UNIVERSITITEKNOLOGI MARA ' ' ' ELECTRONIC CUSTOMER RELATIONSHIP (e-crm): A PULSE ON THE RETAILING COMMUNITY

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1 3 UNIVERSITITEKNOLOGI MARA ' ' ' ELECTRONIC CUSTOMER RELATIONSHIP (e-crm): A PULSE ON THE RETAILING COMMUNITY Engku Badrul Nizam b. Engku Abdul Rahman Thesis submitted in fulfillment of the requirements for Bachelor of Science (Hons) Information System Engineering FACULTY OF INFORMATION TECHNOLOGY AND QUANTITATIVE SCIENCES UNIVERSITI TEKNOLOGI MARA SHAH ALAM November 2005

2 APPROVAL ELECTRONIC CUSTOMER RELATIONSHIP (e-crm): A PULSE ON THE RETAILING COMMUNITY By Engku Badrul Nizam b. Engku Abdul Rahman This thesis was prepared under the supervision of supervisor, Encik Shamsudin Bin Md. Sarif It was submitted to the Faculty of Information Technology and Quantitative Science and accepted as partial fulfillment of the requirement for the degree of Bachelor of Science (Hons.) In Information System Engineering APPROVED BY: EN SHAMSUDIN BIN MD SARffi. SIGNATURE: DATE: n

3 DECLARATION I, Engku Badrul Nizam b. Engku Abdul Rahman (I/C number: ) hereby declare that this work has not previously been accepted in substance for any degree, locally or oversea, and is not being concurrently submitted for this degree or any degrees. This research paper also is the result of my independent work and investigation, except for quotes and summary that each of which their source are mentioned. Engku Badrul Nizam b. Engku Abdul Rahman November, 2005 ui

4 ACKNOWLEDGEMENT ^ JiJ First of all, I would like to express our gratitude to Almighty God as for His Omnipotence and Merciful that led me the way to the completion of this thesis. After a thorough hard works and patience that He gave us, this thesis could be done smoothly with little limitations. Upon completing this final year project 2005, I would like to take this opportunity to express our deep gratitude to all the people who were involved in assisting me completing this thesis. I would like to convey my appreciation Mr. Shamsudin Md. Sarif who acts as my mentor and my supervisor for the paramount patience and guidance throughout the whole process in completion of this research. This research cannot be completed without his advice and encouragement. Not to be forgotten is the lovely Mrs. Wan Nor Amalina Wan Hariri, our lecturer for this subject, for her helpful information and comment. Also I would like to take this opportunity to wish her a happy and a prosperous life. I also like to thank you Prof Datin Dr. Noor Habibah Hj Arshad for being so kind in guiding us. To, my beloved families who are always understand my busy schedule and being really supportive to my thesis. Last but not least; to all the people who had assisted me directly and indirectly in completing the thesis, thanks you for your help and contributions. IV

5 ABSTRACT e-crm is an Electronic Customer Relations Management solution, specifically designed and developed to suit all front and back office needs. e-crm will assist in maintaining and organizing all sales leads, customer base information, list of products, quotation generating and tracking and competitor analysis. With e- CRM, organizations can have instant access to up-to-date information and all the latest on-goings of the organization, at anytime and anywhere. This system is made to facilitate retaining existing customers, and also broadens organization's prospects in the current challenging global market. It is fully equipped with the latest technology to vastly enhance organizations' competitive advantage, while maximizing overall operational efficiency and substantially reducing unnecessary overhead costs. e-crm enables organizations to foster a more fruitful relationship with their customer, while simultaneously monitoring and boost customers' satisfaction of the products and services. This research will investigate the implementation of e-crm by the main retailing sector in Malaysia, focusing on area of Klang valley. The issues such as the way of implementation, risks, risks management and customers feedback will be discusses by the researcher. The recommendation about the implementation also included upon this research.

