a specific organization orindustry. SFA software’s enable companies to take advantage of opportunities which comes at handthrough sales forecasting, generally using transactional histories. In addition, product customizationsoftware’s assist the organization, especially when the product is complex, to design and price customizedproducts.3.1.2 Marketing AutomationOrganizations which rely on their sales for their profitability use the marketing automation (MA) tool tosave both time and assets. MA software involves accessing up-to-date information and automating themin a way which suits the company best. Applying technology to the marketing process allows companies 4
  5. 5. to use customer-related data to enable unique communications and customizing their way of businessaccordingly.3.1.3 Customer Service AutomationCustomer service automation (CSA) helps organizations to manage customer service processes viaappropriate technology. The primary goal of CSA is delivering superb customer service. Achieving thisaim is not a simple process. To achieve this, CSA coups with customer demands more effectively andquickly. Concurrently with providing effectiveness to organizations, CSA assists organizations to gaingreater service productivity and to make the most of improved customer experience. CSA software’s areused in numerous fields, for instance contact centers, call centers, web services and field services. Withthe proper IT infrastructure, CSA can be the difference between success and failure in an organization.3.2 Analytical CRMInterrogation of data; with the assistance of data mining applications, such as sales, financial andmarketing data, can be used to enhance customer and company value. The goal of analytical CRM is tosatisfy customer’s needs parallel to the financial obligations of the organization. However, most of thebusiness enterprises priority these days is to build more and more revenue. The issue of customersatisfaction should be taken more seriously. Without analytical data concerning the customer, operationalCRM struggles to function properly and work effectively. After the analyzation of customer data, therelationships with customer can be widened by acquiring new customers. In addition, the length of therelationship with your top customers can be extended. The secondary aim of increasing revenue is alsoachievable by the transformation of minor customers to highly profitable ones, with the assistance ofcustomer related data.Figure 3.2.1 – Feedback LoopSource: Adapted from SAP (2001), P. 14The data collected from customer transactions and relationships must be made available to relevantemployees and systems, to utilize and optimize the process flow within the organization. To empower 5
  6. 6. your employees and add value to the organization, a model similar to Figure 3.2.1 should be applicable. Ifthe 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 CRMCollaborative CRM is used to share collected data between various departments of an organization toachieve better insight into customer needs and improve customer experience. Collaborative CRM alsoenables different organizations to share the valuable information they shelter along the supply chain toserve customers more effectively. Organizations, employees and customers benefit from collaborativeCRM through the same channel: improved customer experience. The opportunity to communicatefeedback on quality, value and dependability allows companies to improve their services and surpasscustomer expectations. As it can be seen on Figure 3.3.1, collaborative CRM constitutes the interface ofthe service provider to customers.Figure 3.3.1 – Architecture of the general CRM systemSource: Adapted from FIDIS (Future of Identity in the Information Society)4.0 Benefits of CRMAn organization can benefit from CRM in a variety of ways if it is implemented efficiently to fit theorganizations interests. Excellent customer service is CRM’s primary aim. Whilst maintaining bettercustomer service, the organization which is implementing CRM should also avoid high costs. In the longrun, an organization with excellent customer service and low cost is likely to gain high reputationamongst its rivals. The ways in which an organization can benefit from the implantation of CRM is asfollowed:4.1 Customer Satisfaction and LoyaltyCRM technologies coordinate how organizations collect and use customer data. This data is used to betteranticipate customer buying habits and effectively respond to customer demands. The most common wayof measuring satisfaction is to compare customer experience with their expectations, as can be seen in 6
