THE PROCESS OF PREPARATION AND IMPLEMENTATION OF CRM IN THE COMPANY

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1 Journal of Information, Control and Management Systems, Vol. 6, (2008), No.1 95 THE PROCESS OF PREPARATION AND IMPLEMENTATION OF CRM IN THE COMPANY Viliam LENDEL, Milan KUBINA University of Žilina, Faculty of Management Science and Informatics, Slovak Republic Abstract The last several years saw the rise of CRM as an important business approach. Rather than market to a mass of people or firms, market to each customer individually. In this one-to-one approach, information about a customer is used to frame offers that are more likely to be accepted. This approach is made possible by advances in information technology. This article deals with process of preparation and implementation of CRM in the company. This process consists of four basic stages, which interact with each other. Content of individual stages is specified in an article step by step. Keywords: CRM, CRM information system, process, implementation, preparation, analyse, goals 1 INTRODUCTION Traditional marketing strategies focused on the four Ps (price, product, promotion, and place) to increase market share. The main concern was to increase the volume of transactions between seller and buyer. Volume of transactions is considered a good measure of the performance of marketing strategies and tactics. CRM is a business strategy that goes beyond increasing transaction volume. Its objectives are to increase profitability, revenue, and customer satisfaction. To achieve CRM, a company wide set of tools, technologies, and procedures promote the relationship with the customer to increase sales. Thus, CRM is primarily a strategic business and process issue rather than a technical issue. CRM consists of three components: [6] - Customer, - Relationship and - Management (Figure 1).

2 96 The Process of Preparation and Implementation of CRM in the Company CRM tries to achieve a 'single integrated view of customers' and a 'customer centric approach'. Figure 1 Components of CRM [6] The customer is the only source of the company's present profit and future growth. However, a good customer, who provides more profit with less resource, is always scarce because customers are knowledgeable and the competition is fierce. Sometimes it is difficult to distinguish who is the real customer because the buying decision is frequently a collaborative activity among participants of the decisionmaking process. Information technologies can provide the abilities to distinguish and manage customers. CRM can be thought of as a marketing approach that is based on customer information. The relationship between a company and its customers involves continuous bidirectional communication and interaction. The relationship can be short-term or longterm, continuous or discrete, and repeating or one-time. Relationship can be attitudinal or behavioural. Even though customers have a positive attitude towards the company and its products, their buying behaviour is highly situational. For example, the buying pattern for airline tickets depends on whether a person buys the ticket for their family vacation or a business trip. CRM involves managing this relationship so it is profitable and mutually beneficial. Customer lifetime value (CLV) is a tool for measuring this relationship. CRM is not an activity only within a marketing department. Rather it involves continuous corporate change in culture and processes. The customer information collected is transformed into corporate knowledge that leads to activities that take advantage of the information and of market opportunities. CRM required a comprehensive change in the organization and its people. Specific software to support the management process involves: [6] - Field service, - E-commerce ordering, - Self service applications,

3 Journal of Information, Control and Management Systems, Vol. 6, (2008), No Catalogue management, - Bill presentation, - Marketing programs and analysis applications. All of these techniques, processes and procedures are designed to promote and facilitate the sales and marketing functions. 2 GOALS IN PROCESS OF PREPARATION AND IMPLEMENTATION OF CRM Major cost goals of CRM include increase revenue growth through customer satisfaction, reduce costs of sales and distribution and minimize customer support costs. The following examples illustrate tactics to achieve these goals: [6] 1. To increase revenue growth - Increase share of wallet by cross-selling. 2. To increase customer satisfaction - Make the customer's experience so pleasant that the customer returns to you for the next purchase. 3. To reduce cost of sales and distribution - Target advertising to customers to increase the probability that an offer is accepted, - Use web applications to decrease the number of direct sales people and distribution channels needed, - Manage customer relationships rather than manage products (a change in marketing). 4. To minimize customer support costs - Make information available to customer service representatives so they can answer any query, - Automate the call center so that representatives have direct access to customer history and preferences and therefore can cross-sell. Customer loyalty is, indeed, very difficult to obtain or buy. The CRM approach is customer-centric. This approach focuses on the long-term relationship with the customers by providing the customer benefits and values from the customer's point of view rather than based on what the company wants to sell. The basic questions that CRM tries to answer are: 1. What is the benefit of the customer? 2. How can we add the customer's value? Four basic tasks are required to achieve the basic goals of CRM: [6] 1. Customer Identification

