14-11-2012, 01:58 PM
An Evaluation of Customer Relationship Management at Information Technology Industry in India
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Abstract
Customer Relationship Management is now actively considered by organizations
across the globe as an integration of database marketing with technology enabled
strategy. This macro marketing view has led to look at database for building
strategic links for the benefit of the organization and customer in the face of rising
costs and competition. The modern information technology allows larger
organizations to individualize their products and services as per the varying needs of
the customers. Customer Relationship Management is the establishment,
development, maintenance and optimization of long term mutually valuable
relationships between consumers and the organizations. CRM builds on the
philosophy of relationship marketing that aims to create, develop and enhance
relationships with carefully targeted customers to maximize customer value,
corporate profitability and thus shareholders value. Customer relationship
management can be beneficial to both the firm and the customer. From the firm’s
point of view, providing services to a client on a long-term basis cuts down customer
acquisition costs drastically. It has been found that, loyal customers not only
generate more revenue for more years, but also frequently cost less than acquiring
new customers. Globalization and deregulation combined with advances in
information technology have radically changed the managerial context of service
industries. Success of a service provider is dependent on long term relationships
that develop between the provider and customer of the service. services typically
are produced and consumed simultaneously means it is common for customers to
have a direct input to service provision. Customers who have developed a
relationship with a service business expert expect to receive satisfactory delivery of
core service. The industry scenario in India saw a rapid increase in the various
sectors. But the striking factor was observed in the Information Technology (IT)
Industry sector. The IT has potential to raise the long-term growth prospects
through increased productivity in almost every sector of the economy. The Indian IT
industry comprises of a diverse group of companies associated with Information
Technology.
Key words: Customer Relationship Management, Information Technology Industry,
Customer service, Service Industry, Economic Development, innovation.
Introduction
Customer Relationship Management (CRM) is a term for methodologies,
technologies and e-commerce capabilities used by companies to manage customer
relationships. The traditional database marketing captures customer information
including demographic and psychographic data that helps the marketer to develop
suitable target marketing strategy, to forecast demand, to determine type and
quality of service required by customers and to build strategy for market entry,
diversification and expansion. This macro marketing view has led to look at
database for building strategic links for the benefit of the organization and customer
in the face of rising costs and competition. In 1960s, Levitt suggested that, the
purpose of every business is to create and keep customers. He also suggested
that, corporations should view the entire business process as a system consisting of
closely held integrated effort to discover, create, arouse and satisfy customer needs.
Customer Relationship Management is now actively considered by
organizations across the globe as an integration of database marketing with
technology enabled strategy. A new Datamonitor report, “Economic Outlook:
Customer Relationship Management” finds that, in 2006, the global CRM software
market was worth just under $3.6 billion in license revenue alone and is expected to
reach $6.6 billion by 2012 — a compound annual growth rate of 10.5 percent. The
basic proposition of a CRM strategy is based on the age old idea of knowing,
understanding and serving the customer for developing a sustainable competitive
advantage. But building a sustainable and successful relationship with a large
customer base is not the easiest thing to do and carries a direct impact on many
core operational processes.
It is not a tactical decision of software implementation but interaction of the
entire business with customers through an integrated interface. The modern
information technology allows larger organizations to individualize their products and
services as per the varying needs of the customers. Customer Relationship
Management is the establishment, development, maintenance and optimization of
long term mutually valuable relationships between consumers and the organizations.
Successful customer relationship management focuses on understanding the needs
and desires of the customers and is achieved by placing these needs at the heart of
the business by integrating them with the organization’s strategy, people,
technology and business processes (Fox and Stead, 2001).
A perfect CRM strategy is the creation of mutual value for all the parties
involved in the business process. It is about creating a sustainable competitive
advantage by being the best at understanding, communicating, and delivering and
developing existing customer relationships in addition to creating and keeping new
customers. So the concept of product life cycle is giving way to the concept of
customer life cycle focusing on the development of products and services that
anticipate the future need of the existing customers and creating additional services
that extend existing customer relationships beyond transactions. The customer life
cycle paradigm looks at lengthening the life span of the customer with the
organization rather than the endurance of a particular product or brand. A good
customer relationship management program addresses to the changing need of
the customers by developing products and services that continuously seek to
satisfy the lifestyle and need patterns of individual customers. Organizations tend to
acquire a structure around customer segments and not on the basis of product lines
to deliver customer satisfaction
CRM builds on the philosophy of relationship marketing that aims to create,
develop and enhance relationships with carefully targeted customers to maximize
customer value, corporate profitability and thus shareholders value (Frow and
Payne, 2004). The goal then is to improve the customer's experience of how they
interact with the company, which hopefully will turn into more satisfaction, which
might lead to more loyalty and finally to increase in profit (Chou et al., 2002).
Kotorov (2003), while referring to the roots of CRM mentioned that, in the past
many speculated whether CRM would turn out to be just another buzzword, one
more term to add to the managerial dictionary that would soon fade away. Bull
(2003) adds to this thought stating that, it is no longer good enough just to say
that you are customer focused, but it matters what you do. Customer relationship
management is of vital importance to organizations and it requires customercentric
business approach to support effective marketing, sales and service
processes (Carolyn et al., 2003).
