Customer Relationship Management and Its Link to Sales Performance Term Paper

Excerpt from Term Paper :

CRM and Car Buying

The world of business has come a long way since the only maxim was "The customer is always right." One of the most important new versions of that age-old wisdom is the model of "customer relationship management" or CRM. This paper examines that strategy, which is a model of doing business in which various techniques are used to learn more about the needs and behaviors of the company's clients for the purpose of developer stronger relationships with those customers. The motto of this strategy might still be "The customer is always right" - but a more appropriate version might be something more like "Good customer relationships are the core of all long-term business success." While CRM has so far been primarily used in companies involved in high-tech fields, it has extremely wide potential application in both product-oriented and service-oriented firms. This research examines the use of CRM in the former realm, using qualitative research techniques to examine how CRM is linked to sales performance within the arena of automobile sales.

There are a number of different components of customer relationship management, including a number that involve state-of-the-art communications technology. Because these are new and "sexy" technologies, a great deal of emphasis has been placed on them in much of the writing and thinking about customer relationship management. However, while the technical element of customer relationship management cannot be overlooked, it is also a mistake to focus only on the technology (http://www.timesonline.co.uk/article/0,5042-535520,00.html).Far more than the use of complex new software, CRM is a mindset in which a firm makes a commitment to orient itself towards the needs of its clients or customers through the process of becoming well informed about them. This process includes both the gathering of information about those clients as well as creating ways in which to make that information useful and usable: Information without order (as all too many companies that gather data on their clients outside of a CRM framework could testify) is antithetical to efficiency and progress.

Customer relationship management is an overall process that can be used to help assemble information about customers as well as information about sales, the effectiveness of every aspect of a business plan, and market trends. Thus the overall goal of customer relationship management is to blend the most appropriate technologies and human resources to as of way of understanding the complex and changing behavior of customers. However, while it is certainly true that in general as well as in the automobile firms surveyed for this research customer relationship management was found to improve efficiency and profits significantly, it is also important to emphasize that it is not a quick fix that can simply be plugged into an existing system. An effective use of customer relationship management requires a company to make an overall commitment to a way of looking at its clients as being partners in its own success. Those firms that were most successful in adopting and integrating CRM into their firms were in fact those that made a commitment to the process of integration: The adoption of CRM was not simply a change for their companies but a transformation of the ways in which they worked with their clients as well as quite often a transformation in the ways that they worked with each other.

The next sections of this paper review the existing literature on customer relationship management, describe the qualitative methodologies used and the research design then discuss and analyse the data derived from the interviews with both senior managers and lower-ranking employees at five automobile firms in Ireland.

Review of the Related Literature

As W.B. Ellington has quoted in his 25th chapter titled "Sales and Customer Relations," "a distinction should be drawn between sales and customer relations, even though the two tend to overlap and mutually support each other." According to the experts in this field, activities concerning sales pertain to promoting the products and services "through personal contact and advertising" (Ellington, Sales and Customer Relations). On the other hand, "customer relations activities relate to the ongoing dialogue between the supplying organisation and customers about the quality of the product," in this case which will be the quality as well as the functioning and the performance of the car once a sale has been made. Therefore, "the regularity and the success of customer relations will significantly affect subsequent sales" (Ellington, Sales and Customer Relations).

Nonetheless, to date the concept of as well as the relationship between customer relationship programs and sales performance does not yield general agreement. According to Keefe (2001, p. 4), "some CRM experts argue that there is little consensus about what CRM actually is, or how to best execute or measure it." Proving her assertion, Keefe, in one of her research articles "reports on an interview with Heidi Wisbach, manager of CRM analytics in the New York office of Cap Gemini Ernst & Young, who specialise in CRM initiatives in the manufacturing, hospitality, financial services and telecommunications industries" (Keefe, 2001, p.4). Wisbach is one of the designers of the Customer Relations Management Index, the function of which is to assist companies in gauging the degree "to which they use actual CRM techniques and to compare their standing against competitors" (Keefe, 2001, p.4). Wisbach defines "a company's CRM readiness as a function of having:

way to track customer information;

Metrics. A means of evaluating customer performance;

The ability to impact change.

The industries that tend to be more CRM ready are those that are aware of distinct contact with the customer and those, which are really competitive, thus requiring individual companies to differentiate themselves significantly.

What experts mean by improving customer relations thereby increasing sales is to promptly respond to the needs, problems and demands of the customers thereby gaining their satisfaction. Lord (2000,p. 40-43) identifies the following needs of the customers and stresses on the word "relationship" in customer relationship management or customer relationship programs:

Quality products,

Twenty-four hour accessibility,

Easy ordering,

Removal of geographic boundaries,

On-time delivery and Responsive service" (Lord, 2000,p. 40-43).

Thus, with the help of the research conducted by some of the best experts in the related field as well as reviewing the line of reasoning of the experts in the literature review section, it is evident that there exists a clear link between customer relationship management programs and the sales performance.

Customer Relationship Management (CRM) is increasingly gaining prominence among both academics and business practitioners. As technologies and customer expectations rapidly change businesses realize the value of having long-term relationship with their customers and are focused on enhancing shareholder value by shifting from a "market share" mindset to obtaining higher "share of individual customer's business" (http://www.timesonline.co.uk/article/0,5042-535529,00.html).

The practice of CRM has been greatly enriched by contribution of researchers and academics who have developed theories, concepts and frameworks to help us understand and explain various aspects of CRM, this literature review is a compendium of the research papers. Coverage includes emerging concepts in CRM, conceptual model of CRM, knowledge management for CRM and Research agenda for CRM. Managers want to make certain that when implementing they capitalise on CRM's full potential. Therefore there is a brief section on "Implementing CRM" which highlights the optimal allocation rules for CRM.

As Seth and Parvatiyar (1995b) note the task of developing customer relationships has historical antecedents going back into pre-industrial era. Much of it was due to direct interaction between producers of agricultural products and their consumers. It was only after industrial era's mass production society and the advent of middlemen that there were less frequent interactions between producers and consumers leading to transactions oriented marketing.

In recent years, however, several factors have contributed to the rapid development and evolution of CRM. These include the growing de-intermediation process in many industries due to the advent of sophisticated computer and telecommunication technologies that allow producers to directly interact with end-customers. The de-intermediation process and consequent prevalence of CRM is also due to the growth of the service economy. Since services are typically produced and delivered at the same institution, it minimizes the role of middlemen. A greater emotional bond between the service provider and the service user also develops the need for maintaining and enhancing the relationship. It is therefore not difficult to see that CRM is important for scholars and practitioners of services marketing (Berry and Parsuraman 1995; Bitner 1995; Crosby and Stephens 1987; Crosby et al. 1990; Gronroos 1995).

The key account management program designates account managers and account teams that assess the customer needs and then husband the selling company resources for the customer benefit. Such programs have led to the foundation of strategic partnering within the overall domain of customer relationship management (Anderson and Narus 1991). Similarly, in the current era of hyper-competition, marketers are forced to be more concerned with customer retention and loyalty (Dick and Basu 1994; Reicheld 1996).

One can understand more clearly that CRM is "not only about technology, databases or the market of one" (Graham Hoskins 2001).…

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