Benefits Of Implementing Crm Systems

Published Date: 02 Nov 2017

The high rates of deployment of digital technological solutions have contributed to major changes in market research. The advancement in information technology has made mangers to look for new ways of doing market research and consequently enhance them with awareness of their current market both in terms of opportunities and problems. Technologies changes enable companies to re-strategize their plans, which allow them to have more information about their customers and their needs and requirements [1].

The collection and processing information from the client and providing an atmosphere of assurance and trust is imperative to customers’ retention. Keeping long-term relationships has a substantial effect on business success and this can be more enhanced by increasing the effectiveness of existing client relations [2]. It was estimated that the cost of winning a new customer is five times higher than that of maintaining an existing customer [3]. While the retention of an additional 5% of customers can increase profit by almost 100% .Hence, the need to keep effective and long term relationship with customers is necessary and requires a system that encourages keeping such relationships.

Customer Relationship Management Systems

The term customer relationship management (CRM) system is defined as storage of customer information which encompasses all the customers’ profiles. Apart from the conventional database functions, it also plays the role of personalizing the needs of every customer by differentiating products and services of each distinctive customer [4]. CRM systems helps businesses to gain new customers; retain the existing customers and keep good relationship with customers as well as promoting customers’ values; hence improving the organization images [5].

With increasing competition for marketing dominance, many organizations have exploited the customer relationship management (CRM) system to enhance business intelligence, better decision making and improve customer relations to offer quality services and products [6]. According to Buttle (2001), a CRM system is a technology-based business management tool for developing and leveraging customer knowledge to nurture, maintain, and strengthen profitable relationships with customers [7, 8].

CRM systems offer the framework that expedites building long term relationship with customers. It also reduces duplication in data entry and maintenance by enabling a centralized firm-wide database of customer information. It is a database which replaces the individual sales person and prevents the loss of organizational customer knowledge when that sales person leaves the enterprise [9]. CRM goes beyond information technology solution for collecting customers’ information; it is a form of universal concept where firms gain competitive advantage through by having more knowledge about customers understanding and relationships [10].

Customer relationship management systems in banks

Financial service firms are the earliest implementers of customer relationship management systems. Before the implementation of CRM systems within the financial industry, banks and insurance firms had developed close relationships with their customers through personal customized services which were mainly a costly, inefficient and time consuming process [11]. But with CRM systems and information and communication technology (ICT), organizations can provide large customer variety, lower price and customized service all at the same time [12]. The banking sector compared to most other industries has richer customer databases comprising of transaction files, balance positions and call centre records. According to Kalakota and Whinston (1997), banks are no longer "gatekeepers" but "gateways" to financial products. In the old gatekeepers’ model, banks act as an agent which limits themselves to customer related product choices. In the gateway model, banks acts as a flexible agent with wide variety of products like entertainment, insurance and investment, thereby providing more spectrum and flexibility [12].

Chapter One

Introduction

Here in this chapter, the introduction, research question, research purpose, problem statement and delimitation of the research are highlighted

Chapter Two

Research Design

In chapter two, the method of conducting research is explained. This chapter helps the reader to ascertain the research method, approach and standpoint the researcher used to carry her research.

Chapter Three

Literature Review

The chapter comprises of literature review. Literature review is conducted from several sources of databases available through the university’s library.

Chapter Four

Case study and

Bank Background

In this chapter, information about the history of the bank selected for this research is described. This chapter also describes information on customer management in Nigerian banking industry.

Chapter Five

Findings and

Analysis

This section describes the research findings and the analysis. The analysis is performed with both primary and secondary data.

Chapter Six

Conclusion and

Recommendations

This section provides the conclusion of the research by giving answer to the research question. It encloses the result of the study which is collected with the help of analysis carried out. Recommendations for organizations that adopt CRM system are also provided

Table 1: Thesis outline

1.3 Problem statement

Customer relationship management (CRM) system has been ascertained to have better relationships with customers by having detailed knowledge of their requirements with the help of various information technologies. Implementation of CRM systems appropriately will bring tremendous benefits to both the customers and the business respectively. Banks have large number of customers and for the banks to meet up with their customers’ requirements; most of the banks have embraced CRM system. This research work tries to ascertain the benefits of CRM systems to the banking industry.

1.4 Research question

The thesis will be written in accordance with the formulated research question. What benefits can be derived from implementing CRMS systems in the banking industry?

