Lecture 1

General considerations on customer relationship

management (CRM)

1. Objectives

- Introducing the CRM philosophy.

- Understanding where and how CRM can be used and developed.

- Understanding the historical context for a better perspective on CRM.

- Describing why content management system should be considered.

- Presenting types of CRM.

- Considering CRM misunderstandings.

- Defining the CRM.

- Presenting the CRM’s stakeholders.

- Understanding customers’ expectations.

- Defining customer experience.

 General considerations on customer relationship management (CRM)

2. General considerations on customer relationship management

(CRM)

2.1 Introduction

The expression customer relationship management (CRM) is new enough (early

‘90s) to attract a lot of debates on what it represents exactly [but09]. Beside its objectives,
which we will discuss later, some of its methods and techniques have become the drivers
of CRM in the same way the management techniques (e.g.: lean six sigma) have been
transformed from methods to objectives. The initial providers of methods and techniques in
CRM, which have also become the above mentioned drivers, are marketing and
information technology. Therefore it is hard to provide solution thinking only from one side
of the problems involved in the entire process. Yet, the CRM expression has been sold
very well as same as the applications to support it. One of the amazing facts regarding
CRM, as it is mentioned in [cun02] is that organizations are struggling to acquire and
implement such solutions even if they have a large failure rate. For us it is clear that like
any recipe of technology meant to resolve one well defined and delimited problem, it can’t
be generalized as a panacea for all the problems connected in a way with the initial one.
Therefore a more suitable approach will be an interdisciplinary way that has in view all the
factors involved. The objective of this course is to understand where and how CRM can be
used and developed. It will be taking in the account that the course attendances are
familiar with information technology and less with marketing notions. The main focus will
fall on identifying the opportunity to develop new tools or customizing the existing one for
supporting CRM. However, in order to be able to do this, we should have a clear
understanding on what CRM is despite the fact that there still are debates on this topic. In
such cases where the topics remained open, the best thing is to have an historical
perspective of the context. Then we will look on current definitions of the composing terms
and of the CRM expression itself. The marketing component of CRM is very vast and it will
require large volume of materials. In this course it will be touched only for that clear
understanding but it will not be treated in detail. For a broader approach [but09] is a good
and comprehensive starting point. In our engineering way we will try to have a correct view
on the topic, understand its fundamentals, identify the process and flow, analyze some

2
models, see how information technology can be used as support, to finally, conceive how
to automate the process.

The operations in the process of designing new services have evolved from
designing for customers, then designing with customer towards designing by customers.
Meanwhile the services market has developed mainly as an added value to the products
market to becoming nowadays much larger (in terms of volume) than the products market
itself. Because the manufacturing was having the initial attention, it benefited of many tools
and methods. Therefore, it was somehow normal to port some of these methods used for
operations management in manufacturing to the service sector, but not necessary this was
correctly done. The same thing happened with CRM which started as an appendix to
marketing. The CRM strategic paradigm [but09] had also three phases but it happened
more recently (from 1998). First was marketing to customers the best tradeoff between
quality and price. Second was marketing customers with the best services, and third is to
customize the services and products based on the customers’ needs and desires. These
were measured based on their intent and experience within the relationship between
company and them. If in the past the company was the major source of information for
their product and services, today we are witnessing how customers are putting more trust
in the community’s opinions about that services and products. Therefore, the today CRM
solutions are trying to integrate social networks (community, forums, etc.) in their business
process. One good example which could be used as model for many applications for CRM
is the accommodation site “booking.com”. There could be seen how customers’
community has been integrated in the reservation process. Practically, the ranking is
based on customers’ rating and also their opinions and recommendations are highly visible
and easily accessible. Each customer is then asked about his experience and it is
motivated to actively participate in this community. We should have in mind “booking.com”
also when we will discuss other CRM topics.

