ORGANIZATIONAL IMPLICATIONS AND VALUE OF CRM INITIATIVES IN THE HOTEL. THE RESULTS OF AN EMPIRICAL ANALYSIS 1

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1 ORGANIZATIONAL IMPLICATIONS AND VALUE OF CRM INITIATIVES IN THE HOTEL. THE RESULTS OF AN EMPIRICAL ANALYSIS 1 Antonella Angelini Associate Professor - University of Pisa Italy Maria Zifaro Post Doc Researcher University of Pisa - Italy Abstract In the current economic environment, in order to remain competitive in the market, the Hotels are committed to maximizing the value of its offer in view of the customer which takes account of both price and perceived quality of the offer. To have a positive impact on the latter appears more and more personalized service by managing the wealth of information about its customers. CRM is the methodological approach and the technological tool suitable for the proper acquisition and management of customer information. Its adoption will inevitably lead to an economics and organizational impact that the entrepreneur must not be underestimated before making a decision that will affect the operation. This paper aims to investigate the links between business strategy, organizational structure and performance of CRM initiatives launched in the Hotels. We will present the results of an empirical analysis that takes into account the business view. Companies are constantly looking for valuable solutions which provide an increasingly active role of all company front line employees. They are called to intervene in the process of service delivery to implement customization in order to increase the value proposition. 1. Introduction In recent decades it has consolidated the belief that maintaining a good interaction with the customers is an important success factor for companies. It s for this reason that increased attention to the activities of the Relationship management (RM) and, in particular, to those of Customer Realtionship Management (CRM) and Customer 1 Though this paper is the ultimate outcome of a joint effort, it is possible to ascribe par.3 to Maria Zifaro and all the other parts to Antonella Angelini.

2 Management (CM) (Frow and Payne 2009). Relationship marketing focuses on building long-term relationships with customers and other parties (Tareq, 2012) while Customer Realtionship Management regards the strategic management of relationships with customers, involving appropriate use of technology (Frow and Payne 2009, Berry 1983). Customer Management is an even narrower field of CRM as it relates the implementation and tactical management of customer interactions which nowadays often provide for the use of information technology solutions. With the development of technology and Internet, firms can indeed activate and manage the processes of interaction with their customers in a fast, effective and economic way. This makes it one solution for acquiring or consolidating their competitive advantage. Internet provides the ability to find information about the customers even if it s essential to use certain online marketing tools to identify customers, differentiate the customers and personalize marketing activities (Baranov A, Baranov A, 2012). The organizations should create interaction and communication processes that facilitate relationship (Tareq, 2012) through the integration of four important components i.e. people, process, technology and data (Panda, 2002). This is particularly important to service industries because there are numerous opportunities for interactions with customers. Furthermore it is essential to take into account the characteristic of intangibility of the services. Adopting customer relationship marketing the business organizations wants collect and use data for increasing customer value which, in its turn, increase customer satisfaction (Payne, et al 2000). An increase in customer satisfaction level generates positive effects on various aspects such as customer trust, customer retention rate, customer attraction rate and finally on business value (Angelini 2011). In service industry the management of customer relationships is particularly critical for three reasons (Panda, 2003). Many services require an on-going membership (Lovelock, 1983) or at least an on-going relationships with service provides in order to reduce perceived risk. Customers are more likely to form relationships with individuals and with the organizations they represent than with goods (Berry, 1995). Farther the role of employees is essential for having a superior service experience. Then the companies' attention to the CRM activity has increased significantly in recent years, although there are many unsuccessful experiences due, among others, to a lack of clarity as to what CRM encompasses (Payne and Froe, 2006) or a lack of strategic focus in organizations (Thakur et al 2006) or because they failed to deploy the CRM resources they possessed to obtain superior capabilities in managing customer relationships and achieve competitive advantages (Day and Van