1.5 Research Purpose

The main reason of this research is to describe and analyze the benefits of implementing customer relationship management systems in the banking industry in a developing economy such as Nigeria. The strategy will be finding out both customer and businesses benefits, and thus compare the benefits with empirical data obtained from banking sector.

1.6 Delimitation

This research is limited to only one bank as it is hard for the researcher to find other contacts in banks both inside and outside of Sweden. In this research, I concentrated more on benefits with successful implementation being considered essential to accomplish benefits. This study contains the benefit which Zenith Bank got with the implementation of CRM system and it is not necessary that other banks or financial organizations got same benefits from CRM system. Research is conducted in a single bank which can be considered as limitation of the research.

Chapter Two: Research Design

2.0 Methodological Analysis: Realistic

The methodological analysis employed in this research work is related to the realist approach. The realist researcher gazes for relationships between variables and where possible tries to establish chains of cause and effect. The research of this nature involves structuring a problem by splitting it into its various parts. The connection among the parts would then be analyzed, by looking for repeated patterns and associations [13]. As noted by Fisher [13], the realist research divides the problem into various parts and then the relationship between the problems would then be collated and studied. I will embrace a similar approach as I am intending to collate and analyze the benefits of CRM systems in the banking industry. The research problem will be divided into component portions to be able to ascertain the benefits of implementation of CRM system both to the business and the customers. To establish the cause and effect chain, I will examine cause of implementing CRM systems and on the effect side the benefits which successful CRM system offers.

Effect

Cause

Customer & Business

Benefits

Successful CRM implementation

Figure 2.1: Cause and Effect Relationship Diagram

2.1 Research approach: Deductive

In this research, I considered two research approaches namely structured and grounded approach. Fisher (2007) stated that in a structured approach a structure is imposed on the research based on a preliminary theory, concept or hypothesis. So, the structure may be employed to guide the research and also material collating process. Whereas, a grounded approach allows material to collated without prejudice or preliminary conceptual thoughts about what is going to be ascertained. Fisher (2007) further stated that the use of structured approach ensures the security of understanding the structure and shape of the research before the collation of the research material.

In this research I employed structured approach for collating research material. This employs collecting of data from various articles, exploiting literature review of the material collated from various articles and build up the conceptual frame work.

Fishers (2007) noted that there are two types of discoverers "Explorers" and "Surveyors". Explorers travel into an unknown destination and their major focus is making the unknown into known. Based on the fact that they do not have clue of what they will arrive at they embrace the open approach; whereas, the surveyor task is to pin the knowledge down into precise manner. Surveyors have ideas about what they will find out and they will measure things. Surveyors always embrace the close approach [13]. In this research work I will use survey approach. I think using Survey approach is mandatory since answering research question requires using both secondary and empirical data.

2.2 Research method: Qualitative

Fisher (2007) noted that any method, either Qualitative or Quantitative can be used in a research and it is erroneous that realist research means using quantitative research method. In accordance to Fisher postulation (Fisher 2007), in this thesis I am adopting realist research that embraces using qualitative research method.

2.3 Data Collection

In this thesis work, both secondary and primary data are collated.

2.3.1 Primary data

In this research, the primary data are collated using questionnaire. Fisher (2007) noted that there are two types of questionnaires; "Precoded" and "Open". Precoded embraces using tick boxes to be fill in and Open questionnaire allows free space which enables respondents to give responses in their own words. The use of questionnaire in this research work is separated into three sections, which is to collate response from the Zenith Bank on its implementation of CRM system and the customer and business benefits they derived from it. In this research work, I use some open questions for the respondent to answer. Every answer from respondent has been collated by sending open ended questionnaire.

2.3.2 Secondary data

Secondary data is a type of data that is gathered from other researchers work. Secondary data is often gathered from articles, books and journals. In this work I use online databases available through LNU digital library. Databases used in this research work are listed in tabular form as follows:

Databases

Obtained from

Lnu.se

Lnu.se/ub

Emerald

http://www.emeraldinsight.com.proxy.lnu.se/search.htm

Diva(Digital Vetenskapliga)

http://www.diva-portal.org/smash/search.jsf

Google Scholar

cholar.google.com.proxy.lnu.se

Scirus

http://www.scirus.com.proxy.lnu.se/

Science Direct

http://www.sciencedirect.com.proxy.lnu.se/

Table 2.1: Database table

I obtained different articles and journals by typing likely keywords about my research in above mentioned online databases. I then selected close related topics to the benefits of using CRM system and information on CRM systems implementation. The various keywords I used during my literature research are:

CRM system

CRM benefits

CRM customer benefits

CRM business benefits

CRM successful implementation

2.4 Validity and reliability of the research

For validity and reliability of this work, I tried to choose articles from peer reviewed journals. Mostly the articles are collected from the university (LNU) online libraries. The empirical data were collected from the responsible and authorized persons from Zenith bank.

