Customer Relationship Management Systems why many large companies do not have them?

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1 Customer Relationship Management Systems why many large companies do not have them? Manuela Cunha 1 4, João Varajão 2,3, Daniela Santana 2, Isabel Bentes 2 1 Instituto Politécnico do Cávado e do Ave, Portugal 2 Universidade de Trás-os-Montes e Alto Douro, Portugal 3 Centro ALGORITMI, Portugal 4 CITEPE Research Centre, University of Minho, Portugal Abstract. Today's information technologies are heavily embedded in the reality of organizations. Their role is essential not only at the level of internal processes optimization, but also the interaction between the company and its environment. In this context, the Customer Relationship Management (CRM) systems are powerful competitive tools in many different sectors of activity. Despite the undeniable importance of these systems, there are in practice, many large companies that do not use them. Supported by the results of a survey carried out in a sample of large enterprises, this paper seeks to answer to the research question "why many large companies do not have CRM systems". Keywords: CRM, motivations, large companies. 1 Introduction CRM (Customer Relationship Management) systems are now fundamental tools in many organizations around the world, and there is a growing adhesion for the last years. Companies decide to adopt such systems in order to obtain a better understanding of their customers, identify the most profitable customers, retain existing customers, better target their marketing campaigns, create knowledge shared and disseminated throughout organization, improve sales, besides many other reasons. Despite all the perceived and recognized advantages of the CRM systems, it appears that in practice there are still many companies that do not use them. In order to identify the reasons why companies do not invest in CRM, the authors have undertaken a study based on a questionnaire sent to large companies, whose main results are presented in this paper. Section 2, introduces several fundamental concepts related to CRM, section 3 presents the research method followed in the study, whose main results achieved are then discussed in section 4. Finally, Section 5 develops concluding remarks.

2 2 Background As noted by Peppers [7], every five years, a company accounts for the loss of half of its customers. This dramatic statistic of Harvard Bussiness Review stresses the importance of a technology that is gained businesses all over the world, interested in increasing the fidelity time of clients: CRM. A North American study of the Insight Technologies Group, indicates that 42% of companies that invested in CRM increased their revenue and reduced by 35% the cost of sales. Another statistic of Michaelson and Associates showed that 69% of consumers change their supplier due to a poor attendance. To illustrate the sign of the times, in which the individualization or personalization makes a major the difference, an executive at a major consulting firm, cites an ominous statistic: about 80% of customers who leave a supplier are not unsatisfied with products and services, nor even were they mistreated. The reason that led them to change their partner was the indifference. The concept of CRM has established itself since the decade of 1990, as an information technology (IT) that enables improvements in communication and provides software to support the customer relationship. This technology provides companies with important tools for a better understanding of consumer behavior and generation of product offerings and services [3]. Tachivazawa and Scaico [10] highlight the importance for the company to move towards an adequate relationship with its customers, by understanding and satisfying their needs, or better, anticipating and ensuring the quality of services delivery. CRM is a combination of business strategy and information systems, targeted to the client in order to serve him better. It is an integrated business model, important for the success of the company [2]. According to Shang [9], CRM is a combination of people, processes and technology aimed at providing an understanding of customer needs, to support a business strategy and build long term relationships with customers. Indeed, marketing has evolved conceptually, from the product-focused view to the understanding and satisfaction of the consumers needs [11]. According to Martilelli [6], the functionalities of a CRM system include the following operations: sales support, featuring the integration of sales channels; configurators of requests and management of opportunities; support to the clients after-sales service with resources of Call Center and Service of Customer Attendance (SCA); marketing support, using campaign management, segmentation and positioning of clients, assessment of customer value, customer satisfaction and a database of detailed customer information. On this view, Hughes [4] states that the basic idea of CRM is to collect a large amount of customer information, products, promotions and other data, and put them into a single database. With CRM systems it has become easier to collect, maintain and analyze information, bringing competitive advantages for organizations [8]. There are several reasons why companies decide to adopt CRM systems. Among the various potential motivations for the implementation of a CRM system, Bretz [1] highlights: to increase the knowledge of the company about their customers; to improve the process of logic and business marketing, helping to guide the company to market; to develop and provide services and products "tailored" to customers (in mass); to establish a systematic and close communication with potential and current

