Customer relationship management (Customer loyalty) Essay Example
Customer relationship management (Customer Loyalty) in online companies
According to Yufan (2014) online businesses and online shopping is on the rise and the growth in online businesses indicate the compelling advantages that online business environment offers over the customary brick-and-mortar stores and this includes more flexibility, improved market outreach, more convenient and quicker transactions among other benefits. However, on-line business comes with various challenges such as stiff competition since it is very easy for customers to compare prices while shopping online. The fierce competition is a threat to brand loyalty (Tehra, 2014). Customer loyalty is perceived as the key to business profitability. Therefore, online web stores must maintain customer relationship since brand loyalty is the most vital resource of brand capital. Aileen (2006) explained that establishing and developing brand loyalty implies deep interactions with customers. The center of brand strategy should focus on the relationships between the brand and the customers, which means nurturing customer loyalty. Customers who are extremely satisfied with the products or service have a high likelihood of repeat buying and eventually become loyal customers. To achieve this, it is important to maintain a relationship with the customers. Marketing practices show that satisfied customers might not always be loyal customers (Aîda & Pierre, 2010). However, customer satisfaction is undeniably the foundation of customer loyalty. This paper therefore seeks to find out the customer relationship management strategies that companies use to maintain customer loyalty in online web-stores. In addition, this thesis will discuss the relationship between customer relationship management and brand loyalty. Actually, customer relationship management is a management philosophy as well as an automatic management system and the focus is always on the customer and cultivating good relationship with the customers. The study has undertaken a qualitative, explorative study design to find out the customer relationship management strategies that companies use to maintain customer loyalty in online web-stores
Maintaining customer loyalty in online webstores has been a challenging issue to most companies. As a result of this, different companies are utilizing different customer relationship management mechanisms. The success of online companies is mainly dependent on the customer loyalty. Therefore, customer relationship management is paramount to assist in tackling customer issues in order to provide them with better services and thus develop customer loyalty (Yufan, 2014). Customer relationship management provides a unified platform where businesses store a trove of information with the customers. Extraction and analysis of the information can be done in order to develop a business strategy that will guarantee long-term business growth (Harris & Goode, 2004).
CRM is a business process that involves building customer relationships, customer loyalty and brand value using marketing strategies and activities (Harris & Goode, 2004). Customer relationship management’s main strength is in gleaning insights from customers’ feedback with an aim of creating improved, solid and focused marketing as well as brand awareness. Customer relationship can be developed, strengthened and enhanced using various programs which include customization, loyalty programs and also customer service requirements (Lindergreen et al, 2006). According to () loyalty program is one of the most influential and powerful CRM strategy which is designed to raise customer satisfaction along with customer loyalty. Loyalty programs which can be executed using different ways and this enable a company to develop a mutually beneficial relationship and the eventual objective for both the customer and the company to get a positive benefit (Aîda & Pierre, 2010). At the same time, the real brand loyalty and customer loyalty consists two aspects namely; attitudes loyalty and behavioral loyalty. Attitude loyalty develops when customers have positive and strong beliefs regarding a particular brand. Once customers have emotional commitment towards buying a particular brand, behavioral loyalty follows in form of repeat purchases as well as regular stores’ visits (Tehra, 2014). Therefore, online web-stores should develop loyalty programs to improve both attitude loyalty as well as behavioral loyalty.
Customer relationship management strategies basically collect data regarding customers. The collected information is then used in business environments to design customer driven business model (Aîda & Pierre, 2010). Essentially, the collected information is then provided to the sales, marketing and customer service departments to attain higher sales and also increase customer retention. However, customers do not directly see all these efforts and hence to attain higher customer retention and eventually develop customer loyalty customer relationship management strategies should be developed in accordance with the customer’s view point (Tehra, 2014). In addition, the information should be considering in a way that the customer retention will be improved and brand loyalty will be instilled. Application of the insight can then be done in order to build a personalized relationship with customers (Aîda & Pierre, 2010).
The numbers of online companies are on the increase as most of the customers prefer carrying out shopping online (Yufan, 2014). As a result of the increase in the number online companies, the levels of competition has greatly increased. This has forced the companies to develop different customer relationship management (CRM) mechanisms in order to promote customer loyalty. CRM concepts are aimed at addressing the needs of the customers so as to ensure that they are loyal to the company (Liu, 2007). Some of the companies have been successful while others have not. Customer loyalty is directly related to the sales of the company. High customer loyalty translates to high sales and hence it is important to the companies. Customer loyalty problem is currently affecting business and it is also set to affects the companies in future and therefore there is need for companies to come up with customer relationship management strategies that can develop customer loyalty amidst fierce competition in the business world (Liu, 2007).
Maintaining loyal customers in the online business is difficult due to the stiff competition (Khalifa et al, 2011). Therefore, the information gathered from the thesis will be relevant in the managerial practice. It will provide the managers with information on how to improve on customer loyalty through the use of Customer Relationship Management mechanisms. In addition, information about the topic is available however, it is scattered, incomplete and in some instance contradictory. This is due to the dynamic nature of the customer needs as well as the measures that the organizations have to put in place. Clear information is therefore required from the thesis in order to fully create an understanding of the mechanisms that different companies use. Academically, the thesis will highlight the conflicting views and perspectives with regards to the topic. This will lead to the provision of clear information regarding customer loyalty problems in the online webstores. The thesis will also make academic contributions by providing new insights as well as knowledge with regards to the topic. Additionally, this study will be a basis for further research.