2.5 Method Critique

In this thesis work, I employed both secondary and primary method to collate data. For collating primary data, I selected only one bank in Nigeria. My choice of one bank limitation is because it is challenging to have contacts with banks both in Nigeria and Sweden. The limitation of contacts can hamper the amount of data collated in this work. In addition, only the head of CRM system in Zenith Bank answered the questionnaires, which can limit the research as information is provided only in one viewpoint which is pro CRM system.

Chapter Three: Literature Review

3.0 CRM system implementation

CRM system implementation requires looking beyond customers perception since it entails focusing on wider perspective. CRM system implementation entails data collation which is as important as integration of processes. Thus, it implies that technology and processes are the fundamental factors of CRM systems [14].

Technology Infrastructure:

Broadbent & Weill (1998) states that " Technology infrastructure is a key requirement of CRM and in creating any IT infrastructure around business-driven requirements must be based on a sound understanding of a firm’s strategic perspective"[15]. The level of investment in IT and system associated to CRM is imperative to realize and with the drive towards e-commerce making long term infrastructure investment decisions critical [15]. Firms must apply integrated approach instead of employing technology in different ways for successful implementation of CRM systems [14].

Front end technology:

Front end information systems such as sales force automation (SFA) and customer service automation enables enterprises to serve and engage their customers by embracing information system based tools. Most firms incline for more interaction with their clients employing such forms of technologies [14].

Data Gathering:

Data gathering encompasses obtaining the knowledge and information about customer’s requirements and preferences. Data can comprise customers’ name/address, customer status, customers’ buying habit and other information. The use of technology to capture data is faster and time efficient compared to paper based data collection technique. The use of technology facilitates direct communication and interaction of channels to gather data. Technology also allows data saving in such a way that it may be deployed across several channels and can also be deployed for strategic purpose [14]. According to Algesheimer et al (2001), "customers’ processes do not fit into traditional functional organizations so the process flexibility and data integration are most important issues while implementing CRM systems" [16]. But, the systems should be updated with the varying dynamics of the market and customers.

Enterprises that embraced strategic approach in implementation of CRM systems were successful for several reasons. First, they mapped out a business strategy which fits into their business needs, while the business needs determine the functionalities that are deployed and developed. Secondly, they developed strategic approach during the implementation of CRM system. This then provides the facility to define the scope of the project and consequently controls which of the CRM elements are included in the project and which are not. The planning for the scope of the CRM project entails thorough scrutiny of use for sales-force automation, employee relationship management, call center routing, point of sale systems, wireless application, marketing campaign automation and Web self-service [17]. Thirdly, the scope determines the needed cross departmental infrastructural modifications which are needed in building vibrant cross- functional CRM teams that effects organizational changes among various section of the business formation. In summary, vibrant design of CRM strategy, scope determination and development of cross functional teams enhance good CRM system implementation [17].

Kotorov (2003) noted that both process and system integration concurrently are required for successful CRM systems implementation, but also challenging to achieve both together. Enterprises that do not embrace strategic approach only employed partial integration that leads to incomplete customer view, confusing customer service and poor targeting

Employee’s change is an essential measure of implementation of CRM system since employees are closely related to CRM processes, and their exploits in turn impact the success of CRM projects [18]. The success of a large-scale change initiative as presented by a CRM implementation depends heavily on possibility of employees who are subscribed to change [19]. Employees’ commitment to change is one of the important factors for successful CRM implementation. Firms must create an atmosphere where employees exhibit less resistance during the implementation of CRM systems [20]. Corporation must be aware of some strategies before implementing CRM systems [21], these strategies are:

Customers:

The first strategy is identifying the target customers which organization offers services to. Enterprises may employ existing business’ model in identifying target customers. Such approach helps categorizing customers according to their brands. Hence, customer centric strategy enables firms to be more profitable through increase focus on customers, sales and market share [22].

