Incorporated definition of customer relationship management towards successful performance

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1 International Journal of Service Science, Management and Engineering 2014; 1(6): Published online January 20, 2015 ( Incorporated definition of customer relationship management towards successful performance Zahra Ehsani, Noor Hazarina Hashim Faculty of Management, Universiti Technologi Malaysia, Skudai, Johor Bahru, Johor, Malaysia address (Z. Ehsani), (Z. Ehsani) To Cite This Article Zahra Ehsani, Noor Hazarina Hashim. Incorporated Definition of Customer Relationship Management towards Successful Performance. International Journal of Service Science, Management and Engineering. Vol. 1, No. 6, 2014, pp Abstract The definitions of Customer Relationship Management (CRM) have been varied, the inexistence of an agreement definition of CRM leads to unexpected outcomes from the performance of CRM. Hence, this paper attempts to come out with an incorporated definition of CRM from the existing literatures in the fields of marketing, management, and information technology. This definition could provide great help for researchers in the field of CRM. In addition, this incorporated definition of CRM could enhance the successful performance of CRM. Keywords Customer Relationship Management (CRM), Relationship Marketing (RM), CRM towards Successful Performance 1. Introduction CRM was first developed in the middle of 1990s in Information Technology (IT) [1] and become one of the most discussed issues and dynamic topics in marketing fields [2]. CRM is now one of the fastest growing practices in current business environments [3]. In the business world, customers are becoming more challenging, more knowledgeable, and need more attention [4]. Many companies are focused to the customers. As such, the growing importance of customer relationship management (CRM) has become critical [5]. The definition of CRM varies from industries and applications [6].Reviews of the previous CRM literatures in marketing, management, and Information Technology (IT) shows there is no consensus on the meaning of CRM.CRM can be defined to mean different things to different people [6]. There is a little agreement about the meaning of CRM [7]. This little agreement may refer to the different academic backgrounds of the researchers and scholars. CRM is still an emergent perspective and needs more time and studies to reach the consensus and the multidisciplinary nature of CRM with combination of management, marketing, and Information Technology (IT)[8].Therefore, this paper will try to develop an incorporated definition of CRM that could contribute in the successful performance of CRM. 2. CRM and Relationship Marketing Theory The foundation of CRM can be found in Relationship Marketing (RM) [9]. The words relationship marketing and CRM are often used interchangeably [10].The term relationship marketing (RM) was initially proposed by [11, p. 25] who defines it as attracting, maintaining, and enhancing customer relationships. Relationship marketing (RM) is defined as founding relationships with customers and other stakeholders at a profit, by mutual exchange and fulfillment of promises [12]. RM emphasizes a long-term interactive relationship between the provider and the customer, as well as long-term profitability, to allow the co-creation of value rather than its unilateral distribution (e.g. [13], [14]). RM is an important concept for new types of marketing, and the practice of using CRM to handle customer relationships (e.g. [15], [16]. CRM is the values and strategies of RM with special emphasis placed on the relationship between customers and suppliers, turned into practical plans, and dependent on both human actions and technology [16]. The

2 58 Zahra Ehsani and Noor Hazarina Hashim: Incorporated Definition of Customer Relationship Management towards Successful Performance principles of marketing relations help the progression of CRM performance [17]. Although conceptualizations of CRM point out that the relationship between an organization and its customers must be mutually beneficial, "customizing the relationship to the individual customer" remains one of the core elements of practicing relationship marketing [18, p. 236]. Likewise, Relationship marketing theory which was presented in the 1980s by [11], supports the view that a company should follow long-term relationships with customers instead of accepting a short-term business deal oriented approach (e.g. [11], [12], [19]). Long-term relationships with customers are difficult to imitate by competitors. Organization that can nurture and maintain these relationships, can achieve a competitive advantage by using relationship marketing [20]. Hence, create long-term relationship with customer should be part of definition of CRM to achieve competitive advantages. Typically, no distinction is made between CRM and RM in the marketing literature and both play important roles in competitive marketing [10]. The primary concern or focus for both RM and CRM is the longitudinal relationship between customers and company that will achieve mutually beneficial for company and customers [21]. Therefore, according to literature this paper defines CRM based on RM theory to create long-term relationships with customer to achieve profits and competitive advantages. 