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No one company has written the book on CRM. And rightly so, says this author, whose examination of how companies practice this much-talked about discipline led him to develop comprehensive guidelines for enhancing a company's returns from CRM.

By Ian Gordon

Ian Gordon is President of Convergence Management Consultants Ltd., (www.converge.ca), and the author of Competitor Targeting: Winning the Battle for Market and Customer Share (Wiley, 2002).

That few companies are achieving the results they expected from their investment in Customer Relationship Management (CRM) is not news. That most companies continue to invest in CRM without a roadmap for increasing shareholder value or even for forging closer customer relationships is also not surprising, since there are few best practices in CRM for companies to follow. In fact, based on our own research and consulting, and a recent examination of best practices in 35 Canadian and U.S. corporations, we could not find one company that excels in every dimension of CRM. However, we did find examples of one or two specific best practices in individual companies. This article discusses these selected best practices, which, we believe, companies should consider when trying to improve the performance of their CRM initiatives. It also discuss the changing role of senior managers that are developing a relationship-oriented organization

A definition and a vision

There are many definitions for CRM, and best- practice companies adopt one that is shared across the organization. Otherwise, the very term "CRM"

will conjure up many things to different people and lead to confusion. These companies see CRM as a series of strategies and processes that support and execute a relationship vision for the enterprise. In their eyes, CRM is a series of strategies and processes that create new and mutual value for individual customers, builds preference for their organizations and improves business results over a lifetime of association with their customers.

With this definition, an organization can focus on developing the only asset of the enterprise that matters in the long term, progressively deeper relationships with valuable customers. By sharing the definition, they can put the customer first and avoid sending their staff into cycles of interminable CRM programming.

These organizations then create a vision for how CRM will change their companies. Some develop the vision according to attributes that are important to both the customer and the company. These include attributes that affect customers' perceptions of value, how they can bond with the organization, product and company preference and purchase intent.

This vision sometimes changes as the firm gains experience in CRM and as technology makes new things possible. For example, at a major Canadian bank, the vision has evolved. Initially the vision was associated with the development of customer information systems. Personnel then identified five components that the firm built in stages to implement key aspects of the vision. These components were associated with developing a complete, real-time, single and accurate view of each customer. Simple though it sounds, it took several years to accomplish given the sheer scale of the enterprise. In this example, the vision was initially conceived in terms of a strategic capability, that of customer information. Today, the vision is more focused on the delivery of differentiated value propositions through

Best Practices: Customer Relationship Management

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products to customers. This illustrates that once best- practice companies put a strategic capability in place to enable CRM, they tend to modify the vision to use the capability for customer bonding, a learning relationship and competitive advantage. Strategic capabilities are even more important than specific strategies in best- practice CRM companies. We discuss this below.

A CRM plan

At the outset especially, best-practice companies develop their CRM plans in terms of strategic capabilities rather than strategies per se. This helps to ensure that the company can adjust to a wide variety of marketplace and industry changes without affecting the main thrust of the plan. For example, we recently reviewed the plan of an organization considering what to do with CRM in the wake of the events of September 11. Prior to our involvement, it was debating the merits of various programs while the key strategic capability it needed - in this case, developing an ability to listen and respond to customers in a timely manner - was not identified nor discussed.

Increasingly, best- practice companies base their CRM capability plans not just on technology but also on developing and f o c u s i n g o r g a n i z a t i o n a l capabilities in other areas such as CRM processes, people and knowledge/ insight. Indeed, we have found that best- practice companies do not first adopt a CRM technology solution and then build their CRM initiatives around it. Rather, they develop a more balanced approach to conceiving and

implementing CRM strategic capabilities as described in Diagram 1. There are four main CRM strategic capabilities:

• Technology: the technology that supports CRM.

• People: the skills, abilities and attitudes of the people who manage CRM.

• Process: the processes companies use to access and interact with their customers in the pursuit of new value and mutual satisfaction.

• Knowledge and insight: the approaches the company uses to add value to customer data so that they acquire the knowledge and insight needed to deepen the relationships that matter.

The scale and scope of these capabilities are affected by factors such as the core customers on which the firm has chosen to concentrate, the leadership and culture of the organization, the channels the company uses for stakeholder communications, transactions and logistics

and the firm's business model, strategy and structure. Diagram 1: Balancing CRM S t r a t e g i c Capabilities

Strategies and tactics

Many companies have CRM strategies that seek to develop additional sales from certain existing customers. B e s t - p r a c t i c e companies do this, too, and also have strategies that focus on the enablers of

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Diagram 1: Balancing CRM Strategic Capabilities

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the end-customer relationship. For example:

• Processes - Customer collaboration to jointly

plan and create new value, differentiated by class of customer.

- Collaboration with distribution channel intermediaries and suppliers to achieve the value each end- customer wants

- Embedding business rules into CRM databases so that customers' behaviors trigger appropriate actions

• Technology - Integration of the customer's various

touch points with the company - Development of a single, real-time

view of each customer - Creating an ability to sell when the

customer is ready to buy, and knowing what to offer and how to appeal to each customer

• People - Recognizing that employees have

different needs just as customers do, and trying to provide each with the value they want from the company

- Creating a self-serve capability to enable employees to take more control of their careers and career development, including what and when they learn

Measurements

Many companies measure the return on investment (ROI) of their CRM programs. Indeed, firms often embarked on a CRM journey because the performance of specific programs could be measured with more assurance than their traditional means of promotion. Best-practice companies know the ROI for each of their

programs and use this knowledge expeditiously. For example, a major casino understands guest spending and can rapidly relate this data to the investment the casino made to attract the guest. This leads to new offers affected by the amount the guest spent (lost) and the casino's investment in the guest. Measurement allows the casino to limit "free ridership," the provision of offers to visitors who would return anyway without any incentives.

As this example suggests, best-practice companies make use of measurements to allow them to manage customer behaviors. Thus, customer profitability, which today is often measured at the gross margin level, is increasingly allocating costs below the gross margin line to individual customers. For instance, costs per customer such as those below are increasingly being considered to arrive at a more detailed assessment of customer profitability:

• Account management costs • New product concepts developed in

collaboration • Costs or time saved in new product

development • Savings in new account acquisition from

customer referrals • Costs associated with inventory levels

(finished goods works, in process, raw materials, etc.)

• Reduced costs of marketing such as co- marketing

• Reduced infrastructure costs such as from shared investments

• Costs of managing customer communications, customer support, complaints, feedback and restitution (payments for returns or errors)

• Amortization of infrastructure costs such as call centers and Web-sites

Measurements such as these also help a company decide how much to invest to keep existing customers and how much to spend to attract new customers. This is

Increasingly, companies are coming to believe that customer data are as important as financial data

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effectively changing the paradigm in media spending from considering costs in dollars per thousand people to dollars per priority customer.

In addition to the measurement of behaviours, best- practice companies measure attitudes. For example, customer satisfaction and favourability (purchase intent) are measured. For business-to-business purchase decisions, customer satisfaction measurement occurs across the enterprise and scores are weighted to arrive at an overall level that allows satisfaction levels to be compared over time. Best-practice companies also understand their performance compared to other suppliers for that account. They track their share of each customer's spending. By using data such as these, companies are beginning to target specific competitors to transfer customer share one customer at a time and thereby to gain market share. More generally, best- practice companies develop selected competitive measures to help ensure that the performance of their CRM initiative is leading to superior customer relationships.

Managing and delivering CRM

For most companies, today's CRM strategies reflect a material shift in historical marketing and strategy. And, because organizational structure follows business strategy, CRM impacts organizational design. Two areas have a particular impact on the structure of companies:

• the amount and nature of customer data and the processes by which value is added to the data.

• how companies compete, especially for those firms that use CRM to compete on scope.

Most companies obviously see solid financial data as

important for management, leadership and control. They have a financial department and a Chief Financial Officer (CFO) with custodial responsibility for these financial data, including security and management, and the processes by which value is added. Increasingly, companies are coming to believe that customer data are as important as financial data. Some best-practice firms are establishing custodial responsibility for customer data and value-added processes in the same way that they secure and manage financial data. This responsibility includes managing the customer data warehouse and the approaches that add value to customer data. It can also include mechanisms for providing services from a centralized department to the lines of business in decentralized companies.

Companies competing on scope change their structure frequently as they begin to sell what customers want rather than what the firm has made. This leads some companies to distribute the complementary products or services of others, including customers and competitors, and to sometimes sell their own products and services through others. This can be a marked departure in strategy for those companies that built their businesses through economies of scale. Associated with these changes are new roles and responsibilities for an expanded array of stakeholders and how they interact in the value chain. The challenge for organizational design is to accommodate these changes without disrupting the firm's existing business.

