Customer Relationship Management

Kristen Cimiluca Honors Thesis Marketing: Dr. Lutz

Customer Relationship Management I. Introduction of Customer Relationship Management a. Definition of CRM . Importance of CRM i. Customer !alue and Retention ii. "rofit ma#imization II. $%olution of CRM a. Mass Marketing . &rand Lo'alt' c. Transactional Marketing d. Relationship Marketing III. $mergence of CRM a. Technolog' . Total (ualit' Management c. )er%ice Industr' *ro+th d. Customer $#pectations I!. Components of CRM a. Customer Data ase . ,nal'sis and )election i. Traditional method ii. Lifetime Customer !alue iii. Clickstream ,nal'sis c. Customer Targeting

d. Customer Relationships i. Customization ii. Customer )er%ice iii. &rand Communit' i%. Lo'alt' "rograms .. T'pes of Lo'alt' a. ,ttitudinal . &eha%ioral -. Re+ard structure a. Hard/)oft re+ards . Rate of re+ard !. Managing the CRM "rocess a. Role )pecification . $mplo'ee Training c. Communication i. Internal 0+ith emplo'ees1 ii. $#ternal 0+ith customers1 d. "erformance Metrics/$%aluation i. *eneral Challenges ii. CRM )corecard !I. ,d%antages of CRM a. Customer "erspecti%e i. 2tilitarian &enefits

ii. Hedonic &enefits iii. )'m olic &enefits . Compan' "erspecti%e !II. Disad%antages of CRM a. Compan' "erspecti%e i. Cost ii. Difficult' in Measuring )uccess . Customer "erspecti%e and $thical Implications i. "ri%ac' Issues ii. Discrimination c. CRM Criticism !III. Conclusion

Customer Relationship Management Customer relationship management 0CRM15 also kno+n as relationship marketing5 has recentl' emerged as an integral marketing concept in the usiness +orld. In an attempt to reach and connect +ith customers in an en%ironment highl' saturated +ith products5 ad%ertisements5 and promotions5 usinesses are implementing a customer relationship management component in their marketing schemes. CRM practices ena le marketers to uild long lasting relationships +ith consumers at the indi%idual le%el through the use and management of a num er of different programs and ke' components. ,s a relati%el' ne+ practice5 the definition of customer relationship management has een de ated ' field e#perts and is e%er e%ol%ing. In fact5 the term has come to mean different things to different indi%iduals and organizations. In its inception5 customer relationship management +as narro+l' defined as promotional marketing ased on a customer data ase 0&ickert5 .66-1. "eppers and Rogers define CRM to e a comple# process that uilds one7to7one relationships +ith customers in order to achie%e long term gro+th 0.6631. ,ccording to *ronroos5 relationship marketing e#tends past persuading customers to u' products8 it is a out fulfilling their e#pectations in the hope of transforming them into long term5 lo'al customers 0-9961. Most e#perts can agree5 ho+e%er5 that the central theme of CRM is carefull' selecting the most %alua le customers and maintaining and strengthening relationships +ith those customers for long term profit ma#imization. )heth and "ar%ati'ar define CRM as a :comprehensi%e strateg' and process of ac;uiring5 retaining5 and partnering +ith selecti%e customers to create superior %alue for the compan' and the customer< 0-99.5 p. =1. It is a mutuall'

eneficial relationship uilt upon a foundation of trust and lo'alt' through marketing5 customer ser%ice5 and relationship programs. Customer relationship management is a relati%el' ne+ field5 ut its importance is ecoming e%en more e%ident as time passes. The paradigm shift from focusing on attracting ne+ customers to retaining current ones is at the ack one of CRM 0>iner -99.1. Reichheld?s studies re%ealed that small increases in customer retention rates greatl' increased profits5 pro%ing that long term customers can e more %alua le 0.66@1. More re%enue on a%erage is generated from repeat7purchase customers +hen compared to one time u'ers 0Reichheld .66@1. >ith potential profit ma#imization in mind5 usinesses are turning to customer relationship management in order to etter understand customers. Traditional marketing and mass ad%ertising are pro%ing to e ineffecti%e in such a commoditized en%ironment. >ith the num er of similar products on the market increasing and competition among the firms escalating5 companies must look to+ard capturing customers on some factor other than product ;ualit'5 price5 or con%enience 0&ro+n -9991. The' must focus on uilding uni;ue5 one to one relationships +ith customers ased on indi%idual needs and +ants8 thus5 implementing customer relationship management is critical to the gro+th and future success of firms.

$%olution of CRM Customer relationship management has e%ol%ed from the foundations of mass marketing and rand lo'alt'. The height of the industrial era rought +ith it mass production and a di%ision of specialized corporate functions 0,chrol .66.8 "ar%ati'ar A )heth .66=1. The era +as dominated ' product inno%ation5 and firms created

competiti%e ad%antage ' creating products that +ere etter than those products of their competitors 0"eppers A Rogers -9941. Birms focused on the amount of products that could e produced and since speed and efficienc' +ere the top priorities5 %er' little attention +as gi%en to customization and o%erall customer satisfaction. The marketing departments used mass ad%ertising for their products in order to increase a+areness and uild market share 0"ar%ati'ar A )heth .66=1. )ince the firms +ere solel' concentrated on persuading the customers to u' similar products5 the marketing departments +ere often completel' separated from direct consumer contact8 no attempts +ere made to trul' understand the customers or their purchasing eha%iors. ,s competition increased5 ho+e%er5 firms looked to differentiate their products in the highl' commoditized market through randing 0"eppers A Rogers -9941. &randing refers to an' feature or ;ualit' that can differentiate a product or ser%ice from that of a competitor 0&ro+n -9991. The ultimate goals of randing +ere to create rand a+areness and rand lo'alt' among consumers through uilding relationships of trust5 familiarit'5 and relia ilit' 0"eppers A Rogers -9941 and to :make them 0the customers1 feel comforta le +ith the rand< 0&ogart .66@5 p. .C-1. ,ccording to "eppers A Rogers5 rand a+areness and lo'alt' +ill ultimatel' transform into a randed relationship +ith :ongoing dialogue< +here customer needs influence the products or ser%ices 0-9945 p. .@1. &ecause of the focus on the consumer7 rand relationship5 rand lo'alt' can e seen as a precursor to customer relationship management. The concept of mass marketing naturall' led into the competiti%e transactional marketing that is +idel' used toda'. The primar' short term focus of transactional marketing is to attract ne+ customers for single transactions. There is a limited amount