Not at last we should recall the systemic approach of an organization with

interconnected processes. Regardless if they are departments, units, offices, teams, desks
or other form of organizing, some of them are clients for others in the mentioned
interconnection, even if all are components inside the company. We should see this
interconnection as a customer relationship. It is said ([and02]) that the quality of support
provided to internal customers will give an image of the quality of support provided to
external customers. Maybe, for us, it is much easier to understand customer relationship
from this point of view. As members in a team or department and providing work (services)

3
 General considerations on customer relationship management (CRM)

to other teams or departments inside the organization, we are in the position of trying to
add value to the entire process or flow. And when our delivered work is well received and
in accordance with the “customers” demands and expectations, they could become our
supporters and promoters.

2.2 Historical considerations

In the late 1980s, as mentioned in [cun02], there were companies which started to
develop software applications for several business functions. The primary objective of
these applications was automation of customer support or sales. They initially use Local
Area Networks (LANs) as infrastructure for deployment and the architecture was based on
client/server approach. Because IT was received as the future and these applications were
based on IT infrastructure, many companies had to change their operations to match the
software requirements regarding workflow. For example, some of the features which
provided support for customers to customize business functions are as following [cun02]:

 Scripts for assisting sales and support through telephone;

 Tools for assisting the workflow of sales and support based on state
machines which were providing information regarding different stages where
the sale or support was finding at the moment;

 Procedures for dealing with differences between software requirements to

analyze one customer request and the real scenario. This was needed in
order to eliminate the conflicts which would have slowed the process
intended to be accelerated, thus the opposite effect;

 Tools for sales management;

 User-based interface for accessing the related information.

The next step was made when applications such as ERP and data warehousing
techniques had been developed and deployed. These applications were improving the
operations inside the organization and also the relations with suppliers/vendors. It was a
demand to integrate also the customers in this process especially because of the feedback
which could have been provided to the process. First companies which felt this need were
those offering products and services with short lifecycle because of the volatility of their

4
clients. But because the vendors of CRM applications were initially coming from the
marketing and support fields, the software were lacking in providing the correct feedback
(integration) to the operation process. Beside this, they were very expensive and hard to
maintain.

Another change in approach was made when Web-based applications had started
to spread. This crated a lot of opportunities but also put enormous pressure on the existing
vendors. Their major problems at that moment were [cun02]:

 Migrating to Web-based architecture;

 Integration with other applications and services.

Probably the most important thing which has happened with the apparition of Web
was the ability of more and more people to use it and accessing Internet, thus becoming
Web users and potentially customers. Until this moment CRM was transformed from a tool
assisting customer support and some sales automation to an internal tool for improving the
business and operation. From this moment on, the marketing again identified the
opportunity and became the driver. Practically it is the same oscillation met in strategy
where there were moments in time when people with vision drove the business and then
they let their place to people with experience in operation. It is hard to have both of them,
vision and operation/process knowledge, however, a good balance between them will
provide a good solution. The same thing is happening with the CRM. It will need marketing
vision and tools but it will also need a good understanding of the process operation to be
proper integrated in the entire business and improve its results.

It was clear at that moment the importance of communication tools for the success
of CRM and these communications tools didn’t hesitate to appear and develop in all
flavors. Examples are [cun02]:

 E-mail applications,

 Browser-based solutions,

 Project management,

 Project collaboration,

 Chat and instant messaging,

 Remote application access,

 E-learning systems which are revolutionizing the operations these days,

5
 General considerations on customer relationship management (CRM)

 Webcast systems,

 Broadcast tools,

 Web audio and radio,

 Web video and Webcams,

 Customer support,

 Interactive sales support.