6 TABLE CONTENTS CONTENT APPROVAL DECLARATION ACKNOWLEDGEMENT ABSTRACT TABLE OF CONTENTS LIST OF FIGURES LIST OF TABLES PAGE ii iii iv v vi ix x CHAPTER ONE: INTRODUCTION 1.1 Research Background Problem Description Project Scope Project Objective Project Significant Project Limitation Poor feedback Cooperation of companies Overview of Each Chapter Summary 9 CHAPTER TWO: LITERATURE REVIEW 2.1 Introduction E-CRM Background Application E-CRM in Retailing Risks in Implementing E-CRM Project 16 VI

7 2.5 Managing the E-CRM Risk The Future of E-CRM Summary 19 CHAPTER THREE: METHODOLOGY 3.1 Introduction Research Approach Initial study Detailed study Research model Data collection Data analysis Output Summary 25 CHAPTER FOUR: RESULTS AND FINDINGS 4.1 Introduction Demographic Resuh The Approach and the Effect of E-CRM Implementation Feedback from the Customers The Resuk from the Customer Behaviour The Risks in Implementing E-CRM Managing the Risk Summary 47 vn

8 CHAPTER FIVE: CONCLUSION AND RECOMMENDATION 5.1 Conclusion Recommendations Summary 51 REFERENCES 52 APPENDICES A: Sample of questionnaire APPENDICES B: In-Progress Assessment viu

9 LIST OF FIGURES Figures 3.1: Process model for e-crm research Figures 4.1: Companies understanding about e-crm Figures 4.2: Percentage of companies which implement e-crm Figures 4.3: Reason for not implementing e-crm project Figures 4.4: Type of Channel Development project applied by the companies Figures 4.5: Consequences effects from customer satisfaction selected by companies Figures 4.6: Frequencies of member's customers visit in a month Figures 4.7: Frequencies of non-member's customers visit in a month Figures 4.8: Percentage of member's customers spending their time to shopping Figures 4.9: Percentage of non-member's customers spending their time to shopping Figures 4.10: Percentage of customers who become members to the companies Figures 4.11: Percentage of non-member's customers Figures.4.12: Percentage of member's customers spending their money to shopping Figures 4.13: Percentage of non-member's customers spending their money to shopping Figures 4.14: Approachfromthe companies which do not implement e-crm Figures 4.15: Rank of internal risks selected by companies Figures 4.16: Rank of external risks selected by companies IX

10 LIST OF TABLES Table 4.1: Demographic result Table 4.2: The ranking for priority objectives of implementing e-crm Table 4.3: The ranking for factors or interests of companiesfromthe implementation of e-crm Table 4.4: The ranking for purposesfromfactors or interest from implementing e-crm Table 4.5: Percentage of customers choose the reason to join the membership Table 4.6: Percentage of customers who choose the privilege offered by companies Table 4.7: Percentage of members according to the type of receiving

11 CHAPTER 1: INTRODUCTION 1.1 Research Background Customer Relationship Management (CRM) is a broad term for managing a business' interactions with customers. Effective CRM is about acquiring, analyzing and sharing knowledge about and with your customers. Total CRM covers your direct business contacts with customers, your channel partners' indirect contacts with customers, and customer contact management in your supply chain. More importantly, it allows a business to focus on the customer. Electronic CRM or e-crm is the customer relationship care component of e- Business. Customer care linkages in the value chain for B2C and B2B electronic commerce are critical elements for successful adoption of new products and for the evolution of existing products. Technology is being deployed to an ever-broadening set of businesses and the challenge for developers is to not only have the correct customer care mechanisms in place, but in order to differentiate themselves from the competition; it must be done either more cheaply or better than its competitors. Customer-focused implies that there is a demand-pull of information that ultimately focuses on the customer. e-crm is a solution, specifically designed and developed to suit all front and back office needs. e-crm will assist in maintaining and organizing all sales leads, customer base information, list of products, quotation generating and tracking and competitor analysis. With e-crm, organizations can have instant access to up-todate information and all the latest on-goings of the organization, at anytime and anywhere. This system is made to facilitate retaining existing customers, and also broadens organization's prospects in the current challenging global market. E-CRM is fiilly equipped with the latest technology to vastly enhance organizations' competitive advantage, while maximizing overall operational efficiency and substantially reducing unnecessary overhead costs. e-crm enables organizations to foster a more fruitful relationship with their customer, while simultaneously monitoring and boost customers' satisfaction of the products and services. It is also

12 generally said that, "Putting customers at the heart of your business, and building long-lasting relationship with them are the key ingredients in ensuring your business' success." e-crm is an approach that integrates all of customer information and makes it available for each customer contact, so we can provide the kind of consistent and effective personalized service customers want. It need not be expensive for a small to midsized company as it not primarily a single technology, but a refocusing of an organizations collection and use of customer data using existing technologies. Although companies selling unified e-crm solutions may dispute this point. e-crm extends to all of the stakeholders that create value for the customer. Value for the customer may be lower prices, higher quality products and services, continuous stream of innovative new products and services, speedier responses, convenience, and customization of products and services. Value is essential - it is what customers are willing to pay in exchange for some offering.

