PLANNING FOR SUCCESS WITH CUSTOMER RELATIONSHIP MANAGEMENT SYSTEM (CRM) IMPLEMENTATIONS

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1 PLANNING FOR SUCCESS WITH CUSTOMER RELATIONSHIP MAGEMENT SYSTEM (CRM) IMPLEMENTATIONS Mahesh S. Raisinghani, Associate Professor IS & Global, Texas Woman s University, School of Management, Denton, TX Reginald Leseane, Associate Dean/ Professor, Savannah State University, College of Business Administration, 3219 College St, Savannah, GA Anshu Arora, Assistant Professor Marketing, Savannah State University, College of Business Administration, 3219 College St, Savannah, GA Karstan L. Jack, Texas Woman s University, School of Management, Denton, TX Abstract According to the IT research group, Gartner Group, Customer Relationship Management (CRM) is emerging as a top priority for today s businesses. Building and maintaining a solid working relationship with customers is essential to long-term business survival. Today s businesses implement CRM initiatives within strategic plans to fully understand, satisfy and maintain customers. Companies failing to implement CRM initiatives could face declining market shares. Today s competitive businesses protect customer data as a valuable asset and develop information systems to manage and share customer data throughout all levels of the organization; ensuring customer focus is prevalent everywhere. Because customer data is vital to all organizations, taking the time to properly plan CRM implementations is critical. This research paper examines best practices and strategies for project teams in designing and implementing CRM systems for today s businesses. 1

2 INTRODUCTION Customer based decisions are at the center of business survival and evaluation in all competitive consumer markets. Focusing attention on the details associated with attraction and retention of customers is more important now than ever. Rosenbert & Czepiel (1984) estimated that the cost of winning a new customer is five times higher than that of maintaining an existing customer. We must assume this statistic has increased over the last 25 years due to the explosion on ecommerce and online purchases and the international market place. Reichhel & Sasser (1990) estimate the retention of an additional 5% of customers can increase profit by nearly 100%. Research proves spending dollars on maintaining customer relationships is cost effective and should become a key aspect of business strategies, prompting Customer Relationship Management implementations (Morgan & Hung, 1994; Kim, 2003). CRM systems attempt to maximize customer value and loyalty in the long term, by focusing business processes, marketing and customer service on client relationship maintenance within an information technology system. CRM implementations are not cure-all solutions capable of transforming production-oriented organizations into customer-oriented organizations (Chen & Popovich, 2003). Interest in CRM started to boom in the 1990s (Ling & Yen 2001) when firms began to recognize the value of establishing information systems that support a two way exchange between customers so that firms could address intimate knowledge of their needs, wants, and study buying habits. Enhancing customer relationships can lead to greater loyalty, retention, and profits for organizations. AN OVERVIEW OF CUSTOMER RELATIONSHIP MAGEMENT From the 1950s and 1960s business were consumed with producing goods and services to satisfy growing demand and using marketing techniques to capture customers entering the market place (Brooks & Palmer, 2004). In today s market place, businesses are competing in a very different manner. Marketing (product, price, place, and promotion) alone is no longer sufficient to maintain customer loyalty (Denison & McDonald, 1995). Relationship marketing was established to assist in building unique 2

3 relationships with customers and assist in adding more value to goods and services than traditional product, price, place, promotion marketing would allow. Relationship marketing is about building long-term relationships, reflecting a transaction-relationship continuum (Webster, 1992). There are various definitions for Customer Relationship Management. One author defines it as a set of business processes and overall policies designed to capture, retain and provide service to customers (Scott, 2001). Another author defines CRM as a coherent and complete set of processes and technologies for managing relationships with current and potential customers and associates of the company, using the marketing, sales and service departments, regardless of the channel of communication (Chen and Popovich, 2003). Research shows CRM definitions could be defined into two categories, strategic or operational. In general, CRM is a broad term for managing a business interactions with its customers. Effective CRM is about acquiring, analyzing and sharing knowledge about customers. Total CRM covers one s direct business contracts with customers, channels partners indirect contacts with customers and customers contract management in the supply chain. More importantly, it allows a business to focus and target on the customer directly. CRM is a highly fragmented environment and has to come to mean different things to different people (McKie, 2000). For some organizations, CRM means direct s with customers, for others, it is mass customization or developing products that fit individual customer s needs. For IT consultants, CRM typically translates into IT terminology related to databases and concepts like on-line analytical processing and customer interaction centers. One concept of CRM is the utilization of customer related information or knowledge to deliver relevant products or services (Levine, 2000). While CRM definitions are wide ranged, they tend to offer a narrow insight into the goals, basic characteristics and the overall intent for a CRM system. As CRM continues to evolve, its definitions will continue to evolve along with it. Light (2001) believes that CRM evolves from business processes such as relationship marketing and then increases emphasis on improved customer retention through the effective management. This remainder of this research paper defines CRM as a strategic approach that integrates processes, people, and technology to understand an organization s customers, 3