3. CRM towards the Performance CRM towards the performance is customer-oriented business that focuses on customers instead of focusing on products, sources, and processes [22]. CRM towards the performance is based on the unification of focus on customers in all departments including marketing, sales, production, support, accounting, and it includes additional company structures [23]. CRM towards the performance is an enterprise wide initiative that belongs in all areas of a business [24]. CRM towards the performance refers to the idea that the most effective way to achieve competitive advantage is by proactively seeking to build and maintain long-term relationships with customers [25]. 70% of the CRM projects reported failure to meet their objectives [9]. The success rate to implement CRM is less than 30% [26]. The key documented reason for failure is due to lack of appropriate measure used by companies or organizations to monitor performance of CRM [2]. The appropriate measure of CRM is performance monitoring which defined to be more customer-oriented [9]. While CRM activities have different effects depending on the background of where and when they are performed [21], using appropriate measure may help them to be succeeded. Thus, the role of CRM towards the performance in competitive markets is considerable [5].Successfulperformance of CRM helps companies identify and target their most valuable customers to more effectively and efficiently resources to increase profits and achieve competitive advantages (e.g. [10],[27]). The role of successful performance of CRM in competitive markets is considerable [5]. The successful performance of CRM is important because it enables companies to better understand their customers [28], and enables a company to gather indepth information about its customers and then use this information to adjust its offerings to meet the needs of its customers better than its competition and achieve competitive advantages. 4. CRM Definitions and Content Analyses CRM can be defined to mean different things to different people [6]. Based on the reviewing the literature, the definition of CRM varies from industries and academics. In this paper the content-analysis based methodology is used as a general qualitative research methodology to show that there is no agreement among researchers in defining CRM. Content analysis is a descriptive methodological technique which used and applied in marketing research and produce valuable results (e.g. [29], [30]). Content analysis is an observational research method which is used to systematically estimate the symbolic content of all forms of recorded communications. These communications can be also analyzed at many levels (image, word, roles, etc.), in so doing creating a realm of research opportunities. From this viewpoint, this study considers the CRM literatures as the communications and level of analysis is by the (a) Industries viewpoints, and (b) Academic s perspectives of CRM definitions. (a) CRM can be defined from the industries viewpoints; company, management, and customer (e.g. [31], [32], [33], [34]). From a company s viewpoint, CRM avoids wasting marketing money on useless marketing programs and enables them to decrease sales inventory costs through better forecasting [35]. CRM helps companies obtain information about their customers and to use this information to meet the needs of their customers [17]. From a managerial viewpoint, CRM is a management approach that enables organizations to identify, attract, and retain profitable customers by managing relationships with them [31]. From a customer s view point, CRM is a customer-oriented business model that allows company operations to revolve around the requirements of the customers [22]. According to [36], CRM involves using individual customer information to improve company profitability and customer service. According to this viewpoint, CRM is an application of one-to-one and relationship marketing, responding to each individual customer on the basis of what that customer says while considering any other information pertaining to that customer (e.g. [5], [22]). Therefore, based on the different viewpoints definitions it can be concluded that the company s viewpoint focuses on customers information as a source of knowledge for a company. The managerial viewpoint focuses on maintaining customers relationship. The customer viewpoint focuses on individual customer needs and wants. This article focuses on CRM based a customer viewpoint to understand