of contact et+een the customers and firms5 and the primar' +a' that customer satisfaction is measured is through anal'sis of market share 0Hennig7Thurau A Hansen -9991. ,ll relationships5 including those +ith suppliers and customers5 are kept at a distance in order to ensure that each part' is acting in its o+n interest. Competition in the form of product price and ;uantit' is the dri%ing force ehind transactional marketing5 and firms offer %alue to customers in regard to the firm?s o+n self interest 0"ar%ati'ar A )heth .66=1. Relationship marketing is on the opposite end of the spectrum and differs from transactional marketing in a num er of fundamental concepts. Relationship marketing is ased on long7term trust and satisfaction and is centered on customer retention and customization 0"ar%ati'ar A )heth .66=1. Instead of influencing customers to u' the products5 relationship marketing suggests making products to fit the customers. Interaction et+een firms and customers is critical in the success of managing the customer ase. This interaction is ased upon personal and social onds5 +hich :are strengthened ' the integration of customers in the %alue production process< 0Hennig7 Thurau A Hansen -9991.

$mergence of CRM , num er of factors ha%e contri uted to the emergence of customer relationship management including technolog'5 total ;ualit' management5 gro+th in the ser%ice industr'5 and heightened customer e#pectations. Technolog' is at the heart of CRM de%elopment and is essential on multiple le%els of the process. )ome elie%e that technolog' can e credited +ith the +ide acceptance of relationship marketing 0Hennig7

Thurau A Hansen -9991. The customer data ase and soft+are technolog' ena le firms to track consumer purchase eha%ior5 product preference5 and personal contact information 0Bormant -9991. Technological ad%ancements in data ase programs ha%e allo+ed marketers to impro%e direct marketing tactics through indi%idualization 0"ar%ati'ar A )heth .66=1. Ence customer patterns are recorded in the data ase5 the soft+are can cater direct marketing efforts5 such as emails or mailers +ith coupons and special offers5 to each indi%idual customer. This customer %alue can onl' e deli%ered ' highl' sophisticated data ases that com ine information from se%eral e#ternal and internal sources regarding demographics5 ps'chographics5 sur%e' results and purchase patterns 0Bormant -9991. Technolog' is also imperati%e in creating customer7friendl' and easil' accessi le +e sites +here customers can enter information5 pro%ide feed ack5 and e#plore product offerings. The practice of total ;ualit' management has also contri uted to the de%elopment of customer relationship management. Total ;ualit' management is the strategic management of cost and ;ualit' control. It integrates all di%isions and le%els of a firm +ith the goal of emphasizing emplo'ee team+ork5 constant impro%ement5 ;ualit' measurement5 and efficient pro lem sol%ing 0"o+ell .66= A )pencer .6641. Total ;ualit' management results in closer relationships et+een firms5 suppliers and customers in order to add %alue and ensure ;ualit' control all along the production chain 0"ar%ati'ar A )heth -99.1. The practice of maintaining and strengthening those relationships result in firms adopting customer relationship management. In addition to the practice of total ;ualit' management and the ad%ent of ne+ technolog'5 the gro+th of the ser%ice industr' has drasticall' impacted the emergence of

customer relationship management. 2nlike products5 ser%ices are intangi le and consumption is tied closel' +ith production. Therefore5 ser%ices are deli%ered directl' from the ser%ice pro%ider 0or the firm1 to the consumer +ithout the use of middlemen in the distri ution channel 0"ar%ati'ar A )heth -99.1. ,s middlemen disappear from the e;uation5 it is more common to see customers as the :co7producers< +hen the' customize products and interact +ith emplo'ees and +e sites on a more intimate le%el 0!argo A Lusch -9941. The necessit' of this direct contact fosters an en%ironment in +hich relationships naturall' form5 ut the ser%ice ;ualit' of the pro%ider is essential in de%eloping a long term5 satisfactor' relationship 0Cros '5 $%ans A Co+les .6691. In order to capitalize on profita le consumers and to maintain and strengthen the producer7 consumer relationship5 firms are turning to customer relationship management. >ith e%er' customer interaction that takes place +ithin a firm5 there is a possi ilit' that customer e#pectations +ill not e met. The ending outcome can meet5 e#ceed5 or fall short of customer e#pectations. ,s competition increases among firms5 ho+e%er5 there is a greater emphasis on customer satisfaction and in turn5 customer e#pectations are increasing. ,lthough some customers %alue price o%er all other characteristics5 man' customers are not +illing to compromise +hen it comes to products and ser%ices8 therefore5 firms are adopting the practices of customer relationship management to ensure those e#pectations are met 0"ar%ati'ar A )heth -99.1.