3 customers; to reduce the cost of sale and after-sales service, increasing the effectiveness of salespeople in the task of acquiring new customers; to aggregate value to the customer by rationalizing internal processes of new product development, enabling the company to get to know the unattended needs and the product characteristics desired by customer segments, reducing the cost, time and physical and mental effort associated to purchase and to after-sales service, by offering specialized, specific and high quality services. Naturally, these aspects lead us to the most important step, that is the ability to identify new products and/or services that may be of interest to the most profitable customers. Anticipating the desires of their customers is something also pursued by organizations. Kotler [5] noted that more and more competition is not between companies, but between networks of marketing, being the prize awarded by the company that has built the best network. The operational principle is simple: build up an effective network of relationships with the target public and the benefits will be a consequence. 3 Research method In order to investigate and characterize the adoption of CRM systems in the large Portuguese companies, it was undertaken a study involving an online questionnaire which call for response was sent via to a stratified random sample of 500 companies in the universe of the 1000 large national companies national in terms of turnover, according to the Portuguese National Institute of Statistics (INE). The questionnaire was made available on an online platform in the period from 09/Feb/2009 to 11/May/2009, and comprehended four rounds of response. It was structured by thematic groups of questions and included several types of questions (multiple choice, free text). It was pre-tested and underwent an iterative process of content and clarity validation to get the final version. There were obtained 85 valid responses, corresponding to a 17% response rate. After the data collection it was carried out a descriptive statistical analysis. The first group of questions in the questionnaire pretended to characterize the companies participating in the study. The graphs and tables below present the organizations characteristics. Regarding the number of employees, through the analysis of Table 1 and Figure 1, it can be seen that most companies have fewer than 2,000 employees. Only 11% of companies have more than 2000 employees. Table 1. Number of employees of the companies participating in the study. Number of employees 1 to % 201 to % 501 to % 2001 to % More than %

4 Fig. 1. Number of employees of the companies participating in the study. With regard to the turnover of participating companies, the results are presented in Table 2 and Figure 2. In terms of turnover, companies are well distributed across the intervals shown. Note that a significant proportion of companies (44%) had a turnover of between 50 and 250 million Euros per year. The number of responses "Do not know / No not answer" has a value of 12%. Table 2. Turnover of the companies participating in the study. Turnover (euros) Less than % to % to % to % to % More than % Do not know / No not answer 12% Fig. 2. Turnover of the companies participating in the study.

5 The results referring to the sector of activity of the participating companies are illustrated in Table 3. Companies are distributed over several sectors. The areas of Services, Transport of distribution", "Base Metallurgy and Metalworking, are highlighted with the largest number of companies. Table 3. Distribution of the participating companies by sectors of economical activity. Sector of activity Water, electricity and gas 1% Pulp and paper 1% Fuel distribution 1% Transport equipment 1% Electrical and precision equipment 1% Chemistry 1% Hotels and restaurants 2% Metallic and nonmetallic minerals 2% Pharmaceuticals 2% Food Distribution 4% Wood, cork and furniture 4% Telecommunications 4% Trade 5% Construction 5% Textiles 5% Agriculture and agro-industry 6% Sale of motor vehicles 6% Metalworking and base metallurgy 7% Transport and distribution 7% Services 8% Other 27% Only 25% of the responding companies use CRM systems (Figure 3). Fig. 3. Companies with CRM systems.

6 4 Results This section presents the main results of the study carried out. It begins by characterizing the companies have indicated not using CRM systems (75% of responding companies), to then identify and discuss the main reasons why these companies do not have such systems. Table 4 and Figure 4 highlight that most companies that are not using CRM systems have up to 500 employees. Table 4. Number of employees of the companies that do not have a CRM system. Number of employees 1 to % 201 to % 501 to % 2001 to % More than % Fig. 4. Number of employees of the companies that do not have a CRM system The turnover of these companies also appears well distributed among the ranges displayed, as shown in Table 5 and Graph 5. To be noted that a significant proportion of companies (43%) had a turnover between 50 million and 250 million euro per year. Table 5. Turnover of the companies that do not have a CRM system. Turnover (euros) Less than % to % to % to % to % More than % Do not know / Do not answer 11%

