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Role of Customer Relationship Management in retail sector (CSR)


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Role of Customer Relationship Management in retail sector (CSR)

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  3. 3. ABSTRACT Thisresearchinvestigatestheroleandimplementationofcustomerrelationshipmanagement(CRM)inTescoPlc. It investigates the use of information system (IS) in CRM, the obstacles connected with Information system that supportCRM,andrecommendationsaremadeaboutthedevelopmentoftheCRMcustomsinTesco. TheliteraturereviewisbasedonthedefinitionandexplanationofdifferenttermsusedtoimproveCRM.Theseare loyaltyschemes,E-businessandERP.DefinitionofCRMisalsodiscussedinthischapter.Theresearcherhasalso giventhebackgroundtotheschemesusedbyTescotoimproveitsCRM.Theloyaltycardscheme,onlineservices and other unique services provided to the customers are also discussed in this chapter. The analysis of the theoreticalframeworkandthatoftheTescoschemesiscarriedoutattheendofthechapter. In the next chapter the researcher describes the methodology which will be used to find data for the research. Primaryand secondarywill be used in this dissertation. Primary data will be collected through questionnaire. The questionnaire will be distributed amongcustomers at Tesco. Also, qualitative data will be collected, which will be based on the interviews conducted from the customers. The primary data will be used to support the secondary data collected from the official website of Tesco, along with earlier research works done on Tesco. The results of the quantitative data are calculated with the help of certain statistical tools and percentages calculated of the customers who expressed satisfaction over the services of Tesco. The statements of the qualitative data are also detailedinthefindingsofresults. In the last chapter the analysis of the results of both qualitative and quantitative data is carried out and recommendations are also made for further research in future. The researcher also suggests some changes for Tescomanagementthatwouldhelpimprovetheircustomerrelationshipmanagement.
  4. 4. INTRODUCTION: Customer Relationship Management (CRM) is the key factor behind the successful enforcement of strategies which ensure customer pleasure, loyalty and retention thus increasing sales and repeat purchases of a company (Feinberg & Kadam 2002, Kotorov 2002, Anton & Hoeck 2002). CRM is the talk of the business world nowadays. It is characterized by the solution to the peremptory challenges faced by firms in identifying their target market and increasing the profit levels and customer loyalty. Fairhurst (2000) suggests that the best example of the implementation of CRM is provided by shopkeepers who get a chance to know their clients personally by one-to-one services. For centuries CRM has been a major strategy used by many small companies but with the advent of computer science, CRM has reached new levels. Large firms can implement effective CRM techniques on their many customers anywhere in the world now. According to Gillies (2002) the reason for Tesco still leading the list as UK’s largest grocer since 1995 is how the CRM program has played a vital role in the company’s transformation from a buyer-led organization to a customer-focused group. Profits of Tesco have reached a soaring top of £1billionayearconsideringtheirimageamongconsumerswasprettybadthroughoutthe1980s. Consumers thought about Tesco as having only mediocre product range shelved in poorlymaintained stores and theyonlycompetedonprice.Inthelatteryearsofthatdecade,theleadersofthecompanysetouttobringachange and reinventing the brand. Their first priority was to change their store locations. They moved their stores into moremarketableareaswhichmeanttheyhadtobuildnewmodernsuperstoresandthusclosingdownunprofitable stores. Secondly, they focused on their product range and quality by developing its line of convenience food and healthy food lines. Then they shifted their focus towards creating value for money by introducing an initial 70 valuelinesandreducingthepriceofvariousbasicgoods. Apart fromthesechanges,Tesco alsomadevariousimportant organizational changes. Anew seniormanagement team was created for leading the new customer-focused group. . Lord MacLaurin became chairman in 1986and Terry Leahy was appointed deputy managing director in 1984. Teams of employees were created for different product categories and each of the team was given responsibilityfor a particular product range. Basis of selection of these products bythe employees was price, quality, service, innovation and customers’ changing expectations. After these policies were introduced, Tesco turned its attention towards the technological side by introducing its first ever and highly successful loyalty card in 1995. This loyalty card helped Tesco know more about their
