The Dual Creation of value: Customer
relationship Management & Performance;
A Key factor for the Long-term
Success of the firm
Suvijna Awasthi1, Deepali Gupta2,Aradhana Bhopte3, Anjali Bharti4
INTroDuCTIoN
The customer-oriented culture aim to initiate the need and create the awareness of CRM Relationship management is a customer-oriented feature with service response based on customer input, one-to-one solutions to customers’ requirements, direct online communications with customer and customer service centers that help customers solve their questions. Today consumer market establishes a cordial relationship with the customer. IT investment arises from a narrow concentration on IT alone, the most successful programs combining technology with the effective organization of people and their skills. It follows with the greater the knowledge about how firms successfully build and combine their technological and organizational capabilities, and how CRM influences performance. Gulati and Oldroyd (2005), observe that the implementation or CRM systems must serve the purpose of getting closer to customers, and that in order to succeed the company as a whole has to engage in a learning journey—learning about the customer and about the business and how its way of doing business can be improved. Customer relationship management (CRM) is a system for managing a
The association of customer relationship management and cost provides more differential advantage in large firm. This paper examines the technological, innovation, satisfaction, needs, resource, communication, feedback and other services
factors of customer relationship management on the performance and retaining most valuable customers in long run. The
researcher finds out the relationship of Customer Relationship Management on firm performance. The study shows that there is a strong relationship between CRM and performance. The purpose of present study is to find out the dual creation of value i.e. Profitability and Creation of customer as a competitive advantage to large firm in long run.
Keywords: Customer relationship management, firm performance.
ABSTrACT
1. Head of Department, School of Studies in Management, Jiwaji University, City Centre, Gwalior. 2. Faculty, School of Studies in Management, Jiwaji University, City Centre, Gwalior.
3. Faculty, School of Studies in Management, Jiwaji University, City Centre, Gwalior. 4. School of Studies in Management, Jiwaji University, City Centre, Gwalior.
company’s interactions with current and future customers. It involves using technology to organize, automate and synchronize sales, marketing, customer service, and technical support; a computerized system for identifying, targeting, acquiring, and retaining the best mix of customers. Strong relationships are associated with customer loyalty and/or switching costs, which create barriers to competition. Setting customer objectives aim is for achieving customer satisfaction, customer loyalty, and customer value. Thus relationships provide a differential advantage by making resources directed to customers more efficient. For example, loyal customers are more responsive to marketing actions and cross-selling. Goldenberg, (2000), explored that CRM is not merely technology applications for marketing, sales and service, but rather, when fully and successfully implemented, a cross-functional, customer-driven, technology-integrated business process management that maximizes relationships and encompasses the entire organization. Customer relationship management helps in profiling prospects, understanding their needs, and in building relationships with them by providing the most suitable products and enhanced
customer service. It integrates back and front office systems to create a database of customer contacts, purchases, and technical support, among other things.
Berry 1(983), lays the foundation for the development of CRM is generally considered to be relationship marketing, defined as marketing activities that attract, maintain and enhance customer relationships. CRM systems are customer relationship management platforms; a platform for progressing the payments and other related query management. It creates the awareness of CRM and the importance of the main principles and values of CRM.
An effective relationship building can be done only by delivering quality service to the customers. There are many dimensions of the service quality which would help in building relationship with the customer alike Assurance in delivery, Reliability in performance, Tangibles associated with the service, Empathy Responsiveness of the consumers. Bohling (2006) finds that Customer relationship management (CRM) is increasingly important to firms as they seek to improve their profits through longer-term relationships with customers.
