Research Work:

Define the Term Customer relationship management. Give examples of possible

advantages and disadvantages of a CRM system for the digital firm?
Table of Contents
Introduction:................................................................................................................................. 3
Customer Relationship Management:..........................................................................................4
Definition of CRM:.................................................................................................................... 4
Tools of CRM:.......................................................................................................................... 4
Web based CRM vs. Traditional CRM:.....................................................................................5
CRM Process and System:......................................................................................................6
CRM as a strategy:..................................................................................................................7
Advantages of CRM system for the digital firm:...........................................................................8
Disadvantages of CRM system for the digital firm:....................................................................10
Conclusion:................................................................................................................................ 12
List of References:..................................................................................................................... 13
Appendix:................................................................................................................................... 14
Introduction:
CRM is the term applied to the all aspects of interaction a company has with its customer,
whether it be sales or service related. Computerization has changed the way companies are
approaching their CRM strategies because it has also changed consumer buying behavior. It is
the term applied to the processes implemented by a company to handle its contacts with its
customers.

Following is the mini literature review on the Customer relationship management. Advantages
and disadvantages are discussed in details. CRM as a strategy in the business and the
customer markets is discussed too. What the CRM states and what it is about, the process and
the system of the CRM are conferred with the detailed diagram on the same.

Mini literature review is in the report format.

Customer Relationship Management:
Customer’s relationship management is the term which is applied to the processes implemented
by a company to handle its contacts with its customers. Moreover, it store information on the
current customers and those customers who could be prospective in the future. It retains the
information .Basically it is the soft-ware based approach to handle all the customers.

Definition of CRM:
Schellong.A, in his journal on CRM in public sector defined CRM as “Customer Relationship
Management is a holistic management approach, enabled by technology with abroad customer
focus, to start, maintain and optimize relationships to make customers more loyal/profitable.”
Moreover, Gartner, Inc (2009) explained CRM as “Customer relationship management is a
broadly recognized, widely-implemented strategy for managing and nurturing a company’s
interactions with customers and sales prospects. It involves using technology to organize,
automate, and synchronize business processes—principally sales related activities, but also
those for marketing, customer service, and technical support. The overall goals are to find,
attract, and win new customers, nurture and retain those the company already has, entice
former customers back into the fold, and reduce the costs of marketing and customer service.”

In the view of Bruhn & Homburg (2002), “CRM requires a customer centric business philosophy
and culture to support effective marketing, sales and service processes. The main goal is to
optimize the customer value within the customer lifecycle.”

Tools of CRM:
Customer database:
Customer database is a customer information system which consists of regular flow of
information of the customers. It is basically the systematic collection of information which
is properly evaluated from time to time and is compared at different points of time. These
helps the companies either internet based or the physical companies to plan and
implement the product information on which and what customers be it the existing ones
or to attract the prospective ones. For example OLAP and the data mining.

Data mining is an important enabler for the CRM. Advances in data storage and
processing technologies have made it possible today to store very large amount of data
in their warehouses and then to use data mining tools to extract the relevant information
of some customer.

Seidman.C., stated in her book on data mining “In 1998, Microsoft released its first
OLAP Server, Microsoft Analysis Services, which drove wide adoption of OLAP
technology and moved it into mainstream. Pareek. D., (2007), explained OLAP in his
journal as “OLAP is part of the broader category of business intelligence, which also
encompasses relational reporting and data mining”. Furthermore, through Microsoft
OLEDB which is an OLAP programming system, data mining can be done directly on
relational database which supports popular data mining algorithms. XSB, Inc.,
characterized data mining further as “Data mining can be performed on a variety of data
 stores, including the World Wide Web, relational databases, transactional databases,
internal legacy systems, pdf documents, and data warehouses.”
Channels:
 Call centers: Most major businesses use call centres to interact with their
customers. Examples include utility companies, mail order catalogue retailers,
and customer support for computer hardware and software. Some businesses
even service internal functions through call centres. Examples of this include help
desks, retail financial support, and sales support.
 Websites: It’s another efficient way of interacting with the customers and to
know about their attitudes, behaviors, likes dislikes. Face book, Orkut, Twitter are
the most common and efficient examples of that.
 Direct mail & email: From the databases, customer’s addresses are taken and
emails and direct mails are sent to the potential customers.