13 1.2 Problem Description Many of the most influential retailing organizations are implementing comprehensive CRM strategies, processes, applications, technologies and organizational changes to transform themselves into market intelligent enterprises that can respond to and adapt quickly to customer needs. The buzz seems to be everywhere, but what is about e-crm? Although it look similar to CRM but the implementation might be different. How the organization implement e-crm, what are the approach taken. What are the critical challenges and risks these e-crm projects are facing when implementing it? And, how are organizations manage these challenges and risks? GIANT HYPERMARKET, MAKRO, TESCO, CARI^FOUR, JUSCO are several of list of retailing company that looks like familiar to us in their way of servicing customer. They sell almost the same pattern of goods and products generally, low price, bundle, attract lots of people, and a lot of choices. But do we have notice that the system their using is different especially in recognizing and interact with then- costumer. Are they using e-crm? Because the exact situation of implementing it in Malaysia on retailing company or more focus in hypermarket that become a target for this research, is unknown or still blur. If the answer is yes what are the approach there are using in implementing e-crm, do they really optimize the usage of e-crm. Is it meaningful and beneficial to them from what they are doing on the systemfi-omthe implementation of e-crm? How they implemented e-crm in the right way or just following the nowadays trend in business without taking any concern about the advantages, in other words they just don't want to left behind from other competitors in technology usage aspect. This problem need to be solve in order to find and to have the best approach or solution that can become afi-ameworkto all retailing company as a guideline that can utilize the business optimally without any wasted. It's not easy for any company in implementing e-crm. Without any proper plan and management, the profit that they hope can become a bad damage and catastrophe to the company, a loss-making company. That is why we need to find out what are the challenges and risks the company are facing off besides implementing e-

14 CRM. To get notice on different group of customers, market position, customer financial performance and customer understanding about e-crm are several of the challenge that they faces. It is just from external, not on the internal side yet. It has information risk like stolen staff information from database and data damage or technology risk like virus and unauthorized access to a web site. These are the most common risk and challenge that generally assumed exists in e-business world. We need to have accurate information from the retailing company itself of what are the real challenges and risk their facing now in implementing e-crm so we can use it to help in solving the first problem. Others information that need to be concentrates are about the solution of the problem above. The managing method of the challenges and risks are those that we are looking for. How the company handle the situation or they do nothing about it, just ignore the problem and continue a daily working routine. What if the company does not implementing e-crm? In this situation, we need to discover the source or the problem facing by the company that not allowed them to implement it. Why they cannot implement it. Is there any problem like big risks to face, economic factors, do not have any expertise or any other thing that block them to implement it? This we need to know.

15 1.3 Project Scope The scopes of this research are as follows: The research will focus on retailing organization in Klang Valley area which they already have a big name and famous among customers. Survey will be conducted on retailing sector that has performed B2C and B2B business transaction model. 1.4 Project Objectives The objectives of this research project are: To identify the main retailing organizations or hypermarkets in Malaysia that focusing in Klang Valley area, have they started using e-crm, what are the approaches taken to implementing e-crm, what are the risks these projects are facing and the managing step taken by the organizations in handling risks. To identify the response of the implementation to the customers. To propose the best approach or method of implementing e-crm to the retailing sector regarding the findings through this research so it can be standardized by all company to perform more efficient and optimized.

16 1.5 Project Significant e-crm is the technology that is categorize as a new technology in Malaysia although it is akeady become an important method to organizations in developed countries. Currently there are a lot of researches on going and discussion about e- CRM all around organization in Malaysia. With the existence of this research, it will help the organization in retailing sector to manage and understanding their customer requirement and satisfaction by improving the services and in the same time to get profit maximally. This research will provide a guideline to retailing sector in order to manage risk efficiently when e- CRM is implemented.