Components of CRM Implementation of customer relationship management is a multi7step process that in%ol%es se%en asic components. The first ke' component is the creation of a customer

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data ase +hich contains all pertinent information including descripti%e information 0such as ps'chographics and demographics15 transaction histor'5 and customer contact information 0>iner -99.1. Customer responses to marketing tactics such as redemption rates regarding coupons5 mailers5 or emails is also usuall' recorded in the data ase. The customer data ase can ser%e as a competiti%e ad%antage if it is maintained correctl' since it is the eginning step in customer relationship management 0$spinoza A Rust -99@1. In order to uild up the content of the data ase5 companies ac;uire customer information from +arrant' cards5 lo'alt' customer cards5 compan' +e sites5 and contests. The ultimate goal is to collect customer information +ith e%er' customer interaction 0>iner -99.1. Internet transactions allo+ for prime tracking and cross7referencing since information inputted ' the customer is generall' %er' useful and applica le to uilding a potential relationship +ith that customer 0$spinoza A Rust -99@1. ,lthough it is eas' for some companies to collect data5 it is e#tremel' difficult for others. >iner 0-99.1 created a frame+ork regarding data collection and the potential pro lems that might ensue ased on customer interaction and interaction fre;uenc'. The ideal situation for a compan' in%ol%es direct interaction at a high fre;uenc'8 data collection is relati%el' eas' for these firms. Birms that ha%e indirect customer interaction ha%e the most difficult time collecting data and must +ork harder to de%elop +a's in +hich to retrie%e customer information. )ince technolog' has ena led customer data ases to collect and store a large amount of information5 the ne#t %ital step in the CRM process is the anal'sis of this information. Historicall'5 the data +as used to separate the customers into different segments ased on descripti%e information and compara le purchase eha%iors in order

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to de%elop marketing tactics specificall' for them 0&ro+n -999 A >iner -99.1. This traditional segmenting failed to account for the times +hen customers could fall into a num er of categories 0$spinoza A Rust -99@1. >ith a greater understanding and the technological capa ilit'5 the customer data ase can ' anal'zed in smaller5 more specific categories8 each customer can also fall into more than one categor' 0>edel A )teenkamp .66.1. Instead of de%eloping marketing schemes for entire segments5 each customer can e anal'zed in order to understand future purchases and indi%idual profit potential for the firm 0>iner -99.1. This inno%ati%e :one to one< marketing concept encourages firms to address indi%idual customer needs and to anal'ze lifetime customer %alue. >hen determining lifetime customer %alue5 se%eral factors are considered5 including customer purchase histor'5 the contri ution margin5 and %aria le marketing costs 0!enkatesan A Kumar -9941. $ach customer?s past profit is calculated ' adding up past profit margins of all purchases and then su tracting the %aria le costs associated +ith o taining that customer. Customers are often ranked ' their lifetime customer %alues5 allo+ing firms to distinguish the most %alua le customers and to allocate necessar' resources efficientl' among them 0!enkatesan A Kumar -9941. Clickstream anal'sis is another kind of data anal'sis5 ut it takes place on the Internet and compan' +e sites. The data ase records and anal'zes consumer +e site %isits5 purchases5 and shopping patterns in order to predict future customer eha%ior. The goal of clickstream anal'sis is to con%ert those potential shoppers +ho are ro+sing the +e sites into purchasing consumers 0>iner -99.1. Through anal'zing past eha%ioral patterns5 companies can predict future purchases and tailor their +e sites to each

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indi%idual ' changing the la'out of the +e site5 product offerings5 and special promotions 0Bader A Moe -99.1. ,fter anal'zing all of the collected data5 the ne#t step in the CRM process is to actuall' select the customers that the marketing programs +ill target 0>iner -99.1. Customer relationship management is uilt upon retaining e#isting customers instead of ac;uiring ne+ ones. Therefore5 the most desired customers are those +ho ha%e the highest customer lifetime %alues. Birms should concentrate on retaining these customers ' focusing marketing programs on them. Customers +ho don?t necessaril' ha%e high customer lifetime %alues ut ha%e the potential to e profita le in the future should also e targeted +ith special customer promotions. Customers +ho offer no long7term profits or +ho ma' e hurting present profits should e carefull' identified and a andoned5 ut companies must e careful to a%oid spillo%er defections ' profita le customers 0Ro erts5 Liu A Hazard -99=1. Targeting these selected customers in%ol%es a com ination of direct marketing including direct mail5 emails5 sales calls5 and telemarketing 0>iner -99.1. ,lthough these strategies ma' e successful sometimes5 customer relationship management emphasizes the need for indi%idualized targeting through one to one marketing. ,ccording to "eppers A Rogers5 :The one to one marketing paradigm is ased on indi%idualized communication and Fcustomized? products and ser%ices< 0.6641. Ene to one marketing in%ol%es modif'ing tactics ased on each customer?s needs5 +ants5 and preferences8 products and ser%ices are refined to meet the e#pectations of the most profita le customer segments 0&ro+n -9991.

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Ene of the more popular CRM tactics is using opt7in email ser%ices in +hich customers must agree to recei%e emails from a compan' 0>iner -99.1. )ince this is an opt7in marketing ser%ice5 customers are more prone to clicking through the email to get to the compan' +e site and therefore the success rate is high. The emailing approach is %er' eneficial to the compan' ecause of the high success rate and lo+ costs associated +ith it. Ence customers are selected from anal'sis of the data ase and targeted through one to one marketing programs5 the ne#t %ital component in customer relationship management is the focus on the actual customer relationships. Birms are no+ constantl' competing +ith one another to pro%ide etter ser%ice and higher customer satisfaction 0>iner -99.1. Got onl' do customers demand to e satisfied +ith product performance5 the' also e#pect the :cumulati%e< customer e#perience to e satisfactor' 0,nderson5 Bornell A Lehmann .6641. Customer relationships can e uilt upon5 reinforced5 and impro%ed through a num er of CRM programs5 including customization5 communit' uilding5 customer ser%ice re;uirements5 re+ards programs5 and lo'alt' programs 0>iner -99.1. Customization can pertain to oth products and promotions. ,lthough more cost is incurred +hen customizing promotions for particular customers5 man' companies find that their return on in%estment makes it +orth+hile. Re%enues from customized promotions are higher +hen compared to the re%enues generated from standardized promotions 0Kahn5 Le+is A )ingh -9961. >hen it comes to products5 customization has een gro+ing in popularit' from oth a consumer and compan' standpoint. Consumers enHo' the option to uild their o+n products ' selecting specific attri utes or product