Web based CRM vs. Traditional CRM:

1: Customer Information Systems: By web enabled and integration approach customers

could be contacted and are reached through data mining tools. Their information and details are
extracted through these data mining tools from the data warehouses. And are contacted by
emails. While in traditional CRM customers were contacted by Telephone, direct mail as in
posts and in person that made it more difficult to handle and not as efficient and quick as web
based CRM.

2: Sales force automation vs. Personal selling: The technologies of computer have
revolutionized the selling of products even. No longer is the time of personal selling. Bigger
companies have their databases online and they use them accordingly to target certain peoples.
Sales force has more features to it than personal selling. It is basically the process of controlling
customer’s sales information. The customers which are targeted through web based systems
are open to complaint and their complaints are handled more quickly in a vast range as
compared to sole complain at a time in personal selling.

3: Electronic point of sale: Online companies have giant networks to handle their customers
and sell them online. Through credit cards systems they have totally web-based selling.
Amozon.com, e-bay.com are the most popular websites which are the home of web-based
selling.

4: Automation of customer support vs. after sales Service:

Customers are supported in the digital web based CRM before they make any purchase. They
are encouraged to buy the things and are rewarded with certain things if they buy those
particular products. In the old system of CRM there were after sales services, which even were
not handled properly.
5: Complaint Handling:
Firms in these days believe that let go the money but not the customers. Keeping this thing in
mind they even change the things when they have a minute defect in them. This is the way of
retaining the customers as compared to traditional CRM system where customers had to wait
for their turn and even when their turn comes up, they were not satisfied afterwards.

CRM Process and System:

Nykamp. M., stated the CRM processes and system in eCustomerServiceWorld.com as “CRM
processes are based on the combination of the policies, processes, and strategies implemented
by a company that unify its customer interaction and provides a mechanism for tracking
customer information”. Details of CRM process and system are:

>>>Understand and Differentiate:

 Understand:
 Understand the demographics of the customers to know from where they are
and what possibly could be their habits? What is their culture? And what are their
needs and demands according to their geographical boundaries.
 Segment the unique logical groups to know how people behave in certain
situations. How they look like and act alike? One to one marketing is quite
expensive as all the customers are hard to handled separately and its much
harder to know every single person’s demands.
 Basic research should be conducted to check out the needs of the customers
and their attitudes and beliefs.
 “Customer is God”, this term is often echoed in the bigger marketing sectors
which mean that every customer has their own value and to gain the profitability
this should be understood.
 Differentiate:
 Differentiation should be based on the value customers are expected to
deliver. This should be distinguished in the customer’s minds that you have this
unique product according to the customers’ needs and an understanding should
be developed for them. So, it should be based on their needs, characteristics and
behaviors.

>>>Develop and Customize:

 Develop:
 Those products & services should be developed which are according to the
customer’s needs. As this is the customer focused world, so the quantitative
customers should be segmented and then those channels and media should be
used which could target them efficiently.
 Customize:
 Customizing is based on the value customer who is delivered by the customer
segment.
>>>Interact and deliver:
 Interact:
 Interaction with the customer just not means the marketing and selling of the
product. In the same way it’s just not concerned with the media interaction only.
The distribution of the product, shipping of the product, customer service and
online services are what which add up to the interaction with the customers on
web-based systems.
 Deliver:
 Keeping the quality in mind with the ease of convenience and speed it is easier
to deliver the product to the customers. Service excellence and responsiveness
are the main traits.

>>>Acquire and Retain:

 Acquire:
 Customers needs are identified to target them. This acquisition with them helps
the online companies to stay in contact with them. For the greatest value of a
product it is of much ease to value the product.
 Retain:
 Man is more inclined to changes in different stages of life. So normally its really
hard for the companies to retain them. CRM is the best source to modify its
services and make them suitable for the customers.