Because the company competing on scope often has fewer but more important stakeholders, CRM companies are beginning to organize around their stakeholders to create the value each wants. For example, professional services firms have client-service teams for their most important clients with representatives of both the firm and the client on the teams. In another example, a major logistics company has established customer teams that bring together the various processes by which the

once best-practice companies put a strategic capability in place to enable CRM, they tend to modify the vision to use the capability for customer bonding, a learning relationship and competitive advantage

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company interacts with its priority customers. Members of the customer teams are drawn from many areas within the firm, such as marketing, sales, advertising, research, operations and finance, as well as their counterparts from the customer. In this case, the management of the customer team falls to sales, which manages all the processes by which customer value is created - an obviously very different role than the historical role of the sales department.

Implications for senior managers

Managers now developing a stakeholder-centric focus for their organizations may find that they now have additional roles and responsibilities. These can include:

1 Providing a compelling vision to keep the organization focused on CRM strategically, tactically and in real time, continuously and mutually with key stakeholders.

2 Bringing all customer data together in a single location, aligning processes among stakeholders in the service of the end customer, and smoothly integrating the CRM activities of other executives, lines of business and functional areas.

3 Selecting among the often competing requests for projects, funds and people, in accordance with the CRM vision, such as the issue of who is promoting the project, what technology can accomplish or whether new or existing customers merit the most attention from CRM.

4 Helping management and staff at all levels to understand CRM concepts and the firm's vision for CRM, as well as communicating customer, market and profitability data to describe the firm's progress as it proceeds on its CRM journey.

5 Setting expectations to help individuals and groups align their performance with the goals for CRM. Many companies have a large variable component in their compensation structure, for example, which can reward behaviours that run counter to CRM principles. People need to know the link between CRM and their own success or the initiative might be seen as just another program. Among the many

aspects of change management organizations typically employ are the recognition of individual and group achievements, and case study successes.

6 Ensuring that a sufficient flow of people, time, money and knowledge goes to the CRM areas that need these resources.

7 Ensuring that that financial and operational controls are in place to monitor and improve customer performance and that any trust that might have been extended to any stakeholder under the CRM vision is not abused.

Few firms today are realizing the potential from their often-considerable investments in CRM. In part, this is because it is uncommon for management and staff to embrace CRM as a vision for how the business could be. Seen only as a means to generate more short-term sales, CRM can be little more than a means to efficiently interact with chosen customers with appropriate value propositions. This is not a bad start but there is much more to be accomplished from looking at the best- practices of those companies that have a broader view of CRM and have set out to answer some important questions, such as:

• What is the firm's vision for its relationships with all stakeholders, in addition to key customers?

• What new capabilities does the organization need to achieve the CRM vision?

• How will tomorrow's CRM company be structured?

• What roles must management take to implement the vision?

• What measurements must be used to assess CRM performance?

• How should all stakeholders be aligned to createthe value end-customers want?

Perhaps no company has yet achieved the full potential for CRM. Considering best practices from a number of firms suggest that opportunities remain for all organizations to achieve better results and deeper relationships with CRM.

Business Process Management Journal A review of customer relationship management: successes, advances, pitfalls and futures Bang Nguyen Dilip S. Mutum

Article information: To cite this document: Bang Nguyen Dilip S. Mutum, (2012),"A review of customer relationship management: successes, advances, pitfalls and futures", Business Process Management Journal, Vol. 18 Iss 3 pp. 400 - 419 Permanent link to this document: http://dx.doi.org/10.1108/14637151211232614

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Users who downloaded this article also downloaded: Carolyn Heller Baird, Gautam Parasnis, (2011),"From social media to social customer relationship management", Strategy & Leadership, Vol. 39 Iss 5 pp. 30-37 http:// dx.doi.org/10.1108/10878571111161507 Yonggui Wang, Hui Feng, (2012),"Customer relationship management capabilities: Measurement, antecedents and consequences", Management Decision, Vol. 50 Iss 1 pp. 115-129 http:// dx.doi.org/10.1108/00251741211194903 E.W.T. Ngai, (2005),"Customer relationship management research (1992-2002): An academic literature review and classification", Marketing Intelligence & Planning, Vol. 23 Iss 6 pp. 582-605 http:// dx.doi.org/10.1108/02634500510624147

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A review of customer relationship management: successes,

advances, pitfalls and futures Bang Nguyen

Oxford Brookes Business School, Oxford Brookes University, Oxford, UK, and

Dilip S. Mutum Warwick Business School, University of Warwick, Coventry, UK

Abstract

Purpose – The purpose of this paper is to provide academics and practitioners working with customer relationship management (CRM) with a review of key topics, such as advances in CRM, the shifting role of consumers, issues with conceptualisation and consumer exploitation. The authors further integrate concepts of fairness, trust and paradoxes of one-to-one marketing, which are little researched within customer management. As a result, the authors suggest eight propositions for improving the CRM scheme.

Design/methodology/approach – This paper reviews extant literatures in CRM, with a particular emphasis on the pitfalls of CRM.

Findings – The authors find that the risks of depleting customer trust as they perceive themselves being exploited by firm’s CRM offerings should be openly discussed, as it poses a significant threat to the CRM scheme if it is overly used and misused.

Practical implications – It is proposed that the concept of dual value-creation and win-win relationships are fundamental to successful implementation. However, the danger of implementing CRM in such a way as to lead customers to believe that they are worse off requires more research. Managers must therefore define their CRM, understand their pitfalls and look at where their CRM is headed.

Social implications – Advances in CRM must consider issues of fairness, transparency, honesty, trust and with the emergence of social media, understand how CRM will adapt and immerse itself in such a future.

Originality/value – In total, eight propositions are made about CRM’s successes, advances, pitfalls and futures. A focus is on the fairness of CRM and a new definition is offered.

Keywords Customer relationship management, Consumer behaviour, Trust, Success, Advances, Pitfalls, Futures, Fairness

Paper type General review

1. Introduction This article reviews extant literatures in customer relationship management (CRM) with a particular emphasis on the pitfalls of CRM. An overarching objective of this article is to provide CRM academics and practitioners with a perspective on contemporary issues in CRM relating to fairness, trust and the paradoxes of individual treatment of customers. We suggest eight propositions about CRM including what these potentially damaging pitfalls are to CRM implementation. We first engage in a discussion around the nature of CRM, its development, issues facing CRM before concluding on these topics and offer recommendations for where the future of CRM lies. Figure 1 shows our paper.

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1463-7154.htm

BPMJ 18,3

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Business Process Management Journal Vol. 18 No. 3, 2012 pp. 400-419 q Emerald Group Publishing Limited 1463-7154 DOI 10.1108/14637151211232614

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2. What is successful CRM implementation? The history of marketing suggests that a paradigm shift has occurred over the past few decades. In the past, many firms’ quests for market leadership were dominated by production efficiency that was aimed at cutting down operational costs per produced unit, resulting in the ability to sell products and services at a lower price. Over the years, this often proved not to be sustainable as the strategies were easily imitated by competitors over a short period of time. Time has changed, and today, firms have gone from centring their attention on a transaction based selling platform to a more relational based approach (Gummesson, 1999; Grönroos, 1994; Morgan and Hunt, 1994; Peppers et al., 1999; Boulding et al., 2005; Frow and Payne, 2009; Bull and Adam, 2011). Indeed, the relationship marketing (RM) paradigm suggests that a particular business should be defined by its customers through an ongoing relationship (Webster, 1992; Peppers and Rogers, 2004; Payne and Frow, 2005; Vargo, 2009). As Treacy and Wiersema (1995, p. 5) put it:

Whether a business focuses its efforts on product innovation, operational efficiency and low price or customer intimacy, that firm must have customers or the enterprise isn’t a business – it’s a hobby.

The idea of creating a relationship with customers based on quality, dialogue, innovation and learning is regarded as a more sustainable strategy and could be seen as largely inimitable by competitors – in essence, a strategy that could create a long-term competitive advantage (Grönroos, 1996; Payne and Frow, 2006). That paradigm still holds today.