The above solutions were somehow rigid from the customer perspective. Like in
manufacturing, customers would have to select between solutions provided by vendors but
with lack of customization. Some customization was possible but only with help from the
vendors’ specialists which was expensive. We should imagine how manufacturing is
heading to mass customization and the same with the services. Today the CRM needs to
go in the same direction. One step on this road was the change in the functionality of
designing tools (authoring tools for Web) and what is known as content management. At
that time, designing and developing tools were derived from similar tools for software
application. In the software applications market the development of an application were
thought to be made only by the vendor which initially developed the application. But
software applications are usually something internal to the organization. In a world full of
attraction, where media is everywhere trying to capture attention, if these types of
applications that are provided to customers over the Internet are lacking in dynamism, then
they will lose the customer’s interest very fast. Therefore, something had to be done. We
should think: which are the operation’s performance objectives (i.e. quality, cost, speed,
dependability and flexibility) and how an organization will compete based on them. It will
not be acceptable for a company to have a static front desk in terms of a Web site. Neither
will be the solution of heaving an entire army of IT specialists for maintaining and updating
it. One solution was the development of Content Management Systems (CMS). They were
providing a good trade-off between all of the above objectives. We will step at this moment
over CMS explanations considering that it is a well known subject and we will resume on it
when the technology will later be more deeply analyzed. At this point we will only
enumerate the components of a system which could be the starting point for CRM in
accordance with [cun02]:

6
  Web server,

 Application development tools,

 Database management system (DBMS),

 Content management system, which will enable the business to:

o Easily control the authoring and updating process,

o Include data from many sources,

o Manage the data presentation,

o Updating from distributed locations,

o Post new changes fast yet customized,

o Reconvert data for posting or suing in other sites and applications.

2.3 Types of CRM

Nowadays CRM represents an expression widely used and almost a “must have”
for most of the organization. This doesn’t mean that CRM has the same meaning for all
people who used it, either verbal or practical. One example of the previous statement can
be observed from the variety of CRM types. [but09] identifies four types as following:

 Strategic CRM – This has the customer as the core of the entire organization
culture (customer-centric). The results of the organization are measured in
accordance with customer wining, satisfaction and keeping. Other
expressions used in this context could be: customer-led, customer-focused
or customer-oriented. From here we can agree that many of today
companies use this statement as their mission but not necessary as their
orientation. Philip Kotler [kot00] describes another three orientations:

o Product-oriented – customer choose the product or service based on

its characteristics other then price;

o Production-oriented – price is the mainly attraction;

o Sales-oriented – the focus lies on advertising and selling techniques.

 Operational CRM – is about automating the interaction with the customer on

both selling and support. Here the technology has the major role. This will

7
 General considerations on customer relationship management (CRM)

be discussed separately in a future chapter, but as examples at this point, it

is worth mentioning the following:

o Marketing automation – in which the technology will assist marketing.

It will enable the possibility of automatic categorizing the customer
and provide them the suitable messages on the proper channels.
This mechanism is known as event-based marketing (or event-
trigger) and its principle relays on automatic identification of
customers’ behavior which will trigger a response (action) from the
marketing department. Examples of events could be:

 Customers ask about (or accessed the hyper link to) a new
service to them – this could signal the intention of acquiring a
new service and should be proper marketed;

 Customers become interested in more details about a service

he or she already benefited from – this could signal that the
customer are looking also at the competitors;

 Customers’ contracts are getting closer to the expiration dates

– this should trigger a new offer;

 Anomalies in the customers’ pattern of acquiring (demanding)

the services – this could signal that the customer needs have
changed;

 Changes in the customer’s “environment” – where accessible

this type of information could be an early stage before the
above events happen (prevention is better).

o Sales-force automation – it is technological product (software) which

is somehow aware of the process for producing/delivering the
products/services. In this way, some features could be:

 Customers’ orders are easily traced;

 Sales forecasting;

8
  Customers will benefit of suitable prices based on customer’s
importance (history and forecasting) or the order’s value;

 Delivery time could be improved for important customers;

 Automatic quotation system both on prices and components.

o Service automation – for understanding it, at this point, it is enough to

think of what we found when we had called to a call center of one
mobile service provider or we had accessed its web page. Interactive
voice response (IVR) is one example.

 Analytical CRM – as the name tells its objective is to analyze data and
transform them in information for improving both the company and
customers’ benefits. There could be a lot of sources for this type of
information, internal from the relation and interaction with customers and
external from organizations which have as their goal to provide such data.
Each company will have its own way of dealing with the above data to
transform it in useful information (data mining).

