Small business CRM examined

Transcription

1 Small business CRM examined Ing. Štefan Vantroba MSc. University of Technology in Brno, Faculty of Business and Management, Kolejní 2, Brno Abstract CRM practices can help small businesses to step ahead of their competitors and provide additional value to their customers. Unlike with large enterprises, very little attention is put on examination of small business CRM issues and practices. This paper seeks to examine benefits and issues of customer relationship management in small business e-commerce environment. Keywords CRM, small business, family business, e-business, e-commerce Purpose To review the academic literature on customer relationship management (CRM) with a focus on small businesses. Material and methods A qualitative, exploratory approach is taken on the basis of review of literature and research papers related to customer relationship management practices in small businesses. Companies competing for market power are continuously looking for ways to step ahead of their competitors. As rapid advancements in technology lead to increasing transparency of marketing activities it is becoming more challenging goal to achieve long lasting differentiation. Successful customer relationship management (CRM) is one of the major competitive advantages that companies can exploit to retain customers and prevent them from switching to other competitors (Kımıloğlu and Zaralı, 2009). As such the field of marketing is evolving from a primary emphasis on activities that facilitate transactions to an emphasis on building and sustaining profitable relationship (Webster, 1992). Customer relationship management is an active creation and maintenance of long-term relationships with customers which is supported with the use of appropriate technology (Wessling, 2001). It is a process designed to collect data related to customers, to grasp features of customers, and to apply those qualities in specific marketing activities (Swift, 2001).

2 Knowing each customer by storing critical information and utilizing analytical functions and data mining techniques helps the organization gain valuable insight about customer and to offer more products and services and improve customer retention and loyalty. CRM enables organisation to deliver higher value to customer through better communication, faster delivery and personalized product and services (Chen and Popovich, 2003). Enhanced relationship with one's customers can ultimately lead to greater customer loyalty and retention and, also, profitability. In addition, the rapid growth of the internet and its associated technologies has greatly increased the opportunities for marketing and has transformed the way relationships between companies and their customers are managed (Bauer et al., 2002). According to E.W.T. Ngai (2005) we can classify CRM into three major functional areas maintained and supported by information technology and systems. These areas are: Marketing Sales Service and Support IT and IS play a key role in the development of CRM. Appropriate CRM strategies can be adopted through the assistence of information technology which is used to automate and enable CRM processes. Information technology can help collect and manage the data required to understand customer acquisition, retention and life-time value (Ngai, 2005). From the customer perspective (Kımıloğlu and Zaralı, 2009) we can deconstruct customer centric CRM into four components as follows: customer lifetime value and loyalty, customer satisfaction, retention and acquisition, customer interaction and customer knowledge, profiling and understanding. Customer retention (existing customer loss rate), satisfaction (innovative products and services, customisation, convenience, communities, etc.), acquisition and profitability are the major metrics in evaluating e-crm readiness. E-business and CRM The importance of effective CRM implementation is intensified in the e-business environment as customer loyalty is much more difficult to establish in this domain. Therefore, understanding the dynamics of e-crm and assessing its impact on organisational outcomes for e- businesses are crucial. Since customer acquisition, retention, satisfaction and loyalty are centrally important criteria in e-crm success, numerous measures relating to these variables can be encountered in various studies (Kımıloğlu and Zaralı, 2009).

3 Through an extensive review, a list of customer perspective metrics that can assess the improvements experienced by internet businesses as a result of their e-crm implementations have been determined by Kımıloğlu and Zaralı (2009) as follows: Awareness, trustworthiness/reliability of company's/brand's online existence has increased Perceptions about company's brand image as a business using high/advanced technology has been enriched. Pre-sales services provided to customers have been strengthened. Support provided to customers during and after the purchasing process has increased. Total number of users has increased. Number of newly acquired customers has increased. Cost of acquiring new customers has decreased. Rates of re-purchasing and/or re-using the services provided on the site have increased. Rate of winning back customers who have stopped using the site has increased. The process of delivering and completing our service is shortened. Effective customer databases have been established. Accurate determination of target markets has been improved. Databases have been used to develop different marketing methods and strategies for different customer groups. Customer satisfaction, transaction frequency and amount has increased. Rates of using various services and functions on the site have increased. Customers have begun to spend more time on the site. Customers' delivery of complaints to the relevant person has become faster and easier. Rate of solving customer complaints has improved. Customers' willingness to provide additional information requested from them by the company (i.e. survey questions about the site) has increased. Usage rates of help and support services on the site have increased. Barriers to CRM adoption in Small Businesses A common difficulty for SMEs implementing e-crm is a reduction in face-to-face contact with customers. It is vital that an SME finds the right balance between face-to-face and virtual contact, as both can play different and complementary roles. The issue of trust in an online context has been widely researched and most authors conclude that it is more difficult to achieve over the internet than in a face-to-face setting. Remote and impersonal context of the internet creates a new challenge for the development of trust (Harrigan et al., 2009). Subsequently, the power of internet technologies to proactively manage information is in part eclipsed by the increased risk of data manipulation and loss. Security is a key issue in e-crm where even perceived risk is a difficult barrier to overcome. SMEs tend to possess limited resources and expertise. As Feinberg and Kadam (2002) have emphasized, a return on investment through increased sales is a vital, yet difficult objective of e-crm. Brian Halligan (2006) argues that the way business is conducted has been