3 de Bulte, 2002; Morgan et al. 2004). Therefore CRM can be defined as a comprehensive strategy and process that enables an organization to identify, acquire, retain, and nurture profitable customers by building and maintaining long-term relationships with them (Sin, Tse and Yim, 2005). The first step is therefore the existence, within the company, of a strategy highly customer-oriented and an organization of the activities and human resources management defined on the basis of this strategy. In other terms, an operational vision approach (Schael, Nasi, Sciarpa, 2004) will experience, or continue to experience, disappointing results, with the accompanying waste of energy, resources, and lastly, loss of company value (Angelini, 2007). This paper intend to investigate the organizational effects, the objectives and the results achieved of CRM initiatives undertaken within a sample of Hotels associated to the Associazione Italiana Confindustria Alberghi. For this purpose was asked to fill in, via web, a semi-structured questionnaire and below we present the principal results obtained. 2. Objectives of CRM initiatives Through the activities of CRM companies aim to improve interaction with their customers, both in terms of quantity and quality. This can in fact be considered a first important effect of CRM activity, able to acquire a range of benefits absolutely critical to business success, first of all a raise in customer satisfaction level. Companies are focusing their attention on customer satisfaction because there is a strong positive relationship between customer service quality and loyalty (Rust and Zahorik, 1991). An improvement in the customer satisfaction can also have positive effects on productivity. For example, appropriate application of information technology may improve both customer satisfaction and productivity simultaneously (Anderson, Fornell and Rust, 1997). If this is true, it is also possible that an increase in the level of customer satisfaction is associated with a reduction in productivity, mostly in the context of the service company. Therefore, firms must strike the right balance between their efforts to compete efficiently and their effort to compete effectively (Anderson, Fornell and Rust, 1997). The adoption of CRM system can generate some important benefits which are linked to customers and the possibility to offer them a higher level of quality and customization by an increasing use of technology (table 1)

4 Table I CRM benefit Customer data sharing throughout the organization resulting in: Superior levels of customer service Opportunities for cross-selling and upselling Wide range of information about customers' habits and preferences Integrated and complete view of the customers Improved targeting to segments and individual customers Efficient call centers/service centers Source: Adapted from Chen, Popovich (2003) CRM innovative technology: Extends capability to the customer for self-service and Internet applications Attracts existing and new customers through personalized communications and improved targeting Integrates customers and supplier relationships Constructs metrics to analyze common and unique customer patterns Allow a rapid, effective and constant interaction between the company and customers In addition to these benefits it s possible to identify several important specific objectives that a company aims when decide to invest resources and equipment in CRM initiatives, such as (Xu, Walton, 2005): Improving customer satisfaction Retaining existing customers Improving customer lifetime value Providing better strategic information for sales, marketing, finance, etc. Attracting new customers Cost savings These results can be achieved thanks to a better knowledge of habits and preferences of the customers that allows the company to implement operations of personalization able to obtain impacts of value. So, the personalization is one important effect that is possible to obtain with a correct use of CRM systems. Ball et al. (2006) confirm the predictive validity of the personalization construct in a relationship marketing context, since personalization contributes to the explanation of customer satisfaction and ultimately customer loyalty. In establishing the customization interventions the companies should pay particular attention because all form of personalization do not necessarily result in more positive evaluations of the service offering by consumers (Surprenant, Solomon 1987). However, a more detailed knowledge of its customers allows the company to examine possible specific customization

5 interventions which will require a prior assessment, taking into account the time factor and the economic and organizational aspects. Other important effect could be the development of new product/services that is an extension of the possibility of offering addressed to customers, thereby reducing new product failure rates and improving company performance. In other words the knowledge is used to develop new products that are aligned with customer requirements and create value for the firm (Payne and Frow 2005). A recent research conducted on a cross-functional sample consisting of 115 R&D and 122 Marketing managers from firms spanning multiple industries has estimated that CRM has a positive effect on new product performance (Ernst et al. 2011). In our study we intend, among others, consider the importance/contribution of CRM solution to improving the firm proposition during the time, and the consequences in terms of the personalization capabilities of the service provided. Other important effects can be viewed on Human Resource management. This issue will be discussed in the next section. 3. Organizational impact of implementing a CRM system The adoption of a CRM inexorably leads to an impact not only economically linked to the investment technology, but also have an impact at the organizational that the entrepreneur must not be underestimated. A CRM system should be evaluated in several dimensions (Chen and Chen, 2004): strategic organization/culture information technology CRM strategy allow a better management of customer relationships. Thus CRM strategy and technology may improve an organization's ability to sustain profitable customer relationships by gathering and analyzing information about profitable customers, facilitating more efficient and effective firm-customer interactions and streamlining product or service customization We can say that CRM organization has to be an essential means through which firms effect fundamental change in the way they organize their actual business processes for employees and customers (Sin et al., 2005; Yim et al., 2005). CRM strategy will end in failure if the information technology is not used properly, thus the suitable use of technology in marketing is one of the greatest opportunities in hotel industry. Kasim and Minai (2009) find out that the CRM technology dimension is firmly related to hotel performance, because hotels need to use information technology in CRM strategy.