Discussions now focus on CRM and loyalty approaches. This transition in marketing is putting more emphasis on involving and engaging customers in long-term relationships so that the firm can learn about customers’ individual needs (Payne et al., 2009; Peppers and Roger, 2010). This in turn will give the firm the knowledge to customise products that suit the individuals’ needs on a one-to-one basis and thus, create a differential marketing strategy. While the 4 Ps of marketing still remain important tools and tactics to attract and retain customers, research in CRM highlight the need

Figure 1. CRM advances, issues

and futures

What is successful CRM? Advances in

CRM

Shifting role of consumers

Issues with the conceptualisation

Concerns with the good

relationship

CRM exploitation and

relationship paradox

Future of CRM– fairness and

trust

A review of CRM

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to include other variables in order to better capture the mechanisms behind the establishment of buyer-seller relationships. These come in various variations termed as relationship marketing instruments (RMIs) or relationship marketing tactics (RMTs) or more broadly, CRM activities (Bhattacharya and Bolton, 2000; De Wulf and Iacobucci, 2001) and CRM offerings (Nguyen and Simkin, 2009). Examples of these include bonus and loyalty programmes, dynamic pricing, service quality programmes, value offers and deals, social media web sites and internet blogging as a way to create buyer-seller interactive relationships (Lo et al., 2007; Greenberg, 2009; Peppers and Rogers, 2010; Kaplan and Haenlein, 2010; Nguyen, 2011).

Over the past decades, CRM has proven to be a critical tool in increasing a firm’s profitability by enabling it to identify the best customers and satisfy their needs, in order to make them remain loyal to the firm’s activities (Thomas and Sullivan, 2005). Certainly, pursuing long-term relationships with customers, instead of a transaction-oriented approach, is more profitable for firms (Morgan and Hunt, 1994; Jayachandran et al., 2005) as it is often suggested that, “it is from two to 20 times as expensive to get a new customer as to retain an existing one” (Goodman et al., 2000, p. 1). This is a view that is supported by most researchers today, including Reichheld and Teal (1996), whom suggest that acquiring customers is much more expensive than keeping them. Others suggest that long-term success is contingent upon customer retention over customer acquisition and notes that building and retaining long-lasting relationships with existing customers is more profitable than continually to recruit new customers to replace lost ones (Gummesson, 1987; Grönroos, 1994; Hollensen, 2003; Payne and Frow, 2006; Frow and Payne, 2009). By developing customer loyalty, it seems that a steady stream of sales can be achieved over the lifetime of their relationships with the firm (Dibb and Meadows, 2004). Having reviewed the logic of CRM, we offer our P1 for successful implementation:

P1. The premise of CRM is that it is a process of relationship building and dual creation of value between a firm and its customers, to create win-win situations, enhance customer life time value and increase profitability.

However, building customer relationships is much more complex. Simply putting focus on customers is no longer adequate. Managers are becoming deeply concerned about declining customer loyalty as competitors lure away their customers with lower prices and purchasing incentives (Peppers and Rogers, 2004). The sole focus on a customer-strategy business model has come of age. Today, firms are facing a radically different landscape: the liberalisation of markets requires firms to be more conscious of how they do business in an increasingly global and intense competitive environment – ethically, socially and culturally; the technological advancements have boosted customer information and created a demand for more interaction between the firm and its customers through blogs, fora and social networking web sites; the increasing trends in advanced economies to be service-oriented, niche-oriented and information-oriented; the increasing fragmentation of consumer markets; rapidly changing customer buying patterns and life styles; more sophisticated and demanding customers; and the increasing demand for higher standards of quality (Grönroos, 1994; Buttle, 1996; Gummesson, 2002; Wilson et al., 2002; Peppers and Rogers, 2010; Ernst et al., 2011). This landscape increasingly calls for a more individualised and interactive approach to CRM than in the past (Peppers and Rogers, 2004; Payne and Frow, 2005; Boulding et al., 2005;

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Harridge-March and Quinton, 2009). As a result, CRM applications have largely been driven by technology and newer approaches to customization (Nguyen and Simkin, 2011). This is discussed next.

3. Advances in CRM applications Recently, we have seen marketers’ attempt to engage in this challenging environment. In particular, we have seen how the adoption of new technology and the internet have enabled CRM practices to flourish. The communication directed towards potential buyers can now be customised at an individual level through e-mails, social media, e.g. Facebook pages, YouTube and Twitter and blogs (Greenberg, 2009; Quinton and Harridge-March, 2010). At the same time, the interactions between buyer and seller can now be effortlessly stored in a CRM database system for the benefit of the marketer. This interactive era has not only increased collaboration between firm and customer but coupled with continuing technological advances, a marketer has now the ability to track and store customer information optimally, in order to customise offerings to suit individual customer needs and desires. For the firm, this technological impact has meant that CRM activities can be utilised to deal with customers individually, one customer at a time. Ultimately, these relationships may give them an advantage over their competition.

Certainly, the purpose of CRM implementation is that it should considerably enhance firm performance – a quality of any marketing activity (Lehmann, 2004; Rust et al., 2004; Krasnikov et al., 2009). Recently, research has developed specific CRM applications that are designed to increase a firm’s overall performance. For instance, Cao and Gruca (2005) centre their attention on acquiring the “right” customer; Lewis (2005) focuses on identifying dynamic customer behaviour that enables a pricing scheme to increase long-term profits; and Thomas and Sullivan (2005) develop a decision support system using an enterprise database that allows the firm to modify its communication message depending on where customers live and how they shop. All cases suggested an increase in profits and enhanced firm performance. Advancements in CRM are getting increasingly sophisticated. Recent developments have developed methods to understand consumer behaviour and needs through brain scanning, whereas others have developed methods for machines to have “eyes” so they can recognise customers individually and monitor their shopping patterns (The Economist, 2009; Trends Magazine, 2010). Gray (2011) reports that IBM are working on technology which will lead to consumers being shown tailor made adverts that reflects their personal interests on digital advertising screens in train stations and bus stops. This is possible due to RFID chips that are found in their travel cards which recognise individual consumers and their personal interests.

In this changing landscape, Peppers and Rogers (2010) suggest that the impact of technology has spawned another revolution led by the customers themselves. Customers now know exactly what they want, and demand products just the way they want them. They want flawless service, and to be treated less like “a number” and more like the individuals they are. This suggest that firms must put a coordinated effort on learning more about customers in order to attract, keep, maintain, grow and retain valuable customers who have taken on a far greater role than previously. By using recent advancements in CRM to build relationships, a firm can build links and ties with its customers through learning, resulting in a successful long-term and profitable

A review of CRM

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business strategy. In other words, CRM provides a framework for achieving coordination between marketing, customer service and quality programmes (Christopher et al., 1991; Boulding et al., 2005). This learning relationship is a key factor for success in CRM (Payne and Frow, 2006; Lusch et al., 2010; Galitsky and De la Rosa, 2011).

Building learning relationships offers a particular organisation many benefits, including repeat purchases, increased purchases, cross-sales, up-selling, reduced costs, free word of mouth advertisements, employee retention, added customer life-time value, partnership activities and less price sensitivity (Zeithaml and Bitner, 1996; Bowen and Shoemaker, 1998; Payne and Frow, 2005; Lusch et al., 2010). This leads to our next proposition:

P2. Technological advances have increasingly developed sophisticated ways for firms to understand customer behaviour and to customise marketing offerings to suit individual needs and desires. Interaction, innovation and learning are key capabilities needed to operate successfully in this landscape.

4. The shifting importance of consumer awareness The customer has always been a part of a firm’s activities. Historically, firms have not been reluctant to encourage customers to participate in their research and development process of their products and services. But firms’ views on customers have dramatically changed over time (Gummesson, 2002; Peppers and Rogers, 2010). In the past, firms were driven by assembly line technology and mass production as products were highly commoditised which created a need to reach out to as many customers as possible. Branding in particular, emerged as a differentiation strategy that created awareness about manufacturers’ products and services. It was a way to create familiarity, image and trust. Branding from its beginning was, in a way, an expensive substitute for relationships (Fournier, 1998; Peppers and Rogers, 2004; Veloutsou, 2009). Its goal was to improve brand awareness, which eventually would lead to brand preference and brand loyalty among customers. However, brand consumers were often content as long as they were able to get the one brand that they know and respect. Whether this was bought in a store, online, or from a catalogue, customers were satisfied if a retailer carries a trusted store brand or a manufacturer’s brand (Peppers and Rogers, 2010). Brands remained untouched for many years. Firms competed on creating the best brands. This was not a surprise as the inflexibility of mass-marketing gave nourishment to the existence of brands.

Today, however, the changing economy created a fragmented mass consumer market that was more sophisticated and more demanding (Peppers and Rogers, 2004; Payne and Frow, 2005; Harker and Egan, 2006). Whilst recognising that the traditional marketing mix still needs to be addressed, it is also required that firms adopt a relational approach to create an integrated cross functional focus on marketing (Christopher et al., 1991; Boulding et al., 2005). Today, firms have moved into creating a two-way brand, or branded relationship, to accommodate the interactive era where information about customers are readily available (Gummesson, 1987; Grönroos, 1991; Peppers and Rogers, 2004; Payne and Frow, 2005, 2006; Veloutsou, 2009). By interacting with customers and developing an ongoing dialogue, the firm is able to be aware about its customers so that the firm constantly can monitor and where needed, make changes to suit the needs of the individual.