4 98 The Process of Preparation and Implementation of CRM in the Company To serve or provide value to the customer, the company must know or identify the customer through marketing channels, transactions, and interactions over time. 2. Customer Differentiation Each customer has their own lifetime value from the company's point of view and each customer imposes unique demands and requirements for the company. 3. Customer Interaction Customer demands change over time. From a CRM perspective, the customer's long-term profitability and relationship to the company is important. Therefore, the company needs to learn about the customer continually. Keeping track of customer behaviour and needs is an important task of a CRM program. 4. Customization / Personalization Treat each customer uniquely is the motto of the entire CRM process. Through the personalization process, the company can increase customer loyalty. The automation of personalization is being made feasible by information technologies. Figure 2 Relation between CRM and the customer [6] 3 PROCESS OF PREPARATION AND IMPLEMENTATION OF CRM IN THE COMPANY Process of implementation of CRM in the company has four general phases, which are interlock. These general phases are (Figure 3): 1. Conception, 2. Selection, 3. Implementation, 4. Realisation.

5 Journal of Information, Control and Management Systems, Vol. 6, (2008), No.1 99 The first phase is known as conception. This phase informs about necessity of exactly defined criteria and conditions. CRM information system must fulfil this defined criteria and conditions. They are needed in process of selection of effective CRM information system. The third phase is known as implementation. Principal aim of this phase is successful adaptation of software and organizational structure. The phase of implementation finishes with testing and realisation of system in the company. For successful implementation of CRM information system is necessary to have skilled employees. Assurance of regular communication is most important in this phase. Figure 3 Process of implementation of CRM information system Many organizations try to attach a CRM solution to their existing business structures. The worst thing a business can do is to integrate a flawed process into a CRM system, because when automation is added the negative effects of the flawed process increase and the enterprise can unwillingly anger its customers. CRM can speed up all processes, bad and good. [5] Organisations that just replace an existing system with a new one without checking adjusting the old business processes will not improve their customer relationship satisfaction ratings. Therefore, the business structures and processes have to be revised and optimised towards the customers needs. CRM is an opportunity to implement new customer s oriented processes and to eliminate old ones. This is done in four steps. [5] The first step is process description, which consists of three areas. The first area identifies the existing CRM processes and clusters them. The second area is analysing these processes. A well-founded analysis of all CRM processes and structures is the

6 100 The Process of Preparation and Implementation of CRM in the Company basic for any optimisation. Without the exact knowledge of the existing processes, it is useless to start any redesign program. This analysis delivers indicators of which processes have to be changed, improved or eliminated. The second step is process design and focuses on CRM process reengineering. Based on the findings of the first step, the management has to decide which CRM processes need to be changed or created. This includes reviewing, understanding, modifying, documenting and employing the desired business processes, procedures, rules and policies. The processes should be simple to audit and understand. All employees need to have the same understanding of the CRM processes. In addition, the processes need to be flexible for future changes in customer demands. The third step is implementing the redesigned processes. Process implementation is about implementing the process changes according to predefined key performance indicators. The implementation phase consists of a technical and people focussed area. The technical area is about integrating the CRM processes technically and the people area is about gaining commitment from the important stakeholders for these changes. The fourth step is process monitoring. The process-monitoring phase represents a systematic cost and benefit monitoring. The monitoring process checks the process costs and detects when and where key performance indicator deviations occur. Following the "closed loop" principle, further process corrections will be developed and implemented and the monitoring process starts again. The existing customer processes need to be identified analysed and documented. In addition, the new or redesigned CRM processes have to be implemented and monitored. [5] The most important part of the implementation process is the preparation for implementation of CRM information system for a company. There are four general phases of the successful preparation of the company for an implementation of CRM information system procedure and they are interlocked. These general phases are: 1. Effective work with information. 2. Change of organizational structure. 3. Change of thinking. 4. Successful preparation of CRM. Figure 4 depicts the important components of the successful preparation of the company for an implementation of CRM information system procedure. The first phase informs about necessity of effective work with information in process of successful preparation of CRM in organization. Company can achieve this work by realization of following processes: - Accumulation of all valuable information in database, - Arrange for information access, - Apply principles of effective work with information. If company applies principles of effective work with information, it can proceed to the second phase. Principal aim of this phase is successful implementation of change

