The Implementing Customer Relationship Management - Essay Example

Problems and benefits of implementing Relationship Management (CRM) in relation to BT (British Telecom) Relationship Management (CRM) is a group of methodologies, strategies, software, and web-based capabilities that created to assist enterprises in organizing and managing customer relationships. It is the collection and distribution of all data to all areas of the business and is highly important tool of mangement in contemporary competetive business environment. The general purpose of CRM is to enable organizations to better manage their customers through the introduction of reliable systems, processes and procedures for interacting with those customers. In this essays, I will critically analyze the concept of customer relationship managament and emphasie its importance in regular operations of the organization. The case of British Telcom will be used in order to prove the evidence of provided research and theory. Beginning in the late 1980s, there has been a great deal of research on what exactly customer relationship management means and on what exactly a firm should be doing to implement such an orientation. Information technology offered firms a way to obtain, process, and use individual customer information so that firms would be able to personalize customer experiences. Some scholars have called it “market orientation.” (Armstrong, Cowan, Vickers, 2005:195 )One set of researchers suggested that customer orientation is a subset of market orientation. Their definition for market orientation is “the set of cross-functional processes and activities directed at creating and satisfying customers through continuous needs-assessment.” ( John, 2003: 11). Following their lead, market orientation has been treated as being composed of three components: customer orientation, competitor orientation, and interfunctional coordination. Can the terms customer orientation and market orientation be used interchangeably? If we accept the definition of a “market” (Ennew, Binks, 2003:220) as being a set of potential customers and treat the terms market and customer as synonymous except for the level of aggregation in numbers, then we can use the terms interchangeably. Such an argument does not necessarily negate the three-component structure of the concept of customer focus. To be truly customer focused, the firm has to be driven by the goal of providing the customer with the high-est level of satisfaction. This implies that the firm concentrates on how the customer is better served (by the firm) compared to the competitive offerings and that all processes and activities in the entire firm are integrated and coordinated to accomplish this goal. The customer-focused firm has all aspects of the firm directed at providing the superior product to the customer. Thus, we can define customer relationship management as: a form of culture in a firm that directs all processes and activities of the firm toward providing superior value to the customer so as to sustain long-term profits (Gummesson, 2002:40). It is now generally accepted that market orientation or a customer focus is a type of culture and is exhibited by a firm that is committed to providing superior customer value. When compared with different types of business cultures, the customer-focused culture has been found to be superior in delivering the best business performance. Such a customer focus was strongly correlated with the use of customer information in a study involving about 5,000 salespeople and sales managers. This study also found a strong correlation between market orientation, job satisfaction, and trust in management. (Pelham, 2000:50) Another study of 278 salespeople and sales managers found that market orientation significantly influenced job attitudes and the customer orientation of the salespeople. A firm was seen as clearly supporting the salespeople when the salespeople perceived that the firm was being attentive to customer needs and satisfaction, aware of competitor strategies to deliver superior value, and coordinated through the entire firm (Reichheld, Markey, Hopton, 2000:134). With such evidence of strong correlations between customer-focused cultures and successful business performance, it behooves us to learn what these firms are doing to be customer focused and what it takes to be a customer-focused firm. It is clear that there are firms that have been successful in developing and implementing the customer-focused culture. Scandinavian Air Systems, Walt Disney, and British Airways are firms that pay attention to establishing the appropriate culture and climate that fosters customer orientation (Patton, 2002:54). The list of issues that have to be addressed runs the gamut from organizational structure and behavior, operations, and value delivery mechanisms to internal and external metrics such as in balanced scorecards and customer loyalty measurement. Let us now view the approach toward customer relationship management at British Telecom Company which refers to as customer optimization system and is a well-set one in frames of this organization. To BT, CMO is a best practice process, applied by an experienced team of company’s employees who really understand the industry and CRM best practice, know the technology inside out, and can manage business change successfully. BT specialises in CMO within the retail finance, utilities, telecommunications and government sectors, typically where its client has large volumes of interactions with their consumer or business customers over the telephone, internet and face-to-face channels. By using this approach BT have shown that cost to serve can be reduced by up to 20% at the same time as increasing customer retention by 10%, lifting sales conversion rates by 10%, and improving customer satisfaction by 15% (Armstrong, Cowan, Vickers, 2005:195). BT managers realize and prove on practice that CRM approach that the company currently exploits helps to sustainable cost reduction in customer facing operations such as contact centres, branch networks and e-commerce channels. Customer Management Optimisation (CMO) helps company’s client to meet the real needs of their customers and eliminate process failures. This allows costs to be taken out of the operation whilst at the same time maintaining or increasing customer satisfaction. BT relies on Amdocs CRM solutions to track, manage and maintain customer relationships. BT’s implementation of Amdocs CRM, known internally as “Bridge,” manages enterprise business operations and the IT infrastructure. This system supports more than 5,000 users and 140,000 customers, generating over one million cases per year. Bridge runs in the Sun® Solaris™ operating environment and manages all of BT’s desktop and server assets, including purchases and fault reporting.