4 transforming over the last few years and has led to the current state of the CRM art becoming nearly useless for small businesses. He pints out some reasons why CRM initiatives fail: counting vs creating customers - the current crop of CRM systems are very useful for large companies with thousands of customers that want to "count" them in interesting ways. Most small businesses probably have tens or hundreds of customers and the main problem is finding new customers and efficiently growing existing customers, not counting customers in interesting ways. measuring the wrong thing - the current crop of CRM systems is myopic in focus. They measure the activities of prospects after they have "self-selected" in some way by calling company's office or filling in form somewhere. Pre-internet, prospect "self-selection" occurred early in the buying process while today "self-selection" occurs late in the buying process. CRM systems have not accounted for this change in shopping behavior and moved the measurement up the process to what is happening on the web prior to "selfselection". structured vs. unstructured data - CRM systems are essentially databases with customer oriented forms built on top. They are very good at capturing and organizing structured information, but are horrific at capturing and organizing unstructured information. Therefore, the interesting/reusable knowledge about customers/patterns is captured in employees' threads instead of the CRM system. That means the knowledge that can really help you nail a major new account or help you rethink your positioning based on buying patterns is stuck on individuals' desktops versus in a centralized, searchable repository that survives changes in personnel, territory shifts, and memory lapses. easy of use - most CRM are easy to use only for dedicated "operations" people or a dedicated CRM IT person. Basic tasks are beyond the reach of people who have a day job outside of IT. This problem is not limited to just the old school CRM companies, but the newer, web-based ones as well. feeding the monster - like many knowledge management initiatives, CRM requires endusers to take actions that are not part of their natural work process in order to "update" the system. After all, CRM output is only as good as the input - "garbage in, garbage out." Most end-users in small businesses, whether a partner in a law firm or an account manager at a consulting shop, interact with customers in their system (usually Outlook). The act of opening the browser, putting in your password, navigating to the proper account, and filling in a form, fundamentally wastes that user s time. Transactional Systems vs Solution/Relationship Systems - today's CRM is more useful for transactional (i.e. call center) types of companies than it is for small businesses who have client relationships that are more solution oriented in nature. A structured set of fields is just what you want for a highly repeatable, transactional, individual-centric call-center. That structured set of fields limits creativity and limits team collaboration when dealing with complicated relationship/solution-oriented sales. SMEs have many important considerations to make regarding e-crm implementation, as barriers definitely exist to impede the success of such a relationship management approach.

5 Discussion and conclusion However many small businesses do not see CRM as key criterion for future business success (Cooper et al., 2005), CRM can play an important role in small businesses gaining competitive advantage. Very little focus is put on examination of success factors and failures of small business CRM. The biggest issue seems to be lack of adequate integration process or approach. State of CRM implementations which seems not always to match requirements of small business is another obstacle to be tackled. Many small business CRM solutions are downgraded enterprise CRM systems which most of the time do not meet small business needs. Together with them they also bring complexity which makes such systems too difficult for small businesses to handle and operate. Small business CRM is very promising area for further research. Most of current research is focused on enterprise level customer relationship management. Very little focus is put on small business area. There is also significant difference between customers point of view and company s perception. As Chang et al. (2005) mentions, the company point of view is only one side of the picture and must be cross-validated with the customers' perspective. More in-depth customer view would give a new perspective to CRM and potentially provide further refinements to CRM strategy. More case studies of success stories of small business CRM implementation could be examined in the future to serve as a benchmarks which would lead to discovery of new measures and criteria that might be important. The future research should also provide link between specific CRM implementations and the outcomes which would provide clearer picture. Also more focus should be put on specific small business CRM needs and defining those needs as they are fundamentally different in comparison to large enterprise and adopting large enterprise CRM approach in small business is probably not the right way to go. Application of research to specific industries or service sectors could bring more accurate information of particular environment. Giving small scale of operations and specific needs of small businesses into account, I think that small business CRM is enough specific area and as such it should be tackled in wholly new way. The CRM concept is relatively new in small business, as such it can create real benefits to companies and it can be promising topic of future research.

6 References BAUER, H.H., GRETHER, M., LEACH, M., Building customer relations over the internet. Industrial Marketing Management, 31(2), COOPER, M. J., UPTON, N., SEAMAN, S., Customer Relationship Management: A comparative analysis of family and non family business practices. Journal of Small Business Management, 43(3), CHANG, T., LIAO, L., HSIAO, W An empirical study on the e-crm performance influence model for service sectors in Taiwan. Proceedings of the 2005 International Conference on e-technology, e-commerce, and e-service (IEEE'05), Hong Kong, 29 March-1 April, CHEN, I.J. and POPOVICH, K., Understanding CRM people, process, technology. Business Process Management Journal, 9(5), FEINBERG, R.A., KADAM, R E-CRM web service attributes as determinants of customer satisfaction with retail web sites. International Journal of Service Industry Management, 13(5), HALLIGAN, B., Why CRM initiatives fail at small businesses and startups [online]. Cambridge, MA: HubSpot Inc. Available at: [Accessed 29. April 2010] HARRIGAN, P., RAMSEY, E., LBBOTSON, P., Investigating the e-crm activities of Irish SMEs. Journal of Small Business and Enterprise Development, 16(3), ISSN: Kımıloğlu, H. and Zaralı, H., What signifies success in e-crm? Marketing and Intelligence Planning, 27(2), ISSN: NGAI, E.W.T., Customer Relationship Management Research ( ). Marketing Intelligence & Planning, 23(6), ISSN: SWIFT, R.S., Accelerating Customer Relationship Using CRM and Relationship Technologies. Prentice-Hall, Englewood Cliffs, NJ. WEBSTER, F.E. Jr., The Changing Role of Marketing in the Corporation. Journal of Marketing, 56(4), WESSLING, H., 2001, Aktivní vztah k zákazníkům pomocí CRM, Grada Publishing, Praha, ISBN