Customer Relationship Management
According to Javanmard & Soltanzade (2009) customer relationship management (CRM) is a tool utilized in making long-term relationships with customers in order to survive within the aggressively competitive market setting. The main focus on all CRM is on cooperative and collaborative relationship between the company and its customers. Swift (2001) conducted a study and established that CRM is a process whose aim is to collect customers’ data, find profiles of customers and utilize the customer knowledge within specific market undertakings. On the other hand, Lindergreen et al (2006) assert that CRM is an IT enabled business approach that focuses on gaining and retaining customers using elevated scores on satisfaction and loyalty. Medury (2010) suggested that the main aim of relationship marketing is to attract, maintain and improve customer relationship. Payne & Frow (2005) also suggested the following series of activities for carrying out relationship marketing; creating core services for building customer relationship; customizing relationship; expanding core services with more benefits; improving customer loyalty and finally fine tuning internal marketing to stimulate external marketing success (Javanmard & Soltanzade, 2009).
Javanmard & Soltanzade (2009) perceived CRM as a combination of technologies and business process utilized in satisfying the needs of customers at any interaction and specifically CRM involves acquiring, analyzing as well as using knowledge regarding customers with the goal of selling goods and services and to do it more competently. Kim & Kim (2009) define CRM as a strategy where organizations attempt to understand and have an influence on the behavior of customers using certain and meaningful communications in order to retain customers, enhance customer loyalty, acquire customers, establishing customer relationship and lastly to accomplish the most predominant objective of customer profitability (Liu, 2007).
Szeghegyi & Langanke (2007) argue that a restricted understanding of CRM is database marketing that focuses on the link between promotional marketing and database management tools. He further adds that CRM involves applying technology on relationships with customers through integration of database knowledge with the long-term vision of growth and customer loyalty. Successful management of CRM involved a well-integrated and balanced strategy to technology, process and individuals (Alavi et al, 2011). Generally, customer relationship management is an enterprise-wide initiative that encompasses all organizational areas. CRM represents an inclusive approach and process of gaining, retaining along with connecting with selective customers to build a superior value for the customers and organization as well. Specifically, customer relationship management software packages help and facilitates interactions between the organization and customers and therefore enables the organization to manage and synchronize all communication efforts in order for the customers to have a unified message and image. CRM manages all aspects that involve customers (Payne & Frow, 2005).
As companies become bigger and the number of relationships to be managed elevate exponentially, this requires amalgamation of various business departments for collaborating the customer information to have an integrated insight of customer interactions in order to give customers better services (Szeghegyi & Langanke, 2007). Therefore, customer relationship management shapes the interactions between an organization and the customers in order to maximize the current and long-term value of customers for the organization and also to maximize customers’ satisfaction. In line with this, Alavi et al (2011) provides that CRM involves applying one-to-one marketing and relationship marketing, responding to each and every customer individually taking into account the views of the customer and everything that is known about the customer. CRM is a management strategy that allows companies to identify, gain and retain profitable customers through management of customer relationships and further identification of strategically important customers (Payne & Frow, 2005).
According to the literature review, customer relationship management is an all-inclusive business strategy for empowering the internal functioning of a company with the goal of identifying, acquiring, delivering, developing and retaining customers. By using ever-sporadic technology, CRM aims at integrating various organizational functions in a manner that it becomes effective and resourceful in the long-run. This allows a company to acquire and maintain a high customer and market share to have a long-term competitive advantage. More importantly, CRM is really vital since it cots six to seven times more to get a new customer when compared to retaining an existing customer (Lindergreen et al, 2006). Additionally, all customers do not have equal contributions to the company’s bottom-line and hence the value of customers to an organization differs. The worth of targeting the right type customer is extremely important to a point that the success and failure of a company is mainly dependent on acquiring and retaining customers. Accordingly, technology has turned out to be extremely vital within marketing in form of customer relationship management. As Medury (2010) explains, for a company to completely understand regarding customers, there is need to generate the appropriate data and analyze it appropriately as well as back it with suitable data mining as this will enable organization to reap benefits.
Customer Relationship Management Business Model
The customer relationship management (CRM) business model includes three fundamental pillars namely: customer satisfaction, customer loyalty and lastly customer life-cycle value.
For an organization to succeed, meeting the needs of customers is extremely important especially in the business world that is full of competition. CRM strategies enable organisations to collect pertinent data regarding customers and then the data is processed into ital. information which is used for marketing strategies. Ip et al (2014) explain that an organization for instance can use its customer service team to collect data and information regarding the needs and preferences of the customers. Tool that can be used to collect customer data include online surveys, telesales services as well as e-mails. After the collection of the data and analysis of the information, using CRM technologies organisations then align their products and services in accordance to the preferences and needs of customers. As Medury (2010) provides, by using CRM strategies the organisations can provide the customers with high-levels of satisfaction. Ip et al (2014) explain that the CRM as a technology links several departments that manage interactions of customers at different levels. For instance, a company has 5 departments that are concerned with different levels of product development, sales and support. All 5 levels have had interactions with one specific customer personally (Javanmard & Soltanzade, 2009). For an all-inclusive progressive action, all the 5 reports are supposed to be compiled and this is where CRM becomes an interaction link. The different modes of interaction with the customer can encompass e-mails, websites, social media, telephones and even television and radios. Furthermore, the CRM approaches enable companies to offer post-sale service to customers and this improves the general experience of the customers and also elevates customer satisfaction (Javanmard & Soltanzade, 2009).
Customer Life-Cycle Value
According to Aileen (2006) currently organisations and businesses are putting a lot of efforts to maintain their share in the industry by attempting to attain high levels of customer satisfaction or customer loyalty. This I where CRM comes in since the CRM business model attempts to identify the customer life-cycle value. It is important for any business to determine the customers who have long life-cycle and the customers who have a short life-cycle. CRM aids companies and business to identify and maintain the customer life cycle value. Before a company invests a lot of money and time in implementing interactional information for the sale of product by just one customer, a company should first assess the customer’s value. Ip et al (2010) further elaborates that it is vital for a company to ensure that it does not overspend on a customer than its prospective value. More importantly, it is necessary to ensure that a well calculated model that assesses the profitability of customers is built. Such models are crucial in analysis to ensure that the money that is invested on every customer does not exceed their worth for the business (Alavi et al, 2011).