7 Fig. 5. Turnover of the companies that do not have a CRM system. Table 6 represents the distribution of the companies that have not yet adopted CRM systems by sector of activity Table 6. Distribution of the companies that do not have a CRM system by sector of activity. Sector of activity Pulp and paper 2% Fuel distribution 2% Transport equipment 2% Electrical and precision equipment 2% Metallic and nonmetallic minerals 2% Pharmaceuticals 2% Chemistry 2% Sale of motor vehicles 3% Trade 5% Construction 5% Food distribution 5% Wood, cork and furniture 5% Telecommunications 5% Agriculture and agro-industry 6% Metalworking and base metallurgy 6% Textiles 6% Transport and distribution 8% Services 11% Other 21% Given the acknowledged importance of CRM systems and the fact that it appears that a very significant percentage of companies have not yet adopted this type of system, it is important to identify the main reasons for this fact. In order to identify the main driving forces for large companies to not have CRM system, the study included a set of pre-defined reasons so that the participating

8 companies could select those all that applied to their concrete case. The reasons listed for selection included: the investment required is substantial; top management decided not to invest in a CRM system; already existing systems are appropriate; the company structure does not require a CRM system; the implementation of a CRM is currently planned; the implementation of a CRM system is currently under way; the existing infrastructure of the company does not support a CRM system; human resources are not trained enough to use a CRM system; the middle management does not support the acquisition of a CRM system, the company is ongoing restructuring, the cost / benefit relation does not justify the investment in a CRM system. It should be noted that it was left one open question for the case of respondents wish to point out another reason(s). Figure 6 presents the main reasons why the companies do not have a CRM system. Fig. 6. Main reasons why the company does not use a CRM system On top of the reported reasons for not investing in CRM systems, clearly appear the following reasons: "the company's structure does not require a CRM", "top management decided not to invest in CRM" and "existing systems are already adequate". Within the set of reasons, it is emphasized that the major reason for not

9 having a CRM system is related to the intrinsic characteristics of the companies. Close to these three reasons, are also highlighted that "the cost-benefit relation does not justify the investment in CRM"; the implementation of a CRM is currently planned" and "the investment required is significant". In these cases, the focus shifts from the "no need" to aspects of the effort required in terms of investment. It should be noted that from the set of companies that have no CRM system, more than 25% have already the process of adopting a CRM system in progress, or have planned to adopt, and thus it is expected that in the short term the number of firms with CRM systems increases considerably. All other reasons did not obtain a significant expression. 5 Conclusions The authors have undertaken a study directed to the largest Portuguese companies in terms of turnover, in order to answer the question "why many large companies do not have CRM systems". Of all firms that responded, 75% affirmed not using CRM systems, which is a very significant rate given the importance that these systems may have in the development of a competitive company. Within the set of reasons given by participants in the study, there were six reasons that stood out clearly in the results, corresponding to three major justifications: (i) the intrinsic characteristics of the company justifies that it does not need a CRM system; (ii) the decision of do not investing in CRM came from top management; and (iii) the required investment effort makes difficult the adoption of CRM. References 1. Bretzke, M.: Marketing de Relacionamento e Competição em tempo real: com CRM. São Paulo, Editora Atlas (2000) 2. Chan, J.O.: Toward a Unified View of Customer Relationship Management. Journal of American Academy of Business, Cambridge 6(1): (2005) 3. Dominguez, S.V. : O valor Percebido como Elemento Estratégico para obter a Lealdade dos clientes. Caderno de Pesquisas em Administração, São Paulo v. 7, n. 4, Out./Dez. (2000) 4. Hughes, M.: The Mirage of CRM. Journal of Database Marketing, v. 9,nº2, 1 st January, pp (3) (2002) 5. Kotler, P.: Administração de marketing: a edição do novo milénio. São Paulo, Prentice Hall (2000) 6. Martinelli, C.d.S.: Implementação da Estratégia de CRM: estudo de caso de uma pequena empresa, São Paulo UNICAMP, Dissertação da Universidade Estadual de Campinas (2003) 7. Peppers, D., Rogers., M.: Marketing Um a Um, São Paulo, 3ª ed. Campus (2004)

10 8. Rust, T., Zeithaml, V., Lemon, K.: O valor do cliente. O modelo que está formulando a estratégia, Porto Alegre (2001) 9. Shang, S. and Chen, C.-H.: Human Processes in Customer Relationship Management. Proceedings of 11 th Pacific Asia Conference on Information systems (PACIS 2007), July 3-6, Auckland, New Zeland (2007) 10. Tachizawa, T., Scaico, O.: Organização flexível: qualidade na gestão por Processo. São Paulo, Ed. Atlas. 335 (1997) 11. Zenone, L.C: Gestão do Relacionamento com o cliente e a Competitividade Empresarial. CRM, Novatec, 32 (2007)

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