Channel:

Ramsey (2003) noted that enterprises must assess the proper and prospective channels available to them, more so it is particularly imperative that they rationalize and understand how to effectively use those channels they choose [21]. To recognize the conflicts while implementing the new channels is not the problem, but to create and improve the new strategies demands concentration and research [23].

Brand:

It is imperatives for firms to have commitment to their brands. This implies that organization has must know their customer’s needs and preferences; must make improvement based on the feedback and train the employees about their brands and equip up businesses according to brands [24]. In accordance to Ramsey (2003) submission, businesses employ brand value strategies to identify and know customers behaviors. He also noted that brand value strategy help to recognize that it can pay real dividends, increase revenues improve capital efficiency [23].

CRM applications choices

The application of CRM system helps businesses to achieve their vital goal, which is to attract new customers and hold on to loyalty of existing customers. CRM Systems implementation along with its capabilities helps bring substantial benefits for those investments [21]. Piskar and Faganel (2009) said to gain competitive advantage through successful CRM system implementation, company’s management must understand industry’s practices; know how CRM fits into the context of the general business strategy of the organization and how to assess current CRM capabilities. Others are to understand the reason why it is imperative to implement CRM, create and execute a plan; this is defined by how to achieve the goal and how to execute the plan [25].

3.1 Customer relationship management (CRM) system benefits

CRM systems emphasis on customers and they assist in identifying customers who are prepared to pay higher margin. If these customers are identified, their situation can easily be analyzed and also other varying attributes that help them in minimizing cost can be identified. This helps firms to have edge over their competitors whenever they are negotiating with customers since customers are very interested in saving cost. CRM system helps in knowing customers that are not paying "fair" margin [26]. For this purpose, an accounting based methodology known as activity based costing (ABC) is employed and this may be used as a part of CRM process. In activity based costing the cost incurred in managing every customer is calculated with margin earned with each customer [26].

If customers’ demands are known, then CRM systems turn out to be a central aspect of business process and also enhance efficient usage of inventory. This means, less manpower will be needed in the areas of customer support functions like customer service, credit entry, order entry, finance and collections. This is because customers will be demanding less for such services since they are better served with more reliable information, and consequently increases customer [26].

CRM systems improves every customer related transactions from the first contact to the

on-going services, repeating sales and in turn getting value from each step. If these steps are performed and managed properly by the organization then it implies that customer related information and their attributes are gathered in an efficient way. Thus, providing good understanding of customers’ interests, requirements and plans. In addition, CRM systems enable evaluating the cost and return of investment in proving services to the customers. The implementation of CRM systems allows enterprises to recognize the products and services that yield profits from those that just liabilities [27].

The implementation of CRM systems enables organization to embraces proactive approaches in terms of customer interactions. For example, if the sales unit came up with sales strategy, the post-sale unit develops the post-sale strategy of interacting with customers to fulfill their post-sale needs and demands. With CRM systems, organizations can maintain and record the customer information such as objectives, desires and events. Thereafter, the information is updated into the CRM systems to ensure that the customer’s information is not outdated.

Customer interactions allow new business opportunities due to availability of more information about customer’s goals and requirements. This also encourages more customers to the enterprise for additional products and services, or to renew their contracts, thereby providing publicity about the organization to the others. Because of this kind of interactions, information is constantly expanding in the CRM systems and hence increases the profile portfolio of each customer and ultimately works as powerful tool in making business decisions [27].

The application of CRM systems assists enterprises to have good knowledge and relationship with their customers. It helps enterprises to have good market share, enhancing customers’ retention and satisfaction. It also helps in enhancing profitability and revenue. CRM systems help in providing differentiated services or for value customers. The merging of customer information in single platform as applicable in CRM systems improves customer services [28].

CRM systems enhance knowledge integration that facilitates company ability to know their customers immediate needs, the capability to anticipate and solve future needs and providing customized services and goods. In CRM database, customers purchasing behaviors may easily be analyzed. By mere assessment of previous customer buying habit, new product information can be sent to customers. With this, products and services are promoted by analyzing the interest of customers, whereas unused products are removed by assessing the information in the database [29].

CRM systems also play vital role in marketing a company. With a strong marketing policy, companies can discover and understand customers need and also improve on them. CRM systems increase competitiveness among enterprises. Since CRM strategy will be totally unique to each company, this may cause competitive advantage, promote customer relationships management and boosts customer satisfaction and retention [30].