Figure 01: “CRM process and system”

 Adapted from: http://www.ecustomerserviceworld.com/earticlesstore_articles.asp?
type=article&id=961 (Accessed on 14 January, 2010)

Here it is important to note that

1: A successful business always starts with getting hold of the customers.

2: Customer understanding is another initiative for the successful CRM.

(Nykamp. M., eCustomerServiceWorld.com, Accessed on January 14, 2010)

CRM as a strategy:
There are three key phases in the CRM as in the strategic perspective as is shown in figure 2.
1: Customer Acquisition: These customers are attracted on the first basis and are motivated
to buy the product in the strategic point of view. Firstly, customers are attracted and secondly
the growth of customers is administered. The aim is to increase the number of customers that
purchase from the company for the first time. Example is Amazon.com who sometimes gives
certain codes when you buy something in certain limit. When you decode that word or thing, you
get discount on your next purchase. Gifts cards are given sometimes too to attract more
customers.
2: Customer retention: Those customers who came to buy for the second time are most likely
to buy things again so it’s really necessary for the online companies to retain them. For this
purpose they are offered different schemes, promotional offers, gift vouchers, discounts etc. Aim
is to increase their numbers. For example Viking.com is online stationers, who in my personal
experience delivered a DVD player along with the actual purchase as I was working in the
college and had to buy too many of stationery items every now and then.
3: Customer Extension: Customers who purchase regularly are offered with specials services
as those customers are regarded as loyal and are handled as special totally different from their
original purchase. Aim is to increase the number of customers who purchase additional
products. For example, a person who is buying IPod from an online shop is offered headphones
and Ipod case along with the actual purchase to make them happy. Loyalty cards are offered in
some cases too. These customers are usually the privileged ones and are contacted first when
something new comes up.

Figure 02: “Key phases of CRM”

Adapted from: http://www.marketingteacher.com/Lessons/lesson_crm_business_strategy.htm
(Accessed on 14 January, 2010)

Advantages of CRM system for the digital firm:

Advantages of CRM systems for the digital firms are as follows:

1: Media Marketing:
Nokia, Ericsson, LTC Bravo, LG companies have introduced the 3G Internet mobile phones
in the market. Which have HD videos, OVI maps, much of the talk premium and everything
a person can imagine. These companies who work online have the huge mass of data
warehouses which enable them to target some customers. There are always different king
of users in the market. So the innovators and early adopters are targeted first. Media
marketing is much easier than going and selling things personally.

2: Strong category management approach:

The key questions like which handsets meet customer needs?
-How to define the best product segmentation?
-How to elaborate and optimize the merchandising?
-How to set up a change management strategy?

(http://www.greenwich-consulting.com/templates/greenwich.php?NodId=313)

All these questions are easy to manage when you can use data mining tools to select some
particular customers.
3: CRM as Enterprise-wide initiative:
Nykamp. M., stated “CRM is properly described as an enterprise-wide initiative. It involves
all areas of the organization and all functions of the organization, and it requires all areas of
 the organization to be working together in harmony. CRM requires all areas of the
organization to not only exist in harmony, but to be working toward the common goal of
stronger customer relationships.” Enterprise through CRM, a company gains the means to
touch and shape a customer’s experience across the organization, reaching beyond the
bounds of just marketing and sales. It’s easy to maintain the detailed view of individual
customers and communication history of them, this helps the online companies to work
more efficiently.

4: Accessibility:
Companies provide product information; its usage and other technical assistance on the
websites which are accessible 24 hours a day, 7 days a week. Customers think of CRM
oriented companies to be more accessible even there are many security threats for them.
You don’t have to wait in longest queues. Examples are the giant retail stores like GAP,
Marks and Spencer, DEBENHAMS. These stores have every information about their
products. This information of product makes the customer to rely more on the internet
websites than the physical stores. And they can buy things online using their credit cards
under secure networks. Other Digital firms as PayPal and Valista there is a “Stored Value
Payment System” which enables consumers to make instant payments to merchants and
individual based on value stored in a digital account.

5: Digitalization:
Old systems like mobile operating could be converted online with the help of CRM
strategies. Increasing work load, headcounts, and control of OPEX could be managed
through the digital modern system.