  7. 7. Figure 4.1.1. Loyalty on the other hand, is measured by reference to customer purchasing behavior andpurchasing intention.Figure 4.1.1 – Expectations- Disconfirmation ModelSource: Adapted from Oliver (1980)Effectiveness in meeting customer expectations ensures customer satisfaction and results in customerloyalty (McMahon, T. 2003). The question is: can customer satisfaction augment while the organization isoperating cost-effectively?4.2 Cost Reduction and Increased ProfitLow cost is an important asset for all business enterprises. However, to pull off cost-effectivemanagement, organizations have to be customer-centric. Communication barriers have to be eliminated toaccess up to date information about customer buying habits and behavior so that employees across alldepartments can be more proactive when responding to customer needs. In addition by analyzing paymenthistory the most profitable customers may easily be recognized. Furthermore, the accurate prediction ofsales within the organization can provide the flexibility to fine-tune expenses (Angelos, S., 2010)4.3 Better Customer InsightOver time, the relationship deepens between the customer and the organization, resulting in mutualunderstanding between customers and organizations. As a result suppliers become better qualified tosatisfy customer needs. Consequently, revenue and profit streams from customers become secure. Theevaluation of the customer status is shown in Figure 4.3.1, starting from the status suspect until thecustomer reaches the status advocate. 7
  8. 8. Figure 4.3.1 – The Customer JourneySource: Adapted from Francis Buttle, 20094.4 Organization Example 1Near the end of 2007, the global broadband and telecommunications company Verizon CommunicationsInc., realized that a major overhaul was necessary to improve the medium business market. Verizon wasfacing stiff competition from cable providers and new ip-based entrants. Countering the aggressivecompetition in the market and accomplishing growth required a deeper customer insight. Considering thetough market conditions Verizon decided to implement business analytics SAS has introduced to providea more customer-centric approach. After the implementation of CRM, Verizon gained capability ofredefining the medium business customers in less than three months time. Verizon segmented itsmainstream and top customers into micro segments, in an unexpected way by grouping differentbusinesses in an innovative way. In succession, this enabled Verizon to find the right solutions for eachcustomer segment. They also interviewed the most successful sales representatives in the field to confirmthat the software they are using contains all the pertinent data required. This interview enabled Verizon tomodel the finished product according to the most successful sales representatives opinions. The customerfocused 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 ofbusiness. They then, matched the information with their existing information to be able to customize theirprices by market. Adopting CRM was a big leap for Verizon; they can now deliver solutions, enabling thecustomers to meet their business objectives. Even in 2009, during the global recession, Verizon’s mediumbusiness market had a flamboyant year thanks to the analytical solutions of CRM. 8
  9. 9. 5.0 Why CRM Projects FailCRM is a key part of the commercial world indeed. In fact, according to International Data Corporation’spredictions, CRM SAAS (Software as a service) market is expected to reach 40.5 billion dollars. Ifimplemented correctly CRM can boost both customer satisfaction and profits. However, success is alower 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 thefinancial performance of the organization, it may also cause customer dissatisfaction. There are variousreasons behind CRM failures. The main ones are implementation missteps, inadequate planning, lack ofleadership and lack of change management:5.1 Implementation MisstepsImplementing a CRM project into an organization takes time. Even though management might be keen onimplementing the system as soon as possible, it is usually best to take time and deploy the new system inphases rather than rushing it. In addition, being prepared is very important for the IT team to becomfortable when the new system is installed on their network. Management should keep everyone in theorganization 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 considerchanges after the implementation begins. Organizations who does not take precaution, is likely to failwhen implementing CRM.5.2 Inadequate PlanningAfter objectives are set, the critical planning stage usually becomes a problem for organizations of largescale. Many organizations try to achieve more than they can cope with, hence, they are unable to addressvital changes regarding the business process. Mistakes like these are quite similar in most organizationswhen in the planning stage.5.3 Lack of Change ManagementThe implementation of CRM affects the daily routine of an organization significantly. Without sufficientpreparation, employees will be uninterested to the big changes CRM brings. Every business unit has itsown competitive strategy within the organization and the attempt of adopting the same software packageto each business unit can result in serious failure. Despite the financial benefits, every business unitwithin the organization’s role should be considered. CRM problems relating to structure of a company isquite 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 Leadership 9