4 improve stakeholder value, and deliver profitable and long-term relationships with customers. Components to CRM Systems CRM consists of three major components: Technology, People, and Business Processes. Technology refers to computing capabilities that allow organizations to collect, analyze, trend, organize, save, and process data about its customers. Information technology based systems enable CRM systems to achieve their objectives of collecting, classifying, saving and processing valuable data on customers. Integrating information based technology systems allows organizations to develop better relationships with customers by providing a wider view of the customer behavior (Thompson 2006); ultimately increasing the quality of customer service organizations provide. Effective CRM systems demand organizations to integrate IT resources to improve the capabilities of understanding customer behavior, develop predictive models about the customer, build effective communications with customers and respond to those customers with real time and accurate information (Chen and Popvich 2003). Employees and customers are a key factor for successful CRM projects. CRM is built around customers to manage beneficial relationships through acquiring information on different aspects of customers. The primary objective of CRM is to translate the customer information into customized products and services that meet the changing needs of customers in order to achieve their loyalty. A full commitment of the organization s staff and management is critical for an effective CRM implementation to best serve customers and satisfy their needs. CRM is a business strategy that has its philosophical basis in relationship marketing (Chen and Popovich 2003). CRM success requires tailoring business processes around the customer. All business processes that involve both direct and indirect interaction with customers should be analyzed and assessed (Mendoza 2007). An effective CRM system has an organization-wide impact and requires processes that directly interact with customers be dealt with as a priority when integrating and automating business processes. The main business processes that should be addressed in CRM implementation are marketing, sales, and services. 4

5 WHY CRM IMPLEMENTATIONS FAIL CRM systems fail to meet their business objectives for several reasons. Some reasons are inevitable, however many can be avoided (Payne, 2004). On average, CRM failure is caused by the complexity of technical and organizational issues that are associated with CRM implementation (Goodue 2002). Research indicates the primary reasons CRM implementations fail are for the following: lack of senior management support, failure to align internal customer processes, failure to link CRM initiatives to the organization s higher-level strategies, failure to focus on CRM ROI. Chalmeta (2006) has identified the following factors for CRM failure: Thinking of CRM as a pure technology Lack of upper management support Lack of customer-centric vision Lack of readiness process Poor quality data Lack of change management Lack of vision and strategy Lack of involving the end user in designing the CRM system Failing to re-engineer business processes Underestimating difficulties with data mining and data integration Forsyth (2001) argues the primary causes of CRM implementation failures are related to the following: Organizational Change (29%) Company polices/inertia (22%) Little understanding of CRM (20%) Poor CRM Skills (6%) Research indicts the overwhelming reason why CRM implementations fail is due to lack of senior management support and failure to develop a CRM strategic plan. Rigby (2002) highlights four objectives for CRM implementations that must be overcome: Implementing CRM prior to developing a customer strategy, rolling out CRM before 5

6 changing an organization to align with the new or existing business processes, assuming that more CRM technology is better. However, other factors such as lack of focus on human/social dynamics (employee and customers) were the main problems behind CRM implementations researched by King and Burgess (2007). Additional key misconceptions made by organizations that have been identified to lead to CRM implementation failures are the assuming CRM is equal to customer acquisition / customer satisfaction is equal to customer loyalty and focusing only on profitable customers. Figure (1) displays a graph from ARM Research that details percentages of CRM implementations that failed to go live from Figure 1: CRM Implementation Failures 6

7 PLANNING FOR SUCCESS Much research has been conducted to indentify critical factors leading to CRM implementation success. Table (1) lists key factors leading to CRM success from various researchers. Kings & Burgess (2007) Top Management Support Communication of CRM Strategy KM Capabilities Willingness to Change Processes Willingness to share data Technological Readiness Cultural change customer orientation Systems integration capabilities Chalmeta (2005) Awareness among management Defining vision and objectives Creation of committee Official appointment of coordinates Development and approval of the project plan Monitoring to control time slippage Prevent resistance to change Motivate Staff TABLE 1: CRM Success Factors Mendoza (2005) Senior management commitment Clearly defined objectives Interdepartmental Integration Communication of CRM strategy to the staff Staff Commitment Customer Service Sales Automation Marketing Automation Chen &Chen (2004) Champion Leadership and internal marketing Business-It alignment System Integration Ease of Culture / structure change KM Capabilities Siebel (2004) Clear communication of Strategy Back office integration Software Customization A successful implementation begins with senior executives supporting the CRM project. Employees are most likely not going to support CRM initiatives if senior executives and upper management echelons are not pushing them. Many times the success of a CRM implementation is the result of a senior manager who realizes the value of the project, understands the problems it will solve and is willing to dedicate time and energy to its success (Beasty, 2005). 7