Establishing consumer loyalty in any business is the main factor in becoming successful in the high competition in business world (Liu, 2007). The informed customer has the alternative of comparing the services and products that different companies provide and then choose services and products that offer the optimal quality and price. Therefore, in such circumstances it becomes very hard to build customer loyalty and extraordinary experiences and good customer relationship service is what differentiates one organization from another one. The CRM strategies enable businesses to establish and build robust customer loyalty by offering an outstanding experience as well as good product quality. Alavi et al (2011) further elaborates that post-doing all the interactive analysis, the most critical step is applying the change efficiently. This is the reason behind installation and use of CRM. Organisations utilize efficient processes to make use of the interactional feedback and implement them for better and enhanced products and services.
Building On-line Customer’s Brand loyalty
According to Liu (2007) on-line marketing has many benefits like no real restriction on advertising space, private and instant shopping, and quick access to information, as well as quick retrieval of information among other benefits. However, Medury (2010) warns that it is important for marketers of online business to confront the involved great risks. For instance, through the internet it is very easy to lose brand preference, a long-standing customer relationship as well as customer loyalty. Moreover, every company has a distinctive culture as well as distinctive business processes. This is where the significance of CRM solution comes in, in order to find out the benefits of CRM to attain the success. Liu (2007) explains that the first step is recognizing on-line customers. Customer recognition is very vital during execution of CRM and selecting the right customer characteristics is a vital aspect in customer recognition. Payne & Frow (2005) argued that not all customers are valuable to a business. The most important aspect of CRM is maintaining consistent customer and not just attracting new customers. The theory of commerce circle, Lai-li method and 20-vs-80 method offers a means of constructing the efficient marketing channel. Identifying and looking at 20 percent steady customers is the key to customer relationship management since the customers will be the loyal customers. Afterwards, marketers are supposed to understand customers using databases. Databases consists both the information and efficient integration of the data. In online businesses, the purpose of the online customer service is to link with the customers with an aim of selling more (Payne & Frow, 2005).
However, Liu (2007) is of the view that businesses that are genuinely interested in reaching online customers may lose their mails in spam-folders; thus it is extremely crucial to ensure that the customer information is updated in real-time. The third step involves data analysis. Payne & Frow (2005) emphasize that marketers are supposed to find out the regulation through processing the huge data within the database. The key purpose for this is to find the probable demand or likely dissatisfaction of the customers. It is only possible to obtain these findings through data analysis using CRM system and developing readable charts (Tehra, 2014). Therefore, staff is able to make the appropriate decisions promptly and satisfy the demands of the customers and also address customer’s complaints. Studies show that dealing with the complaining psychology of the customers is an efficient way of increasing the satisfaction levels of the customers and cultivating loyal customers (Payne & Frow, 2005). The fourth step involves customizing requirement. As mentioned before, the key aim of CRM is to build deep and personal relationship with customers. Demands of customers vary. CRM can meet the demand of each and every customer individually instead of mass production and meet the demands of customers to the maximum. Numerous practices are required in order to improve customer delivered value (Tehra, 2014). Customer transfer value is the theory that attempts to explain how a business can maintain customers effectively. According to the theory, when businesses face fierce competition, a company is supposed to develop and deliver more value for customers if the business wants to satisfy customers and triumph over other competitors in the market. The level of the customer transfer value determines the gravity of the customer satisfaction as well as the level of customer loyalty (Xu & Walton, 2005).
Continuing communication plays a big role in building long-term relationship with customers and achieving brand loyalty (Yufan, 2014). Customer satisfaction obviously plays an important role in creating brand loyalty. This is where CRM comes in because it focuses on reaching out to customers in order to meet their specific and individual needs and even surpass customers’ expectations (Szeghegyi & Langanke, 2007). As per Tehra (2014) companies should implement relationship programs, for instance community-building websites as well as loyalty card programs with an aim of developing a trusting relationship with customers and gaining their confidence and hence elevate recurrent purchases. In addition, companies can consider offering customers symbolic benefits using self-expression, recognition and approval as well. These benefits have no direct connection with tangible traits or to products but they are related to a person’s self-esteem and how the world perceives the individuals (Szeghegyi & Langanke, 2007).
Harris & Goode (2004) define loyalty as the preconception to behavioral response over a time period where the individual chooses a specific brand over other brands and makes the decision a mental dedication. Loyalty is a concept in the marketing management that greatly influences the long term benefits that an organization gets from the loyal customers since loyal customers do not require a lot of promotional efforts (Javanmard & Soltanzade, 2009). Customer loyalty is significant in various ways. Customers who are loyal assist a business to determine the anticipated rise in regard to sales and profit. Additionally, customers with brand familiarity have a high likelihood of recommending the brand to their friends and family members and have an impact on the feedback as well as assessment cycle of the product and these matters are important in the present business environment. According to Harris & Goode (2004) customer loyalty is a strong commitment to repurchase a product or a service in future in a way that the brand, service or product is bought regardless of the marketing efforts and potential competitors. On the other hand, Kim & Kim (2009) argue that loyalty involves developing customer commitment to carrying out business with a certain company and procurement of services and products. Khalifa et al (2011) explain that loyalty is the behavior on the brand which leads to the repeated purchase of the brand. Loyalty is also the psychological processes that assess various options on many criteria. Another definition of loyalty is that it consists of the customer’s commitment to and hence loyalty is the customer’s deep commitment to buy a certain good or service repeatedly in the future and this implies purchasing the product or service again and again in spite of the environmental influences and marketing efforts of other brand’s competitors to change the buying behavior. Kim & Kim (2009) conducted a study and found out that customer relationship management helps businesses to have more knowledge regarding their customers, have better competitive advantage, better understand the difficulties and threats and staff in the company. Therefore, loyalty and customer satisfaction involves factors like reliability, service quality, perceived value as well as the cost change as the aspects that greatly influence customer loyalty as well as customer satisfaction. Service quality is another aspect that has been found to greatly influence customer loyalty. According to a study conducted by Javanmard & Soltanzade (2009), there is a major positive relationship between quality of service incidents and service quality, customer satisfaction. When the customers perceive that the quality of services is high, they are likely to have higher levels of satisfaction and consequently they are likely to be more loyal as customers (Liu, 2007).