  10. 10. 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 usuallyresult in failure. Even if the planning stage is processed flawlessly the senior managers should continuethrough the completion and beyond. The reason for this is that even after the implementation, ifmeasurement procedures are not carried out, the organization will have no knowledge whatsoever abouthow the initiative is performing.5.5 Organization Example 2In 1999, Cigna Corporation, a world-wide healthcare company, was operating with IT systems that werenearly twenty years old. Hence, it was difficult to deal with the 120 million claims per year that Cignawere receiving using the old IT system. The CIO of Cigna, Andrea Anania, planned to gather up all theinformation from the old IT systems and develop an integrated system that could cope with customertransactions. 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 decisionhad come so late. However, instead of consulting professional business solution providers, she took 1400employees from the IT department to form a team and invited the leading business consulted Cap GeminiErnst and Young for the implementation of transformation. Anania and her team planned to install twoseparate platforms and then connect them for processing. The main goal was to speed up the processingof 120 million medical claims by using technology. However, things were not going according to plans atall. On January 2001, the insurance commissioner of Georgia obliged Cigna to a 300.000 USD finebecause 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 Cignaaccepted their failure in executing the project and analyzed the problems. The main reason they cited wasa planning mistake. The cost of the implementation project exceeded the expectations the management. Inaddition, the timing of the economic benefits from the project was misjudged.6.0 ConclusionThe increase of competition in the business world has led to the expectations of the customers to rise. Theability to satisfy the increasing expectations of the customers in the competitive market lies withinimplementing CRM. An organization which successfully installed CRM applications is likely to increaseits sales and customer satisfaction. There is no doubt that CRM can increase the overall success ofbusiness. However, the adaptation of CRM is a daunting task. Most of the companies attempt of installingCRM applications to their organizations end with failure.Regardless of the failure statistics, by taking the right steps, an organization can successfully implementCRM applications that suit their business flow. Taking advantage of the benefits and avoiding the factsthat lead to failures can lead organizations to success. This report has briefly explained the types of CRMas well as its benefits and limitations to an organization. 10
  11. 11. 7.0 References ADVFN. (2010). Oracle Corporation.Available: [ Last accessed19th October 2010.] All Things CRM. (2010). The Advantages of Integrating CRM Software to Reduce OngoingCosts.Available: [Last accessed 17th Nov 2010.] Bligh.P., Turk.D. (2004), “CRM Unplugged – Releasing CRM’s Strategic Value”, Hoboken, NewJersey: John Wiley & Sons, Inc. CABC. (2010). Implementing CRM.Available: [Last accessed 16thNov 2010] Contact Professional . (2010). CRM Technologies That Drive Customer Satisfaction.Available: [Last accessed 19th Nov 2010.] Data monitor. (2010). Operational CRM. Available:[Last accessed 18th Nov 2010] FundingUniverse. (2010 a). Siebel Systems, Inc..Available: [ Last accessed 20th October 2010.] FundingUniverse. (2010 b). Oracle Corporation.Available: [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.Available: [Last accessed17th Nov 2010.] 11
  12. 12. 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 LisbonAvailable:[Lastaccessed 18th Nov 2010] SAP White Paper. (2001). Analytical CRM.Available: [Lastaccessed 20th Nov 2010] SAS. (2010). Verizon: Creating their own upturn.Available: [ Last accessed 17th Nov 2010]Bibliography: 1. Gentle M. (2002). “The CRM Project Management Handbook – Building Realistic Expectations and Managing Risk”. Great Britain and United States: Kogan Page Ltd. 12
  13. 13. Appendix 1:Siebel Systems, Inc. 13