8 A second key to ensuring CRM implementation success and ensuring organizations obtain the most value from a CRM system is to align departmental strategies with CRM objectives. Each department within the organization has its own requirements and goals. However, all departments should communicate a consistent message highlighting customer touch-points. Customer touch-points within each departmental section should be identified, reviewed and integrated into CRM initiates to ensure the organization, enterprise system and customer are aligned and in sync. CRM requires a customercentric attitude (Lipka 2006). Unless you are selling a cheap commodity to a nameless customer, the quality of your relationship with the customer will do more to improve or destroy your business than anything else you do (Lipka p. 95). Along with aligning customer touch-points it is also critical customer data be scrubbed for accuracy. Behavioral data is the lifeblood of CRM systems (Beasty, 2005). Beasty, 2005 explains how many organizations overspend on CRM technology implementations without ever gaining an accurate view of their current customer data maintained within the organization first. Customer data must first be consolidated into a centralized data repository and cleansed of duplicates and anomalies. Organizations must then ensure data is accurate and distributed across all customer touch-points. Best practice CRM implementations standardize all organizational databases to ensure customer data is presented accurately and formalized throughout the entire organization. Running multiple independent databases containing customer data leads to a lack of data integrity and increased data duplication; resulting in data anomalies. A final key to CRM implementation success is to plan for training during the early stages of a CRM initiative. Training is often considered the last component of a CRM implementation and typically receives the least amount of funding for a CRM project (Beasty, 2005). The earlier users are trained on the new CRM system and business processes, the faster they adapt to new business processes and the quicker they realize the benefits of the application. It is also considered a best practice to develop training curriculums that mirror the business processes of each department. 8

9 CONCLUSION In today s competitive market, organizations must focus on maintaining customs and increasing quality of customer service and care more than ever. Customer Relationship Management information systems focus on technology, people, and processes to assist organizations in increasing their quality of customer service. CRM systems are not plug and play software packages that organizations purchase commercial off the shelf. A successful CRM implementation begins with a strategic plan that aligns organizations goals and objectives with CRM initiatives. Senior management within the organization must be involved in planning and supporting CRM implementations to ensure success. Organizations must create a customer centric work environment first, align customer details within each department second, and map customer related business processes to CRM initiatives to ensure implementations add the most value for the organization. It is critical organizations scrub all customer data within the organization prior to implementing a CRM system. Taking the time to plan, design, and implement a customer relationship management system is believed to increase customer loyalty, retention, and profits for organizations. REFERENCES Beasty, C. (2005), 11 Ways to Ensure CRM Success, CRM Magazine, December Brooks, R. and Palmer, R. A. (2004), The new global marketing reality, Basingstoke Palgrave. Chalmeta R. (2006), Methodology for customer relationship management, The Journal for Systems and Software, 79: Chen, J. S. & Popovich, K (2003), Understanding CRM: people, process, technology, Business Process Management Journal, 9(5), pp Denison, T. and McDonald, M. (1995), The role of marketing: Past, present and future, Journal of Marketing Practice, 1(1), pp Goodhue, D (2002), Realizing business benefits through CRM: Hitting the right target in the right way. MIS quarterly Executive 1(2): King, S. & Burgess T. (2007), Understanding success and failure in customer relationship management, Industrial Marketing Management, Levine, S. (2000), The Rise of CRM, America s Network, 104(6), p. 34. Light, B (2003), CRM packages software: A study of organizational experiences, Business Process Management Journal, 9(5) pp

10 Ling, R. and Yen, D.C. (2001), Customer relationship management: an analysis framework and implementation strategies, Journal of Computer Information Systems, 41(3), pp Lipka, S. (2006), Twelve steps to CRM without eating an elephant, Handbook of Business Strategy, 2006 pp McKie, S. (2000), Customer role management, Planet IT, 13 April. Mendoza, L (2007), Critical success factors for a customer strategy, Information Software Technology, 49: Payne A. (2005), A Strategic Framework for Customer Relationship Management, Journal of Marketing Management, 22: Reichhel, F. F. & Sasser, W. E. (1990), Quality comes to services, Harvard Business Review, 68, pp Rigby, D. (2002), Avoid the Four Perils of CRM. Harvard Business Review, February, Rosenberg, L. J. & Czepiel, J. A. (1984), A marketing approach to customer retention, Journal of Customer Marketing pp Scott, D. (2001), Understanding Organizational Evolution: Its impacts on management and performance, Quorum Books. Siebel Systems (2004), Critical Success Factors for Phased CRM Implementations. Siebel white papers, Thompson S.H. Teo, Paul Devadoss, Shan L. Pan (2006) Towards a holistic perspective of customer relationship management implementation, Decision Support Systems, 42: Webster Jr. F. E. (1992), The changing role of marketing in the corporation, Journal of Marketing, 56(4) pp