17 1.6 Project Limitation During the execution of this research, there are a limitations and constraints that become a problem in achieving the data. These problems must be faced and we try our best to reduce it Poor feedback The questionnaire was distributed to the six selected companies but none of them replied it back. The problem is we need to do the follow up like to make a phone call for many times, send an and try to get an interview, otherwise they just can reply the questionnaire and that all. Unfortunately, it has come to understand that some of them did not implement the usage of project management through phone calls and letters replied. While some of the questionnaires are replied back empty or wrongly answered. This is maybe because lack of understanding of the questions asks Cooperation of companies Most companies in Malaysia do not gave the opportunity to students to conduct their research. It has come to term that some of the companies' information are considered confidential and cannot be made shared with the public. This is maybe because the fear of letting the rivals obtaining the information or as a marketing strategy for the company. Some of the companies have made it policies not to entertain research groups. This is maybe because the lack of staff and expertise or the understanding of what the research is all about.

18 1.7 Overview of Each Chapter Chapter one Chapter one contains information regarding the research background, the problem statement, the project scope, the objective of the research, the significant of the research, the project limitations and the overview of each chapter in this research. Chapter two This chapter contains the literature reviews. Literature reviews is a comprehensive survey of publications in a specific field of study or related to a particular line of research, usually in the form of a list of references or an in-depth review of key works. Chapter three Chapter three contains the research methodology. It is defined as the way in which the data are collected for the research project. This chapter also elaborates in great detail the research approach. Chapter four Chapter four will present the result andfindingsconcluded from the research. Data presented will be elaborated in detail in this chapter. Chapter five Chapter five will provide a conclusion to the whole research. It will also provide recommendations for future project and to the resuh of the research.

19 1.8 Summary Chapter one provides the whole guideline to the research. The research will follow step by step instruction provided in this chapter in order to meet the research demand. All objective and purpose stated in this chapter will try to befiilfilledto produce the desired result for this thesis.

20 CHAPTER 2: LITERATURE REVIEW 2.1 Introduction Literature review is the effective evaluation of selected documents on a research topic. In a context of a research paper, the literature review is a critical synthesis of previous research. A literature review was conducted to fiuther confirm the terms and the definition. Both local and international literatures were reviewed. Through the literature review characteristics may or may not be confirmed, as sometimes no supporting literature can be found. Any related literature will be reviewed for the purpose of e-crm research. This will help gives us an idea on how to conduct our research. 10

21 2.2 E-CRM Background In today's fast changing global economic marketplace, organizations are required to respond immediately in providing solutions to satisfy all customers; needs and requirements. With the explosion and tremendous growth of technology, organizations must constantly focus on the varying market trends as well as to stay competitive. It is unquestionable that the effective use of this technology will not only keep you in touch with customers' demands, but also will create new business opportunities and diversify your customer base across the globe. In a networked world of digital business, most of business firms from all sizes are going online. This phenomenon is not matter of choice, but is becoming necessity. The use of the internet, as a channel for commerce and information presents an opportunity for businesses to use the internet as a tool for customer relationship management. More over, there are justifiable prevalent agreements that CRM has direct or indirect impact on customer satisfaction, loyalty, sales and even profits. Primarily, a customer relationship management strategy envisages both business and marketing strategy that incorporates technology, process, and all business activities around customer. e-crm is programmed based in the Internet technology platform, which combines the fundamental aspects of customer service and other more comprehensive functions of sales and marketing into a single solution. With e-crm, it eliminates the redundancy of manual work and organizations can now concentrate on expanding their business and market ventures. Ro King (2002), executive vice president of Quaero Corporation, had mentioned e-crm can be defined as the systematic use of information to acquire and retain customers through ongoing dialogue to create long lasting, mutually beneficial relationships between customers and the enterprise. It also defined as a subset of CRM. Technology and customer data, dialog and value are critical to both CRM and e- CRM. The difference lies in the nature of e-crm; it is real time, often via electronic touchpoints where CRM can occur online or offline across any or all customer touchpoints. 11

