IMPLEMENTING ELECTRONIC CUSTOMER RELATIONSHIP MANAGEMENT SYSTEM

SWEDISH SCHOOL OF ECONOMICS AND BUSINESS ADMINISTRATION RESEARCH METHODOLOGY IMPLEMENTING ELECTRONIC CUSTOMER RELATIONSHIP MANAGEMENT SYSTEM TERM PAPER 14.5.2007 SARI MERINEN

2 TABLE OF CONTENTS 1 Introduction...3 2 Literature review...5 2.1 Introduction to the chapter...5 2.2 Research papers...5 2.2.1 Success factors...5 2.2.2 Design decisions...6 2.2.3 Corporate Culture...7 2.2.4 Usability and resistance...8 2.2.5 Customer knowledge...8 2.2.6 Case Study in a Greek bank...9 3 Summary and Conclusion... 10 4 References... 12

3 1 Introduction It is far more expensive to acquire new customers than it is to retain existing customers. Instead of treating all customers equally, it is more effective for companies to invest in customers that are valuable or potentially valuable, while limiting their investments in non valuable customers. They expect to be served according to their individual and unique needs. Companies need to develop and manage their relationships with their clientele, because those relationships are profitable and create loyal customers. (Cunningham 2006). Customer Relationship Management (CRM) includes all kind of interaction a company has with its customers, such as the strategies, processes, people and technologies in order to attract and maintain customers for maximum corporate growth and profit.(indiaweb) CRM can mean either relationship marketing or customer management depending on the connection. CRM collects, stores and analyzes customer information, like demographics and future needs, with the help of methodologies, software, and usually Internet capabilities. (balancedscorecard). Computers have changed the way companies are approaching their CRM strategies because it has also changed consumer buying behavior. CRM means also an enterprisewide integration of technologies working together such as data warehouse, Web site, intranet/extranet, call centers, accounting, sales, marketing and production. It has many similarities with ERP, but CRM is more like a front office tool and CRM usually requires access to the back office data often through an ERP system. (Indiaweb) Although CRM has become widely recognized as an important business approach there is not yet any universally accepted definition of CRM, therefore it can be broadly divided into four aspects: 1. Analytical CRM is used to segment customers effectively and over products and services that better fit their buying profiles. 2. Operational CRM personalizes the relationship with the customer, and broadens the organizational response to the customer s needs.

4 3. Collaborative CRM offers knowledge and tools to everyone in the extended enterprise and helps drive sales through every channel from call centre to the web. 4. ecrm allows customer information to be available at all touch points within the company and among external business partners through the internet. (Xu 2005) Electronic customer relationship management (ecrm), a sales force automation tool, is becoming increasingly important as organizations seek to deliver their services and information as well as to provide transactional facilities via online and wireless platforms, in additional to the more traditional means of communication channels. ecrm is actually a combination of hardware software, processes, applications and management commitment. (Fjermestad 2003). It has the power of mass customization of customers. It is seen more as a strategy than a software, because it includes the change of organizational culture, business processes, technological infrastructure and employee behaviors with customers.(chen 2004). After the year 2001 CRM was not as attractive anymore as before, because of failures in CRM implementations. Those high failure rates posed questions about how CRM projects are managed and especially what cultural preconditions are required for implementing CRM successfully. Cultural aspect became important in determining success or failure in CRM implementations. (Bentum 2006). But as was mentioned before customer relationship management can be understood differently depending on the need of the company. The aim of this literature review is to find different aspects of electronic Customer Relationship Management system implementation research. This is done by using ABI/Inform (ProQuest) and Business Source Complete to retrieve scientific articles. The keyword customer relationship management and customer relationship management, implementation were used to look for the articles. The research papers of CRM falls into several categories, such as marketing, sales, service and support, IT and general. In this literature review I have concentrated on the papers that deals with the development and implementation of ecrm. Most of the papers selected have been published in management and IT journals one in financial marketing. Thus the majority of the research papers written about CRM are published in