  14. 14. Statistics:Public CompanyIncorporated: 1993Employees: 6,000Sales: $790.9 million (1999)Stock Exchanges: NASDAQTicker Symbol: SEBLNAIC: 511210 Software PublishersCompany Perspectives:Siebel Systems, Inc. was founded in 1993 to address the growing need of organizations of all sizes toacquire, retain, and better serve their customers. Today, Siebel Systems is the worlds leading provider ofeBusiness application software, with more than 6,000 employees who operate in more than 30 countriesand 100 offices around the world.Company History:Siebel Systems, Inc. began in sales force automation software, then expanded into marketing andcustomer service applications, including customer relationship management (CRM). From the time it wasfounded in 1993, the company grew quickly. Benefiting from the explosive growth of the CRM market inthe late 1990s, Siebel Systems was named the fastest growing company in the United States in 1999 byFortune magazine. With the growth of electronic commerce, Siebel formed strategic alliances and madeseveral acquisitions to provide e-business solutions for CRM and related areas. One secret to Siebelssuccess has been its ability to form alliances; as of late 2000 the company had more than 700 alliancepartners. Revenue for 2000 was expected to surpass the $1 billion mark.Appendix 2:Verizon Communications 14
  15. 15. Verizon Communications Inc., based in New York City and incorporated in Delaware, was formed onJune 30, 2000, with the merger of Bell Atlantic Corp. and GTE Corp. Verizon began trading on the NewYork Stock Exchange (NYSE) under the VZ symbol on Monday, July 3, 2000Verizons Formation: The Bell Atlantic - GTE MergerThe mergers that formed Verizon were among the largest in U.S. business history, culminating in adefinitive merger agreement, dated July 27, 1998, between Bell Atlantic, based in New York City, andGTE, which was in the process of moving its headquarters from Stamford, Conn., to Irving, Texas. Priorto the merger, GTE was one of the worlds largest telecommunications companies, with 1999 revenues ofmore than $25 billion. GTEs National and International Operations served approximately 35 millionaccess lines through subsidiaries in the United States, Canada and the Dominican Republic, and throughaffiliates in Canada, Puerto Rico and Venezuela. (Access lines are the individual connections from acustomers 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 wirelesscustomers.Current Statistics:Verizon today is a global leader in delivering broadband and other wireless and wireline communicationsservices to mass market, business, government and wholesale customers. At year-end 2009, the companyhad approximately 222,900 employees, serving customers in more than 140 countries. Verizons corporateheadquarters is located at 140 West St. in Manhattan, and it has a major operations hub, the VerizonCentre, at the former headquarters location of AT&T in Basking Ridge, N.JAppendix 3:CIGNA Corporation 15
  16. 16. Statistics:Public CompanyIncorporated: 1981Employees: 43,200Total Assets: $95.09 billion (2000)Stock Exchanges: New York Pacific PhiladelphiaTicker Symbol: CICompany Perspectives: At CIGNA, we intend to be the best at helping our customers enhance andextend their lives and protect their financial security. Satisfying customers is the key to meeting employeeneeds and shareholder expectations, and will enable CIGNA to build on our reputation as a financiallystrong and highly respected company. We believe: Providing the customer with products and servicesthey value more than those of our competitors is critical to our success. Talented, well-trained, committedand mutually supportive people working to the highest standards of performance and integrity are whatmake success possible. The profitable growth of our businesses makes career opportunities and personalgrowth possible. Profitability is the ultimate measure of our success.Company History: CIGNA Corporation is an insurance and financial services organization focusing onemployee 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 dentalinsurance; pension, profit-sharing, and retirement plans; and investment management. Outside the UnitedStates, the company offers, through CIGNA International, individual and group life, accident, and healthinsurance 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 insuranceoperations 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 andcasualty insurance, and Connecticut General Corporation, with its strength in life insurance and employeebenefits, merged. The resulting corporation immediately became one of the largest international, publiclyowned insurance and financial services companies based in the United States. CIGNA gained itspreeminent position by combining some of the oldest and most important companies in the insurancemarketplace. The oldest of its predecessor companies was Insurance Company of North America (INA), acompany rich with tradition. INA was formed by a group of prominent Philadelphians in November 1792,in Pennsylvanias State House, where the Declaration of Independence had been signed just 16 yearsearlier. Connecticut General Life Insurance Company was incorporated in 1865. That company began toexpand from its focus on life insurance and employee benefits almost a century later, when it acquiredanother company with a long history of its own, Aetna Insurance Company, in 1962. Significantacquisitions 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 majoremployee benefits provider, purchased in 1990; and Healthsource, Inc., a managed-care firm based inNew Hampshire, acquired in 1997. 16