This chapter will serve as the theoretical backbone for this thesis and will form the basis for the analysis, discussion and conclusion of the thesis. The chapter begins by analyzing various theories and then exhibiting fundamental foundations within customer relationship management and e-customer relationship management. The end of this chapter will summarize the key foundations in a model.
The discourse on gaining new customers and retaining the existing customers has been there for a long time and companies have put lot of efforts on customer relationships long before this was discussed within the marketing literature. Study of customer management is normally done in a service form because the nature of services enables companies to customize their relationship with the customers (Aileen, 2006). As a result, customers are motivated to remain loyal to the company instead of starting over with other competing companies. A good relationship should benefit the company as well as their customers.
A Customer Relationship Management Process Framework
Numerous studies have been conducted on the buyer-seller relationships and relationship development process models have been hypothesized. This thesis will build on the works of various authors to create a four-stage customer relationship management process framework. The broad framework hypothesis that customer relationship management process consists of the following processes namely: customer relationship formation process; relationship
management and governance process; relational performance evaluation process; as well as customer relationship management enhancement process (Aileen, 2006).
Customer Relationship Management Formation Process
The formation procedure of customer relationship management involves decisions to initiate the relationship activities for a company for a particular group of customers or for a specific individual customer with whom the organization aims at having a collaborative relationship with (Aileen, 2006). Therefore, a company should first identify and differentiate distinct customers the formation procedure of customer relationship management, three critical decision areas are involved and they include: defining the goals of implementing CRM; choosing the group of customers for suitable customer relationship management programs; and lastly developing the CRM programs to engage the customers and build a relationship with them (Aileen, 2006).
Goals of Customer Relationship Management
The main objective of CRM is to enhance marketing productivity and improve mutual values for the organization and the customers as well and this means that improving the relationship between the customers and companies (Alavi et al, 2011). CRM improves marketing productivity and develops mutual values through increase in the marketing efficacies and improving marketing efficacy. Through seeking and attaining operational objectives like reduced distribution expenses, restructuring order processing and managing the inventory, lowering the costs of undue customer acquirement costs and also by customer retention strategies; a company can attain higher marketing efficacies (Nath et al, 2009). A company can improve marketing efficacy through careful selection of customers for its numerous programs, personalizing market offers with an aim of serving the emerging needs of individual customer, establishing customer loyalty and commitment and redefining the competitive playing arena for the organization. Accordingly, defining the goals and purpose for the customer relationship management within an organization assists in clarifying the nature of customer relationship management programs and activities that should be carried out (Javanmard & Soltanzade, 2009). In addition, stating the purpose of CRM aids to identify appropriate relationship individuals who have the required expectations and abilities to meet mutual objectives. The goals can be specific goals like marketing objectives, financial objectives, strategic objectives and general objectives. In the same manner, customers anticipate that their objectives allied to efficacies and value regarding their buying and consumption behavior will be met. Kim & Kim (2009) agree that customers have motivation to take part in relational behavior due to the psychological and sociological advantages that come with decrease in selection decisions. Moreover, customers are motivated to get rewards and benefits that come with customer relationship programs.
This chapter provides an overview of how the study was carried out. The chapter presents the study object, methodology, research design, data collection methods, theory’s role, data analysis as well as discussion on the reliability, validity along with the level of thesis’ generalization.
There are two key approaches to the relationship between theory and empirical material namely, deduction and induction. Saunders et al (2003) define a deductive approach as the study of existing theories which afterwards are applied on reality and are either validated or precluded. A researcher conducts the study on reality without any hypothesis and collects the required data. In contrast, in an inductive approach the reality is studied devoid of any hypothesis or expectations and afterwards new theories are either created or found. The deductive approach can lead to a restricted empirical collection since it is established on already founded theories. In addition, in a deductive approach the pertinent data is searched unconsciously (Saunders et al, 2003).
To reduce the limitations in both deductive and inductive approaches in this theory the relationship between theory and research involves an interactive nature. Since the key aim of this thesis was to find out the customer relationship management strategies that companies use to maintain customer loyalty in online web-stores, an inductive approach was not suitable either because this thesis first required reviewing the literature to find areas of interest that could assist in developing existing literature and research. In addition, this thesis aimed at establishing the conditions that the theory would hold (Saunders et al, 2003).
Therefore, an iterative approach was deemed as the most appropriate because it facilitated going back and forth during the study between theory and empirical material. This allowed exploration of new theories regarding the correlation, and at the same time it allowed to have an own groundwork within the already existing theories. The iterative approach made it possible to develop a new theoretical model whose basis was on already existing literature and collected data that afterwards can be assessed on the empirical material (Saunders et al, 2003).
