Term Paper: CRM and Car Buying

Pages: 25 (6951 words)  ·  Bibliography Sources: 1+  ·  Level: College Senior  ·  Topic: Business  ·  Buy This Paper

SAMPLE EXCERPT:

[. . .] It is about changing the way we do business and valuing those people who manage our customer interactions. "It accepts the role of technology and customer information but only as enablers" (Graham Hoskins 2001).

Interestingly Eastman Software conducted a survey recently of the UK's top 1000 companies asking what they see as the most important elements in successful CRM. The results were:

Proactive customer management

Product Quality single telephone number

Web address for all enquiries.

In many respects these results are not surprising. There is no mention of end-to end process or organisational change. It is still viewed by many to be just about access and the web.

What is Customer Relationship Management?

Before we begin to examine the conceptual foundations of CRM, it will be useful to define what is CRM. In the marketing literature terms customer relationship management and relationship marketing, are not distinguished from each other (Parvatiyar and Seth 2000) therefore we use them interchangeably.

The customer relationship management terms have been used to reflect a variety of themes and perspectives. Some of these themes offer a narrow functional marketing perspective while others offer a perspective that is broad and somewhat paradigmatic in approach and orientation. A narrow perspective of customer relationship management is database marketing emphasising the promotional aspects of marketing linked to database efforts. Another narrow, yet relevant, viewpoint is to consider CRM only as customer retention in which a variety of after marketing tactics is used for customer bonding or staying in touch after the sale is made.

A more popular approach with recent application of information technology is to focus on individual or one-to-one relationship with customers that integrate database knowledge with a long-term customer retention and growth strategy. Shani and Chalasani (1992) define relationship marketing in the following way, as:

integrated effort to identify, maintain, and build up a network with individual customers and to continuously strengthen the network for the mutual benefit of both sides, through interactive, individualized and value-added contacts over a long period of time (p.44)

Berry (1995) professes a more strategic view, by stressing that attracting new customers should be viewed only as an intermediate step in the marketing process. Developing closer relationship with these customers and turning them into loyal ones are equally important aspects of marketing. Thus, he proposed relationship marketing as "attracting, maintaining, and - in multi-service organisations- enhancing relationships" (p.25).

Berry's notion of customer relationship management resembles that of other scholars studying services marketing, such as Gronroos (1990). Gronroos takes a broader perspective and advocates that customer relationship ought to be the focus and dominant paradigm of marketing. "Marketing is to establish, maintain, and enhance relationships with customers and other partners, at a profit, so that the objectives of the parties involved are met. This is achieved by mutual exchange and fulfilment of promises" (p.138). The implication of Gronroos' definition is that customer relationships is the 'raison de etre' of the firm and marketing should be devoted to building and enhancing such relationships.

Another important facet of CRM is "customer selectivity." As several research studies have shown not all customers are equally profitable for an individual company (Storbacka 2000). The company must tailor their marketing efforts and segment and select customers for individual marketing programs. It could even lead to "outsourcing of some customers" so that a company better utilize its resources on those customers it can serve better and create mutual value. However, the objective of a company is not really to prune its customer base but to identify appropriate programs and methods that would be profitable and create value for the firm and the customer. We shall look at this in more detail further on in this literature review.

To tie up this section we have identified a definition within this vast amount of literature, which we believe integrates the various different perspectives of what CRM stands for. The definition is the following:

Customer Relationship Management is a comprehensive strategy and process of acquiring, retaining and partnering with selective customers to create superior value for the company and the customer (Parvatiyar and Seth 2001).

As is implicit in the above definition, the purpose of CRM is to improve marketing productivity. Marketing productivity is achieved by increasing marketing efficiency and marketing effectiveness (Seth and Sisodia 1995). In CRM, marketing efficiency is achieved because cooperative and collaborative processes help in reducing transactions costs and overall development costs for the company. Two important processes of CRM include proactive customer business development and building partnership relationship with most important customers. These lead to superior mutual value creation.

CRM: Research Agenda

Relationships are as old as humanity. Sociologists, social psychologists, anthropologists, philosophers, theologians and many other people have studied it. For that matter even the traders and businessmen of yesteryears relied on relationships for their success. However the modern marketers started taking fancy to the same only recently. Which is why CRM is replete with opportunities for research studies.

In the early 1990's the concept of relationship marketing was formally introduced into the field of services marketing. Financial service institutions, airlines and other service providers found it profitable to retain and reward existing customers than running after new customers. It was established that building closer relationships with customers resulted in better returns to companies through the following means:

Increased use of company services by loyal customers;

Charging of price premiums for customized services;

Referrals by satisfied customers that brought new customers (Reichheld, 1993).

The concepts developed for services marketing also found application in the case of industrial as well as consumer products too. This has led to the debate as to whether the whole marketing should be re-written with the new relationship paradigm or should it rest on the traditional 4P's [Product, Price, Place and Promotion] approach (Gronroos 1994). However a whole lot of questions need to be answered before the relationship paradigm is accepted as a foundation on which the entire marketing theory can be built. A paper by Shanthakumar, 2001 attempts to throw a number of research ideas that need to be explored in depth.

Some of the ideas discussed in this article include the development of scale to measure the depth of relationship, the stages of relationship development and also the underlying dimensions of business relationships. Further research should identify ideal timing (in terms of the stage of the relationship and the depth of relationship) for cross selling and up selling of products and services.

Taking the customer lifestyle into account, the article explores the research opportunities at different stages; 1) Customer need assessment and acquisition; 2) Customer development through personalization and customisation; 3) Customer equity through cross -selling and up-selling and; 4) Customer retention referrals for new customers.

The research areas we are interested in for this project are the stages of the relationship in order to analyse how they are formed and developed. Anderson and Narus (1991) and Dwyer, Schurr and Oh (1987) along with numerous other scholars have contributed towards our understanding of the relationship process model. By looking at the stages of the relationship development process, one could identify which constructs would actively impact the outcome considerations at that stage and which of them would have latent influences (Wilson, 1995). The process model of relationship formation, relationship governance, relationship performance and relationship evolution is an attempt to add to this stream of knowledge development on relationship marketing. Our objective by using this model is to have a conceptual foundation for applying to and understanding the domain of customer relationship management in Irish automobile. This model is described comprehensively in the following section, "A CRM Process Framework."

CRM Process Framework

Several scholars studying buyer-seller relationships have proposed relationship development process models (Dwyer, Schurr and Oh 1987; Evans and Laskin 1994; Wilson 1995). Building on that work Parvatiyar and Seth (2001) developed a four-stage CRM process framework. The broad framework suggests that CRM process comprise of the following four sub-processes: customer relationship formation process; relationship management and governance process; relational performance evaluation process; and CRM evolution and enhancement process. Appendix 1 depicts the important components of the process model.

CRM Formation Process

The formation process of CRM refers to decisions regarding the initiation of relational activities for a firm with respect to a specific group of customers or with respect to an individual customer with whom the company wishes to engage in a cooperative or collaborative relationship. Hence it is important that a company is able to identify and differentiate individual customers. According to Seth and Parvatiyar (2001) in the formation process three important decision areas relate to "defining the purpose (or objectives) of engaging in CRM; selecting parties (or customer partners) for appropriate CRM programs; and developing programs (or relational activity schemes) for relationship engagement with the customer.

CRM Purpose: The overall purpose of CRM is to improve marketing productivity and enhance mutual value for the parties involved in the relationship. CRM has the potential to… [END OF PREVIEW]

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