7 Journal of Information, Control and Management Systems, Vol. 6, (2008), No of organizational structure. If company top management wants to successfully manage these changes, it is necessary for the company to realize following processes: - Creating and interpretation of employees vision of change, - Necessary knowledge assurance to change, - Motivational system upgrade, - Accumulation of financial and personal resources, - Creating of competent action plan. Accumulation of all valuable information in database, Arrange for information access, Apply principles of effective work with information. Creating and interpretation of employees vision of change, Necessary knowledge assurance to change, Motivational system upgrade, Accumulation of financial and personal resources, Creating of competent action plan. Required situation ideal display, Development of individual scenarios, Apply causal process, Effective process control and investing in customer. Knowledge upgrade about products, services and conduct from customer point of view, Identification of all processes related to CRM, Creating own process model of CRM, Phase identification of development processes CRM, in which the company wants to be, Assigning of priority to missing processes of CRM. Effective work with information Change of organizational structure Change of thinking Successful preparation of CRM Figure 4 Process of preparation Realization of change of organizational structure in the company fails. Company must achieve the change of thinking. The companies, which want to succeed, must think about effects of their activities. The company can achieve change of thinking by realization of these processes: - Required situation ideal display, - Development of individual scenarios, - Apply causal process, - Effective process control and investing in customer. Company must principally aim for the needs of people. Investment in customer doesn t always cost marketing and sales. Investment orientation of effects meaning,

8 102 The Process of Preparation and Implementation of CRM in the Company that the company renounce of actual cash flow for account for assurance of future cash flows thanks to good relationships. If a company has achieved effective work with information, a change of organizational structure and a change of thinking, it is prepared for entering the fourth priority phase. In this phase the company builds CRM. For its successful building it is necessary to realize these processes in the company: - Knowledge upgrade about products, services and conduct from customer point of view, - Identification of all processes related to CRM, - Creating own process model of CRM, - Phase identification of development processes CRM, in which the company wants to be, - Assigning of priority to missing processes of CRM. 4 CONCLUSION Excellent CRM system guarantees marketing success. CRM is not a strategy but a tool to help and modify the marketing strategies of a company. Before it achieves a viable CRM system, a company needs the right value propositions and strategies to implement the customer centric philosophy of the CRM. CRM requires more commitment and loyalty by the company to the customer rather than by the customer to the company. Without competitive products and services, a company cannot obtain the benefits of CRM. To use CRM, a company must be organized by customer segments rather than products. Organizational restructuring is expensive, time-consuming, and painful process for a company and the people in the company. Without appropriate coordination with other functions in a company, restructuring is not as effective as expected. For example, channel strategies should be combined with CRM capabilities so a customer does not receive different offers from a company through different channels. [6] Successful CRM requires a large centralized database with complete customer data. Many successful financial companies maintain databases at the product level. By having a smaller database, a company can simplify the system design and maintenance and the customer ownership. Common standards of hardware and software are more important than large databases. CRM requires the most advanced and sophisticated analytical techniques. Clean data is more important and effective than sophisticated analytical tools. Frequently incomplete, inaccurate, and outdated customer information is used. If there is garbage in, the output is also garbage. Future-oriented and hypothesis-based analysis and anticipation are more effective than complex analysis. CRM is a turnkey system. Database, infrastructure, and supporting business processes are required to start CRM programs. However, it is not necessary to set up

9 Journal of Information, Control and Management Systems, Vol. 6, (2008), No everything together. Rather CRM is a 'test, run, test' process. An iterative and incremental approach is cheaper and more effective than turnkey based approach. Lessons from mistakes are important to educate employees about how to use CRM. CRM is a part of complex set of business strategies and processes to serve the customer. REFERENCES [1] CHLEBOVSKÝ, V.: CRM Řízení vztahů se zákazníky. Brno: Computer Press, s. ISBN [2] BURNETT, K.: Klíčoví zákazníci a péče o ně. Praha: Computer Press, s. ISBN [3] DOHNAL, J.: Řízení vztahů se zákazníky. Procesy, pracovníci, technológie. Praha: Grada, s. ISBN [4] CHAPMAN, A.: CRM - principles, strategy, solutions, applications, systems, software, and ideas for effective customer relationship management. Available on internet: [5] BOSSE, S.: A systematic perspective of a CRM solution for businesses Available on internet: [6] GRAY, P. BYUN, J.: Customer relationship management. Center for research of information technology and organizations, University of California Available on internet: repositories.cdlib.org/cgi/viewcontent.cgi?article=1133&context=crito.

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