5 management journals. Short summaries of each of the six scientific articles in this literature review are presented and finally a summary and conclusion of all the papers are drawn. 2 Literature review 2.1 Introduction to the chapter In this chapter six scientific papers are shortly presented to create a picture of the various kind of research that has been made about electronic Customer Relationship Management system implementation. 2.2 Research papers 2.2.1 Success factors Chen Qimei, Chen Hong Mei. Exploring the success factors of ecrm strategies in practice (2004). Journal of Database Marketing & Customer Strategy Management. Vol.11, Iss. 4; pg. 333 This paper tries to find such success factors, that explains if the CRM will survive or not by exploring the current adoption practices in ecrm implementations. The main point is to find out the Critical Success Factors (CSFs) of ecrm from the managers point of view. By utilizing the concept of net benefit IS Success Model it aims to help to understand what net benefits companies have realised in practice of ecrm implementation. The research questions were: What are companies strategic intents in adopting ecrm? What are the net benefits realised by companies across industries? What are the common ecrm critical success factors recognised by companies across industries? Both qualitative and quantitative research methods were used in this empirical study. The data was collected from 180 companies from 12 different industries with 15 companies from each industry by conducting 36 in depth interviews. After that an ecrm survival model is introduced to assist companies in ecrm strategy implementation. For companies that already had implemented ecrm system, the model works as a diagnostic tool. Tangible as well as intangible benefits from implementing ecrm were found Six major success factors of ecrm were identified, with 2 5 subfactors. The six CSFs are champion leadership, internal marketing, knowledge

6 management, business IT alignment, system integration and cultural/structure change. System integration and knowledge management were the most frequently mentioned CFSs. Furthermore managers regard ecrm as very important for achieving business success. The results show that the strategic intents of ecrm are for large companies taking better care of customers, for medium sized companies an efficient communication and for small sized companies a marketplace to meet more consumers. 2.2.2 Design decisions Cunningham Colleen, Song Il Yeol, Chen Peter P. (2006). Data Warehouse Design to Support Customer Relationship Management Analyses. Journal of Database Management. 62 84, April June 2006, pg. 62 This paper is a part of a long term study to examine CRM factors that affect design decisions for CRM data warehouses and on the ground of it to build taxonomy of CRM analyses. A multidimensional model, which is built in this research, supports CRM analysis and consists of a profitability fact table, a future fact table, a customer service fact table and various dimensions. The model is then tested with an experiment using the following hypothesis as a base: the proposed data warehouse starter model has a positive impact on the ability to perform CRM analysis. Two new measures are introduced: percent success ratio and CRM suitability ratio. Then a case study using data from a manufacturing company is used to validate the proposed model. A series of CRM queries are executed against the proposed data warehouse schema and a success rate of the schema are computed. The queries are selected by random sampling. The taxonomy of this paper would serve as a guideline for companies in the selection and evaluation of CRM data warehouses and related technologies. The proposed CRM data warehouse model can be used to perform various CRM profitability analyses. It can also analyze both trends and overall lifetime value of customers, markets, channels and products. And the results of the model are easy for the user to understand. By utilizing a data warehouse, companies can make decisions about customer specific strategies.

7 2.2.3 Corporate Culture Van Bentum Ralph, Stone Merlin (2005). Customer relationship management and the impact of corporate culture A European study. Journal of Database Marketing & Customer Strategy Management. Vol 13, Iss 1; pg 28 The aim of this paper is to find out if there is a dependency between CRM implementation and culture. A model was created on the basis of a literature review and the following hypothesis were tested: H1: the higher the solidarity index the higher the customer orientation, H2: In order for an organization s CRM efforts to it become or stay customer oriented it should have mainly a network culture, H3: The higher the solidarity index the higher the learning orientation, H4: In order for an organization s CRM efforts to make it become or stay as a learning organization it should have mainly a network culture, H5: The higher the solidarity index the higher the CRM project orientation, H6: In order for an organization s CRM efforts to develop or maintain a CRM project culture it should have mainly a mercenary occupational sub culture, H7: The higher the solidarity index the higher the organizational climate factors, H8: In order for an organization s CRM efforts to become or stay CRM oriented it should have mainly a communal culture. For this research such organizations were selected that were entered into or were going to enter into a CRM project and the individuals in each organization were selected as a quasi random sample. The distribution of the online questionnaire was done by the primary contacts in the respective organizations. The results of the questionnaire were analyzed using several statistical methods. From the tested hypothesis it was found that climate factors correlate directly with a communal culture form. The paper presents also a model of CRM culture building elements, which shows the tight connection between customer orientation and learning and the relationship between organizational climate and the respective occupational sub cultures. An organizational assessment is provided by this paper to help identify where the organization is positioned. The following findings apply irrespective of industry sector. The main conclusions are that without an appropriate cultural foundation, CRM will not succeed and there is not only one way to CRM success. No single CRM culture exists. A holistic culture for

