Customer Relationship Management Ch1

7/30/2019 Customer Relationship Management Ch1

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C rma g pcv

gerhard raab

Ludwigshafen University of Applied Sciences, Germany

riad a. ajami

Wright State University, USA

Vidyaranya b. gargeya

The University of North Carolina at Greensboro, USA

g. jason goddard

Wachovia Corporation, USA

Cover art, graphics and illustrations by Susan Resko

htt ://www. ower ublishin .com/isbn/9780754671565
http://www.gowerpublishing.com/isbn/9780754671565http://www.gowerpublishing.com/isbn/9780754671565


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Chapter Objectives:

Understand the global signicance of Customer Relationship

Management (CRM).Identify the primary sustainable competitive advantages.

Discuss the pros and cons of international strategic theories.

Elaborate on the primary components of international strategy.

Discuss the three pillars of Customer RelationshipManagement (CRM).

Elaborate on the advantages and objectives of Customer

Relationship Management (CRM).

Global Perspective on Customer Relationship Management

As global markets become increasingly integrated, all rms from the largest

multinational to the smallest entrepreneur must be able to nd a market niche which

enables the rm to survive in highly competitive markets, and to prosper by nding

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h w x f w wnot selected, to the downfall of the decision-makers or rms who failed to plan

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requirement, and this is where Customer Relationship Management (CRM) gures into


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Customer Relationship Management2

the global economic landscape. In order for a rm to create and sustain international

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customers provide the best long-term opportunities for protable relationships. In the

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v f c , c q, c fc, cretention in a global context. Successful CRM programs allow rms large and small

to achieve efciencies which would not be possible in an environment that does

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global efciencies can be achieved via economies of scale and scope, and by

catering to the specic desires of a rms most protable customers. As Genghis

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Sustainable Competitive Advantages in a Global Economy

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The rst competitive advantage is global efciency. b x

rather than remaining in its country of origin, a rm can lower its costs and improve

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context, as a rm must fully understand the customer prole that is most likely to

provide them with a protable, long-term relationship.

a c cv v multi-market exibility. l rms must respond to changes in numerous markets that are all inter-related.

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Customer Relationship Management: Global and Local Dimensions 3

customer, this strength can be utilized in achieving rst-mover advantages against

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c v w cc c k kw throughout the entire geographic region where the rm conducts its business. As will

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a rm in retaining customers in a protable fashion.

Overview of International Strategic Theory

Before we discuss the CRM perspective in detail, it will be helpful to briey

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one hand, and the pressures for efciency in an effort to reduce total cost on the

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an example of a managerial philosophy that helps rms nd the appropriate level

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the most important for a given rm, and what is the most efcient way to satisfy the

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One common strategy for internationally active rms is an attempt to replicate

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strategy for rms that believe that their customers tastes and preferences are

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strategy can be a successful strategy for rms that compete in international markets

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corporate efciency, this strategy is short on the former, but long on the latter.

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multi-domestic or multinational strategy. Executives at rms that opt for this

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operating subsidiaries, each of which focuses on a specic domestic market. The

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customized to the markets in which the rm competes. As is often the case in a

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not be communicated, and the rm loses valuable data collection ability from theck f cc. t, c v,

more than likely lacking in terms of corporate efciency.

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of multi-domestic strategy, as the one size ts all mentality is in opposition to

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that would best suit all of the markets where a rm competes, rather than simply

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of market-specic knowledge in order for the overarching strategy to be realized.

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typically strong in terms of corporate efciency. The success of this strategy in terms

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A nal selection available to corporate managers is transnational strategy. t

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the international level. The rm attempts to combine the benets of global scale

efciencies with the benets of local responsiveness. This strategic alternative

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areas best able to achieve the desired balance between efciency and exibility.

As we have seen over the last decade globally, rms have chosen to outsource k ff f cz cz

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economy, those rms that can reduce cost while at the same time realizing and

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Components of Synergy and Strategy for Cross-border Operations

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components are a series of questions that a rms leadership team should resolve in

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competence. This deals with an area, or areas, where a rm excels in relation to

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efcient distribution network, a well-respected brand name, or other such advantages.

i f Crm, w q xc cc rms leadership team. The customers must also be consulted in this process, as will

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a c f scale orscope of operations.

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rm plans on conducting its business, as well as with whom. Scope may be dened

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Once the determination has been made concerning what makes a rm successful, as

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determined from a centralized platform with the intent on global efciency, or in a

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best to maximize protability via cross-selling to its existing customer base. This is

the essence of synergy. If a rm is able to identify which customers are of paramount

importance, as well as how best to meet and exceed their expectations, the rm will

benet via increased protability. As will be discussed in subsequent chapters, it is

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of the rm.