6 It is proven fact that the multi-dimensions concept of CRM can be considered relatively new, because of the only few studies, which are made on the CRM dimensions of some service sectors such as bancking (Mohammed, Rashid, 2012; Akroush et al., 2011; Sadek et al., 2011 Sin et al., 2005) and contact centers, thus range of information on this concept is quite limited. Every organization is characterized by a different level of complexity due to the number of people, organizational structure and the cultural model adopted. A CRM system involves all the organizational structure and the success of its implementation is evident at the level of performance. All the organization resources have to be integrated in order to implement CRM successfully and, in turn, to improve organizations performance. Every step of the process must be monitored and evaluated in relation to the interactions between various organizational units involved and the real information needs that allow you to achieve results. The main steps that have an impact on the organization and leading to the successful implementation of a CRM system are five: 1. definition of business requirements business requirment 2. creation of the project team; 3. analysis of the existing architecture 4. architecture design maximum 5. gap analysis and technical-organizational In the first top management must identify the strategic lines of development in terms of problems to be solved and opportunities. This step is very important because it is the foundation on which to base organizational change company. The competition on the market is very strong. this means that An offer which does not meet the customers can be turned into a loss of competitiveness for the company. The second assumes a very important role that contributes substantially to the success of the same. Engaging employees, to understand and convince the company on the potential of the system and in particular all those who are related with the "customer" limits the resistance to change that the new system can generate. The creation of the project team wants to achieve certain organizational objectives ( make sure that the work is tailored to the specific needs of the users of the system make sure that people continue to manage the activities by adopting new models. The team must: be sponsored by top management understand the people who work the front office

7 fostering an understanding of information systems and the potential that generates its use The task of the team will be to ensure proper training of the benefits and organizational change that this methodology introduces. The team will take care of an adequate operational training. The third adopts an incremental approach that requires: organize the existing improve the existing develop the new. The analysis of the information system allows you to effectively manage the different components of CRM system. This approach can produce results in the short term and to develop people and the procedures step by step. If this step is not given due importance staff does not support the change. The fourth stage is connected to the second team in which he is involved in the customization of the system with the real needs of the company. In this step you define the skills that most directly come into contact with the use of CRM. The fifth phase evaluates the gap between the current situation and the desired one for the two relevant dimensions of the CRM system: Information gap; Technological gap in relation to the eligibility requirements for the correct analysis and information management. The impact of organizational and technological produces a CRM system is not be underestimated because it produces effects on human resource management. For this reason it is important to build a check list for all areas of the organization and all the professionals involved in order to predict the actions necessary and consistent with the changes that the methodology introduced. The following are the areas which are generally the object of impact: modifying business processes that require new professionals; the corporate culture and the way in which the company will interface with the market. For this reason it is important to define performance measures are evaluated with the people that are consistent with the new goal of managing the relationship with the customer. It is possible to assess the impact of CRM in terms of performance on human resources through the index of employee turnover and the satisfaction index of human resources present in the hotel. 4. Theoretical framework The theoretical framework used in this research is illustrated in fig. 1. To obtain positive effects on Customer interaction (quantity and quality), Personalization, Development new product/services and Human Resource management the company