6: User-friendly mechanism:
Mobile companies like T-mobile have their online monthly payment systems. People can
make a payment, top up online with the friendly mechanism which is easier to use. T-mobile
have the scheme known as “U-Fix Price Plan” and “Pay as you go” price plans where the
payments could be made. Japan’s largest phone company, NTT DoCoMo, introduced
wireless RFID cell phones and a related payment system (Felica) in 2004. Currently 12
million wallet phones are in use in Japan.

7: Information Density and Segmentation of market:

Information density in CRM markets makes prices and costs more transparent. Due to these
information’s the online merchants can easily segment the market into groups who are willing
to pay different prices and permits the merchant to engage in price discrimination. –“selling
the same goods or nearly the same goods at different prices. ( Laudon. K.,& Laudon. Jane,
2009)

8: Wireless Advertising:
Cell phone providers have information’s which are valuable to the advertisers about the data of
subscribers, their location at the moment when they view some particular ad’s, their age,
 games interest etc. Advertisers try to find a way to deal with those subscribers to reach them
they evolve different ways. When done right, mobile companies yield high response rates.
According to Sylvers, 2007, “with over 2 billion cell phone users worldwide the market for
mobile advertising is expected to reach $11.3 billion be 2011.”

Yahoo! displays ads on its mobile home page for companies such as Pepsi, Proctor & Gamble,
Hilton, Nissan and Intel. Google is displaying ads linked to cell phones searches by users of
the mobile version of its search engine.

Disadvantages of CRM system for the digital firm:

David Billings, CIO of Air borne Express stated once “The big CRM suite can be disadvantage
if you’re paying for more than what you’re going to use in the near term. “

1: Cyber attacks:
Kevin Blakeman, President of Surf control stated that” Security is not just about firewalls and
hackers anymore.” Moreover he said:”It’s also about optimizing resources and mitigating legal
risks”. According to the May issue of CIO, “ one example is the Health insurance portability
and accounting Act (HIPAA) which created the new standard for ensuring the security of the
information which is transmitted electronically” The upshot here is that organizations not only
limit what’s disclosed but also who it’s disclosed to, those who fail to do so face criminal
penalties. Because email is one of the chief means of transmitting sensitive data even if you
using software that filters email-content.

2: Security:
Testing finger print tests, biometric technologies and iris scanning are not as useful sometimes
as they sound. And they are even really hard for the digital companies to associate as
personal as this to their online accounts. Credit cards thefts are the biggest issue these days.

3: Spam:
Spam which allows the peddlers to hawk their products instantly to thousands of people
virtually at the same time. Many of these emails contains viruses and stuff so this Is the
biggest threat and count as a disadvantage for the digital firms because people even don’t
read and delete them instantly. The FTC and The national Fraud Information Center are
working on it but it’s really difficult to completely minimize the effects of spam.
(M. Stair, R., & W. Reynolds, 2001)
 4: Growth:
Growths of the companies just have an optimal level on the internet. They are less likely to
grow more when they reach that maximum level. In the Case study showing the e-bay it is
stated by Pykkonen.M, that the “company is not screwing up, and it’s not that Meg Whitman
needs to go or they have gone in the wrong direction. It’s just that there are some finite limits
to growth and they are reaching it.”

5: Technical Factors:
CRM is failing because the correct capabilities are not being built at the enterprise level. Overall,
in failed projects there is little or no alignment between stakeholders neither on success criteria,
performance metrics, and project drivers nor on the dynamics of the change in the projects.
Companies underestimate the complexities of the CRM projects and tend to invest inadequately
in the provisions of CRM soft wares.

6: Other factors:
Other factors involved in the Disadvantages of CRM are as follows:
 Implementing CRM in a holistic way is no sinecure.
 Making large CRM investments profitable is difficult.
 Achieving a sustainable competitive advantage with CRM is even more difficult.
 Inadequate motivation for the employees to learn and to provide input in the softwares.
Normally employees don’t take full advantage of the information systems.