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During the 1990s, Peppers and Rogers (1993) introduced the concept of one-to-one marketing and Pine (1993) introduced the concept of mass customization. Since then, firms have embraced the idea that detecting and collecting data about customers could help them acquire and retain profitable customers through a learning-based and evolving relationship. With the significant interest among marketers, the concept soon evolved further into various streams. For more detailed review, see Harker and Egan (2006) who described how three different schools of thought in RM have emerged. This leads to our P3:

P3. With CRM, the customers’ roles have shifted from being a buyer to becoming an integrated partner within the business model. As data are increasingly shared between the two parties, learning based relationships is a way for firms to evolve and modify their behaviour.

Following our extensive review of the development of the CRM literature, we now turn our attention to issues and pitfalls that are less researched, but require more focus as these issues could potentially damage the way in which CRM is practiced.

5. Issues with the conceptualisation of CRM The discourse on CRM has produced a rich and diverse set of meanings with the extensive contribution of authors whom have defined CRM. However, CRM has not developed into an integrated and a streamlined body of research (Payne and Frow, 2005). While some regard this as a confusion about what constitutes CRM and notes that it creates a significant problem for adopting CRM (Reinartz et al., 2004; Harker and Egan, 2006; Frow and Payne, 2009), others view the attempts to cover CRM definitions to reflect the multi-faceted nature of the scheme itself (Buttle, 2001). To understand this issue, it is important to direct our attention to the concept of RM, which is a predecessor to CRM.

Both RM and CRM neither have universally accepted definitions, so often, both are used interchangeably which has caused much confusion (Sin et al., 2005). In RM, Barnes and Howlet (1998) refer to the lack of consistency in how academics define RM and consider that there is even less consistency in how practitioners apply the concept. For instance, Harker (1999) outlines 26 definitions of RM and seven conceptual categories. Gummesson (1999) identifies 30 types of relationships, which are divided in four levels. Similarly, in CRM, there is a challenge in defining CRM in that any definition is contingent on the level at which CRM is practiced in an organisation, or what the researcher believes about the correct level of CRM (Reinartz et al., 2004). Thus, conceptualising and operationalising the CRM concept is difficult due to the numerous definitions of CRM. Indeed, with so many differing definitions, it is not surprising that there is so much confusion. Some software vendors and major management consultancies have even tried to associate CRM with the implementation of a particular technological solution (Khanna, 2001). However, on the other hand, this myopia of definitions may be regarded as a multi-faceted nature of the broader CRM scheme and seen as a flexible and a more adaptive marketing approach.

Despite many commonalities, there are some important differences between the RM and CRM concepts. Sin et al. (2005) offer three points, namely: first, it is suggested that RM is more strategic in nature whilst CRM is used in a more tactical sense (Ryals and Payne, 2001; Zablah et al., 2003). Second, it is also suggested that while RM is relatively more emotional and behavioural, centering on variables such as

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bonding, empathy, reciprocity and trust (Morgan and Hunt, 1994; Yau et al., 2000), CRM is more managerial, focusing on efforts to attract, maintain and enhance customer relationships from a management perspective. And third, while RM embraces relationship building with all stakeholders including suppliers, internal employees, customers and government (Morgan and Hunt, 1994; Sin et al., 2005), CRM is more dedicated to building relationships with key customers (Tuominen et al., 2004; Lewis, 2005; Galitsky and De la Rosa, 2011).

In spite of the lack of consensus in the literature for a definition, as CRM increases in exposure, a growing number of scholars emphasise the need for a holistic approach and view CRM as a process reflecting integration of market orientation and information communication technology (Srivastava et al., 1998; Payne, 2001; Plakoyiannaki and Tzokas, 2000, 2002; Grabner-Kraeuter and Moedritscher, 2002; Hart et al., 2003). As a result, Boulding et al. (2005) have more recently proposed a convergence of CRM on a common definition. According to Boulding et al. (2005), CRM is no longer a customer focused orientation, but rather, an integration of all relationships and use of systems to collect and analyse data across the firm, linking the firm and customer value along the value chain in order to develop capabilities to integrate these activities across the firms network to subsequently, generate customer value, while creating shareholder value for the firm. This is a view that is supported by recent studies, such as Piercy (2009), Fan and Ku (2010) and Ernst et al. (2011).

The literature on CRM shows a great number of attempts to provide a classification of the concept. For instance, according to Palmer (1995), CRM can be classified into three broad approaches that consist of tactical-, strategic- and philosophical CRM-aspects. Zablah et al. (2003) go further to distinguish between CRM as a process, a technological tool, a capability, a strategy and a philosophy. Peppers and Rogers (2004) conceptualise CRM as two broad areas; namely, operational CRM that focuses on the IT-related processing which affects the day to day operations, and an analytical CRM that focuses on the strategic planning of how a firm can build customer relationships and enhance their value base as well as the cultural measurement, and organisational changes required to implement the strategy successfully. Reinartz et al. (2004) view CRM entirely as a process, consisting of three stages, namely: initiation, maintenance and termination. This issue of conceptualisation and use leads to our P4:

P4. CRM is defined on the level at which CRM is practiced in a firm or what the researcher believes about the correct level of CRM. Conceptualisation is difficult due to the numerous definitions. Success is dependent on a firm’s own understanding of their utilization of CRM.

6. Concerns related to what constitutes a good relationship As previously mentioned, a good relationship between a firm and its customer is vital for CRM to be effective (Boulding et al., 2005; Frow and Payne, 2009). Certainly, there are many similarities between a business and a personal relationship. For example, in a marriage, two individuals exchange with one another only if the balance of trade is favourable to both and greater than what can be derived from the greater market (Kumar et al., 1995a; Britton and Rose, 2004). However, in CRM, it is not always clear what constitutes a good relationship. To create successful CRM implementation and long lasting relationships, it is important to look at the fundamental mechanisms pertaining a strong relationship. This section looks at four factors, namely:

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(1) trust and commitment;

(2) satisfaction;

(3) symmetry and dependence; and

(4) fairness (Smith et al., 1999; Britton and Rose, 2004).

Each will now be briefly presented to review what constitutes a good relationship.

6.1 Trust and commitment Although the study of trust has resulted in various context-specific contributions, there is nevertheless a common and shared notion that trust is a feeling of security based on the belief that favourable and positive intentions towards welfare are on the agenda, as opposed to lying or taking advantage of the vulnerability of others (Moorman et al., 1992; Morgan and Hunt, 1994). The existing literature suggests that trust is an essential component of commitment and conceptually, links with satisfaction and loyalty (Morgan and Hunt, 1994; Ballester and Aleman, 2001).

Important outcomes of relationships based on trust include: . Improved co-operation. Trust reduces feelings of uncertainty and risk and thus,

acts to engender increased cooperation between relationship members (Dwyer et al., 1987; Moorman et al., 1992; Morgan and Hunt, 1994).

. Increased commitment. Trust increases commitment, however, customers are selective to trustworthy partners, as commitment results in their own vulnerability of personal data (Morgan and Hunt, 1994; Selnes, 1998).

. Relationship duration. Trust encourages investment in long-term relationships by securing future business rather than short-term gains, and thus, opportunistic behaviour and self-interest may be avoided (Morgan and Hunt, 1994; Ballester and Aleman, 2001).

. Better quality. Disputes among trusted parties can be solved in an efficient and amicable way, while in the absence of trust, disputes are perceived as signals of future difficulties and usually bring about relationship determination (Morgan and Hunt, 1994; Selnes, 1998; Michell et al., 1998; Britton and Rose, 2004).

6.2 Satisfaction Studies show satisfaction and loyalty are positively related (De Wulf and Iacobucci, 2001; Zins, 2001; Verhoef, 2003). Satisfied customers are more inclined to remain in a relationship, whereas dissatisfied customers are likely to look for alternative options. In a service context, overall satisfaction is similar to overall evaluations of service quality (Zeithaml et al., 1996; Gustafsson et al., 2005). Hence, as firms seek effective ways to measure customer relationships, many have turned to the traditional tool of customer satisfaction monitoring, which historically was used to understand consumer perceptions of products and services.

Another positive relationship exists between satisfaction and the duration of the relationships. Bolton and Lemon (1999) show a positive effect of overall customer satisfaction on the duration of the relationship for telecommunication subscriptions services. The duration of the relationship depends on the customers’ subjective assessment of the value of a relationship that is continuously updated based on perceptions of previous experiences (Britton and Rose, 2004).