In management research, theoretical suppositions are main issues as they influence the research design (Saunders et al, 2003). The theoretical position is important because it assists in clarification of the kind of empirical data required for any specific research problem, and moreover the means of acquiring it. Therefore, it is important to refine the theoretical position prior to the start of the research. Mishra & Mishra (2009) provide two conflicting ontologys: positivism and hermeneutic. Positivism attempts to explain human behavior and terms e-customer relationship management as an external and objective and that knowledge founded on facts. Measurement of research ought to be through objective methods and mostly uses a deductive approach. On the contrary, hermeneutic view aims at understanding the human behavior and focuses on understanding the empirical material according to the phenomenon’s perception (Szeghegyi & Langanke, 2007). The purpose is that online media is a broad theory and meaning is built in the person, and can thus be perceived as if individuals construct reality. Additionally, this study involved researching to understand the perceptions of online web-stores regarding online mediums and e-customer relationship management, which has been discussed in accordance with hermeneutic approach (Mishra & Mishra, 2009). Nonetheless, this thesis has also been influenced by the positivistic ontology. In addition, this thesis has considered that there are various means of using CRM and online media in order to develop customer loyalty.
This is a completely different tactic from positivism approach in carrying out research. Interpretivism holds an opinion that social sciences are more valuable than natural sciences due to their outstanding characteristic of all companies and individual too. It is hypothesized that interpretivism approach can be very complex and result to ambiguity in this new era of business and management. Szeghegyi & Langanke (2007) argue that a person’s behaviour cannot be predicted scientifically and in such an event during the research the researcher takes hold of the subjective side because the key assumption is that each individual is different and perceives the world differently.
Realism is the combination of both positivism and interpretivism. Marie et al (2010) explains that a realist accepts the natural scientist methodology and their line of thought as well. In reality, a realist holds a belief that the manner in which their data is collected and analyses and also views the interpretivism methods as laws that is not pertinent always.
This thesis used positivism approach because the thesis involved investigating customer relationship management strategies that companies use to maintain customer loyalty in online web-stores at organizational level as well as at individual level.
This thesis employed a qualitative study methodology to carry out the research. A comparative case study was conducted by taking into account numerous cases. Since this study looked into two online web-stores for its investigation, it was necessary to have a number of case studies.
Convenience sampling was used in sample selection by taking into consideration the activities of web-stores with most recent e-CRM practices. Availability of the interviewee ready to answer the questions was reviewed. The phone contacts were picked on the contact details availed on the companies’ website. The first telephone contact was taken with the managers of the web-stores and the study topic as well as the study outline and the significance of the research problem were discussed with the specific managers. Each and every manager provided me with a list of workers and the duties and we discussed about the employees involved in marketing and it was me to decide when and how to contact them. Selection of the study subjects was done basing on the role of the staff members in the online webs-stores as well as basing on the study purpose. Some of the staff members on the list were not available but every respondent that was contacted was willing to respond apart from a few. Later, the interview requests were approved according to the reference frame. The selected respondents were the employees whose roles in the web-stores could offer representative input in the study. All the selected study subjects were qualified regarding customer relationship management issues. Five respondents from five webs-stores holding various management positions in the marketing departments were selected. Interviews from the 5 staff members were carried out from the 5 various respondents that dealt with matters of CRM and every interview was completed within time duration of about 30-45 minutes. To achieve this objective, an open-ended questionnaire covering various aspects of CRM in the respective web-stores was designed.
Marie et al (2010) explains that there are various methods used to collect qualitative data, by either primary data collection or secondary data collection. The choice method used in data collection is vital since data collection method has great impact on the study validity. This study utilized primary data as well as secondary data. Evidence shows that semi-structured interviews are very effective when carrying out interviews. Interviews increase the validity of study because all study subjects are asked identical questions. However, highly structured methods do not give a chance to ask follow-up question or the chance for exploring new topics (Marie et al, 2010). In this thesis, open semi-structured interviews were utilized but to reduce the risk of collecting a lot of irrelevant information, the interviews were semi-structured and this means that some of the questions were ready-made from the prior understanding. Semi-structured interviews were deemed more suitable for this thesis since the study subjects did not hold the same positions in the web-stores and also their working roles regarding customer relationship management were different. In addition, semi-structured interviews are more suitable when obtaining opinions of organizations and “individuals” because it facilitates understanding of the principal meanings since an interviewer can notice various things such as body languages and hence frame suitable follow up questions. During the interviews, various follow up questions were asked especially when the study subjected indicated that they were really interested certain subject and this most definitely enhanced the qualitative data. The already prepared questions had an open feature which means that the study subjects could freely answer the questions during the interviews. The prepared questions developed from research regarding customer relationship management within the web-store. Important theories and concepts in the areas were used in basing the topic deliberated during interviews. Still, the follow-up questions provided an opportunity to discuss new remarkable topics and use them in this thesis.
Data analysis was based on theories and previous studies and also this formed the basis for data collection, data analysis as well as comparison of this study. The answers that were recorded during the interviews were analysed and this included the available data on the websites of the web-stores by taking into account general analytical strategy. In order to identify the data that was more pertinent in the study, data reduction technique was used. In addition, table was used in the interpretation of data and labeling of the table was done in accordance with primary significance, highly significant and lowly significant. Analysis of all cases was carried out and cross case analysis followed in order to identify the variations and similarities in the cases and finally a verdict was based on the comparisons.
The Role of Theory
Nath et al (2009) provides that any research aims at creating new or developing existing knowledge by providing new theories. Therefore, existing research was found in the field that acted as the basis for the theory part. Conducting literature review assisted in gaining and adding knowledge to the existing research. The area of CRM in web-stores is less explored and hence theory was used to gain more research in the area. The CRM model was developed using the theory concepts and concepts from the reviewed literature. The model was used as a framework for the analysis and also further assisted in finding patterns that can extend research in the area of CRM in online web-stores.
Reliability, Validity and Generalization
Generally, the aim of reliability is to assess if the research results are repeatable and hence study reliability is about “dependability” of a study. Studies that use interviews to collect data have the risk of the respondents being influenced by the physical attendance of the interviewer during the interview. In this thesis observation was used in complementing interviews and thus reliability was increased. According to Marie et al (2010), variation in the answers of the respondents can have an impact on the reliability. In thisthesis, there was no variation in the answers of the respondents during the interviews. Furthermore, after the interviews were over, the answers of the study subjects were discussed with them and all the respondents agreed to the answers they had given. This played a big role in providing reliability in this study.