3 International Journal of Service Science, Management and Engineering 2014; 1(6): individual customers in terms of what they require in order to improve company profitability and customer service. Table 1.1. Summary of the industries viewpoints of CRM definitions Author(s) Elliott, 1997 Crowder et al., 2001 Kim et al., 2010 Abele, 2008 Tamilarasan, 2011 Hobby, 1999 Gray and Byun, 2001 Verma and Chaudhur, 2009 Petrissons, Blattberg, and Wang, 1997 Couldwell, 1999 Peppers, Rogers, and Dorf, 1999 Company viewpoint Managerial viewpoint Customer viewpoint The definitions of CRM are given based on three different industries viewpoints; (i) company viewpoint, (ii) managerial viewpoint, and (iii) customer viewpoint (e.g. [31], [32]). And so, the element of analysis is based on three viewpoints including company, managerial, and customer. These viewpoints represent the criterion for classifying definitions of CRM towards the successful performance. The sample of this study is based on 11 definitions of CRM which are collected based on this criterion and selected from different CRM literatures in IT, management, and marketing. A summary of the analysis of these definitions is provided in Table 1.1. The percentage of the industries viewpoints of CRM definition shown in Table 1.2 as follow: Table 1.2. The percentage of the industries viewpoints of CRM definition Industries viewpoint Percentage Company viewpoint (5) 46% Managerial viewpoint (3) 27% Customer viewpoint (3) 27% Table 1.3. Summary of the academics perspectives of CRM definitions The analysis shows about half of the definitions is indicated for focusing on the CRM as a company viewpoint while 27% of the definitions are associated for CRM as a managerial viewpoint and 27% customer viewpoint. These results show there is an agreement among researchers in defining CRM from company viewpoint. Companies that adopt this viewpoint to use CRM are called product-centric. While, if companies wish to achieve competitive advantages, they must be customer-centric. Companies which are customer-centric, focus on customer to understand their requirements for products by providing high-quality, responsive customer service. Author(s) Philosophy Strategy Technology Comed of all three perspectives Ryals and Knox (2001) Newell ( 2003) Zablah et al. (2004b) Huang and Wang (2009) Croteau and Li (2003) Gupta and Lehmann (2003) Swift (2001) Zikmund et al.(2004) Ryals (2005) Payne (2006) Parvatiyar and Sheth (2001) Liou (2009) Karakostas et al. (2005) Tarokh and Ghahremanloo (2007) Bose (2002) Peppers and Rogers (2004) Campbell (2003) Hsieh (2009) Urbanskienė et al. (2008) Payne and Frow (2006) Hung et al. (2010) Lun et al. (2008) Ryals and Knox (2001) Newell ( 2003) Zablah et al. (2004b) Lun et al. (2008), Pedron and Saccol (2009), Rababah et al. (2011) (a) CRM can be defined from the academics perspectives; philosophy, strategy, and technology (e.g. [2], [37]). Few researcher has provided descriptions for the links between these three perspectives (e.g. [2], [8], [33]). As a business philosophy, CRM places the customer at the center of the organization in order to develop a close relationship with the customer and enable the organization to realize, define, and even forecast, the needs of its customers [38]. As a business strategy, CRM is an approach that connects every part of a business that interfaces with customers [39]. CRM is a

4 60 Zahra Ehsani and Noor Hazarina Hashim: Incorporated Definition of Customer Relationship Management towards Successful Performance strategy used to learn more about the needs and behaviors of customers' in order to develop stronger relationships [40]. As a technology, CRM focuses on obtaining and keeping customers, creating long-term business strategies, implementing CRM processes, and increasing profits [41]. CRM is often used to explain technology based customer solutions [42]. Generally, technology is defined as one of the key enabling or supporting factors in CRM, but by itself it does not constitute CRM [5]. Technology-based customer performance approaches, such as customer relationship management (CRM), attempt to increase customer relationships through improved comprehension of customer behaviors [43]. CRM influence many parts of a business, so it has been suggested that organizations should adopt a link between these three perspectives that puts CRM at the center of the organization by adopting customer orientated business processes, and integrating CRM systems [2]. A few studies define CRM through its relationships with business philosophies and strategies, and as a technology. Based on reviewing, there is no common definition of CRM. Typically, researches defined CRM based on three perspectives which represent the criterion for categorizing CRM definitions according to research done in the field of IT, management, and marketing (Table 1.3). The definitions of CRM are given based on four different academic s perspectives, (i) a philosophy, (ii) a strategy, (iii) a technology, and (vi) combined of all three perspectives. Hence, the element of analysis is based on four perspectives including philosophy, strategy, technology, and combined of three perspectives. These perspectives represent the criterion for classifying definitions of CRM towards the successful performance. The sample of this study is 26definitions of CRM which are collected based on this criterion and selected from different CRM literatures in IT, management, and marketing. A summary of the analysis of these definitions is