Customer relationship management can be beneficial to both the firm and the
customer. From the firm’s point of view, providing services to a client on a long-term
basis cuts down customer acquisition costs drastically. It has been found that, loyal
customers not only generate more revenue for more years, but also frequently cost
less than acquiring new customers. The firm is also assured of certain minimum
amount of business which helps it plan and coordinate resource allocation more
effectively. Moreover, the chance of getting positive referrals and new customer
leads also increases. Thus, building customer loyalty can be a very effective way of
building a sustainable competitive advantage. From the customer’s point of view, a
certain level of quality of service is assured. The time and cost to search for a quality
service provider is also drastically reduced. There is a greater efficiency in decision
making, reduction in information processing, more consistency in decision making
and reduction of perceived risks with future decisions. In addition, as the relationship
matures, the relationship partners also understands the business needs and
constraints better and provides expedited and better quality service.
In order to implement a CRM strategy, a key dimension is the question of
customer service and the way in which it is perceived by the recipient of the
service. Customer service can be defined as a task other than pro-active selling
that involves interactions with the customers in person, by telecommunication or by
mail. It is designed, performed and communicated with two goals in mind:
operational efficiency and customer satisfaction (Lovelock, 1991). The quality of
customer service is determined and evaluated by the customer and this affects the
desirability of a relationship with the organisation. Customer service creates the
moments of truth with the customer and these service encounters need to be
managed by the organisation (Payne et al., 2001). Service encounters and CRM are
thus associated.
The service sector is considered as one of the most challenging and
competitive landscape and like all businesses services firms face some degree of
competition. The ability to view all customer interactions and information is
essential to provide the high quality of services that today’s customers demand
and service firms that want to be successful in the knowledge economy must
implement a comprehensive CRM integrated solution that involves all departments
working as a team and sharing information to provide a single view of the customer
(Yusuf, 2003).
In 1990s, CRM started attracting attention of academicians as well as
practitioners from marketing and Information Technology (IT). The academic
interest in CRM paralleled the explosive growth and adoption of relationship
orientation and implementation of CRM solutions across different businesses.
Worldwide, service firms have been the pioneers in adopting the practices of CRM.
In India too, the service firms took some of the early initiatives in CRM. The CRM as
a strategic management tool has been successfully implemented in various service
firms like IT, hospitality, telecom and financial services.
Customer Relationship Management In Service Industries
Globalization and deregulation combined with advances in information
technology have radically changed the managerial context of service industries.
Though the origin of customer relationship management was initially in the
industrial context, the service industry is also focused on maintaining and
enhancing customer relationships. Services are produced and delivered by the
same institutions. Success of a service provider is dependent on long term
relationships that develop between the provider and customer of the service. A
greater emotional bond and trust between the service provider and service user
develops a need of maintaining and enhancing relationship.
Berry (1983) defines customer relationship management as attracting,
maintaining and enhancing customer relationships in multi service organizations.
Berry and Persuraman (1991) propose that, customer relationship management
concerns attracting, developing and retaining customer relationships. Berry
stressed that, the attraction of new customers should be viewed only as
intermediate step in the marketing process. Solidifying the relationship,
transforming different customers into loyal ones and serving customers as clients
should also be considered as marketing. He outlined five strategy elements for
practicing customer relationship management: (i)developing a core service around
which to build a customer relationship, (ii)customizing the relationship to the
individual customer, (iii)augmenting the core service with extra benefits, (iv)pricing
services to encourage customer loyalty and (v)marketing to employees so that,
they in turn will perform well for customers.
It is a consensus that the relationship between the firm and its customers is
critical to their firm’s survival and success. The management of customer
relationships is critical in services marketing.
Lovesick (1983) points out that, many services by their very nature require
ongoing membership (e.g. insurance, banking etc). Even when membership is not
required, customers may seek ongoing relationships with service providers to
reduce perceived risk in evaluating service characterized by intangibility and
credence properties. Customers are more likely to form relationships with
individuals and with the organizations they represent than with goods (Berry,
1995). Services are performances where the employees play a major role in
shaping the service experience (Bitner, 1995). The service setting is especially
conducive to customers forming relationships with individual service providers.
Relational benefits to Services Industries
Inseparability is widely cited as one of the distinctive features of services.
The fact that, services typically are produced and consumed simultaneously
means it is common for customers to have a direct input to service provision. For
service businesses, strong customer relationships are important because of their
inherently interpersonal focus and relative lack of objective measures for
evaluating service quality (Czepiel, 1990). Loyal customers can lead to increased
revenue (Reichheld 1996; Schlesinger and Heskett, 1991), result in predictable
sales and profit streams (Aaker,1992), are more likely to purchase additional goods
and services (Clark and Payne, 2000; Reichheld, 1996), typically lead to low
customer turnover(Reichheld and Sassar,1990) and often generate new business
for a firm via word-of-mouth recommendation (Reichheld, 1996; Reichheld and
Sassar, 1990; Schlesinger and Heskett, 1991; Zeithamal, Berry and Persuraman,
1996). In addition, a loyal customer base can lead to decreased costs (Reichheld,
1993), Loyal and satisfied customers are likely to cost less to service (Reichheld,
1996), sales, marketing and setup costs can be amortized over a longer customer
lifetime (Clark and Payne, 2000).
Customers who have developed a relationship with a service business expert
expect to receive satisfactory delivery of core service. There exist different types of
relational benefits through effective customer relationship management. Customers
derive social benefits from long-term relationships with service firms (Czepiel,
1990). In addition to the benefits received from core service, a kind of friendship
often occurs between customer and service providers. A second set of relational
benefits reported by respondents can be described as psychological benefits.
Customers realize that, there is often a comfort or feeling of security in having
developed a relationship with a provider.