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packages8 this customization option onl' strengthens the relationship et+een the firm and consumer 0)tump5 ,thaide A Ioshi -99-1. ,s the seller5 a compan' offers customized products or ser%ices to increase customer %alue in order to gain competiti%e ad%antage o%er competitors that offer onl' standardized products and ser%ices. Customization emphasizes consumer7seller interaction and communication +hile increasing the chances of satisfaction and future e#changes 0"orter .6D91. Customer ser%ice goes hand in hand +ith product and ser%ice customization. >ith customization of essentiall' e%er' customer7firm contact5 customer ser%ice is %ital in de%eloping long term relationships and CRM. Customer ser%ice egins efore the purchase transaction5 ut e#tends far e'ond it through increasing the percei%ed %alue of the product or ser%ice 0Christopher5 "a'ne5 &allant'ne .66.1. Birms can engage in t+o general t'pes of customer ser%ice: reacti%e and proacti%e. Reacti%e ser%ice takes place +hen the customer initiates contact +ith the firm due to a pro lem or ;uestion. "roacti%e ser%ice in%ol%es the firm making the first contact +ith the customer in order to ensure satisfaction efore a formal complaint is made 0>iner -99.1. ,nother relationship program in the implementation of CRM is rand communit' uilding. ,ccording to Mc,le#ander5 )chouten5 and Koenig 0-99-5 p. 3D15 a rand communit' is a net+ork of relationships including those et+een :the customer and the rand5 et+een the customer and the firm5 et+een the customer and the product in use5 and among fello+ customers.< The +e offers the ideal location for these net+orks to de%elop and for customers to interact +ith each other ' allo+ing them to pro%ide discussion and feed ack a out information regarding products5 the rand5 and the firm. ,s these customers e#change stories5 product suggestions5 and other product related

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information5 the' egin to feel part of a communit' and ecome personall' attached to the rand or the compan' ehind the rand 0>iner -99.1. This e#clusi%e communit' offers enefits onl' to those +ho partake in it5 and it therefore creates an :in7group/out7 group split< 0Reinartz -99@1. This split is desira le +hen the consumers +ho are included in the e#clusi%e group make repeat purchases and remain profita le to the compan'. Those +ho do not feel a part of the group5 ho+e%er5 can ha%e negati%e perceptions and ma' choose not to support the rand or the compan'. The rand communit' as a CRM program is customer7centric and promotes relationship uilding in an open5 interacti%e en%ironment. "erhaps one of the most po+erful programs in the customer relationship management process is the lo'alt' program5 +hich is designed to increase customer lo'alt' and satisfaction. Through a lo'alt' program5 the firm aspires to create a mutuall' eneficial relationship +ith the customer8 the ultimate goal is for each part' to recei%e a positi%e enefit 0&ro+n -9991. Lo'alt' programs ma' e implemented in %arious +a's5 ut all of them are created to retain customers5 to generate long term relationships5 and to increase the num er of customer interactions in order to increase profit. &efore a firm creates a program5 it must first define lo'alt' in compan' terms and identif' the firm?s goals regarding lo'alt'. True customer lo'alt' is a com ination of t+o components: attitudinal and eha%ioral lo'alt'. ,ttitudinal lo'alt' is created +hen customers hold strong5 positi%e eliefs a out a specific compan'5 rand5 or product 02ncles5 Do+ling A Hammond -9931. Ence indi%iduals ha%e made a mental or emotional commitment5 eha%ioral lo'alt' often follo+s in the form of repeat purchases or fre;uent store %isits 0Reinartz -99@1. )ince true lo'alt' depends on oth the

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customer?s satisfaction and in%ol%ement +ith the purchase5 companies design lo'alt' programs to enhance these e#periences. ,ccording to Reinartz5 a lo'alt' program is defined as a marketing practice that offers re+ards for customers to encourage them to make repeat purchases 0-99@1. $ffecti%e lo'alt' programs are those that are customized to fit the needs and goals of a compan' and their customers. >hen designing a lo'alt' program5 the re+ard structure accounts for the most defining characteristic. The re+ard structure is the most alluring component of the lo'alt' program8 consumers are primaril' attracted to lo'alt' programs ecause of the re+ards and enefits a%aila le to them 0Mimouni7Chaa ane A !olle -9961. Lo'alt' programs can offer hard and/or soft re+ards depending upon the nature of the product or ser%ice5 ut oth should e percei%ed as %alua le in the consumers? minds. Hard re+ards offer tangi le or financial enefits such as promotions5 free products or ser%ices5 and price reductions. )oft re+ards are ased on ps'chological enefits and often incorporate special customer recognition or status. These re+ards ma' or ma' not e connected +ith the compan'?s product offerings. Birms can choose to directl' support their product proposition ' allo+ing customers to redeem lo'alt' points for free products or price reductions on those products 0Reinartz -99@1. En the other hand5 firms can offer products that are unrelated to their usiness. More often than not5 ho+e%er5 firms usuall' choose to offer re+ards that are directl' tied to their product offerings in order to encourage additional usiness and further de%elop the relationships +ith the consumers. Effering re+ards directl' related to the products is also less costl' to the firm. Go matter the t'pe of re+ard offered in the lo'alt' program5 firms should re+ard customers at a high rate5 +hich is determined from the ratio of the monetar' %alue

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of the re+ard to the monetar' %alue of the initial transaction. Consumers are much more satisfied and percei%e the lo'alt' program Hustified +hen this rate is higher ecause the decreased lag time et+een re+ards keep customers percei%ing the %alue of the program. The effecti%eness of the lo'alt' program comes do+n to +hether or not the consumer adopts the program and consistentl' uses the tools pro%ided to them5 such as a lo'alt' card 0Mauri -9931. Through offering %alua le re+ards in a timel' manner5 customers +ill increase repeat purchases and strengthen their relationships +ith the firm and its products. The lo'alt' program in com ination +ith the other relationship programs allo+s for the CRM process to cater to the needs and +ants of the customer ase.