22 Other definition about e-^crm is the process of acquiring, retaining and growing profitable customers, to understand and anticipate their evolving individual needs and maximize the life-time value of this relationship (Bourdon, 2001). Research firm the Gartner Group defines it as consisting of a selling platform, a communications infi-astructure, and a suite of applications. Infi-astructure can include online chat, outgoing and incoming , and even multicurrency support. And the applications can be geared toward self-service, customer service, or data analytics. In other words, e-crm is a profitability barometer, and the mercury is customer sales. "Effective e-crm means knowing my good customers, my bad ones, and how can I improve service," says Yankee Group analyst Sheryl Kingstone. "It's about customer loyalty, conversion, and retention." Ro King (2002) also said that one of the areas where e-crm has fallen down in the past is in understanding, measuring and monitoring customer value. While the sources of the data needed for value measurement may differ, the skills and techniques used to measure customer value - an understanding of current and future revenues, knowledge of costs associated with customer activities, predictions of customer lifetime and attrition - are the same for online and offline customer value monitoring. 12

23 2.3 Application E-CRM in Retailing There is clear logic to electronic customer relationship management (e-crm) being the central focus for business (Roberts-Witt, 2000). At its most basic level there clearly is nothing more important than a customer. A business that does not consider a customer important should try to do without them for 30 days. A satisfied customer buys more, is more loyal, and more profitable over their lifetime (Anton, 1996). Retailers should be especially interested in customer relationship management (Triversity, 2001). The consumer has been (and will always be) the central focus of their universe. The structure, organization, and business processes of retail have always been (or at least they have always said) focused on the consumer. Retailers should be way ahead of other businesses in understanding the nature and scope of e-crm. e-crm requires that a retailer (business) manages the customer interaction whatever channel the consumer chooses to use; anytime, anywhere anyhow (Feinberg et al, 2000). Agreement on a definition of e-crm is not needed to address more operational issues (for those interested, the different, sometimes opposite definitions of e-crm can be found elsewhere, e.g. Triversity, 2001; Montgomery Research Inc., 2000). Despite the differences in nuance and definition there is general agreement that e-crm is good (although Feinberg and Trotter (2001) discuss some possible negative effects of e-crm). During the past 20 years, the in-store and the telephone (1-800 call centers) contacts have been the primary means of delivering quality CRM. It appears that in the near future companies will rely on the ease and lower costs of E-CRM. Sterne (1996) reports that Sun Microsystems reported saving $1.3 million annually through Web based CRM. An unpublished study at the Center for Customer Driven Quality highlights the potential savings: for one particular retailer the cost of an in-store customer contact was estimated to be $10, the cost of a phone contact $5 and the cost of a Web contact $0.01. (The cost differentials will differ for each retailer but it is certain that whatever the actual numbers there is potential for considerable costs savings in shifting consumers to Web applications and interactions.) 13

24 The shift of consumers to use of the Web for contact is not driven by the fact that companies save money (consumers probably do not care if companies save money unless it has a direct payoff for them). The shifl to Web access is a general evolutionary migration of consumers to the Web for all aspects of retail and business activity because of the Internet becoming more available and consumers gaining more experience and comfort with Web business decisions. Consumers who do not have Web access today will have access tomorrow. Those who have Web access but have never purchased today will try tomorrow. Those who have tried yesterday will do more on the Web tomorrow. It is logical to state that the growth and importance of E-CRM is all but guaranteed (e.g. Reda, 2000). Retailing should, by virtue of the nature of the business (direct customer contact), be at the cutting edge of customer relationship management. To assess the state of E-CRM in retailing we simply evaluate which of the 41 possible E-CRM features are present on retail Web sites identified as the top retailers in their category (an approach used successfully to begin to look at the first stages of Internet integration by retailers by Morganosky (1997)). Stores Magazine (the voice of the National Retail Federation, the leading and largest professional association of retailers) publishes an annual list of the top general retailers, the top specialty retailers, and the top Internet retailers. There is some reason to assume that e-retailers would have more advanced E-CRM applications than traditional retailers. First, one would assume that pure Internet retailers think "e" morefi-equentlyand better than traditional bricks and mortar stores. Second, pure e-retailers have more experience in the "e" space and probably have greater expertise. Indeed, online shoppers have been found to be more satisfied shoppingfi-ompure e-retailers (Infoworid, 2001). In order to implement ecrm successfully, the method taken must be clearly identify. According to Ro King (2002), there are two basic methods for implementing ecrm: comprehensive implementation and targeted implementation. For companies that have a lot of money, comprehensive implementations will work primarily for them. It will include the following steps; an evaluation of any business process which relates to the customer, an evaluation of the firm's customer data structure, an assessment of the firm's technology infrastructure and the development of a comprehensive plan with projects prioritized. 14