provided in Table 1.3. Table 1.4. The percentage of the perspectives of CRM definition Perspectives Philosophy (7) 27% Strategy (10) 38% Technology (5) 19% Strategy + Technology (2) 8% Philosophy + Strategy + Technology (2) 8% Percentage As the result, the analysis shows most of the definitions is indicated for CRM as a strategy of doing business while 27% of the definitions are associated for CRM as a philosophy and 19% as a technology. These results show that there is an agreement among researchers in defining CRM as a strategy. On the other hand, two definitions pointed out that CRM is a strategy enabled by technology. Only three definitions combined all three perspectives. [33] stated that "CRM is the philosophy, policy and coordinating strategy mediated by a set of information technologies, which focuses on creating two way communications with customers so that firms have an intimate knowledge of their requirements and buying patterns". [2] claimed that "CRM as a philosophy is the background for any strategy and IT application" where the goal is to develop strategies that will influence IT applications for CRM. [8]suggested CRM be defined as the building of a customer-oriented culture by which a strategy is created for acquiring, enhancing the profitability of, and retaining customers, that is enabled by an IT application; for achieving mutual benefits for both the organization and the customers. These three explanations are very useful for the development of a general and unified definition of CRM. 5. Incorporated Definition of CRM toward Successful Performance This paper acknowledges that although there are different definitions of CRM based different the academics perspectives, the main focus of most definitions is on customer orientation and managing the relationship between customers and the company in different ways. The philosophy approach is the basic definition of CRM and it is focused on the customer and customer s ability to benefit for both customer and company. The strategy approach focuses on the needs and behaviors of customers. The technology approach focuses on obtaining and keeping long-term customers. Figure 1.1 shows the customer, relationship, and management entities of CRM. Figure 1.1. The entities of Customer Relationship Management The first entity states that the customer is the sole source of guaranteed future income for a company [44]. According to this viewpoint, CRM is an approach which is based on customer information, and provides the possibility of detecting and managing customer information [45]. CRM helps recognize the most profitable customers using the CRM system and then places these customers at the center of the organization [46]. As shown above, CRM is first and foremost a strategy and business philosophy which positions the customer at the center of the organization to increase profits by improving customer value [47]. Second entity shown in Figure 1.1 focuses on the relationship between the company and its customers. The relationship can be for a long or a short-time, continuous or discrete, repeated or a one-time event (e.g. [48], [49]). According to [35], CRM is an essential tool for a company that wishes to create longterm and profitable relationships with customers. Third entity

5 International Journal of Service Science, Management and Engineering 2014; 1(6): from Figure 1.1 explains that many companies need investment in their infrastructure. Companies must make large investments in the management of customer relations [44]. The management entity allows the company to control the complicated relationships with their customers and with other vendors. Managers have found that enhanced customer relations bring benefits such as of profitability and sustainable income growth [44]. Managers are also influential in the approval and control of costs, setting performance goal, and monitoring performance [50]. In the other words, management plays a main role in controlling customer information with use of technology and making strategic decisions for a company [48]. As a result, although complete definition of CRM is combined of three perspectives but there is no common definition or an agreement between researchers when it comes to define CRM. This paper states that complete definition of CRM can be combined of three perspectives by focusing on customer to better understand customer s requirement and keeping long-term relationship with customer. This incorporated definition may help the companies to better understand CRM and enhance the successful CRM performance to increase company s profits and achieve competitive advantage. Hence, this paper suggests CRM be defined as CRM is the philosophy which focuses on customer s requirements and strategy mediated by a set of information technologies to create long-term relationship with customer to increase company s profits and achieve competitive advantages. 6. Conclusion This paper aims to come out with an incorporated definition of CRM toward successful performance that could be useful for companies to achieve competitive advantages. 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