In recent years, many have invested heavily in information technology (IT) assets to better manage their interactions with customers before, during and after purchase. CRM software comes with many features and tools, (ex. Outlook, Gmail, I-Call etc.) and despite the fact that many of CRM products offer similar feature sets, there are some unique tools in each one. Jayachandran (2005), find the interaction effect showing that customer relationship performance for a diverse sample of businesses is enhanced by organizational information processes when a high level of technology is used. In other words, technology use for customer relationship management—by moderating the influence of organizational information processes on customer relationship performance—performs a supportive role only. Business world is fast-paced, managers need to be able to access customer’s information quickly like Sales and marketing tools designed to help and maintain current clients and gain new ones. These tools help find campaigns with positive ROI and those that are not performed. Ease of use is about app’s design; how well it integrates with other applications and how accessible information is.
Newbert (2007), indentify the CRM capability is potentially a source of competitive advantage―it takes time and effort to develop, it is rare and difficult to imitate, and is causally ambiguous. This is the essence of the resource-based view of the firm. With the development of customer strategy in which the target market is identified, differentiated strategies can be developed to deal with customers segments based on their profitability. The importance of the principles, values and the execution of CRM programs are brought, in which the focus on carrying out differentiated strategies for each customer segments. Feedback is one of the effectiveness steps to the development of customer strategy. Based on this feedback it could be a need to change the target market, the customer segmentation, or the differentiation strategies. Anton (1996), explored that CRM as an integrated approach to managing customer relationships
with re-engineering of customer value through better service recovery and competitive positioning of the offer. Vargo and Lusch, (2004), explored that CRM principles and systems help organizations to focus on the dual creation of value: the creation of value for shareholders (via long-term firm profitability) and the creation of value or utility for customers.
The firm is comfortable with long-term business results. It’s careful not to allow the push for quarterly results to overshadow its business investment rationale or its internal operations. As the CRM initiative the firm is obsessed with delivering value to customers. The objective of this paper is to elevating the customer experience, improving customer satisfaction, and paying close attention to customer feedback and attitudes moves forward, reporting capabilities and a vehicle to communicate successes which are crucial for building and sustaining momentum. It is also likely to seek out customer insight through its quality-improvement initiative with long-term business results. rESEArCH METHoDoLoGy
The study was exploratory in nature with survey method was used. Population sample include 100 respondent of Gwalior Region; Individual respondents of service industry were taken as the sample. Non Probability quota, sampling technique was used. 20 Standard questionnaires were used for customer relationship Management and 5 standard questionnaire were used to evaluate the performance for long term success. Reliability, Item to total correlation, Linear Regression tools was applied to find the relationship/effect of customer relationship management on the long term performance.
rEvIEW of LITErATurE
Amit and Schoemaker (1993), the researcher defines such second-order or meta-capabilities as the firm’s overall ability to combine efficiently a number of resources that engage in productive activity. In other words, the lower-order capabilities such as IT, HA and BA are necessary, but not sufficient, to improve firm performance relative to competitors.
Berger and Nasr, (1998), the researcher finds that marketers were quick to recognize that the value of the customer asset (i.e., the value a customer or potential customer provides to a company) is the sum of the discounted net contribution margins of the customer over time—that is, the revenue provided to the company less the company’s cost associated with maintaining a relationship with the customer.
Blattberg and Deighton (1996), the researcher has explored that this perspective naturally evolved and expanded to consider the management of customer equity or the value of the customer base. Initially, researchers were primarily concerned with the allocation of resources between customer acquisition and retention.
Boulding et al., (2005), the researcher finds that Customers are likely to be willing to reveal private information if they derive fair value from exchanges with the firm. However, firms may behave opportunistically (extracting all economic surplus),
creating mistrust among customers, so that they act strategically when they provide information or participate in transactions with the firm.
Day (2000), the researcher finds that CRM systems—software that integrates relevant customer information (sales, marketing, etc.) with product and service information—and CRM processes, for example, the cross-functional steps required to ensure customer retention and effectiveness of marketing initiative, such as a continuing dialogue with customers across all contact points and personalized treatment.
Eckerson and Watson (2000), the researcher finds that using technology to optimize interactions with customers, companies can create a 360 degree view of customers to learn from past interactions to optimize future ones.