8 CRM requires a sophisticated approach to integrating a variety of sub cultures. Evolving a CRM culture is a continuous leadership task on all organizational levels. 2.2.4 Usability and resistance Fjermestad Jerry, Romano Jr. C Nicholas. Electronic customer relationship management: Revisiting the general principles of usability and resistance an integrative implementation framework. (2003) Business Process Management Journal. Vol. 9, Iss 5, pg 572 The aim of this paper is to review the general usability and resistance principles in order to build a framework for analyzing ecrm case studies. This paper empirically analyzes secondary data from 13 case studies published in three business press magazines and one academic journal in the context of the basic usability and resistance principles. After that two separate analysis were conducted; on the cases that achieved limited success and on the successful implementation cases. This ecrm framework provides a guideline for system designers and the corresponding management team to improve usability and reduce resistance. These two strategies go hand in hand. This study emphasizes the need for organizations designing and implementing ecrm systems to review and apply the principles of usability and resistance. Based on the observations in the study an organization needs to focus on the users and their needs and on the overall strategy it has for implementing an ecrm system if it is to be successful. The organizations with limited success in implementing ecrm did not realize the effect of people on success of the system. 2.2.5 Customer knowledge Xu Mark, Walton John (2005). Gaining customer knowledge through analytical CRM. Industrial Management + Data Systems. Vol 105, Iss 7, pg. 955 The aim of this paper is to find out how the knowledge that customers have can be acquired and how an analytical CRM system can be developed in order to use that information. The information needed is: who the customers are, how they behave and what pattern they follow. It explores how a company can use their CRM to get access to customer information and deliver it to internal and external users. 20 CRM systems were selected in order to evaluate the analytical function of CRM software. A model of an analytical CRM system for customer knowledge acquisition is created. The CRM systems are then evaluated based on the demo systems and the

9 additional information available from the company s brochures, web site and other literature. The model provides guidance to CRM vendors to develop more analytical solutions for customer knowledge acquisition. The research gives guidance for the IT industry as how an analytical CRM system should be developed to support customer knowledge management. The research shows that the majority of the CRM systems in use have operational functions. 40% have analytical functions. The success of implementing of a CRM system, which has the ability to gain customer knowledge, relies on senior managers awareness and support. Furthermore organizational changes are required to create a knowledge centric organization. So far, organizations have not benefited from using analytical CRM to gain customer knowledge. 2.2.6 Case Study in a Greek bank Blery Evangelia, Michalakopoulos Michalis (2006). Customer relationship management: A case study of a Greek bank. Journal of Financial Services Marketing. 11, 116 124 This is a single descriptive case study of a Greek bank that has implemented CRM. The aim of the study is to analyze the design and implementation of CRM in the bank, identify the benefits, the problems as well as the success and failure factors of the implementation in order to develop a better understanding of CRM impact on banking competitiveness and provide a greater understanding of what constitutes good CRM practises. The empirical data are used to compare with the existing literature in order to find out similarities or dissimilarities of existing knowledge about CRM and if this could be used as good CRM practice. Two types of sampling methods were used: snowball sampling and maximum variation sampling. The eight in depth interviews were conducted with the bank s executives based on a questionnaire about CRM. Secondary data was collected from press articles, the bank s leaflets, newsletters and monthly reports and the bank s Web page. The summation of the responses was based on a qualitative content analysis method.

10 The benefits the bank received from implementing CRM were: reduced costs, decreased complexity and improved operations. The technological benefits were: easier architecture as far as the maintenance and the supporting operations are concerned a platform able to support future new applications and a platform costing less than those of competitors. The results were categorized according to the points of interest of this research. The interviewees stated that effective project management, realistic time scheduling, perfect programming and not exceeding the budget are critical success factors for CRM implementation. There has not been much research made to the financial services about CRM applications. Thus further research based on these findings examining CRM applications in other banks would be recommended. 3 Summary and Conclusion The various research papers in this literature review handle the success factors in implementing a CRM system, design decisions of a CRM data warehouse, the effect of corporate culture on CRM implementation, the usability and resistance principles in implementing ecrm, customer knowledge acquirement and one case study of a Greek bank. Most of them have the collaborative approach to CRM, that is they concentrate on customer knowledge in order to be able to create more sales. The paper of Chen and Chen had an operational approach in their paper by concentrating on the communication with the customer and by that way trying to fill the customers needs. The ecrm approach was in all selected papers. Four different models are built on the base of those research papers: a model to assist companies in ecrm strategy, a model for CRM analysis, a model for CRM culture building elements and a model for analyzing case studies in the light of usability and resistance. The critical success factors, that were found in two of the studies were champion leadership, internal marketing, knowledge management, business IT alignment, system integration and cultural as well as structure change, (Chen 2004) effective project management, realistic time scheduling, perfect programming and not exceeding the budget (Blery 2006). Also the study of gaining customer knowledge showed that the support and participation of senior management as well as organizational changes are important. (Xu 2005). Fjermestad and Romano (2003) show that and organization needs to focus on the users and their needs and on the overall