Managing the CRM "rocess Ence the CRM components are defined ' the firm5 the ne#t step is to acti%el' manage the process through role specification5 emplo'ee training5 effecti%e communication5 and e%aluation. Role specification is necessar' in managing the relationships of CRM5 and its main goal is to define the responsi ilities and duties of the relationship partners such as the firm5 the emplo'ees5 and the customers 0Heide .6641. ,s the CRM programs progress in comple#it'5 role specification ecomes more important in managing the comple# relationships 0"ar%ati'ar A )heth -99.1. Role specification ensures that the indi%iduals responsi le for maintaining the relationship are held accounta le and are gi%en the necessar' resources to continue the CRM programs. ,fter roles are specified5 the emplo'ees must e ade;uatel' trained to implement the programs +ithin the CRM process. In order to successfull' e#ecute effecti%e CRM5

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emplo'ees should e e;uipped +ith strong sales and communication skills5 and the' should e trained to pro%ide e#ceptional customer ser%ice 0Bormant -9991. )ince emplo'ees are responsi le for direct contact +ith customers and can enhance or +eaken the customer7firm relationships5 the' should feel empo+ered to make decisions regarding customer ser%ice. $mplo'ees need to kno+ ho+ to use and update the customer information located in the data ases efficientl' and effecti%el' in order to uild relationships and increase customer satisfaction 0LilHander -9991. )ince emplo'ees are such an integral part of customer relationship management5 companies should focus on emplo'ee satisfaction and offer emplo'ee moti%ation in the form of re+ards or incenti%es 0"ar%ati'ar A)heth -99.1. Customer and emplo'ee lo'alt' and satisfaction are positi%el' related to each other5 so it is in the firm?s est interest to train and re+ard emplo'ees 0Reichheld .66@1. In order to carr' out an' successful programs or uild an' relationships5 the firm should accuratel' communicate +ith its internal audience 0the emplo'ees1 as +ell as its e#ternal audience 0the customers1. Relationship marketing re;uires communication among all ke' pla'ers since it is uilt upon trust and mutual satisfaction. Birms must communicate +ith emplo'ees +hen training and enforcing guidelines and policies. The top e#ecuti%es and customer relationship managers must e#plain the CRM goals of the compan' and ho+ the CRM programs +ill e implemented to the rest of the firm 0LilHander -9991. En an e#ternal le%el5 communication is essential to uilding relationships +ith the customers. Customers must e informed a out the CRM programs 0such as lo'alt' programs1 a%aila le in order to encourage repeat purchases. The firm

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must perfect the communication channels et+een the firm and the customers to ensure that information is eing accuratel' shared 0"ar%ati'ar A)heth -99.1. The final step in managing the CRM process is e%aluating the results and o%erall successfulness of the program. Customer relationship management is focused on uilding and maintaining customer relationships in order to increase retention and profit in the long run. If the programs aren?t successful and the firm does not get an ade;uate return on in%estment5 then the CRM process should e modified or ended immediatel'. )ince CRM incorporates su Hecti%e and a stract concepts such as satisfaction5 lo'alt'5 and relationship de%elopment5 it is often difficult to measure its success. ,lthough most scholars elie%e that there is no technolog' or method that measures the success of CRM completel' accuratel'5 there ha%e een attempts at de%eloping a comprehensi%e report for a firm?s CRM programs 0"ar%ati'ar A )heth -99.1. The CRM process should e e%aluated using a set of uni;ue performance metrics that reflect the core concepts of a firm?s relationship marketing 0Ro erts5 Liu5 A Hazard -99=1. In addition to measuring profita ilit' and market share5 the firm can easil' e%aluate its CRM programs ' o taining con%ersion rates5 customer ac;uisition costs5 same customer sales and user adoption of lo'alt' programs 0>iner -99. A *olden erg -9.91. These components are often organized and recorded on a CRM scorecard that di%ides the CRM frame+ork into specific categories. The first categor' of the CRM scorecard is the organizational performance perspecti%e +hich ultimatel' pro%es +hether or not the CRM process increases profit 0*olden erg -9.91. It details the customer e;uit'5 shareholder %alue5 and profita ilit' of the CRM plan using percei%ed %alue5 customer lifetime %alue and rand e;uit' calculations 0H'ung7)u A Joung7*ul -9961.

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The second categor' of the CRM scorecard is the customer perspecti%e5 +hich is centered on e%aluating ho+ a customer %ie+s the particular firm and +hat %alue he or she percei%es to gain from the firm. The customer perspecti%e includes customer lo'alt' measured ' customer satisfaction and customer %alue measured ' sur%e's and num er of customer complaints. The process perspecti%e is another component of the CRM scorecard and includes e%aluating the o%erall success of the usiness strateg' ' measuring customer ac;uisition5 retention5 and e#pansion 0H'ung7)u A Joung7*ul -9961. Ence the CRM initiati%es ha%e een e%aluated5 the firm?s e#ecuti%e leaders must make a decision regarding the future. If the initiati%es sho+ an impro%ement in the firm?s ottom line5 then mone' should e continuall' in%ested into the CRM program. If the initiati%es don?t impro%e the ottom line5 then the CRM program should e re%ised or ceased.