8 has to manage some resources in properly and effectively way. In this contest we have categorized in four specific groups that resources, namely Customer oriented strategy, CRM technology, Organizational culture and Customer recovery programs (Fig. 1). In other words, with a strategic plan in which in the center is placed on the customer and his satisfaction, using appropriate IT solutions (Day 2000, 2003) the company can generate important effects that have implications of value. These effects of value are brought back within three categories ie customer indicators, economic indicators and human resources indicators. Figure 1 Resources, effects and performances of CRM Source: Our elaboration 5. Methodology The research is based on a questionnaire which is addressed to the hotels associated to the Associazione Italiana Confindustria Alberghi. This latter invited, via , its members to fill out a questionnaire available through the website. Despite this

9 involvement, the response rate was particularly low. The results thus relate to a sample of Hotel consists of 23 structures with different dimensions. Of these 23, however, only 13 completed the questionnaire correctly in all its parts. Therefore, the analysis will cover these 13 Hotels, of which 7 represented by chains. The questionnaire is developed after reviewing the literature review and previous studies from various references, which deal with the research topic. In addition, two 4 star hotels has been tested it, providing some suggestions. The questionnaire is structured to be able to relate the resources, the effects and performance of CRM initiatives, as highlighted in the theoretical model described above. 6. Results The four categories of resources is carried out by asking to the sample hotels to express an opinion, to completely agree (score 5) not to agree (score 1), to a series of questions about the topic investigated (see table II). The results highlight a strong customer orientation in the sample hotels, aimed to achieve high levels of customer satisfaction. Has also emerged a positive attitude to the activities of customers recovery. The other two categories of resources seem to have lower importance, though not negligible, especially the organizational culture that gets the lowest average value (3.792) (see table III). Table II Customer oriented strategy Jayachandran et al (2005) In our organization, retaining customers is considered to be a top priority Our employee are encouraged to focus on customer relationship In our organization, customer emphasizes the importance of customer relationships Our senior management emphasized the importance of customer relationships CRM Technology Reinartz et al. (2004) We invest in technology to acquire and manage real time customer information and feedback We have a dedicated CRM technology in place We have technologies that allow for one-to-one communications with potential customers Relative to our competitors the quality of our information technology resources is larger Organizational culture Jayachandran et al (2005) (*)

10 In our organization, employee receive incentives based on customer satisfaction measures (*) In our organization, business processes are designed to enhance the quality of customer interactions (*) We focus on customer needs while designing business processes (*) In our organization, services are organized taking into account the needs of different types of customers Customer recovery program We try to recover the customer who raised some complaints Consider the complaints helpful to identify and eliminate the problems related the service provided We have a well-defined program of customer recovery We contact the customer who complained about the service Table III Resources scores (max 5 min 1) Res1 Res2 Res3 Res4 Mean Std. Dev. Var. 0,276 0,076 4,458 0,772 0,596 3,846 0,222 0,049 3,792 0,432 0,187 4,404 Source: Our elaboration The above is consistent with the results obtained about the purposes of the objectives CRM initiatives. These include improving the customer satisfaction level, maintenance of the relationship with existing customers and attracting new customers that get the highest scores, respectively 6.62, 6.77 and 6.38 (see table IV). However, we observed higher average scores for the remaining goals. These results are in line with those of a research conducted by PMP Research from 2001 to 2004 related to CRM applications in UK companies (Sweet, 2001, 2002, 2003, 2004; Xu, Walton, 2005; Angelini 2007)

11 Table IV - Importance attributed to the CRM objectives (max 7- min 1) Media Std. Var. Dev Improving customer satisfaction level 6,62 0,87 0,76 Preserve the relationship with existing customers 6,77 0,60 0,36 Improving Customer Lifetime Value 5,92 1,44 2,08 Providing better strategic information to sales, marketing, finance, etc.., 5,62 1,89 3,59 Attracting new customers 6,38 1,19 1,42 Cost savings 5,77 1,36 1,86 Gain useful information to improve / enhance the offer over time 6,08 1,19 1,41 Gain useful information to personalize as much as possible the offer Source: Our elaboration 5,92 1,66 2,74 A higher level of knowledge of the customer should also allow to improve over time the offer, eventually adding new services. The results of the empirical analysis suggest an effective high importance given to these goals (see table V). All the aims considered shown a high importance for businesses, with a score greater than 6. However, acquire useful information to assess the performance of front-line staff is considered unimportant for the 15,4% of the Hotels considered. Among these goals some are more "traditional" and "strictly operational", how to make reservations. Other goals are more strategic oriented because directed to an eventual improvement in supply and customer satisfaction level. These goals are decided from CRM manager, when exist. In our sample the 77% of the hotels have a CRM manager, that coincides with the marketing manager in the 30,9% of cases. In term of value, businesses that manage to adopt CRM systems successfully should observe an improvement in performance relative to customers, economic aspects (Reichheld, 1996) and human resources management. In our sample the first two categories has obtained the higher scores. The hotels of our sample believe they have experienced good results in terms of customer satisfaction, turnover and profitability (see table VI) thanks to a good relationship management with its customers. Minor impacts are to be seen in terms of human resources, especially with respect to the