  5. 5. customers’preferencesandtocreatedifferentsegmentsoftheircustomersaccordingtopurchases,locationandlife stage. Tesco made successful decisions with this knowledge in hand for example not offering meat products to vegetarian customers and children’s products not offered tochildfreeshoppers. The money-off coupon that Tesco introduced helped them in diverting their customers attention to high-priced products as well as giving discounts on their routinely purchase. Later on, Tesco increased their technological side of the business by introducing a second innovation-online shopping. Byunderstanding the customers’ requirement, Tesco created a gold standard in online supermarket shopping with a number of facilities like re-order functions and lists of favorites and previouspurchases.Customerscanalsochooseadeliverytimeschedulesoasnottowaitfortheorderdeliveryand theycanalso giveTesco’s staffthepermissiontochangetheirorderwithareplacement ifits unavailable.Tescois nowtheworld’slargestonlinegrocer. CompanyProfile Tesco was founded in 1919 as a market stall in the United Kingdom, London. The stall grew to be a small store, which was first opened in 1929 in Edgware. From then on the journey of the retail store started till now it has reached the status of UK’s largest retail store chain and an international retail business. The headquarters of the business is in Chestnut, UK. The company is also listed in London Stock Exchange and Irish Stock Exchange (Guardian, 2011). The main business of the company is retailing, but now it has diversified its business into insurance and banking as well. The company has opened its international stores in China, the Czech Republic, Hungary, Ireland, India, Japan, Malaysia, Poland, Slovakia, South Korea, Thailand, Turkey and the United States of America (Tesco, 2011). The company also offers the services of online grocery and home delivery services to its customers. The retailing business of the company is divided into different subsidiaries, such as, Tesco Express, Lifespace, Kipa, Tesco Metro, Tesco Bank, Tesco Phone Shop, Tesco Extra. The brand names of the products Tesco produces are Technika, Go Cook and F&F. By the end of fiscal year 2011 in February, the company was successful in adding 13% to its assets through acquisition of different companies and also buying more shares (Guardian, 2011). AimsandObjectives
  6. 6. The aim of the research is to explore the importance of customer relationship management in retaining customers and generating profits in a retail sector. For this purpose, the case study will be performed on Tesco, which is the leadingretailstoreintheUnitedKingdomandalsohasbranchesglobally. Basedontheaimoftheresearch,followingaretheobjectivesoftheresearch: ToinvestigatetheimpactofCRMontheprofitabilityoftheorganization. ToexploretheimplementationanduseofInformationSysteminTesco TomeasuretheinfluenceofE-businessonthegrowthofanorganization TosuggestrecommendationstoimproveCRMinTesco Followingresearchquestionswillbeansweredinthisdissertation: WhatistheroleofCRMinsuccessofanorganisation? HowisInformationSystemsandE-businessusedinCRMforcompany’sbenefit? WhatareTesco’sCRMactivities? HowsuccessfullyTescofollowsCRMpolicies?
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  8. 8. LITERATUREREVIEW This studywill reviewthemain theoretical areas that support theroleofCRM implementation inTesco. Different definitions of basic research concepts will be presented including Customer Relationship Management, KnowledgeManagement,E-business,EnterpriseResourcePlanningSystemandLoyaltyscheme. CustomerRelationshipManagement CustomerRelationshipManagement covers thewholeprocess on which theentirerelationship with acustomeris founded upon, says Bocij (2008). Different ranges of information system which contains data regarding customers are integrated by CRM. This may include various information system applications such as customer details andpreferencedatabases, salesorderprocessingandsales forceautomation.AccordingtoJelassi &Enders (2005), main focus of CRM is the relationship between an organization and its customers and these relationships include activated like marketing, sales and services. According to Finnegan & Willcocks (2007) business process of managing customers is a vast field to contemplate and CRM helps in integrating this vast field on a single enterprise-wide information system. Increased efficiencies in customer support along with improved customer satisfactions are the main benefits of CRM. Many CRM early processes were regarded as IT initiatives explains Buttle (2003). Therefore most CRM system would require creating a strong customer database and use IT solutions and so CRM is normally used in creating better value for customers and organizations. According to Godson (2010) the technology behind the implementation of CRM has increased drastically and it’s based upon maneuvering of millions of customer data. For a long time, identifying customers’ needs and requirements have played a vital role in the success of a business and today CRM helps in identifying the most profitable customers and creates a best way of serving them (Godson, 2010). Whereas Kroenke (2008) explains that customer relationship management integrate all of the business activities. They track all the activities relating to a customer fromidentifyingacustomertofollow-upserviceandsupport.Mainreasonforacompany’ssuccessthroughCRM isthatitmakesanorganizationcustomer-centric.ThisimplementationhasthusresultedinthegrowthofTescoand making it the number one in UK retail industry(Kroenke, 2008). According to Godson (2010), CRM is not only applied to the marketing department but requires the whole company to be customer centric. CRM is a business strategy to achieve to achieve customer satisfaction through taking customer specific actions (Godson, 2010). Tesco is the leadingsupermarket in UK and was founded bySirJackCohen(Thompson & Martin, 2005). Tesco transformed itself to become the market leader. Tesco has continuously used IT as a way to communicate with their customers more effectivelybysharing their sales data with them in order to keep track of sales trend use this information to stock up their warehouses accordingly so that individual stores never run out. Tesco have, with