Gulati and Garino (2000), the researcher finds that CRM offers customization, simplicity, and convenience for completing transactions, regardless of the channel used for interaction. Hackney (2000), the researcher finds that although CRM software vendors may entice organizations with promises of all-powerful applications, to date there is no 100 percent solution.
Kumar & Reinartz (2003), the researcher compare traditional models that consider frequency, timing, and monetary value with models that show how managerial decision variables influence the profitability of customers over time—and show that the latter are superior.Nevertheless, most applications (to date) have relied on estimates of current customer profitability, rather than the customer profitability.
Lehmann (2004), the researcher finds that the challenges of applying CRM principles were exacerbated as managers and researchers turned their attention to metrics or the measurement of the impact of marketing on business performance.
Mithas, Krishnan et. al. (2005), the researcher studies the effect of CRM applications on customers and find out that the use of CRM systems positively impacts customer satisfaction, both directly and through improved customer knowledge. Despite this fact—and the common belief that more and better customer knowledge can only benefit a firm and its customers.
Mittal and Kamakura (2001), the researcher discuss the nature of the relationship (or fit) of the customer and the brand, finding that customers with different characteristics have different satisfaction thresholds, and, therefore, different probabilities of repurchase.
Peppers & Rogers (1999), the researcher finds CRM is simply a technology solution that extends separate databases and sales force automation tools to bridge sales and marketing functions in order to improve targeting efforts. Other organizations consider CRM as a tool specifically designed for one-to-one.
Reichheld (1996), Jackson (1994) & Levine (1993), the researchers has explored that CRM initiatives have resulted in increased competitiveness for many companies as witnessed by higher revenues and lower operational costs. Managing customer relationships effectively and efficiently boosts customer satisfaction and retention rates.
Reinartz et al. (2004), the researcher has explored that consequently banks need to allocate their resources efficiently to maximize the profitability of customer relationships. In short the customer relationship profitability distribution must be worthwhile and considerable. A common finding suggests that businesses tend to overspend on customers that generate marginal profitability while the more profitable customers are not given ample attention.
Rigby, Reichheld et.al. (2002), the researcher finds identified four situations that independently and together result in failed CRM systems: (1) implementing CRM without having in place a clear customer strategy, (2) assuming that CRM has to match organizations’ current practices, and not enhance them, (3) assuming that CRM technology and not CRM strategy matters, and (4) using CRM to stalk, not to woo customers. Srivastava, Shervani, and Fahey (1998), the researcher has explored that how market-based assets, such as customer or partner relationships, can increase shareholder value by accelerating and enhancing cash flows, lowering the volatility and vulnerability of cash flows, and increasing the residual value of cash flows. Their framework links customer relationship management with business performance metrics.
Verhoef (2003), the researcher finds that these objectives are congruent because relationships represent market-based assets that a firm continuously invests in, in order to be viable in the marketplace.