 Collaborative CRM – is more appropriated to supply chain where

collaborations and alliances are making sense in their objectives. Because
the demand from end customers will propagate across (or upstream) the
entire supply chain, the demand for this type of CRM has become
mandatory between partners (partner relationship management – PRM).
This relation started first with delivery facilities between partners on both
materials and information and the today advances in technology enhanced
it. Examples of such technology are electronic data interchange (EDI),
clusters, portals, e-business, chat rooms, web conferences, etc.

2.4 Misunderstandings about CRM

As mentioned before, many people use this term but there are also many who
associate it a wrong sense. [but09] describes some of them as follows:

 CRM represents database marketing – these types of databases could not be

considered as CRM on their own. The data are used for marketing propose such
as targeting, segmentation, offers and communications. This is closed to
analytical CRM but less obvious in the other CRM types. One good example of

9
 General considerations on customer relationship management (CRM)

the difference is illustrated in [and02]: “A dictionary is a wonderful database of

words, but a dictionary can’t write a letter for you”.

 CRM represents a marketing process – as mentioned above CRM can assist

marketing in many ways but it is much more than this. It is about redundant data
which should be eliminated between different functions of business. It is the
same as designing databases. If they have the same data available in more
locations (tables) it will be hard to maintain its consistency. In CRM case, more
departments (functions) will uses the same information and should be thought in
an integrated manner not only because of its consistency but also for
economical considerations. This integration could and should continue with
partners, both suppliers and customers (in B2B). In conclusion CRM should be
more then marketing.

 CRM represents a consequence of IT development – It is clear that most of

CRM deployments requires IT infrastructure but this ensures only some of the
tools. There are also the strategies of dealing with customers, the modification of
the delivering (transformation) process to support and improve the outcomes,
and, of course, peoples’ attitude and skills. Above this there are CRM which
doesn’t need large investment in IT (or even not at all as in some part of the
lawyer guild).

 CRM is handling loyalty schemes – Some CRM are including also this type of
attracting and retention of customers, but not all of them. The loyalty schemes
can participate in CRM with two types of benefits:

o Customers entering in loyalty programs will agree to provide important

information in exchange to their membership. This information will be
used in the other aspects of the CRM and for marketing propose
(identifying other customers or providing new services to existing ones).

o Through the credits accumulation system, the customer becomes less

willing to leave the relationship. It is like in Tolstoy’s says that we love
people for what we have done for them and not for what they have done
for us. It is like protecting an investment.

10
  CRM can and should be implemented by all organizations – when we are
thinking on the customer-centric approach this statement seems of common
sense. But this is regarding, as above mentioned, to strategic CRM. The other
types are more delicate on dealing with. For example, operational CRM is
desired but could become an investment which will never payoff. This is way
CRM should be very well understood and its objective clear. Otherwise a failure
in synchronization will appear and will cost more than could turn back. One
illustrating example is given in [and02] with PDAs. Same happening these days
with expensive smartphones which could bring a lot of benefits for those who
understand how to use them and really use them. For others become a very
expensive telephone which add a lot of troubles to initial process of making or
receiving a call. The same things can happen with expensive CRM packages
(both infrastructure and knowledge)

2.5 Definitions of CRM

Finally, we reach the point in which we have made an image of what CRM should
represent but we have to put it in a more theoretical context. This is because we all have
to hold the same language and understanding of terms.

Dealing with all the previous types and misunderstanding of CRM and knowing that
there are still debates on this topic, we should stop on the definition provided in [but09]
which is more comprehensive:

“CRM is the core business strategy that integrates internal process and
functions, and external network, to create and deliver value to targeted
customers at a profit. It is grounded on high quality customer-related data
and enabled by information technology”

Even the above definition could appear too synthetic it is the manner in which its
author synthesized all of the previous discussions. It means, in order of appearing words,
strategy, operation, collaboration and analyze. It is a customer-centric approach based on
profit which is the main objective of for profit companies. In case of non-profit
organizations or public sector, it could be maintained the definition with some change in
the words. For example, in [and02] is suggested to use “member” and “citizen” instead of
“customer”. If the organization’s incomes or budget are from taxes, donations or grants

11
 General considerations on customer relationship management (CRM)

instead of “sales” should be used “support” or “patronage” but the idea remains the same:
adding value to the relation.

