Impact of Customer Relationship Management on the Organization Performance

Impact of Customer Relationship Management on the Organization Performance

ABSTRACT

Customer relationship management (CRM) is a comprehensive business and marketing strategy that integrates technology, process and business activities around the customer. CRM is assumed to lead to bottom-line benefits for the organization. Advances in information and communication technologies have provided an effective platform to deliver electronic CRM functions. Despite widespread agreement that CRM can have direct and indirect satisfaction, loyalty, sales, and profit, the significance of CRM and its features in influencing customer satisfaction has not been well researched in construction firms. The thesis examines the critical success factor of CRM implementation by using a questionnaire survey to obtain data from 68 building material suppliers. Using a structural model and the evaluation technique of partial least squares the analysis revealed that CRM technological initiatives are successful when adequate top management support and accurate knowledge management capabilities, supported by a suitable information technology structure, measured by technological readiness are in place. Construction organizations are considering the implementation of CRM technological initiatives. The need to justify the impact of CRM on organizational performance in the boardroom has never been more important. Shareholders expect value for their investments; organizations have invested large sums of money in people, processes, and technology to imbibe the CRM culture. The promises of CRM are enormous. Yet, various organizations cry out for help over lost investments and damaged relationships. Is CRM promising too much or perhaps are the executives expecting more than they can get? Literature suggests that in order to justify the investments of CRM, there is the need to develop a universally accepted holistic framework for the measurement of CRM activities is the lack of a universally acceptable definition of CRM. The concept of CRM is multi-faceted involving investments in people, processes and technology to various degrees.

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

Traditionally, `many organizations were structured around their products and service’. Emphasis was on the delivery of a good mist of the 4Ps – product, price, place and promotion. The focus was on exchange, once this was achieved, organizations were sure to remain in business. Needless to say, this was the era of transaction marketing.

In the late 1990s however, most organizations began to realize that the 4Ps were no longer sufficient to remain in business. Products were easily copied to desired standards, price, and easily matched, Product accessibility was no longer an issue and mass Promotions were no longer as effective. In many cases, customers and consumers had become more sophisticated and less responsive to the traditional marketing pressures – particularly `advertising’. This is a result of the availability of more choice, partly as a result of globalization of markets and new sources of competition. Also, many markets had reached the matured stage of their lifecycle (Christopher, Payne, and Ballantyne, 2002). The response to these changes in the business environment was that organizations began to transform themselves as well as adopt a more customer-focused orientation. This led to the emergence of relationship marketing.

To some schools, relationship marketing is used synonymously with customer relationship marketing. This view defines relationship marketing as a management approach that enables organizations to identify, attract and increase retention of profitable customers by managing relationships with them (Reinartz and Kumar, 2003). To other schools, customer relationship management involves the use of information technology (IT) in the implementation of relationship marketing strategies (Wilson et al, 2005). Customer Relationship Management is oftentimes referred to by its acronym – `CRM’ and will henceforth be referred to as such in the present study.

The CRM philosophy focuses on a pan-company orientation in which the specific capabilities of an organization are focused around creating and delivering value to targeted market segments in the expectation that this would developed

into a relationship such that the organization is able to determine, fulfil and even predict the needs of the customer while attaining customer loyalty so as to increase profits over time (Rigby et al 2002). Thus, successful CRM activities are expected to enable organizations to gather customer data swiftly, retain existing customers, identify the most valuable customers over time, increase customer loyalty, acquire new customers and grow relationships with existing customers thereby placing the organization in a better financial position for the future.

To obtain the benefits of investing in such IT applications there is a need for construction organizations to better understand and be aware of the bottom-line financial returns of business automation initiatives (Love and Irani, 2004). Moreover, knowing customers and what their requirements are is deemed to be critical for long-term business success (Nargundkar and Srivastava, 2002). Yet only a small percentage of businesses have basic information about their customer (McKeen and Smith, 2003; Kale, 2004). In recognizing the need to be more customers centric many businesses have adopted

CRM applications gather, organize, understand, anticipate, and respond to the constant evolution of customers’ requirements and demands (Reinatz and Chugh, 2002). Effective CRM is assumed to lead to bottom-line benefits fro the organization. Advances in IT have provided an effective platform to deliver CRM functions. Despite widespread agreement that CRM can have a direct and indirect impact on customer.

Many businesses operating in the construction industry have been trying to respond to the demands being imposed on them by utilizing IT applications such as CRM and ERP, but immediate benefits and improvements in business performance have not been forthcoming: the `Red Queen’ syndrome. With this in mind, the research presented in this paper aims to provide material suppliers operating the construction industry with underlying knowledge to overcome the `Red Queen’ syndrome often associated with enterprise applications such as CRM and ameliorate their chances of obtaining improvements in business performance.