On the other hand, validity deals with the research conclusions. Validity is about if the measurements assessed what ought to have been measured. Validity focuses and emphasizes on the integrity of the results of a study (Marie et al, 2010). The methodology that was used to collect the data was considered to most appropriate for the purpose of this study. In addition, the interview questions be the were chosen to assist in answering the purpose of the research and they research questions were carefully analyzed before the study was started in order to establish if the questions were suitable and relevant for the study. To further enhance the validity of the study, the author of the questions was the one who conducted the interviews and hence the risk of own interpretations of the questions was reduced and this increased validity. Moreover, interviewing and observation were the two research methods that were used in data collection and this improved the research validity through making a triangulation of data. As Marie et al (2010) explains, triangulation of data involves using more than one data collection method within a study. Triangulation of data is important in providing a more fair and reliable representation. Still, to further improve and increase the validity of the study the interviews were all recorded and also during the interview the main focus was on asking pertinent questions, formulation follow up questions, observing the respondents’ body language and taking note of the respondents’ varying nuances and sounds when the interviews were being conducted. Transcription of the details was then done afterwards in order to provide the most truthful representation of the context (Harris & Goode, 2004).
Generalization refers to the representative study for other cases in the same area. Aileen (2006) argues that it might be hard to generalize study results when conducting a qualitative study. Normally, the aim of the study is to add more knowledge to the existing research and also offer knowledge to the existing knowledge gaps without limiting research. With limiting research, generalizing the study results is hard because there are no other research studies to do comparison with just like in this study because there are few research studies on CRM and online web-stores. Nonetheless, this thesis will provide a new theory in the area, which can be examined to find out whether there can be a theoretical generalization. As Harris & Goode (2004) provides, this strategy is commonly used when conduct a qualitative study. nonetheless, the study results in this thesis depicts how online web-stores think and the mechanisms they use in developing customer relationship management and therefore it can be hypothesized that the patterns can be visible when conducting study on other organizations’ mechanisms of customer relationship management (Aileen, 2006).
The research question in this thesis aimed at exploring the objectives of customer relationship management and CRM mechanisms that companies use in customer relationship management. Basically, there are various views about the objectives and mechanisms of CRM (Mishra & Mishra, 2009). To ensure that this frame was more structured, the objectives of CRM have been divided into two classifications, namely: objectives related to customers and objectives related to business.
Customer Related Objectives
These objectives have close link to the customers. The objectives consist of loyalty, retention as well as customer satisfaction. The different sources of reviewed literature provide very comparable views about customer relationship management; the following customer related CRM objectives were selected as they were common among different sources in the reviewed literature.
Increased customer loyalty
Increased customer satisfaction
Increased customer retention (Saunders, 2003)
The above objectives are so much interconnected because when a customer keeps on coming back it is an indication that the customer is loyal and such customers are likely to be satisfied with the services or products that a business provides.
Objectives related to Business
These are CRM objectives that have a more linked to the business. The goals consist of collecting and analyzing the data to have a better understanding of the customers in order to better fulfill the needs of the customers and also provide forecasts regarding future sales and increasing profits for the business. Another CRM goal that goes hand in hand with efficacy and profits is automation. The objective that was common in theory was use of customer relationship management to gather information. Javanmard & Soltanzade (2009) give clear information on this and similarly Kim & Kim (2009) provide reasons for information collection.
Collection of information
To fulfill the needs of customers more efficiently
Give information about future sales
Using CRM Mechanisms/Strategies
Various theories describe CRM mechanisms/strategies. Theories are divided into the below classifications to describe what encompasses a CRM process.
Overview of CRM mechanisms
CRM System and data warehousing
Customer touch points
Customer Touch Points
Touch points includes the points of interaction between the customers and the company. The interaction phase of the IDIC (Identify, Differentiate, Interact, Customize) model was utilized as the overview for the customers’ interactions because it provided a comprehensive and clear insight of the customer touch points (Nath et al, 2009). One of the most comprehensive theories that were used in this thesis is Davids theory on “touch points” and it provided an outline regarding how customers interact and come into contact with the company. Xu & Walton (2005) also gives various interactions points between the customers and the company and they correspond with the views of Davids. More importantly the list was utilized in explaining how customers exchange information with companies.
IDIC (Identify, Differentiate, Interact, Customize) model
Customer touch points
According to Saunders (2003) the front office refers to all functions of a company that have direct contact with the customers. This section presents theories that hae direct relationship with customer interaction. The identify phase of IDIC (Identify, Differentiate, Interact, Customize) model is utilized and it offers a clear explanation regarding the key prerequisites for the usage of customer relationship management (CRM) within the front office. The CMAT model is then utilized in viewing various phases that customers pass through during their interactions with the company. The CMAT model is utilized since it has an extremely broad and exhaustive description of the various stages. Nath et al (2009) are of the view that the staff’s knowledge should be digitized. This is in line with Xu & Walton (2005) who explain that this is very vital with the implementation of a new customer relationship management mechanism/strategy.
IDIC (Identify, Differentiate, Interact, Customize) model
Life cycle of customer management
Medury (2010) provides that the back office has all the functions that do not have a direct visible relationship with customers. Several sources explained that there is a great need within the customer relationship management process to find the value of every single customer individually. Zikmund theories have been utilized because they are the most comprehensive of all theories that were reviewed on value of customers. In addition, Alavi et al (2011) provide a distinctive insight of customer categorization by use the profit cost matrix, comparable theories were not traced in the reviewed literature and hence it was comprised.
The differentiation and customize phases of IDIC model are included as they offered a very clear and detailed descriptions regarding the aspect of customer differentiation as well as product customization. In order to broaden the overview of customization phase in the IDIC model, Payne & Frow (2005) are utilized in providing a description of the customization phase as they provide a detailed explanation on the topic.