(Armstrong, Cowan, Vickers, 2005:197) BT recognized that accelerating database growth was gradually degrading response time. Managers had already bought more storage and processors for the application, as the transaction rates increased. Although the costs of disk are plunging, the costs were still significant, and there was still a database issue. Like most CRM applications, Amdocs CRM collects large volumes of customer and transaction data that is stored online, even though only a small percentage is needed to support daily operations. Storing historical data online consumes disk resources and more importantly, impedes access to open cases – directly affecting service levels, productivity and profits. As BT’s business expanded, the number of closed cases in the Bridge database continued to increase. The application was adding more than 5,000 new cases per day to a database already containing more than 1.2 million closed cases. (Armstrong, Cowan, Vickers, 2005:198). British Telecom (BT) is one of the world’s leading providers of telecommunications services and one of the largest private sector companies in Europe. Key business activities include local, long distance and international telecommunications services, mobile communications, Internet services and IT solutions. Challenges: • Solving data growth issues affecting BT’s mission-critical CRM application • Removing the backlog of 1.2 million closed cases • Improving the management of more than 5,000 new cases being added daily • Reducing Process Manager data growth • Maintaining rigorous service level agreements (SLAs) for performance and 24/7 availability Solution: • Princeton Softech Optim™ Success: • Archived in excess of 50,000 cases per hour • Implemented customizations to manage Process Manager data growth • Removed hundreds of thousands of Process Manager instances per day • Increased application availability and improved response time • Improved customer service and support Optim has met and exceeded BT’s requirements for effective database archiving. “We were able to archive approximately 50,000 closed cases an hour and save the data to archives, where the data can be easily researched and restored when needed,” said Harley. Archived data can be stored on a more cost-effective medium and made available to browse and restore in real time from within Bridge. The result is performance, availability and reliability are greatly improved, and planned hardware expansion has been deferred – with the potential for significant cost savings. “We see the implementation of Princeton Softech Optim as essential for the continued operation of Bridge, given the levels of data we are generating,” Harley concluded. BT and Amdocs jointly developed Process Manager, a utility that facilitates coding and automating each business process. However, implementing Process Manager resulted in an increased number of process instances saved in the Bridge database. “If left unaddressed, this growth would degrade the overall response time and the Process Manager would become unusable. As weeks expanded to months, solving the problem was a high priority,” said Parker. Because Princeton Softech’s database archiving technology can be easily customized, Optim was up to the task. In terms of Process Manager instances, BT’s managers are removing hundreds of thousands of process instances daily. Princeton Softech’s solution easily exceeds the daily transaction rate generated from Bridge usage. Princeton Softech Optim leads the market in providing comprehensive enterprise data management and database archiving capabilities. The company has the solution and doesn’t need to look any further than Princeton Softech to meet its future requirements with this new enterprise database archiving standard. In terms of opportunities for BT as a company, its emerging Center of Excellence will be the focal point. A customer focus necessitates a deep understanding of customers and their activities, interests, and opinions around the particular value or solution that the firm is providing. It should be an attitude that is pervasive and that permeates throughout the firm such that it becomes ingrained as a culture. Once this focus becomes a given, then the firm will find itself in the mode of serving the customer while ensuring a reasonable profit. The realization is that you cannot achieve a sustainable competitive advantage to command sustainable profits unless you are customer focused. Serving the customer contrasts with the notion of marketing a product. It is more than providing a solution for the customer. It is about serving the customer. The firm looks at the customers need in the broadest possible context, going beyond the scope of the core product that satisfies the core need in a particular consumption activity. The product is redefined to include all value-added components in a total solution. By definition, the product is extended to include several dimensions that would include as part of the total product the value added in any and all customer interactions. The service-oriented firm is one that focuses on serving the customer, regardless of whether its core product is a physical good or an intangible. Such firms are better positioned to deliver that customer value in its products. When all competing firms provide the same core product, the competitiveness of a firm or its superiority has to come from enhancements to the core product. The key to competitiveness is in these enhancements, which are invariably provided by service dimensions. These service dimensions contribute to providing superior customer value. To successfully provide these service dimensions firms have to be service oriented. When you look around, you will find that successful firms exhibit a frame of mind that is service oriented and focused on the customer. The service-oriented firm owns responsibilities over and above just providing a product. Such a firm is proactive in anticipating customer needs and situations in customer interactions. For example, customer education is seen as a significant responsibility of the firm. The customer-focused firm views the customers role in consumption activities as an integral part of its solution. A customer-focused firm truly cares for the customer. Such a firms behavior demonstrates that it feels privileged to have the customer. When its product fails the customer, the service-oriented firm will evoke built-in customer recovery procedures implemented by customer-focused employees. The total customer experience at such firms goes beyond the core product and is superior to other firms. The quality of the total experience includes a whole host of components or experiences other than that of the core product. The value that the customer seeks includes all of these components and not just the core product. When Lexus, Toyotas luxury division, found that its customers in the United States were having to drive hundreds of miles to buy a Lexus, the carmaker converted trucks into mobile service stations so that customers didnt have to drive that far to have the car serviced. Singapore Airlines provides its fliers a wide range of choices from what and when they eat to how and when they are entertained. 