,d%antages of CRM Implementing customer relationship management offers a num er of ad%antages and disad%antages to oth the companies that initiate the programs and the customers that partake in them. Brom a customer perspecti%e5 the ad%antages are directl' attached to e#periences and can mostl' e attri uted to the percei%ed enefits of the CRM programs 0Hol rook .66@1. Customers o tain percei%ed %alue from the utilitarian enefits5 hedonic enefits5 and s'm olic enefits offered ' the CRM programs. 2tilitarian enefits deri%e from completing a task or o taining a tangi le o Hect5 and the' often are connected +ith a product?s ph'sical characteristics. Customers +ho seek utilitarian enefits from CRM programs are often most concerned +ith the financial re+ards5 such as monetar' sa%ings

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from coupons or special offerings. Con%enience enefits also pro%ide utilitarian %alue ' sa%ing a customer?s time 0Mimouni7Chaa ane A !olle -9961. Hedonic %alue originates from emotionall' gratif'ing or sensor' fulfilling enefits that are not connected +ith tangi le product characteristics. Bor e#ample5 customers recei%e hedonic enefits from CRM programs +hen the' are encouraged to tr' ne+ products and enHo' ne+ e#periences after collecting a predetermined set of lo'alt' program points or after o taining a certain customer status 0,rnold A Re'nolds -9931. Customers ma' also recei%e s'm olic enefits through self e#pression5 recognition5 and appro%al. These enefits are not related to tangi le characteristics or to products8 the' pertain specificall' to an indi%idual?s self7esteem and ho+ the' feel the' are percei%ed ' the +orld 0Mimouni7Chaa ane A !olle -9961. CRM programs pro%ide its customers +ith s'm olic enefits ' recognizing indi%iduals and their o+n uni;ue product preferences and shopping eha%iors. >hen these indi%iduals are considered a part of an elite group of customers or a rand communit'5 the' feel sociall' accepted and satisfied8 therefore5 CRM programs should focus on gi%ing these customers the e#periences the' desire 0Muniz A E?*uinn -99.1. The ad%antages of successful CRM implementation from a compan' perspecti%e in%ol%e increasing customer retention5 repeat purchases5 and customer relationships in order to gain the ultimate o Hecti%e of raising profits. In a +orld inundated +ith marketing tactics and ad%ertising campaigns5 companies must redefine themsel%es in the e'es of the customers5 and CRM allo+s them to do Hust that. CRM pro%ides companies +ith a customer kno+ledge ad%antage through effecti%e and efficient internal and e#ternal information flo+ and communication 0Minocha -9991. The technolog' created

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for the CRM process and the focus on customer relationships disco%er customer leads5 encourages lo'alt'5 and generates sales. Ence companies create and strengthen those customer relationships5 the' gain a competiti%e ad%antage through customer commitment and trust 0Morgan A Hunt .66418 there '5 the companies ps'chologicall' connect +ith customers and capitalize on their purchase eha%iors.

Disad%antages of CRM Brom a compan' perspecti%e5 the costs associated +ith CRM programs and technolog' can ser%e as a great disad%antage if the return on in%estment does not reach the optimal le%el. Ence firms commit to adopting the CRM practice5 the' must in%est in training emplo'ees5 de%eloping the data ase soft+are5 and targeting marketing efforts at the most profita le customers. $%aluating the CRM process is another disad%antage due to the fact that there is no one factor that can determine if the program is successful or not. There are man' contri uting factors that cannot e easil' numericall' measured5 and therefore5 firms ma' find it difficult to get the true %alue of its CRM programs 0>iner -99.1. T+o main ethical implications5 +hich pertain to oth the customers and companies5 in%ol%e customer discrimination eha%ior and pri%ac' issues. ,lthough CRM attempts to target the most profita le customers and maintain strong relationships +ith them5 the process inherentl' discriminates against other current and potential customers +hen the' are treated differentl'. >hen consumer segments are defined and separated according to their %alues5 some customers are e%aluated as eing more %alua le and therefore the' hold priorit' o%er others. "ro lems arise +hen these segments

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communicate +ith each other and +ith the compan' %ia social net+orking sites and other communit' uilding sites. >hen unfa%ora le communication takes place regarding differences in customer e#periences5 the compan' ma' ha%e to defend itself 0)tauss -9991. Discrimination can e seen as unfair and can ultimatel' e counterproducti%e to uilding customer relationships and maintaining a sense of communit'. ,ccording to Hansen 0-99915 a :discrimination relationship polic' is tied up +ith pro lems of moral sensiti%it'5< and therefore ma' e detrimental in relationship uilding. )ince the CRM process re;uires a %ast amount of customer information5 pri%ac' issues remain an important and sensiti%e issue +ith firms and customers alike. In order to customize products and ser%ices for indi%idual customers5 personal information is collected and stored in CRM data ases. There is a fine line5 ho+e%er5 et+een collecting and capitalizing on information and stepping o%er customer pri%ac' oundaries. ,ccording to Borrester Research5 indi%iduals ha%e reported feelings of irritation and %iolation and some ha%e admitted that the' are fearful a out internet usage tracking 0)tanle' -9991. >hen firms %iolate customer pri%ac' ' sending un+anted e7mails and mailings or ' sharing pri%ate information5 customers can acklash and o'cott the firms. )ome pri%ac' issues can e resol%ed ' an :opt7in< option in +hich the customer must e#plicitl' gi%e consent to personal data collection or ' an :opt7out< option in +hich customers must for id the use of data 0>iner -99.1. ,s more firms adopt and de%elop CRM processes5 pri%ac' issues should e addressed in order to ensure that consumers feel comforta le and confident +ith the firms and +ith the data those firms are collecting and using.