The investigative model by Medury (2010) regarding the fields that requires attainment of data was the only theory that was identified on this topic and hence it was included as it provided a distinct view regarding what online web-stores should take into consideration when making a decision on the information to look for. In addition, Khalifa et al (2011) offer a more detailed description and explanation on what companies can do with the customer knowledge and hence his theory was utilized together with to offer an insight about information that should be attained and how the information should be used after being obtained.
Profit cost matrix
Acquiring customer knowledge
Customer Relationship Management System/Data Warehousing
This part provides the theory regarding the implementation of customer relationship management system as well as warehousing. Bose provides a model about the implementation of customer relationship management systems in a very detailed manner. Nonetheless, David provides a clear summary of Bose and hence David’s list was utilized as it was much easier and also provided information in the same key areas. Furthermore, Chase provided a comprehensive description regarding the planning of a customer relationship management system and also explained levels of system integration (Mishra & Mishra, 2009).
Key points ((Szeghegyi & Langanke, 2007, Nath et al, 2009).
Measuring Performance of Customer Relationship Management
The theory that was used in this section was linked to measurement of the performance of the customer relationship management initiative. Young-Gul came up with a customer relationship management scorecard and this was used in measuring the performance of customer relationship management because it was extremely detailed. In addition, Hughes theories were also utilized in order to provide further insight regarding the performance of CRM (Mishra & Mishra, 2009). Specifically, the customer relationship management scorecard measured the CRM on all organizational levels.
Customer relationship management scorecard: key points
Customer relationship management measurements (Mendoza et al, 2007 & Mishra & Mishra, 2009).
The following research questions were selected to attempt to develop a complete insight of the customer relationship management enterprise from execution to an on-going procedure.
Overview of the link between theory and research questions
Research question 3
Research question 2
Research question 1
In the initial phase, the goals of the strategy are selected, and also the purpose for the initiative specified. Next, the second phase provides the description of theories allied to strategy for the initiative and how CRM systems can be constantly utilized. Systematic process to measure the performance of the customer relationship management is provided so as to assess if the objectives were attained (Szeghegyi & Langanke, 2007).
Study approval to conduct the study was sought from the relevant authorities before the study was carried out. Informed consent was sought from all study subjects before they were enrolled in this study. The ethics of obtaining the collected data from various sources were carefully considered ad informed by ethics advice issues by the university. In this study, anonymised data of all collaborators from the original studies was conveyed in a way considered most convenient to the primary study researchers. Formatting of the data in a consistent manner was then done to allow re-analysis of the data. Storage of the data was done in file protected using passwords and the data was only accessible to the authorized persons. This procedure integrates a data confidentiality agreement and this signifies the significance of de-identifying individual study subjects. The procedure also incorporates a guarantee that the primary researchers in all the articles that were used in this study have local ethical approval for carrying out their studies.
For the data analysis, descriptive methods are used in presenting the study findings under various themes.
Measures online web-stores must implement to attain excellent customer relationship
Committed relationship managers to facilitate the web-store’s relationship with customers
Incentives to top customers targeted to win a greater share of their
Internet-based products to allow customers to shop online
Ensure that the work is less stressful for the staff
Results from the above table show that 70% of the study subjects believed that assigning a committed relationship managers to facilitate the relationship between the web-stores and their customers is an important step towards attainment of exceptional customer relationship.
How the need for customer relationship management is highlighted in the companies (web-stores)
Leadership from the top management
Provision of customer focused mechanism
Staff members being customer focused
55% of the respondents indicated that the web-stores emphasise the need for customer relationship management by providing a customer focused mechanism. This indicates that the management of web-stores should put more efforts on implementing mechanisms and strategies that put the main focus on the customers. The next highest number of respondents (30%) was for the opinion that the web-stores need to train their employees on how to always remain customer focused while 15% of the respondents indicated that directive from the top management in the stores influence how the stores highlight the need from customer relationship.
Indicators that the web-stores practice customer relationship management
Focus on customer satisfaction
Simplified online transaction procedures
A high number of respondents (30%) were of the view that focus on customer satisfaction, followed by integrated processes, simplified online transactions and focus of customer satisfaction in that sequence are the key indicators that the web-stores follow and practice customer relationship management. The simplified online transaction processes facilitates one stop shop for all customer needs and information and this is another strong indication that the web-store practice customer relationship management.
Factors that facilitate implementation of customer relationship management in companies
The collected data indicated that management and leadership, technology, procurement of data, in addition to integration matters are the factors that play the biggest role in facilitating successful implementation of CRM. About matters to do with management and leadership, study subjects were of the view that the management had put substantial efforts to improving customer relationship management through steady and methodical training of personnel in order to enhance their knowledge on customer service and hence improve customer relationships. In addition, respondents confirmed that introducing technology as well as cutting-edge IT software in the web-stores enabled web-stores processes. This is supported by literature review which showed that companies that want to implement customer relationship management systems should address some important elements, namely; individuals, processes, in addition to technology. Furthermore, good quality of data, adequate data, high technology literacy in customers are also some other factors that facilitate implementation of customer relationship management systems.
Customer Relationship Management Mechanisms/Strategies
Customer Portfolio Analysis (CPA)
According to the analysed data, in creating customer portfolio analysis, the initial step that companies do in the customer relationship management value chain is to acknowledge that different customers have different value to the firm. Results show that in customer portfolio analysis, companies seek to find out “their strategic customers”.
In this regard, when companies such as online web-stores sort the actual or potential customer base in to various groups, the different customers can be targeted using various value propositions.