  9. 9. time, increased the use of IT in their business, for example, they have introduced a small computer which can be attached to a customer trolley which bar-scan items on shelves. They also show prices of products, accumulated totals,locationofproductsonshelvesandproductavailability(Thompson&Martin,2005). KnowledgeManagement According to Curtis & Cobham (2008) knowledge management explains how the intellectual assets, that are a resultant of utilizing important business intelligence tools and techniques, are produced and shared among an organization. It improves employee performance and corporate competitiveness by implementing a systematic business optimizationstrategythat selects,stores,organizes packages and communicates information important to thebusinessitself. LoyaltySchemes Loyalty schemes basically provide rewards to loyal customers by offering discounts or other benefits on their purchase (Godson, 2010). In the 60s and 70s, loyal customers were given green stamps with each purchase by retails shops and petrol retailers which could be saved up by the customers and later on given special rewards on them. One of these schemes was the Green Shield Stamps. Depending on how many stamps a customer has saved,theycouldchooseanumberofgiftsfromacatalogue.ThesestampscouldalsobeexchangedatHighStreet redemption centres for household appliances (Godson, 2010). Todaycustomers are given loyalty cards instead of stamps.Everyloyaltycardisdifferentinterms ofbenefitstheyprovideandtheyincludesimplepoint accrual, club cards and combined credit cards (Godson, 2010). Due to the price competitiveness in UK grocery sector, customers’ perception and behaviour is destabilized and therefore the use of loyalty card is fading (Seybold, 2002). According to Humby (2003), loyalty schemes is a way in which a business can attract customers by providing them incentives on products related to the ones they are buying. Loyalty cards help in communication withthecustomersoveramassivescale(,2003). Loyalty cards also help large organizations to change their taste and behaviour which are normally susceptible to change. They provide sufficient information to the change of shopping behaviour of customers which minimizes theriskofchange(,2003). E-business E-business is using Internet to conduct business (Bocji, 2008). Internet helps in streamlining the business which increases productivity and efficiency. E-business has a lot of advantages like helping in communication
  10. 10. withpartners,vendorsandcustomersandcarriesoutcommerceinamuchsecuremanner.Inthisglobalizedworld today, internet has greatly facilitated the retail industry. E-business is a vast area of internet economy where the entire business is conducted over the internet. According to Finnegan & Willcocks (2007) e-business is a wayof conductingexternalandinternalbusinessprocesseselectronically. The increase use of internet in this age is primarily due to the significant changes being made in the information systems that support the commercial activity (Curtis & Cobham, 2008). Early data processing era gave way to management information systems generation of last 30 years and now internet era is beginning to overtake the MIS age. Internet has provided with easy accessibility of data and also smoothes the different channels of communicationswhichresultantlyhashelpedthedecisionmakersandeveryonerelatedtoanindustry.Internethas entirelychanged the environment in which business is conducted nowadays for example now the vendors have a globalmarkettocontendwith.Tradingisnowdone24/7insteadofthenormalworkinghoursofdayspast. Online transactions can be executed for both the small and large organizations. According to Mari (2008) the internet sales ofTescoincreased by31percent in2007to £1.6bn withaprofitincreaseof£124m, primarilydueto improvedorderpicking.Tesco’s onlinemarket hasoveronemillion activecustomersandvitalimprovementslike delivery slot and product availability has resulted in 20 percent increase in new business. Tesco also announced that its online store with its small warehouse that can deliver to a local are in Croydon is now reaping profits and handlingordersofover£1mperweek.Tesco’schiefexecutiveTerryLeahysaysthattheyhaveyetanotheryearof growthinachallengingmarketduetothesestrengthsintheirbusinessmodel.TescoDirect,anonlinecataloguefor Tesco,haveits performanceincreased considerablyduetoservicelevels andavailabilityofproducts. Thedivision comfortably exceededits revenue target of£150m and posted sales of almost £180m, but start-up costs and operatinglosseswere£25m,whichthesupermarketwillaimtoreducetoaround£20mthisyear.Numerouscross- functional changes have taken place such as improvement in supply chain management and introduction of new checkout technology for stores which has result in efficiency savings of more than £350min2007. Also outsourcing of IT and administrative support has helped in reducing cost and due to this there are now 3,000 employeesinIndiafortaskslikesoftwaredevelopmentandmanagementaccountingandpayroll. EnterpriseResourcePlanning(ERP) According to Mohamed (2009), Enterprise Resource Planning (ERP) systems carry out business planning functions which may previously be executed by many smaller applications. Examples for ERP systems include product lifecycle management, supply chain management, warehouse management, customer relationship
  11. 11. management, sales order processing, online sales, financials, human resources and decision support system. ERP system helps in running the business smoothlyand efficientlybyuniting various aspects of a business together. It helps in creating a single database which eradicates the problem of having synchronizing data on multiple databasesandprovidesmoreaccurateandtimelyinformationtobusinessmanagers.MicrosoftDynamicERPand SageisacoupleoffamousERPvendors.