12 rate of tournover. Indeed only 38.5% of the hotels believe that the adoption and use of a CRM system has brought positive effects on the rate of tournover employees. This percentage rises to 61.5% considering the level of employee satisfaction. Table V - CRM goals (max 7- min 1) Mean Std.Dev. Var. Send information to customers 6,31 1,49 2,23 Have relationships with customers 6,38 1,26 1,59 Capture customer data quickly 6,31 1,18 1,40 Consult the customer information and the 6,38 0,77 0,59 conditions applied Customize the service 6,08 1,19 1,41 Improve over time the overall supply 6,23 1,36 1,86 Add new services over time 6,23 1,24 1,53 Make bookings 6,69 0,63 0,40 Store data on service failures and recovery 6,08 1,71 2,91 actions Monitor customer satisfaction 6,46 1,20 0,14 Acquire useful information to assess the performance of front-line staff 6,08 1,38 1,91 Source: Our elaboration Table VI Effects of CRM activities (range 1-7) Mean Std. Var. Dev. Retention rate 5,38 1,80 3,26 Rate of new customer acquisition 5,69 1,25 1,56 Customer satisfaction 5,92 1,26 1,58 Word of mouth 5,69 1,25 1,56 Development of turnover (compared to competitors) 5,85 1,41 1,97 Level of profitability 5,77 1,24 1,53 Rate of tournover of employees 3,85 2,12 4,47 Level of satisfaction of employees 4,77 1,88 3,53

13 Taking into account the effects obtained and the efforts sustained with the adoption of CRM systems, the overall assessment is satisfactory, with average score of 6,08. In addition, 7 of 13 gave the highest score highlighting the highly importance attributed to CRM activities. 7. Limitations and future research In this study we used only descriptive statistics because of the small sample size. With this sample it was not be possible to test some hypotheses. Therefore, shortterm we intend to involve more hotels associated with the Associazione Italiana Confindustria Alberghi to achieve a satisfactory number of completed questionnaires that enable it to perform a quantitative analysis. In addition we propose to make a comparison between hotels and hotel chains because we believe this is a factor that can influence the attention and commitment to the CRM initiatives. References Akroush N.M., Dahiyat E.S., Gharaibeh S.H.,Abu-Lail N.B. (2011), Customer relationship management implementation. An investigation of a scale's generalizability and its relationship with business performance in a developing country context, International Jo14urnal of Commerce and Management, 21(2), Almotairi M. (2009), A Framework for CRM Success. Proceeding of the European and Mediterranean Conference on Information Systems Izmir, Turkey, July. Angelini A, (2011) The supplier's contribution to the value co-creation process and the effect on business value, 14th Toulon-Verona Conference, Organizational Excellence in Service, University of Alicante, 1-3 September 2011, Spain, Conference Proceedings Angelini A. (2007), Enhancing customer relations through CRM systems. The Ventaglio Group case, 10th Toulon-Verona Conference, Quality in services, Aristotle University, Thessaloniki, 3-4 September 2007, Proceedings Ball D., Coelho P.S., Vilares M.J. (2006), Service personalization and loyalty, Jounal of service marketing, Vol. 20. N.6, pp Baranov A, Baranov A, (2012), Building Customer Relationship, Bulletin of the Transilvania University of Brasov, Vol. 5 (54), n.1

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