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6.3 Symmetry and dependence Being dependent on another party is not a strategically favourable position and would cause a member to seek for other relationships. Thus, while dependence plays a role in long-term development it is not sufficient to maintain the relationship.

Relationship symmetry refers to the degree of equality between relationship members. Through various relationship elements, including information sharing, dependence and power, the balance of power determines the stability of a relationship. In a symmetric relationship, members have equivalent stakes in the relationship. In contrast, asymmetric relationships undermine the balance of power and create motivation for the stronger party to act opportunistically; with diverging interests, this is a determinant of conflict and eventually, a less stable relationship. Hence, commonality of interest is strongest when the relationship is symmetric. This is supported by Adams’ (1965) theory of equity which suggests that justice in interpersonal relationships is achieved when the distributions of resources are fair and equal.

In contrast, asymmetric dependence refers to one member being dependent on the other, whereas symmetric interdependence exists when the relationship members are equally dependent on each other. Increased dependency by one party will result in a more asymmetric and less stable relationship, as one party may feel vulnerable and constantly look for more favourable relationships. In other words, a bad relationship.

6.4 Fairness Research has shown that the perception of relationship fairness also enhances relationship quality (Kumar et al., 1995b). It is, in particular, important to develop processes and procedures which the other member of the relationship judges as being fair, in order to sustain the relationship. The various definitions suggest two distinct types of relationship fairness – distributive and procedural.

Distributive fairness is based on the weighing of relationship rewards versus relationship obligations and thus, looks at the outcomes of a particular relationship. Procedural fairness is based on whether the used procedures and processes are fair, and thus, more behaviour-oriented independent of the outcomes (Thibaut and Walker, 1975). Of the two types, procedural fairness has a much stronger effect on the development of trust and commitment. Thus, while distributive fairness tends to be unstable as outcomes change, in contrast, procedural is more likely to constitute the basis for a sustainable relationship. It can be said that procedurally fair exchange systems have a more enduring quality and accounts for better CRM (Britton and Rose, 2004).

As CRM puts emphasis on the good relationship, all of the above mechanisms are vital to understand since they are fundamental to successful relationships. An agreement of what constitutes a good relationship is the first step towards fairer, more trustworthy and more long-term collaboration. This leads to our P5:

P5. Building good buyer-seller relationships require firms to consider issues of trust, commitment, satisfaction, symmetry, dependence and fairness. The objective is to create mutuality, interaction, iterative and shared benefits.

Next, we present various CRM approaches with particular focus on issues of consumer exploitation which could undermine CRM activities. Without careful execution, they can diminish customers’ role in the relationship, causing issues of privacy and violating consumers’ perceptions of what is fair.

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7. Exploitation in consumer markets As mentioned earlier, one of the factors in an ideal relationship includes a growth of value so that both are better off; or in CRM relationship, an expansion of the value creation pie so that both customer and firm are better off. However, Boulding et al. (2005) note that the extensive research into CRM from a firm perspective may be considered as a focus on creating more value for the firm and leave the customers with the lesser value. CRM can, in this case, be seen as a pie-splitting mechanism, whereby the firm can learn things about the customer that enables it to take a bigger slice of the created value.

For example, consider the collection of customer data. If a customer starts to anticipate what a firm will do with its data after it observes and collects them, that customer may modify its behaviour (Wright, 1986; Lewis, 2005). These customers may choose to try and get a larger share of the value creation pie and leave the firm with a smaller share. As for a customer, this is a way to act strategically and to keep their information for themselves and be selective about the given information or even distort their data. Therefore, a firm must be aware of these issues as it can put itself in substantial risk if information reciprocity (i.e. giving and receiving information in return) breaks down and customers choose to opt out of the relationships (Boulding et al., 2005; Nguyen, 2011). Because a firm must rely on customers to provide this information, an ongoing dialogue between customer and firm is crucial. When interacting with customers, the firm must anticipate that customers are likely to set limits in terms of what firm’s behaviour or request is acceptable and what is not. For example, if a customer decides to order a pizza online, but the web site not only asks for the necessary information about the order itself, but also requests personal details such as household income, age, gender, etc. it is likely that the customer may find the request unacceptable, and choose not to proceed with the transaction. In other words, the customer could not see the returns by giving the firm such information.

Hence, it is not always in the interest of the customer to provide data to these firms, especially if they begin to consider that firms are using it to make excessive profits (Campbell, 1999, 2007). This is supported by the theory of Schemer’s Schema (Wright, 1986) which maintains that customers hold intuitive beliefs about marketers influence tactics and acts or modify their behaviour accordingly if they dislike what they see or experience. Indeed, recent studies have shown increasing mistrust in marketing and CRM schemes (Heath and Heath, 2008; Nguyen and Simkin, 2011).

For example, through the increasing use of social networking web sites, blogs and fora, there are greater transparency and consumers may write about their negative experiences. If customers become less trusting of a firm’s behaviour, over repeated transactions, customers will spread negative word of mouth and thereby reduce the firm’s value creation pie if they hold beliefs about a firm’s misbehaviour. In today’s internet setting, there has been an explosion of spyware which are used by firms to track customer behaviour. This has led to a general distrust in online shopping and a desire for more consumer privacy. In these cases, issues of trust and distrust have emerged as customers infer how firms will use their data.

If a firm does not consider these issues, potentially, CRM activities will cross the line in terms of what the consumers consider as being fair. As a result, this may decrease trust in firm activities and cause dissatisfaction and loss of potential key advantages (Deighton, 2005). In particular, customers who believe that firms are exploiting their data will attempt to keep their data private or alter their data making them unusable.

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Ultimately, this could lead to both individually-, or collectively-based efforts to keep all data private or to campaigning for more privacy regulations (Deighton, 2005; Boulding et al., 2005; Nguyen, 2011). Thus, long-term successful implementation of CRM requires that firms consider with foresight the issues of trust, privacy implications and perceptions of fairness (Boulding et al., 2005). A firm must adequately consider a fair value creation for both the firm and the customer, or they may lose access to the data required for the dual value creation process. This leads to our P6:

P6. CRM requires careful consideration to monitoring, tracking and using customer data and privacy. Firms that collect data excessively may damage future opportunities due to increased regulation.

8. The CRM paradox Recently, Nguyen (2011) has put forward the issue of a CRM paradox. In CRM, it is a well-known practice to treat some customers differently, but do marketers appreciate the consequences of such a strategy? There are clear benefits of a strategy that favors one customer over another. By targeting and favoring some customers over others, firms may increase the attractiveness of their offerings to a certain group and thus increase the potential for creating cross-sales, up-selling, increasing profits, and for developing a long-term relationship. However, recent research have shown that such favoritism and differential treatment of customers may cause perceptions of unfairness, resulting in buyers opting out of relationships, spreading negative information, or engaging in misbehavior that may damage the firm. This is termed as the CRM paradox and an inherent part of what is known as the dark side of CRM (Nguyen, 2011; Nguyen and Simkin, 2011).

Because CRM fundamentally involves treating customers differently based on the assumption that customers are different and have got different needs, each individual customer will receive different offers. Consequently, this may cause dissatisfaction and issues of distrust and unfair practices due to the perceived inequality. As suggested by Boulding et al. (2005), the precursor to issues of consumer trust is fairness. For example, a customer shows trust to bond in a relationship with a firm when they know that the firm is acting fair in creating a win-win situation. However, will customers trust that firms will be fair in splitting the value creation pie in the first place? Amazon.com’s test use of dynamic pricing was a public relations nightmare for the company. As Feinberg et al. (2002, p. 277) put it:

Few things stir up a consumer revolt quicker than the notion that someone is getting a better deal. That’s a lesson Amazon.com has just learned [. . .] Amazon was recently revealed to be selling the same DVD movies for different prices to different customers.

The idea that someone else is getting a better deal on the same offer can raise eyebrows and evoke dissatisfaction. Nevertheless, foundations of CRM lie in the fact that separate customers have varying needs and want different products and services – even different prices and ways of promotion.

However, there are also examples whereby customers did not become upset by being treated differently. For example, Reitz (2005) cites an example of customers who did not become upset even when they were on the same airline flight. He notes that customers have norms for what is perceived as fair and what is unfair in terms of differential treatment of customers, and that it is easy for firms to cross over

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the line of unfairness. Consequently, firms need to recognise the concern in monitoring and managing customer perceptions of trust and fairness because issues of fairness and trust are connected with customers’ willingness to provide data and their satisfaction with the relationship. Inappropriate and incomplete use of CRM may put the firm at risk of long-term failure. Our P7 relates to the above issues within the dark sides of CRM:

P7. Implementing a one-to-one strategy causes concern for favouritism as some customers will receive better offers than others. Thus, CRM create the potential for negative consumer feelings due to differential treatment of customers and unequal distribution of outcomes. Building trust may be a way to reduce such perceptions.