rESuLTS & fINDINGS reliability
rELIABILITy ANALySIS – SCALE (ALPHA) N of
Statistics for Mean Variance Std Dev Variables
SCALE 10.8500 5.6035 2.3672 5
Item-total Statistics Scale Scale Corrected Mean Variance Item- Alpha if Item if Item Total if Item Deleted Deleted Correlation Deleted VAR00001 8.8400 3.9539 .4638 .6710
VAR00002 8.6700 3.4759 .5505 .6332
VAR00003 8.4800 3.5855 .5324 .6416
VAR00004 8.6600 4.2469 .3688 .7052
VAR00001. Increased productivity & return VAR00002. Cost effectiveness & efficiency VAR00003. Firm performance & reward VAR00004. Market share
VAR00005. Retaining of customers Reliability Coefficients
N of Cases = 100.0 N of Items = 5
Alpha = .7150
RELIABILITY ANALYSIS – SCALE (ALPHA) N of Statistics for Mean Variance Std Dev Variables SCALE 42.6800 55.3915 7.4425 20
Item-total Statistics Scale Scale Corrected Mean Variance Item- Alpha if Item if Item Total if Item Deleted Deleted Correlation Deleted VAR00006 40.6700 50.8294 .4161 .8720 VAR00007 40.5100 48.8787 .6862 .8631 VAR00008 40.8200 50.6339 .3828 .8736 VAR00009 40.8700 48.0132 .6578 .8631 VAR00010 40.5400 49.3418 .5079 .8688 VAR00011 40.2600 49.9317 .4488 .8711 VAR00012 40.6400 49.2630 .5648 .8667 VAR00013 40.4900 52.2726 .3737 .8730 VAR00014 40.4800 50.0703 .5809 .8668 VAR00015 40.6200 49.5915 .4659 .8705 VAR00016 40.3600 50.6570 .4301 .8715 VAR00017 40.6100 50.9474 .4701 .8702 VAR00018 40.3600 51.9499 .3225 .8748 VAR00019 40.4500 50.7146 .4036 .8725 VAR00020 40.3900 50.7858 .3831 .8734 VAR00021 40.5600 49.8246 .5707 .8669 VAR00022 40.4600 51.6448 .4256 .8716 VAR00023 40.4500 50.7955 .4791 .8699 VAR00024 40.6100 50.2807 .4435 .8711 VAR00025 40.7700 49.9365 .5956 .8664 VAR00006. Information technology VAR00016. Comprehensive database VAR00007. Relationship of buyer & seller VAR00017. Great care VAR00008. Customer satisfaction surveys VAR00018. Technical suport VAR00009. Customer knowledge VAR00019. Responsive manner VAR00010. Customized service VAR00020. Knowledge learning VAR00011. Sales & marketing VAR00021. Customer expectation VAR00012. Customer needs VAR00022. Cooperation between teams VAR00013. Time & resources VAR00023. Communication VAR00014. Employee performance & reward VAR00024. Customer feedback VAR00015. Organization structure VAR00025. Innovation Reliability Coefficients N of Cases = 100.0 N of Items = 20 Alpha = .8756
INTErPrETATIoN
It is being considered that reliability should be more than 0.7 as we can see that the reliability through cronbach alpha test is more than the standard value, hence questionnaire is highly reliable. Item–item correlation was identified between each item and a scale score that excludes that item ranges from .3 -.5 i.e (85%- 95%), hence items is having good correlation with other items & the no questionnaire were dropped from further studies. regression Model Summaryb Model Summaryb .821a .673 .670 1.35986 .673 201.993 1 98 .000 1.939 Model 1 R R Square Adjusted
R Square the EstimateStd. Error of R SquareChange F Change df1 df2 Sig. F Change Change Statistics Durbin-W atson Predictors: (Constant), CRM a. Dependent variable: FP b.
ANOVA indicates the value of F (201.993) is significant at .000% level of significance and the F value is significant at 5% level of significance (t= 14.212, significant at .000%). The beta value (.821) indicates significant relationship between customer relationship management and performance. Results of the regression clearly show that the factors of CRM affect the performance. This implies that CRM has a positive relationship with long term success. It has significant impact on profitability and thus helps much in predicting future growth.
SuGGESTIoNS
1. There should be more and more emphasis given by the company for satisfying the customer up to an apex limit and by providing the utility.
2. There should be more use of information technology.
3. The industry should be flexible to bend its rules & proce-dures in the clients favour.
4. The industry can communicate and develop stronger customer bonding social and financial benefits.
CoNCLuSIoN
Customer Relationship Management is a very good tool which has brought lot of success for many firms; it helps the firm to build a very good relation with the customers but also helps the firm to treat different customers differently. The paper finds out the various factor of Customer Relationship Management which affects the firm performance in long-run. CRM focuses on technology, innovation, satisfaction, communication, feedback and other services and performance focus on retaining most valuable customers. The results show that there is a strong relationship between CRM and performance. Thus, a proper usage of CRM not only increases the market share of the firm but for the firms, it is easier to keep the existing customers than to search for new customers.
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