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,lthough there are man' ad%ocates for the adoption of customer relationship management5 man' skeptics criticize the practice for a num er of reasons. The initial criticism attacks the fact that no top marketers5 or e#ecuti%es of the same firm for that matter5 can agree on a single definition of CRM8 this lack of consistenc' makes it difficult for an organization to create a united front regarding CRM o Hecti%es and programs 0Ge+ell -9938 "lako'iannaki A Tzokas -99.1. This lack of definition ma' not e critical5 ho+e%er5 if the firms are a le to successfull' implement their o+n indi%idual +orking s'stems. Ether critics elie%e that CRM is failing to meet customer needs8 CRM practitioners are too focused on managing the customer and not enough on satisf'ing the customer. Binall'5 marketing e#ecuti%es often %ie+ technolog' as the most important part of CRM5 ut man' see technolog' as the onl' re;uirement for CRM implementation. Technolog' does not uild relationships5 and critics argue that the process of CRM puts too much emphasis on data ases and not enough on personal interactions 0Ge+ell -9931.

Binal Thoughts: The Buture of CRM The future of CRM is right if companies are +illing to in%est mone' and impro%e their current practices. Currentl'5 CRM implementation is relati%el' +eak among firms8 the future of CRM +ill e determined ' ho+ +ell these firms adapt to its practices. ,ccording to >iner5 technolog' and data ase functions +ill continue to impro%e5 ut companies +ill ha%e to ecome more effecti%e in anal'zing customer eha%ior and information 0-99.1. Birms must continue to uild compan' and rand communities to encourage communication and increase lo'alt' le%els among current and potential customers 0Reinartz -99@1. , popular trend in impro%ing CRM in%ol%es the

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splitting of the marketing manager Ho into t+o separate positions. Ene position +ould e responsi le for customer ac;uisition and the other for customer retention5 allo+ing for the managers to solel' focus on one?s responsi ilities and o Hecti%es 0>iner -99.1. Customer e#perience management 0C$M1 is another marketing mo%ement that is an offshoot of CRM5 and it focuses on the customer e#perience at e%er' touch point et+een the firm and the customer. If C$M pro%es to e a %alua le and effecti%e practice5 then it is likel' that CRM +ill e%ol%e to include C$M techni;ues 0)chmitt -993 A >iner -99.1. Customer relationship management has ecome the ne+ +a%e of marketing in an attempt to uild lo'alt'5 strengthen customer relationships and increase profits. 2sing soft+are technolog' and ad%anced data ases5 CRM aims to reach out to customers to meet their indi%idual needs and e#ceed their e#pectations. Birms implement relationship programs5 such as communit'7 uilding +e sites and lo'alt' card programs5 to de%elop a trusting relationship among consumers to gain their confidence and increase repeat purchases. CRM +ill continue to e a dominant marketing techni;ue that +ill contri ute to ongoing customer relationships and ottom line profits.

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&i liograph' ,chrol5 R. 0.66.5 Ect1 :$%olution of the Marketing Erganization: Ge+ Borms for Tur ulent $n%ironments.< Journal of Marketing, pp. CC763. ,nderson5 $.5 Bornell5 C. A Lehmann5 D. 0.664 Iul'1 :Customer )atisfaction5 Market )hare5 and "rofita ilit'5< Journal of Marketing, pp. =37@@. ,rnold5 M. A Re'nolds5 K. 0-9931 :Hedonic )hopping Moti%ations.< Journal of Retailing, pp. CC76=. &ickert5 I. 0.66-5 Ma'1 :The Data ase Re%olution.< Target Marketing, pp. .47.D. &ogart5 L. 0.6D@1 Strategy in Advertising: Matching Media and Messages of Markets and Motivations. Illinois: GTC &usiness. &ro+n5 ). 0-9991 :Brom Customer Lo'alt' to Customer Dependenc'.< Customer Relationship Management, pp. @67D@. Ge+ Jork: Iohn >ile' A )ons Canada5 Ltd. Christopher5 M.5 "a'ne5 ,.5 A &allant'ne5 D. 0.66.1 Relationship Marketing: Bringing uality, Customer Service and Marketing Together. E#ford: &utter+orth Heinemann. Cros '5 L.5 $%ans5 K.5 A Co+les5 D. 0.6695 Iul'1 :Relationship (ualit' in )er%ices )elling: ,n Interpersonal Influence "erspecti%e.< Journal of Marketing5 pp. @D7 D.. $spinoza5 B. A Rust5 R. 0-99@1 :Ho+ Technolog' ,d%ances Influence &usiness Research and Marketing )trateg'.< Journal of Business Research, pp. .9C-7.9CD. Bader5 ". A Moe5 >. 0-99.1 :2nco%ering "atterns in C' ershopping.< California Management Revie!5 pp. .9@7..C.

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Bormant5 C. 0-9991 :Customer ,c;uisition and CRM.< Customer Relationship Management, pp. DC7.9@. Ge+ Jork: Iohn >ile' A )ons Canada5 Ltd. *olden erg5 &. 0-9.91 :,ssessing Jour CRM )ituation.< CRM Maga"ine, pp. .9. *ronroos5 C. 0-9965 Iune1 :Marketing as "romise Management: Regaining Customer Management for Marketing.< Journal of Business # $ndustrial Marketing, pp. 3=.73=6. Hansen5 2. 0-9991 :Lost in Relationship7Marketing )pace.< Relationship Marketing5 pp. 4.=743=. Ge+ Jork: )pringer. Heide5 I. 0.6641 :Interorganizational *o%ernance in Marketing Channels.< Journal of Marketing, pp. C.7D=. Hennig7Thurau5 T. A Hansen5 2. 0-9991 :Relationship Marketing7 )ome Reflections.< Relationship Marketing, pp. 37-C. Ge+ Jork: )pringer. Hol rook5 M. 0.66@1 :Customer !alue7 , Brame+ork for ,nal'sis and Research.< Advances in Consumer Research, pp. .3D7.4-. H'ung7)u5 K. A Joung7*ul5 K. 0-9965 Ma'1 :, CRM "erformance Measurement Brame+ork: Its De%elopment "rocess and ,pplication.< $ndustrial Marketing Management5 pp. 4CC74D6. Kahn5 R.5 Le+is5 M. A )ingh5 !. 0-9961 :D'namic Customer Management and the !alue of Ene7to7Ene Marketing.< Marketing Science, pp. .9@37.9C6. LilHander5 !. 0-9991 :The Importance of Internal Relationship Marketing for $#ternal Relationship )uccess.< Relationship Marketing5 pp. .@.7.6-. Ge+ Jork: )pringer.