  12. 12. RESEARCHMETHODOLOGY In this chapter the researcher discusses the methodologyused to collect data for the study. Research methodology is the way that researcher uses to define the research problem, finds an approach to research, makes research designandcollectsdataforanalysis.Throughthistheresearchermakesasystematicattempttocollectevidencefor thesupportoftheresearch(Bryman and Bell, 2007). DataCollection The researcher uses bothqualitative and quantitative form of methodologyin this study. The data collectedforthe research is based on primary and secondary sources. The primary data is the one collected through surveys and interviewsandthesearefirsthandsourceofinformation.Secondarydataisbasedoninformationalreadyavailable, forexamplepreviousresearches,journals,books,internetsourcesetc. The researcher will carry out a survey to collect the primary data. The questionnaire will be based on questions regarding the CRM services of Tesco. These questionnaires will be distributed among 200 customers of Tesco. The questionnaire will contain both closed ended and open ended questions. Closed ended questions are the ones that have a definitive answer among the choices given, whereas, in open ended questions the respondents have to give their opinion or views (Bryman and Bell, 2007). This helps the researcher to get both quantitative and qualitativedatafortheresearch. The secondary data is obtained from the reviewed literature and case study of CRM implementation in Tesco. Existing data (Journals & Articles) will be used in analyzing the role CRM performance and also an in-depth interview will be conducted with one of Tesco’s managers. Customers will be asked as well through customer feedback form about how they view the CRM services of Tesco and if they suggest any recommendations for improvement. The secondary data will be used to support the primary data obtained from the customers and managerofthestore. Limitations One of the hindrances in this research is availability of information from Tesco’s managers. This research involves face to face interviews with the managers who are well-informed about the role of the CRM and the information system of the company. The managers are not reliable sources since they can retain some of information knowing that they are employed by the company. Thus, the researcher would have to rely on information collected from newspapers and journals.
  13. 13. REFERENCES Bocij, P., Grealey, A., and Hickie, S., (2008), Business Information Systems: Techonology, Development and Management,4th Edition,Harlow,PearsonEducationLimited Bryman A., Bell E.; 2007; Business Research Methods; Oxford University Press; Pages 153-177. Buttle,F.,(2003),CustomerRelationshipManagement:ConceptsandTools,Butterworth-Heinemann:London Curtis, G., and Cobham, D., (2008), Business Information Systems: Analysis, Designs and Practice, Pearson EducationLimited,Harlow Finnegan,D.,andWillcocks,L.,(2007),ImplementingCRMfromTechnologytoKnowledge,JohnWiley&sons Limited,WestSussex Gillies, C., Rigby, D. And Reichheld, F., (2002), The Story Behind Successful CRM, European Business Journal Godson, M., (2009), Relationship Marketing, Oxford University Press Guardian, (2011), Jelassi, T., and Enders, A., (2005), Strategies for e-business: Creating Value Through Electronic and Mobile Commerce – Concepts and Cases, Prentice-Hall, Essex Kroenke, M.D., (2008), MIS Experiencing, Pearson Education Limited, New Jersey Mari, A., (2008), Technology Boosts Tesco Results, Computing Weekly News Mohamed, A., (2009), Enterprise Resource Planning (ERP) Software Suppliers, Computer Weekly News Seybold, P., Marshak, T., and Lewis, J., (2002), The Consumer Revolution, Business Books Limited, London Tesco, (2011),
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