The McNeely Principle

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on how to compete in a given market, rms must be careful in understanding what

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competing with a bigger, stronger rm in the same way. Even a perfectly envisioned

strategy can wind up as a disaster if a rm decides to compete for the same business,

in the same form or fashion, as a larger, more nancially secure competitor. This f c f f x hc p mcn.

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from Massachusetts, who received the chance of a lifetime. He was the rst opponent

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result was a rst round knockout loss for Mr. McNeely, along with relegation back

to the world of obscurity. Managers may nd this analogy useful when consideringc v, w c f c distinctive

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The Concept and Relevance of Customer Relationship Management

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been felt by companies in all elds and of all sizes. Add to that an increasingly sated

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protable customer relationships.


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Relationship c c f

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Protable c f c , ccustomers contribution to the company prot will be maximized.

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In this day and age, companies should be in the position to fulll the wants of the

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degree of exibility, in order to react to customer wishes with considerable speed, and

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contact is important; from the rst contact with the customer to the establishment of

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become a regular, trusted customer, bears the rst fruit of CRM philosophy. The

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efciently and effectively organize its business relationships.

The Three Pillars of Integral Customer Relationship Management

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However, having efcient dealings with the customer, which is crucial to a

rms survival, requires more than just a technical infrastructure. The introduction

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(g, 2001, . 27).

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a companys personnel, a rms technology, as well as the structure of the organization

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the company. This has, direct consequences on the costs and prots of the rm. Rising

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w c , w wf to achieve a good cost to benet ratio. In the end the concept of CRMlike all other

company activitieshas the economic goal of raising prot.

Advantages and Objective of Customer Relationship Management

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(e, sw & Kc, 2000, . 84).

Every satised customer brings in at least three more customers.a c cc v xc

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Customer

Orientat ion

Cu s t ome r

Reten t ion

Customer

Profi tabi l i tyCustomer

Sat isfact ion

Personnel

Technology Organization

Figure 1.1: The pillars and process of Customer Relationship Management


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Reducing the level of customers leaving the rm by ve percent can raise

prot by as much as 85 percent (Tpfer, 1996, p. 92).

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For example, airlines, through engaging frequent yer programs, established

the rst steps of CRM years ago. Indeed, SAS, British Airways and Lufthansa

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for the various airlines: 12 percent of frequent yers buy their tickets because of a

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f 20 c f (Kwk Kk, 2000, . 338).

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commitment. The British retailer Tesco achieved a rst mover advantage through

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the leading and most protable companies in its industry.

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programs to nd out which brands will have a positive image. Daimler Chrysler ran

an integrated CRM project via a European call center, which involved a unied sales

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Personnel Technology Organization/

Environment and the Strategic Goal

Structure

Customer Relationship

Management

Figure 1.2: The design of integrated Customer Relationship Management


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American Express was able to improve its customer protability. Barclays Bank

is a similar case. A study concerning credit cards showed that a ve percent rise in

customer loyalty results in a 25 to 30 percent rise in prot (www.bbdo.de).

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survey from CSC Ploenzke AG makes clear what signicance qualied customer

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Customer Orientation

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Quality of Product and Service Performance

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Instead of nding customers for the product, the idea is to nd products for

the customer. The cost to benet ratio is here denitely a factor to take into

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5 = very important

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Teleworking

Digital Signatures

Speech-Data Integration

Rapid Prototyping

Document Management

ERP Solutions

Intellectual Property

Product Data Management

Simultaneous Engineering

E-Business

Workflow Management

Life Cycle Management

Performance Management/Data Warehouse

Design to cost

Data Security

Knowledge Management

Capacity Control/Revenue Management

Supply Chain Management

Business Process Reengineering/Improvement

Quality Assurance Programs

Relationship Management

Figure 1.3: Signicance of Customer Relationship

Management (Kroker, 2000, pp. 1821)


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Customer

Value

Company

Success

Customer

Retention

Customer

Satisfaction

Product

Quality

Customer

Orientation

Personnel Technology Organization

Figure 1.4: Process and stages of Customer Relationship Management

Customer Satisfaction

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The key to building up a regular clientele is obtaining satised customers.

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Customer Value and Company Success

There is a close relationship between customer commitment and prot level.

The prot per customer increases with the growing duration of a customers

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note the benets and complications of pursuing a global CRM strategy in the pages

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Multi-domesticStrategy

GlobalStrategy

TransnationalStrategy

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Questions for Discussion

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Consider a multinational rm that you believe is following each of the

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benets that might be achieved by implementing CRM at each company.

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Briey discuss the four steps in the CRM chain of effects. Then relate these

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1.

2.

3.

4.

5.

Documents

Customer Relationship Management Ch1