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Mauri5 C. 0-9931 :Card Lo'alt': , Ge+ Issue in *rocer' Retailing.< Journal of Retailing and Consumer Services, pp. .37-=. Mc,le#ander5 I.5 )chouten5 I.5 A Koenig5 H. 0-99-1 :&uilding &rand Communit'.< The Journal of Marketing5 pp. 3D7=4. Mimouni7Chaa ane5 ,. A !olle5 ". 0-9961 :"ercei%ed &enefits of Lo'alt' "rograms: )cale De%elopment and Implications for Relational )trategies.< Journal of Business Research5 pp. 3-73C. Minocha5 H. 0-9991 :Learning and Kno+ledge Management "rograms in the ,ge of CRM.< Customer Relationship Management, pp. 39C73-9. Ge+ Jork: Iohn >ile' A )ons Canada5 Ltd. Morgan5 R. A Hunt5 ). 0.6641 :The Commitment7Trust Theor' of Relationship Marketing.< Journal of Marketing5 pp. -973D. Muniz5 ,. A E?*uinn5 T. 0-99.1 :&rand Communit'.< Journal of Consumer Research, pp. 4.-743-. Ge+ell5 B. 0-9931 %hy CRM &oesn't %ork( Ge+ Ierse': &loom erg "ress. "ar%ati'ar5 ,. A )heth5 I. 0.66=1 :The $%olution of Relationship Marketing.< $nternational Business Revie!5 pp. 36C74.D. "ar%ati'ar5 ,. A )heth5 I. 0-99.1 :Customer Relationship Management: $merging "ractice5 "rocess5 and Discipline.< Journal of )conomic and Social Research5 pp. .734. "eppers5 D. A Rogers5 M. 0.6631 The *ne to *ne +uture: Building Relationships *ne Customer at a Time( Ge+ Jork: Harper and Ro+.

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"eppers5 D. A Rogers5 M. 0.6641 :>elcome to the .:. Buture.< Marketing Tools5 pp. .@7 .D. "eppers5 D. A Rogers5 M. 0-9941 Managing Customer Relationships: A Strategic +rame!ork( Ge+ Ierse': Iohn >ile' A )ons. "lako'iannaki5 $. A Tzokas5 G. 0-99.1 :Customer Relationship Management: , Capa ilities "ortfolio "erspecti%e.< Journal of &ata,ase Marketing, pp. --D7-3C. "orter5 M. 0.6D91 Competitive Strategy: Techni-ues for Analy"ing $ndustries and Competitors( Ge+ Jork: Bree "ress. "o+ell5 T. 0.66=1 :Total (ualit' Management as Competiti%e ,d%antage: , Re%ie+ and $mpirical )tud'.< Strategic Management Journal5 pp. .=73C. Reichheld5 B. 0.66@1 The .oyalty )ffect( Massachusetts: &ain A Compan'5 Inc. Reinartz5 >. 0-99@1 :2nderstanding Customer Lo'alt' "rograms.< Retailing in the /0st Century, pp. 3@.73C6. Ro erts5 M.5 Liu5 R. Hazard5 K. 0-99=1 :)trateg'5 Technolog'5 and Erganizational ,lignment: Ke' Components of CRM )uccess.< &ata,ase Marketing # Customer Strategy Management5 pp. 3.=73-@. )chmitt5 &. 0-9931 Customer )1perience Management. Ge+ Ierse': Iohn >ile' A )ons5 Inc. )pencer5 &. 0.6641 :Models of Erganization and Total (ualit' Management: , Comparison and Critical $%aluation.< The Academy of Management Revie!, pp. 44@74C.. )tanle'5 I. 0-9991 :The Internet "ri%ac' Migraine.< +orester Research, $nc(

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)tauss5 &. 0-9991 :2sing Ge+ Media for Customer Interaction: , Challenge for Relationship Marketing.< Relationship Marketing5 pp. -337-=4. Ge+ Jork: )pringer. )tump5 R.5 ,thaide5 *. A Ioshi5 ,. 0-99-1 :Managing )eller7&u'er Ge+ "roduct De%elopment Relationships for Customized "roducts.< The Journal of 2roduct $nnovation Management, pp. 43674=4. 2ncles5 M.5 Do+ling5 *. A Hammond5 K. 0-9931 :Customer Lo'alt' and Customer Lo'alt' "rograms.< Journal of Consumer Marketing, pp. -6473.@. !argo5 ). A Lusch5 R. 0-9941 :$%ol%ing to a Ge+ Dominant Logic for Marketing.< J Mark5 pp. .7.C. !enkatesan5 R. A Kumar5 !. 0-9941 :, Customer Lifetime !alue Brame+ork for Customer )election and Resource ,llocation )trateg'.< Journal of Marketing, pp. .9@7.-=. >edel5 M. A )teenkamp5 I. 0.66.1 :, Cluster+ise Regression Method for )imultaneous Buzz'.< J Mark, pp. 3D=736C. >iner5 R. 0-99.1 :, Brame+ork for Customer Relationship Management.< California Management Revie!, pp. D67.9=.

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