(http://www.12manage.com/methods_customer_relationship_management.html)
Conclusion:

CRM is the term applied to the processes implemented by a company to handle its contacts
with its customers and it is Soft-ware based approach.

CRM is for the customers who want to have a control over their buying process, who are always
interested in the best possible prices. Who think that the online systems are secure for the
payments and the communication system is best to their needs.
Applications of CRM in all form of trading online are emails, E-commerce, Mobile, SMS, Digital
TV and internet. Cable and satellite are the most common and traditional way of application of
CRM.

Three key phases are involved in the CRM which Customer Acquisition, Customer retention and
Customer Extension. In every CRM system, customers are made familiar with the product; they
are motivated to buy it and are given gift cards and other things to make them come again to
you. In customer retention the customers who came once to you are made to stay with you
forever. Loyalty cards and other gifts hampers are given sometimes to them to retain. All the
online companies work really hard to retain there already existing customers because it helps
them to minimize the costs of advertising and other marketing stuff. In customer extension, the
already customers are who purchase regularly are awarded with the special gifts.

Essentials of the CRM have 3 perspectives to it: Organizational perspective, Customer

perspective and Front office staff perspective. 360˚ degree view of each customer is handled
through the data mining tools from the data warehouses. Customers are enabled to have a
consistent view of your enterprise and are made satisfied. From the business point of view,
sales and knowledge is created within the organization to maximize the profits. Front office staff
is motivated to perform sales service and marketing tasks efficiently on the softwares.

Flip side of CRM is that there is no CRM for offline small businesses. At least, not for
businesses that operates in the physical world for example: Dry cleaners, restaurateurs,
retailers and other small businesses. They may have loyalty punch cards, but generally don’t
have any programmatic way to track and engage customers.

List of References:
1. Gartner, Inc. (6 June 2009) What's 'Hot' in CRM Applications in 2009 (Accessed on 14th
January,2010)

2. Bruhn, m., & Homburg, C. (2003): Manual customer connection management,

Wiesbaden, ISBN 3-40942-269-2

3. Schellong, A., (2008) ". Citizen Relationship Management - A Study of CRM in

Government: CRM in the public sector" Frankfurt: Peter Lang Publishing.
4. http://www.12manage.com/methods_customer_relationship_management.html (Accessed
on 14th January, 2010)

5. Nykamp. M., CRM: How To Get There From Here:

http://www.ecustomerserviceworld.com/earticlesstore_articles.asp?type=article&id=961
(Accessed on 14 January,2010)

6. Claude Seidman: Data Mining with Microsoft SQL Server 2000 Technical Reference.''
ISBN 0-7356-1271-4

7. http://www.xsb.com/glossary.aspx (Accessed on 14th January,2010)

8. Deepak. P., (2007). Business Intelligence for Telecommunications. CRC Press. pp. 294
pp. ISBN 0849387922: http://books.google.com/books?id=M-UOE1Cp9OEC. (Retrieved
18-03-2008)

9. http://www.marketingteacher.com/Lessons/lesson_crm_business_strategy.htm
(Accesses on 14th January,2010)

10. http://www.greenwich-consulting.com/templates/greenwich.php?NodId=313 (Accessed

on 14th January 2010)

11. CIO, Issued on : may 01 2002, http://books.google.co.uk/books?

id=IQ0AAAAAMBAJ&pg=PA152&dq=disadvantages+of+CRM+case+studies&cd=7#v=onep
age&q=&f=false (Accessed on 14 January,2010)

12. Pykonenn.M., : The associated Press, “E-bay rethinks its ways as it enters middle age,”
(June 18, 2007)

13. M. Stair, R., & W. Reynolds,( 2001) 5th ed. Principles of Information Systems: a
managerial approach, United states of America: Course Technology

14. C.Lauden, K., & P.Lauden, J., (2004) 8th Ed, Management Information Systems: Managing
the digital firm, New Jersey: Pearson Education, Inc.

15. C.Lauden, K., & P.Lauden, J.,(2009) 8th Ed. Essentials of Management Informations
Systems, New Jersey: Pearson Education, Inc.