10 The costs are worth the value the flexibility adds to the customer experience. Customers choose firms that provide this customer value in a total solution. Such firms are service oriented. Firms add a number of dimensions typically encompassed in “services” to augment the product. Customer service is a common term used to denote these dimensions. But it is important to understand that customer service is a specific type of customer interaction and as such, it performs a narrow but necessary function. While customer service is typically involved with nonroutine customer situations such as recovering from a service failure, being service oriented can include, for example, anticipating that service failure and proactively initiating a service recovery. EMC, the storage devices provider, builds its products with redundant systems. When the primary system fails and the redundant system takes over, the design and service team assigned to the client looks into the causes and alerts the client if necessary. EMCs diagnostics cover competitor products that are part of the storage and retrieval system. In service-oriented firms such as EMC, service recovery processes are built into the design of the total product offering. EMCs service orientation is reflected in the design of its products and in its concern for the customers experience with the product performance. EMC claims a 99 percent customer retention rate. The total product offering includes serving the customer during all stages of consumption of a solution. In service-oriented firms, services complete the product as a total solution. These services are also the primary key to a sustainable competitive advantage within that total value bundle. Providing these services requires a completely different mind-set with an understanding of the complex characteristics of services. This is true even in products where the core benefit is delivered by a physical good that the customer takes title to. The services that go along with the physical good are a significant component of the total product. As illustrated in the EMC example, this perspective is readily apparent in the business-to-business (B2B) situation, where firms are naturally inclined to focus on service to the customer. Their perspective includes service elements to augment the product and to establish and maintain customer relationships. Business benefits of CRM Implementing a customer relationship management (CRM) solution might involve considerable time and expense. However, there are many potential benefits. A major benefit can be the development of better relations with existing customers, which can lead to increased sales through better timing due to anticipating needs based on historic trends, identifying needs more effectively by understanding specific customer requirements, cross-selling of other products by highlighting and suggesting alternatives or enhancements (Upton, Teal, Felan, 2001:60). Once the business starts to look after its existing customers effectively, efforts can be concentrated on finding new customers and expanding your market. The more managers know about their customers, the easier it is to identify new prospects and increase customer value. Potential drawbacks of CRM There are several reasons why implementing a customer relationship management (CRM) solution might not have the desired results. There could be a lack of commitment from people within the company to the implementation of a CRM solution. Adapting to a customer-focused approach may require a cultural change. There is a danger that relationships with customers will break down somewhere along the line, unless everyone in the business is committed to viewing their operations from the customers perspective. The result is customer dissatisfaction and eventual loss of revenue.(Upton, Teal, Felan, 2001:62). In order to make CRM work, all the relevant people in business must know what information is needed needed and how to use it. Poor communication can prevent their buy-in.(Upton, Teal, Felan, 2001:66). Weak leadership could cause problems for any CRM implementation plan. The onus is on management to lead by example and push for a customer focus on every project. If a proposed plan isnt right for your customers, dont do it. Send your teams back to the drawing board to come up with a solution that will work. (Webster, 2002:3) It is tempting to try and implement CRM as a complete solution in one go but this is a risky strategy. It is better to break your CRM project down into manageable pieces by setting up pilot programs and short-term milestones. It is also needed to consider starting with a pilot project that incorporates all the necessary departments and groups but is small and flexible enough to allow adjustments along the way.(Webster, 2002:3) In the end, customer relationship management has been recongnized as an important tool in contemporary business. It could be viewed from the example of CRM approach that BT used in its policies. To summarize, much has been said about the service encounter—customer interactions with the firm. In a way, all CRM solutions are basically technology support to ensure that the firm maximizes returns from customers by enabling customer-focused interactions. The service encounter is truly “where the rubber hits the road” (Quinn, Doorley, Paquette, 2004, 58) —where the prospects of customer loyalty are materialized or lost. It is where promises made in advertising are honored or reneged on, and where expectations of customers are disappointed or met. It is where all the assets of the firm need to be brought to bear. Service encounters with the customers are also laden with the challenges of a product that is produced and consumed in real time, where failures are bound to happen. When the firm designs the value creation process with the customer in mind, it will be prepared for all predictable eventualities. When the service fails, smart firms have smart processes, that recover and learn from the failure. They have service recovery and knowledge management processes in place. As firms compete more and more on services, the management of the customer interaction becomes critical to ensure superiority in customer value. Bibliography: 1. Armstrong Mark, Cowan Simon, Vickers John. (2005). Regulatory reform: Economic Analysis and British Experoence, London, Chapter 7 Telecommunications, pp. 195-244. BTGroup: www.bt.com. 2. Denise J. 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