A simpler definition that throws the responsibility on the word “comprehensive” we

can find in [and02] where it is stated simple that CRM is “a comprehensive approach for
creating, maintaining and expanding relationship”. But the strategy is brought also on front
as a model or even a benchmark for other strategies in the organization.

Other authors like [cun02] are trying to focus and define the term “management” in
the CRM expression. Thus, CRM designates how should be interacted and proactively
managed the customer relationship. Further this should include the business process, the
technology, and the procedures of treating the customers at various stages of the business
lifecycle. One important idea to remain with is that attracting customers will require costs,
but reacquiring them or replacing the lost ones will yield costs which could be avoided
through a good management of customer relationship.

2.6 CRM stakeholders

There is a lot of interest around CRM and the major artisans are [but09]:

 Organizations implementing CRM – One of CRM objective is to assist

organizations to improve their results and therefore they have a particular
interest in it. CRM is continuing evolving in all of its types. There are already
many companies which have implemented it. The trend is providing accessibility
for smaller and new developed businesses to be able to implement it.

 Customers and partners - They are also present in CRM objectives and the
beneficiary of implementing such approaches.

 Vendors of CRM software – Like any other market the vendors are having their
influence and interest. They provide solution directly or through integrators.
Between companies providing CRM solution (software, knowledge, trainings,
certificates, etc.) are found giants like Microsoft, SAP and Oracle.

 Application service providers (ASPs) – This will be also a later topic because of
its importance in service sector. CRM is depending on different services and
functionalities (sales, hardware infrastructure, communications, internet access,

12
 etc.) and for majority of organizations is more efficiently to externalize these
services to companies with much greater competence in the field. One example
that we are familiar with is online payment. Therefore, is much cheaper, secure
and trusting for customer to subscribe to a provider of such service then one
“developed in-house”. With the cloud architecture even expensive hardware
infrastructures become affordable. These days they are very common
approaches like Software as a Service (SaaS).

 Vendors of hardware infrastructure – Here could enter computers vendors,

communication devices vendors including Smartphone vendors.

 Management consultants – Knowing by now the aspects of CRM it is easy to

indentify many types of consultancies. There could be support regarding
strategy and operation. The strategy could be derived from analyzing or
collaboration. Operation could be improved through a better understanding of
the process, by gathering and analyzing data, designing information systems
and choosing the technology. But, like in other management sectors, the same
danger can be met here. Some integrators are becoming consultants and their
interest is selling CRM vendors’ solutions and not necessary improving the
customer’s results of his business.

2.7 Customers’ expectations and customer experience

We are witnessing how customers’ expectations are increasing by each day.

Customer’s expectation is driven not only by what the provider promises to do but also by
customer’s experience. [but09] defines customer experience as:

“the cognitive and affective outcome of the customer’s exposure to, or

interaction with, a company’s people, processes, technologies, products, services
and other outputs.”

Quality is very important factor in this experience but is a generic term. There are
six key elements that a CRM system should consider to meet the customers’ expectations
as mentioned in [ale02]:

 Flexibility suitable to their individual requirements.

 Only communication that is relevant to them.

 Recognition for their status as potential and history.

13
 General considerations on customer relationship management (CRM)

 Interfacing only through one person for the entire experience.

 Asking for same information only once.

 Ease in providing information at all customer interaction.

References

[ale02] Alexander, D., Turner, C., 2002. The C.R.M. Pocketbook, Management
Pocketbooks Ltd.
[and02] Anderson, K., Kerr, C., 2002. Customer Relationship Management. McGraw-Hill
[but09] Buttle, F., 2009. Customer Relationship Management. Concepts and Technologies.
2nd Ed, Butterworth-Heinemann, Elsevier.
[cun02] Cunningham, M.J., 2002. Customer Relationship Management. Capstone
Publishing (Wiley).
[kot00] Kotler, P., 2000. Marketing management: the millennium edition. Englewood Cliffs
(Prentice-Hall International).

14