In the final section of the paper, we discuss future developments in CRM. We consider CRM as a flexible marketing strategy that is adaptive to future technologies and future environment.

9. Future of CRM Peppers and Rogers (2010) note that too many firms have jumped on the bandwagon of CRM without proper preparation. They hold that the mechanics of implementation are complex. For instance:

[. . .] it is one thing to train a sales staff to be warm and attentive; it’s quite another to identify, track, and interact with an individual customer and then reconfigure your product or service to meet that customer’s needs (Peppers et al., 1999, p. 151).

However, even with the complexity of CRM implementation, it does not necessarily mean that it requires sophisticated analyses, concepts, or advanced technologies to be successful (Boulding et al., 2005).

Recent studies in the application of CRM reveals that most firms still focuses on known methodologies, such as segmentation (Lewis, 2005; Thomas and Sullivan, 2005; Dibb and Simkin, 2009); and, in some cases, research still focus on small pieces of the overall CRM activities, such as in the use of customer life time value in studying the effects of CRM on performance (Ryals, 2005). Additionally, in the definitions of CRM, the idea that every firm’s offers should be customised for individual customers was put forward. Yet, research shows that the use of basic market segmentation in CRM still yields benefits for the firm (although in the context of CRM, the segments were not based on simple demographics but rather on detailed analyses of prior observed behaviour) (Cao and Gruca, 2005; Lewis, 2005; Ryals, 2005; Thomas and Sullivan, 2005; Boulding et al., 2005; Simkin, 2008). Nevertheless, it is still far from the segmentation on an individual level as imposed by the definitions (Boulding et al., 2005).

In determining what the similarities and differences between the implementation of basic marketing techniques to a more advanced CRM implementation, Boulding et al. (2005) found that most made use of customer information with the aim to create firm value. This applied in all the researches with the application of CRM. It did not matter how simple the customer database the firm used; as long as customer data were provided, there was a difference. In essence, the key element of successful CRM implementation was information. Indeed, Jayachandran et al. (2005) show that as long as the firms had good relational processes in place, linking customer data and implementation, they were able to obtain good firm performance. Thus, it was concluded that even simple CRM activities

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could yield measurable benefits for a firm, as long as a firm acquired customer knowledge and used it wisely for a dual creation of value (Fan and Ku, 2010).

While an increase in shareholder profits is the ultimate objective for any firm as well as a good way to measure the effects of CRM, one of the real advantages of CRM is that the firm will obtain other measures and information that are of strategic value, including information about customers’ lifetime value or acquisition and retention costs – all of which can contribute to the value creation process. In the end, this information would create a better picture and deeper insight into the implementation of CRM, which in essence is one of the key benefits.

For a successful implementation, CRM needs to be integrated into the overall operations of the firm (Piercy, 2009). However, because different firms have different core capabilities, CRM activities have differential effects depending on the context of where and when they are implemented ( Jayachandran et al., 2005; Boulding et al., 2005). For example, in an online context, e-retailers’ prior experience in both a “bricks and mortar” – and online setting affect the level of impact of CRM investments (Srinivasan and Moorman, 2005). In such cases, Srinivasan and Moorman (2005) show that investments could affect firm performance both positively but also negatively, e.g. by creating unnecessary rigidities and thus, decreasing firm performance. Hence, it was concluded that CRM does not always enhance a firm’s activities but may also reduce firm performance, depending on where and when they are implemented (Krasnikov et al., 2009).

Jayachandran et al. (2005) show that the effects of CRM technology investments are enhanced when the firm has the appropriate relational information processes in place. They show that as long as a firm has good processes to harvest the knowledge, they were able to obtain good firm performance. This was further supported in a different context, where Thomas and Sullivan (2005) showed how an enterprise CRM system coordinates and integrates data from different channel sources, enabling a firm to gain new knowledge about individual customers and thus, enhanced firm performance. Therefore, although the effectiveness of CRM may vary depending on the context, it appears that the most important element in CRM implementation is for the firm to acquire customer knowledge and use it to create added value (Boulding et al., 2005; Canhoto, 2009). The idea of co-creating or dual creation of value is at the core of CRM and future approaches to CRM should focus on collecting, storing and utilising customer information.

Given the increasing use of social networking sites, various internet fora, blogs, comparison web sites, etc. more transparency in retailers’ various offerings exist. As a result, customers’ behaviours are changing and so must the CRM schemes. Indeed, using social media and mobile technologies have been an increasingly effective way for firms to interact with their customers through Facebook (Pages), Twitter, and Youtube (Harridge-March and Quinton, 2009; Greenberg, 2009). “Deal of the day” companies such as Groupon have in particular been successful at capitalising on such channels and many are following in their footsteps. So whilst customers are sharing their deals and shopping experiences with friends and families on social networking web sites, CRM must tap into this market with new applications. That is, web-based user-generated content to allow consumers an easy way to use these technologies – social media, blogs, and mobile comms – to quickly share with many fellow consumers their pleasure with how well they have been treated and so can improve on a firm’s brand reputation (Greenberg, 2009; Kaplan and Haenlein, 2010). The uncertainty in the future of CRM is vast and unpredictable, but technological advancements such as social media are certain

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to be a major part of the future. We therefore consider our final proposition as a more philosophical proposition, incorporating previous issues about fairness and trust, but at the same time, focusing on the adaptive strengths of the CRM scheme. Thus:

P8. The paradigm of CRM and the relational approach is at the forefront of marketing thinking. The scheme must be flexible and adaptive to follow technological advancements. At the same time, it should consider issues of fairness and trust so that the overuse or misuse of CRM may be avoided and long term efforts not wasted. This is essential for future CRM.

10. Conclusion In this paper, CRM researches have been extensively reviewed and it is proposed that the concept of dual value-creation and expansion of the pie such that both customers and firms are better off, are fundamental to successful implementation. However, the danger of implementing CRM in such a way as to lead customers to believe that they are worse off requires more research. The risks of depleting customer trust as they perceive themselves as being exploited by firms’ CRM offerings have been discussed and pose a significant threat to CRM if it is overly used and misused. Advances in CRM must consider issues of social media, fairness and trust. Given these issues related to the pitfalls and dark sides of CRM, we offer a revitalised definition of CRM, as:

The purposive use of customer knowledge and technologies to help firms generate customized offerings on an individual basis based on fairness and trust in order to enhance and maintain quality relationships with all the involved parties.

Future studies should examine the factors that affect a particular relationship between a customer and the firm, i.e. the factors that are likely to contribute to building customer relationships. Bansal et al. (2005) calls for research to enhance our understanding of the specific factors that push or pull customers away from a firm. With the emergence of social media, how will CRM adapt and emerge itself in such a future? We believe that relationship building within social media is taken to a new level – more personal and intimate, and thus, a stronger emphasis must be put in fairness. Sophisticated technologies are an integral part of future CRM and must be further studied. We hope that this article will generate a renewed interest in issues of fairness and trust in CRM, so that future marketers can continue to collect data and customise offerings. Indeed, we hope that in the near future one of the fundamental questions in marketing will be answered, and that is of course, what comes after CRM.

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About the authors Bang Nguyen is a Senior Lecturer at Oxford Brookes University in Oxford, UK. His research interests include customer relationship management, consumer behaviour and issues of fairness and trust. He has extensive knowledge in retailing and has presented at various national and international conferences. Before joining Brookes, he worked as a Lecturer at RMIT International University. Bang Nguyen is the corresponding author and can be contacted at: [email protected]

Dilip S. Mutum is a tutor at the Warwick Business School, University of Warwick. He is an avid blogger and his research interests include social networking, electronic marketing and consumer behaviour. He has previously worked as a Lecturer with Universiti Utara Malaysia.