Studies also show that companies should analyse and classify customers in accordance with the profit potential and not by volumes. Literature shows that sackable customers include the customers who do not have the current or future profit potential and also they lack life-time value. The “invest” group has customers who have present value and substantial future potential. On the other hand, the re-engineer group includes customer who currently are not profitable but in future can be profitable to the company if there is re-engineering of the relationship between the firm and these customers (Yufan, 2014). Therefore, online web-stores can use customer portfolio analysis to trace the existing as well as future costs and revenues to customers. This is because customer portfolio analysis can help online web-stores to:
Identify customers whose exit barriers ought to be established
Enable web-stores to understand the likelihood of their customer to shift or decrease volumes as well as benchmark the existing relationship activities against the best in order to determine opportunities for further improvement.
Provide strategic input into a company’s planning procedures and can also be important to an effective relationship management strategy
Generally, results show that companies use customer portfolio management to understand the customer portfolio, develop plans, manage the implementation of the plans, as well as assessment afterwards.
The management of the company can determine the high-potential customers, elevate their value using target offers along with personalising their service to make sure the customers remain loyal and hence increase profit-opportunities for the company. The analysed data as well as the reviewed literature indicate that companies developed the following portfolios to gain the high customer value high profit matrix:
High profitability: Customers with high definite and prospective value, in addition to the comparatively low cost to service
High potential: Customers with high prospective value, average actual value, as well as low cost to service
Under-performing: This group includes customers who are not profitable to the company. Therefore, customer portfolio management procedures lead to planning and creating strategies for maximizing returns on customer relationships through portfolio or distinct accounts.
Customer profitability as among the most common factor that the interviewed companies utilised in customer valuations this can be simply computed as the variation between revenue and costs. Customer profitability also was used in performing comprehensive customer contribution to profit margin.
Summary, Conclusion, Recommendations
In online marketing, customer satisfaction is a very vital index. Online companies put more efforts in satisfying customers with an aim of maintaining long-term relationship with the customers. As the thesis shows, customers who are satisfied are likely to become loyal customers. Therefore, in online web-stores, there is need to attract the attention of customers to further develop long-term loyalty among customers. There are various mechanisms and strategies that the companies can use in implementing customer relationship management systems. For instance, the customer relationship management software can assist companies in tracking the management of customers’ contact. Winning customer loyalty mainly involves establishing positive images of the company to the customers and when customers have a positive image about a company, they are likely to talk positively about the company. Companies also win customer loyalty through provision of good and prompt services experience to the customers. Because the CRM software facilitates integration of all elements of customer management which include: sales, marketing, as well as services, it enables customers to track interactions between the company and customers during each contact.
The success of customer relationship management depends of factors such as; focusing on the key customers, organisation of the factors focus on customers, organising knowledge management using the staff members, as well as use of updated technology. Customer knowledge management provides a mechanism for developing a competitive advantage for the companies.
Customers make decisions to purchase products basing on information index as well as buying decision. When the utility of the produce surpasses the expectations of the customers, customers become satisfied and are pleased with the products. The customer satisfaction becomes a positive reinforcement that greatly influences the attitudes of the customer towards the brand/product and influence the subsequent buying. After numerous reinforcements, the customer gets into a habit of purchasing a specific product/brand and eventually develops loyalty towards the brand or product. In a nut shell, factors that influence customer loyalty towards a specific brand include cognition, customer attitude as well as customer behavior. Finally, customer value which is an important factor that should be considered when implementing customer relationship management is determined by various factors that include: market share, competition, material costs, product identity in addition to the customer’s perceived value of the product.
The online web-stores ought to invest in www ventures for them to gain customer loyalty as well as brand reputation. In online businesses, developing brand value and customer loyalty are very crucial elements. In the internet age, a valuable and well-organised website can be a very effective tool to build brand value
With the rising usage of internet as a means to seek information and an efficient tool for electronic businesses, the customer touch point has moved to online presence. In particular, online presence is very important for the success of online web-stores. A website is the most optimal way that a web-store can represent its products and services online. Therefore, the website needs to provide a comprehensive view of its products and services and applications to empower customers to navigate through the website while procuring services and buying the companies’ products. The web-stores should ensure that the website’s loading time is fast because a website that takes a very long time to load can put off customers.
Web-stores should always ensure that their information and content is always well organised. This is because organisation of the content and information greatly influence the customers because when customers visit shopping websites, they expect aesthetically attractive website and at the same time informative content on the website. Disorganized and wrong organisation of the content can result to loss of customers.
The concept of customer relationship management is still very new among online web-stores. The scope of the CRM concept is similarly extremely broad and it is this far from being over-researched. The focus of this thesis was on customer relationship management in online web-stores and the mechanisms and strategies that the companies use. There is need for additional research to be carried out which can consider the research topic from the customers’ perspective. In addition, other study subjects that can be considered for further research can encompass; stages of customer relationship management implementation, customer relationship management technology and its application in online web-stores.
Online companies are on the increase since the number of customers who opt for online shopping is on the rise. As a result, competition is on the rise and thus maintaining customer loyalty among online web-stores is a challenging matter to many businesses. Consequently, companies use various customer relationship management mechanisms to gain and maintain customer loyalty. Some of the mechanisms that the companies are using include; focusing on customer satisfaction and loyalty, use of the latest technology, committed relationship managers to facilitate the web-store’s relationship with customers, Incentives to top customers targeted to win a greater share of their businesses, among other discussed mechanisms. Generally, the study shows that using customer management system influences the loyalty of customers. The findings of this thesis indicate that there is significant relationship between organising business procedures and customer loyalty. The findings also indicate that there is a significant relationship between customer loyalty and knowledge management and hence the information collected about the customers should be managed and used appropriately in customer relationship management. The findings also show that the web-stores should always use updated technology because according to the findings there is a relationship between modernized technology and customer loyalty. The management should put the main focus on the customers in order to maintain the relationship and eventually maintain customer loyalty.
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