1.2 STATEMENT OF PROBLEM

There is no universally accepted approach for the measurement and assessment of the ongoing contributions of CRM activities to the performance of an organization (Garbner – Kraenter et al, 2007). This research aims to critically evaluate, compare and contrast the various approaches used to measure CRM effectiveness, summarize their limitations and purpose modifications to obtain best practice towards the realization of a universally accepted holistic assessment for ongoing contributions of CRM activities to the performance of an organization. To gain a better understanding of CRM in building material supplier firms.

1.3 OBJECTIVES OF THE STUDY

These thesis objectives are as follows:

To identify the main problems concerning the CRM implementation process.

To examine the core principles required in adopting and integrating CRM systems within an organization.

To critically analyze the CRM adoption framework proposed by many leading CRM reviews.

To examine how CRM is measured within an organization. To know the strategic/technological benefits of CRM implementation.

1.4 RESEARCH QUESTIONS

The questions addressed in this thesis are:

How do organizations measure the effectiveness of their CRM activities?

How could these measurements be improved?

How can firm major reasons and benefits of implementation of CRM be described?

How can the component of CRM implementation (i.e. people, process, and technology) be described?

What are the strategic implications of the implementation and use of CRM systems?

1.5 RESEARCH HYPOTHESES

The following hypotheses are hereby formulated:

H1:Perceived operational benefits from using CRM Technological initiatives are positively linked to CRM impact.

H2:Perceived strategic benefits from using CRM technological initiatives are positively linked to CRM impact.

H3:Top management support is positively linked to CRM impact technological readiness.

H4:Technological readiness is positively linked to CRM impact.

H5:Technological readiness is positively linked to knowledge management capabilities.

H6:Knowledge management capabilities are positively linked to CRM impact.

1.6 SIGNIFICANCE OF THE STUDY

Currently, there is no universally accepted empirical method for measuring CRM effectiveness; there is no definitive guidance as to how to assess the value of CRM activities nor is there a holistic assessment of the ongoing contribution of CRM activities to organizational performance (Grabner-Kraeuter et al, 2007). As CRM techniques become more sophisticated and expensive, as well as relevant in many business environments, there is the need for accountability of investments in their activities. CRM will benefit managers and other business individuals because it allows the system to identify the different needs of the different customers so that products can be target marketed and suggestively sold to the most appropriate clients. CRM strategy may lead to an “increase in the bottom line” of the company and lastly with its importance must establishment needs to consider the implementation of the CRM to ensure that when it is used it adds value and is successful.

1.7 LIMITATIONS OF THE STUDY

One of the limitations of this study is non-availability of resources on the CRM implementation in the Nigeria building material and construction firms.

Lack of academic literature on the subject matter.

Telephone calls were used during interviews, it’s typically non-academic literature. Academic literature used for the study has been based on developed economies, whereas, the research focus is on the construction of building material firms in a developing economy.

1.8 SCOPE OF THE STUDY

The importance of the vital prospect of customer relation management (CRM) in the development and upliftment of any business/technological economy cannot be overemphasized.

This literature is based on the general overview of the measurements of (CRM) as it impacts on the organizational performance in the building material suppliers and construction industry situated in Nigeria. Based on this the focus will be to analyze the activity of (CRM). That will aid business and technological firms for maximum utilization. Industries around the metropolis of Enugu, Asaba, Onitsha, Awka, and its environs are used to obtain cogent and vital information, as such will be used as a research-based.

1.9 CONTEXTUAL DEFINITIONS OF TERMS

The terms below were defined for this research to enable a clearer understanding of the meaning of these terms as they apply to this research.

CRM

Christopher, Payne, and Ballantyne (2002 p.16) define CRM as a strategic approach to improving shareholder value through the development of appropriate relationships with key customers and customers segments’.

CRM Effectiveness

The effectiveness of CRM is defined as attaining a satisfaction level achieved by CRM activities (Kim, Sub and Hwang, 2003).

CRM Critical Success Factors

Critical success factors have been defined as `the limited number of areas in which results if they are satisfactory, will ensure successful competitive performance for the organization’.

Reliability

Payne, A. and Frow, P. (2005) define reliability as the degree to which measures are free from error and thus yield consistent results.

Validity

Payne, A. and Frow, P. (2005) define validity as `the degree to which instruments truly measure the constructs which they are intended to measure.