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Parikalpana - KIIT Journal of Management116

DEFINING SUCCESS IN CRM IMPLEMENTATION PROJECTS: AN EMPIRICAL STUDY FROM THE IT

CONSULTANTS PERSPECTIVE Hory Sankar Mukerjee

Principal-Education Training and Assessment, Infosys Limited, [email protected]

U Devi Prasad Associate Professor, Hyderabad Business School,

GITAM University [email protected]

S.S Prasada Rao Faculty of Management, Director, Academic Affairs, GITAM University Gandhinagar

Campus, [email protected]

DOI: 10.23862/kiit-parikalpana/2017/v13/i1/151283 Article available at: http://ksom.ac.in/faculty-and-research/research/parikalpana-the-research-journal/

ABSTRACT

One of the key stakeholders in CRM implementations is the IT consultant, whose job is not only restricted to selecting the right package, but also ensure that the organisation implementing CRM is able to benefit from the same. For the IT consultant, CRM implementation is a technology project which enables resources for implementation. However ‘success’ per se has different meanings for various stakeholders and this article tries to analyse the definition of project success from a CRM project management perspective of an IT consultant. The article tries to look at the various factors that define success for CRM projects.

Introduction:

The relationship between a customer and the enterprise is strengthening and has been the center of all discussion in business and management literature. The need to have the customers at the center of the business is well justified and universally accepted as they form the reason of ‘being in business’ for every corporation. Along with this, today’s hypercompetitive

marketplace, with plethora of product and service choices available makes the offerings often indistinguishable to a customer.1 This have in turn pulled down the margins, put pressure on the top and bottom lines with companies leaving no stone unturned to get their margins, profitability and cost mix right.

A key aspect of this relationship building is therefore implementation of the right

117

technology in the right spirit. Two questions that grip businesses looking in for an IT solution are: First: Which software solution will fit into my requirements in case we choose to buy a CRM solution from a vendor? Two: In case we procure the solution from a CRM vendor, can this be outsourced for implementation, maintenance and upkeep of the solution to a third party (IT consultant)?

Companies often are not willing to invest in information technology personnel for issues pertaining to infrastructure, upgrade and maintenance of the required facility or software and is also often an overhead to the organisation in the long run. The IT function may not be a core part of their business and therefore it does not make sense for them to invest on personnel for a longer time.

Implementation of a CRM solution is extremely complex, lengthy, time consuming, and costly. It requires specific expertise which most implementing organisations cannot provide. Therefore an ideal way to bridge this gap is to hire a team of information technology consultant who would help with the process and drive this. The consultants provide their advice in selecting the right CRM software. Unfortunately the failure rates of such implementations are very high. 2

Research Gap and Research Problem:

An important aspect of a successful CRM implementation comes from the

successful deployment of the IT solution. However the definition of ‘project success’ in management research are different. There is a lack of research on the definition of ‘successes’ in CRM package implementations from the IT project managers view. It is therefore critical to look at what ‘success’ would mean to a project manager who has finished implementing a packaged CRM solution.

Objectives of the Study:

There are over 900 registered CRM vendors. An organization trying to implement a CRM solution has a plethora of choices with him. Not being able to identify the right implementation objective or having a weak vision of CRM may mean a wrong choice. CRM products essentially are of two types: On-demand (SaaS) or an on premise solution. While an on- demand solution means a light weight, low maintenance and low cost product, it may sacrifice the data security. An on premise solution however is costly, but more secure and scalable. Also integration with other systems like the ERP is also easier with an on premise solution. So weighing the choices before implementation can be a tough choice.

The specific objectives that we intend to meet is to understand the factors that constitute ‘project successes for a CRM IT solution implementation.

Blount, J. (2013). People Love You. People Love You, 1-8. 2 http://www.what-is-crm.com/crm-failures.php; Accessed on 5 th January 2016

Parikalpana - KIIT Journal of Management118

Literature Review:

Researchers also noted that for a project manager, a project is considered closed when they are handed over to the customer, which means a CRM implementation is done. However one of the important thing that is missed out in this understanding is the ‘effect’ it will have on end users of the system.3

Projects essentially have a start and end date which is a must, however the importance of the dates are very important. So for the project manager the cost and the time matters the most.

The impact a project could have on businesses have also been studied. For example, customer satisfaction has been studied as an important dimension in project success. The time, budget and the scope for the project (referred as the ‘iron triangle’) is also critical. Ignoring the bigger picture of the project, lack of understanding the environment under which the client operates cannot be

avoided. Just getting the job done or the implementation done is no measure of success.4

Another researcher, Cooke-Davies, mentions that there is a difference in the term ‘project success’ and ‘project management success’. The former is about the outcome of the project and if that meets the vision of the organization investing in it. The later however according to the researcher meant a traditional way of looking at success, especially when the project is complete and based primarily on cost, functionality and time objectives. 56 The overall project success therefore means a lot in terms of implementation.

Researchers have cited many examples where the projects are near perfect, done on time, well planned, executed, achieve the goals originally set, but fail on account of providing benefits to the customer. The customer often does not realize any value from the project implementation. 7 The reverse of this has also been noted by

3 Munns, A. K., & Bjeirmi, B. F. (1996). The role of project management in achieving project success. International journal of project management, 14(2), 81-87. 4 Shrnhur, A. J., Levy, O., & Dvir, D. (1997). Mapping the dimensions of project success. Project management journal, 28(2), 5-13. 5 Cooke-Davies, T. (2002). The “real” success factors on projects. International journal of project management, 20(3), 185-190. 6 Atkinson, R. (1999). Project management: cost, time and quality, two best guesses and a phenomenon, its time to accept other success criteria. International journal of project management, 17(6), 337-342. 7 Dvir, D., Raz, T., & Shenhar, A. J. (2003). An empirical analysis of the relationship between project planning and project success. International Journal of Project Management, 21(2), 89-95. 8 Thomas, M., Jacques, P. H., Adams, J. R., & Kihneman-Wooten, J. (2008). Developing an effective project: Planning and team building combined. Project Management Journal, 39(4), 105-113.

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researchers. Projects in which the original objectives have not been met, but the client was happy with the final outcome. 8

For this study, we will be looking at seven important parameters for defining project success, as identified across various literature. They are: 9101112

1. Meeting the costs: Was the project profitable?

2. Time: Was the project successful in meeting the timelines?

3. Budgets: Was the project successful in meeting the project budgets?

4. The scope of the project: Was the project successful in meeting the scope and changes?

5. Bigger picture (organizational goals as to why to implement CRM): Was the final objective met or how was the overall success of the project?

6. The client assessment impact: Was the client satisfied with the final outcome of the project?

7. End user satisfaction: Were the end users satisfied with the final outcome?

Researchers also agree that project completions on time and budget are often incorrect measures for success, but are important and cannot be ignored. Quality for example is linked with the technical performance of the system, the specifications and achieving the end objectives and can be subject to different set of interpretations by different stakeholders.

There is very little empirical evidence for IT CRM implementation projects on the factors that contribute to the project success. Is it merely the ‘iron triangle’ of costs, time and scope, or is it something more than that? This needs to be investigated.1

Hypothesis for the study:

For the purpose of this study, the research hypothesis are:

HaD1: There is significant difference project managers have on the definition of project success.

Research Methodology:

The research design employed for the

9 Dvir, D., Raz, T., & Shenhar, A. J. (2003). An empirical analysis of the relationship between project planning and project success. International Journal of Project Management, 21(2), 89-95. 10 Serrador, P., & Turner, R. (2015). The relationship between project success and project efficiency. Project Management Journal, 46(1), 30-39. 11 Baccarini, D. (1999). The logical framework method for defining project success. Project management journal, 30(4), 25-32. 12 Shrnhur, A. J., Levy, O., & Dvir, D. (1997). Mapping the dimensions of project success. Project management journal, 28(2), 5-13. 13 Schwalbe, K. (2015). Information technology project management. Cengage Learning, pp 6

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present study is empirical in nature. A questionnaire was be executed for this purpose. The respondents be project managers, consultants and senior consultants who have worked on the technology implementation of CRM. The research cut across both on-demand and on-premise solutions.

• The pilot questionnaire was administered to a panel comprising of seven experts from the Information technology consultants to check its adaptability to Indian conditions.

• A pilot study was conducted initially to examine the reliability and validity of the questionnaire.

• A total of 105 samples was included from the big five IT consulting companies based on simple random sampling.

Methodology

Part 1: The opinion of the project managers were collected on a 5 point Likert Scale. (1= Disagree and 5= Agree). This data was collected on 10 parameters of project success.

Part 2: A Cronbach’s Alpha (to test the reliability) followed by a factor analysis was conducted to find out the critical factors that were creating the maximum variance.

Part 3: A Pearson’s Chi Square test was done, within on demand and on premise projects for successful and unsuccessful implementations to find if there is difference in the project manager’s opinion of project success factors.

Analysis and Results

The study would provide essential insights to project managers and researchers on what constitutes success in CRM technology implementations. This would also provide a building block for other researchers to look at the phenomenon of technology implementations in CRM, which is a missing link.