11 strategy. A corporate strategy is closely related to corporate culture and the research of Van Bentum and Stone (2006) proves that without appropriate cultural foundations, CRM will not succeed and no single CRM culture exists.. The benefits that the Greek bank gained from the CRM implementation were reduced costs, decreased complexity, and improved operations (Blery 2006). Because several CRM implementations have failed in the past Cunningham, Song and Chen (2006) created a model to perform various CRM profitability analyses. Consequently the results of these papers were not very surprising. In order and ecrm implementation to be successful there has to be management support and change in the corporate culture, the resistance should be reduced as well. However additional and larger research with several cases in the area of developing models to analyze CRM system failures and develop guidelines that will lead to successful implementations are needed. More research is also needed in the area of acquiring customer knowledge as well as guidelines for designing data warehouse to support CRM. ecrm implementations are expected to increase in the future (Chen 2004) and guidelines for successful implementations are needed.

12 4 References Blery Evangelia, Michalakopoulos Michalis (2006). Customer relationship management: A case study of a Greek bank. Journal of Financial Services Marketing. 11, 116 124 http://web.ebscohost.com/bsi/pdf?vid=5&hid=122&sid=35124c6c e434 4ad0 896c 51586a5763d0%40sessionmgr106 Chen Qimei, Chen Hong Mei. Exploring the success factors of ecrm strategies in practice (2004). Journal of Database Marketing & Customer Strategy Management. Vol.11, Iss. 4; pg. 333 http://proquest.umi.com.proxy.shh.fi/pqdweb?index=4&did=674399071&srchmode=1 &sid=4&fmt=4&vinst=prod&vtype=pqd&rqt=309&vname=pqd&ts=11749 92896&clientId=15386 Cunningham Colleen, Song Il Yeol, Chen Peter P. (2006). Data Warehouse Design to Support Customer Relationship Management Analyses. Journal of Database Management. 62 84, April June 2006, pg. 62 http://proquest.umi.com.proxy.shh.fi/pqdweb?index=0&did=1012023001&srchmode= 1&sid=2&Fmt=4&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1174 996309&clientId=15386 Fjermestad Jerry, Romano Jr. C Nicholas. Electronic customer relationship management: Revisiting the general principles of usability and resistance an integrative implementation framework. (2003) Business Process Management Journal. Vol. 9, Iss 5, pg 572 http://proquest.umi.com.proxy.shh.fi/pqdweb?index=8&did=436780111&srchmode=1 &sid=6&fmt=4&vinst=prod&vtype=pqd&rqt=309&vname=pqd&ts=11749 96736&clientId=15386 IndiaWebDevelopers. http://www.indiawebdevelopers.com/articles/ecrm_solutions.asp. Accessed 28.3.2007 Paul Niven s balaced scorecard academy powered by QPR. http://www.balancedscorecard.biz/glossary.html. Accessed 28.3.2007. Van Bentum Ralph, Stone Merlin (2005). Customer relationship management and the impact of corporate culture A European study. Journal of Database Marketing & Customer Strategy Management. Vol 13, Iss 1; pg 28 http://proquest.umi.com.proxy.shh.fi/pqdweb?index=0&did=996141051&srchmode=1 &sid=5&fmt=4&vinst=prod&vtype=pqd&rqt=309&vname=pqd&ts=11749 96495&clientId=15386 Xu Mark, Walton John (2005). Gaining customer knowledge through analytical CRM. Industrial Management & Data Systems. Vol 105, Iss 7, pg. 955

13 http://proquest.umi.com.proxy.shh.fi/pqdweb?index=76&did=929909591&srchmode= 1&sid=2&Fmt=4&VInst=PROD&VType=PQD&RQT=309&VName=PQD&TS=1174 979492&clientId=15386