Part 1: The opinion of the project managers were collected on a 5 point Likert Scale. (1= Disagree and 5= Agree). This data was collected on 10 parameters of project success. The project managers were also asked to rank them from 1 to 10.

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1 2 3 4 5 Total Meeting the internal project margins

3 15 17 32 38 105

On time completion of a project 0 4 18 18 65 105 On budget completion 2 14 13 37 39 105 Meeting the scope of the project 0 1 5 28 71 105 Meeting the bigger picture for implementing CRM

1 5 25 26 48 105

Ratings of the project sponsor 5 2 27 34 37 105 Satisfaction of the project team members

12 4 28 29 32 105

Customer satisfaction 1 6 4 15 79 105 Satisfaction of end users 1 4 5 16 79 105 Future revenues from customer 0 2 5 35 63 105

Opinion of project managers on a Likert Scale of 1-5 on project success parameters

Ranks from 1 to 10 on components of project success Ranks 1 to 10: (1=Highest and 10=Lowest)

1 2 3 4 5 6 7 8 9 10

Meeting the internal project margins 12 5 5 13 5 5 19 12 14 15 On time completion of a project 11 18 14 12 12 9 8 5 13 3 On budget completion 2 14 16 9 6 16 4 12 11 15 Meeting the scope of the project 19 19 6 21 13 9 8 4 3 3 Meeting the bigger picture for implementing CRM

8 5 16 13 5 12 7 15 15 9

Ratings of the project sponsor 5 2 6 8 29 19 6 9 17 4 Satisfaction of the project team members

5 0 2 9 6 8 9 15 9 42

Customer satisfaction 9 12 22 11 7 10 16 5 11 2 Satisfaction of end users 23 20 9 8 1 12 10 12 5 5 Future revenues from customer 11 10 9 1 21 5 18 16 7 7

Part 2: A Cronbach’s Alpha (to test the reliability) followed by factor analysis was conducted to find out the critical factors that were creating the maximum variance.

Reliability Statistics Cronbach's Alpha N of Items

.743 10

The results from the Cronbach’s Alpha was found to be more than the required value of 0.7, which implies that the internal consistency reliability for Likert scales used for the study was high. Factor Analysis KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy. .544

Bartlett's Test of Sphericity

Approx. Chi-Square 282.421 df 45 Sig. .000

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Communalities Initial Extraction Meeting the internal project margins 1.000 .698 On time completion of a project 1.000 .772 On budget completion 1.000 .654 Meeting the scope of the project 1.000 .730 Meeting the bigger picture for implementing CRM 1.000 .695 Ratings of the project sponsor 1.000 .709 Satisfaction of the project team members 1.000 .760 Customer satisfaction 1.000 .774 Satisfaction of end users 1.000 .728 Future revenues from customer 1.000 .596 Extraction Method: Principal Component Analysis.

Total Variance Explained Compo nent

Initial Eigenvalues Extraction Sums of Squared Loadings

Rotation Sums of Squared Loadings

Total % of Variance

Cumulat ive %

Total % of Variance

Cumulative %

Total % of Variance

Cumulative %

1 2.605 26.046 26.046 2.605 26.046 26.046 2.293 22.930 22.930 2 1.948 19.480 45.526 1.948 19.480 45.526 1.780 17.797 40.727 3 1.354 13.540 59.065 1.354 13.540 59.065 1.672 16.718 57.445 4 1.210 12.105 71.170 1.210 12.105 71.170 1.372 13.725 71.170 5 .815 8.151 79.321 6 .645 6.448 85.769 7 .440 4.397 90.166 8 .425 4.251 94.416 9 .354 3.541 97.958 10 .204 2.042 100.000 Extraction Method: Principal Component Analysis.

Initially, the factorability of the 10 project success items was examined under the study. Several well recognized criteria for the factorability of a correlation were used. Firstly, it was observed that 7 of the 10 items correlated at least .4 with at least one other item, suggesting reasonable factorability (see correlation table). Secondly, the Kaiser-Meyer-Olkin

measure of sampling adequacy was .54, above the commonly recommended value of .5, and Bartlett’s test of sphericity was significant. The communalities were all above .5 (see Table on commonalities), further confirming that each item shared some common variance with other items. Given these overall indicators, factor analysis was deemed to be suitable with

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all 10 items. Principal components analysis was used because the primary purpose was to identify and compute composite scores for the factors underlying the short version of the ACS. Initial Eigen values indicated that the first four factors explained 70% of the total variance.

For the final stage, a principal components factor analysis of the remaining 4 items, using Varimax rotations, was conducted. The table containing the rotated factor loadings (factor pattern matrix), which represent both how the variables are weighted for each factor but also the

correlation between the variables and the factor. In each of the four factors extracted, we identified the two top factors. The component 1 are the traditional measures of success, component 2 is the team for CRM implementation, component 3 is the satisfaction matrix and component 4 is the future outlook of the project.

Part 3: A Pearson’s Chi Square test was done for successful and unsuccessful implementations to find if there is difference in the project manager’s opinion of project success factors.

Cross tabulation analysis by Chi-Square test pro1 Total

Successful Unsuccessful

pro1 On demand

Count 136 2 138 % of Total 52.9% 0.8% 53.7%

On premise Count 111 8 119 % of Total 43.2% 3.1% 46.3%

Total Count 247 10 257 % of Total 96.1% 3.9% 100.0%

Pearson Chi-Square = 4.752 (.029* SIGNIFICANT). Therefore the alternate hypothesis is accepted. Limitations: The study was limited only to the top Indian information technology consultants and their choice. The sample size though 105, may still remain a small size of consultants compared to the large number of information technology consultant population available. The projects with CMMI level 5 process maturity were chosen. It may not be in lines with the

results for projects with lesser maturity. Consultants were chosen primarily from India, however consultants overseas may see the factors from a different perspective. Managerial implications and conclusions: Here are the managerial implications. 1. There is a significant difference that

project managers have on project success. This also essentially means for organisations implementing CRM as well as the steering committee the guidelines given to project managers

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and their KPI’s should either be standardized or should be tailored for each project. Standardized KPI’s for projects does not work.

2. Project managers significantly vary on the definition of the project success.

3. The components of success as found out in this research adds a fourth dimension of success and that is future outlook. For an IT consultant the ‘icing’ on the cake would be a situation when the client is happy with the work done and assigns the consultant the next phase of the CRM implementation. Even if the client agrees to serve as a reference for any other prospective customer of the consultant and is willing to vouch for him, must definitely be considered as a parameter for success in CRM projects.

Scope for future studies:

Further studies on the topic can be conducted for each of the dimensions of success. This will give a better view to the projects. Also managerial motivation and project success, especially in Indian scenarios can be studied. The impact project team members can have on the overall project success can also be studied. Another important aspect of project success that needs to be studied is the difference that may exist in different types of IT projects.

References:

Atkinson, R. (1999). Project management: cost, time and quality, two best guesses

and a phenomenon, its time to accept other success criteria. International journal of project management, 17(6), 337-342.

Baccarini, D. (1999). The logical framework method for deûning project success. Project management journal, 30(4), 25-32.

Blount, J. (2013). People Love You. People Love You, 1-8.

Cooke-Davies, T. (2002). The “real” success factors on projects. International journal of project management, 20(3), 185-190.

DIDRAGA, O. (2013). The Role and the Effects of Risk Management in IT Projects Success. Informatica Economica, 17(1), 86-98.

Dvir, D., Raz, T., & Shenhar, A. J. (2003). An empirical analysis of the relationship between project planning and project success. International Journal of Project Management, 21(2), 89-95.

http://www.what-is-crm.com/crm- failures.php ; Accessed on 5th January 2016

Munns, A. K., & Bjeirmi, B. F. (1996). The role of project management in achieving project success. International journal of project management, 14(2), 81- 87.

Schwalbe, K. (2015). Information technology project management. Cengage Learning, pp 6

Serrador, P., & Turner, R. (2015). The relationship between project success and

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project efficiency. Project Management Journal, 46(1), 30-39.

Shrnhur, A. J., Levy, O., & Dvir, D. (1997). Mapping the dimensions of project success. Project management journal, 28(2), 5-13.

Thomas, M., Jacques, P. H., Adams, J. R., & Kihneman-Wooten, J. (2008). Developing an effective project: Planning and team building combined. Project Management Journal, 39(4), 105-113.

Turner, R., & Zolin, R. (2012). Forecasting success on large projects: developing reliable scales to predict multiple perspectives by multiple stakeholders over multiple time frames. Project Management Journal, 43(5), 87-99.

Zwikael, O., & Globerson, S. (2006). From Critical Success Factors to Critical Success Processes. International Journal Of Production Research, 44(17), 3433-3449

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