3.2 Customer benefits

3.2.1 Customer satisfaction

Because of the importance of customers to the growth of any business, there has been a tremendous amount attention to this concept. Wang et al (2004) noted that the central objective of CRM is to ensure steady streams of revenue and maximization of customer life time value or customer quality and customer behaviors [31]. Hence, CRM systems performance is focused on customer behaviors since it could impact on the organization future.

It also imperative to know that customer satisfaction contributes immensely to the profitability of a business. Satisfaction is the process of equating opportunities with performance. Thus, it is believed to encompass cognitive practice within consumers’ cognizant control and emotional practice outside of the cognizant control [32]. Hsu and Lin (2008) submitted "when satisfaction becomes an important element, CRM affects retention not only independently but also collaboratively. Moreover, the main effect of CRM is conspicuous for retention; customer satisfaction is very complicated and multi-dimensional phenomenon" [32].

3.2.2 Customer value

In the past, customer value was constraint to just quality and price, but nowadays researchers are of the opinion that there are other functions to this concept. Sweeney and Soutar (2001) submitted that it is imperative that enterprises take note of this concept because if they understand it, they will be able to evaluate process of customers and re-engineer their resource and activities [33]. "CRM is a corporate strategy and systematic approach based on relationship and one-to-one marketing that aims to integrate management of personalized relationships with customers and to continue customer’s value in the long term and to maximize value creation for companies." [32]

"Customers are becoming more value-oriented and are not simply influenced by high quality or lower price. Nevertheless, they can make a reasonable trade-off between the benefits and sacrifices in the process of obtaining and consuming products or services. However, not all customers value the same benefits and care for the same sacrifices at any given time" [31].

3.2.3 Customer Retention

"Customer retention can be achieved by attractive customer satisfaction and loyalty, civilizing problem decrease, and creating the ability to recognize and save "at-risk" customers. Actuality, an "at-risk" customer represents a major chance for extra income – if handled correctly. For example, a customer makes a large extraction from his or her account. This may sign that the customer is transferring money to a second bank. CRM driven practices aid in customers retention and also help to migrate meager account holders to more profitable and long-term customers" [34].

3.2.4 Customer Achievement

CRM systems is expected to assist customers in accordance to the "value" its bring through the life of the customer and beyond through marketing. Enterprises must ensure that their value propositions have connection with the right market segments. This will allow them to achieve their goals and gain new customers [34].

3.2.5 Customer trust

"The continuing search for added value and competitive advantage, increasing competition, similarity in core products and lack of customer loyalty lead companies to search for new ways of gaining competitive advantage over their rivals; This implies how to create offer more unique, valuable on the basis of unique business system based on multidimensional competitive advantage, better than their competitor" [35]. Thus, there is necessity for marketing technique such as customer relationship marketing (CRM) which facilitates trust between customers and suppliers to increase retention rates. "The successful delivery of CRM benefits requires fundamental changes in the way that the organization approaches marketing management. In its consequence, it represents a corporate restructuring caused by positive reasons that involves all functional areas; including production, property, financial, business, organizational and personal" [35]

3.3 Business benefits

I have so far discussed the benefits of CRM systems to the customers. But, here I will also discuss the benefits of CRM systems to the business. I have explained earlier that CRM has lots of benefits and also could have good effect on the customers, but the question is that how it can impact on whole business? I will discuss about a view that divide the business benefits of CRM systems to three sections. This view is exhibited by three students‟ names Goodhue, Wixom, and Watson in Georgia and Virginia University in the United States. In their research they examined the business benefits of CRM in some organizations. They were of the opinion that using CRM systems has three targets and by reaching to these targets managers can enhance their business profile.

3.3.1 CRM Application

The first target according to them is application. With this concept, they showed that some organizations strongly need for a particular CRM application and the benefits that are likely to be obtained. They are not prepared to run into a CRM effort and due to their culture they must first test and establish the concept before applying it in the organization. The outcome of this research showed that the use of individual application assists organizations to know important impacts in each department. Although, it was stated that implementing this view may bring some challenges for an organization [36]. They further stated that an intently attention on this approach can help an organization to have a better customer relationship management. In total, individual approach can bring about lower-cost efforts

3.3.2 Infrastructure

The second target according to them is the infrastructure. An organization must complement an efficient application with strong and suitable infrastructure to exchange information. An enterprise must work together in a synchronized way with their customers. By doing this, they demonstrate that without coordination, it may be impossible to have good customer relationship. In attaining this goal, managers require a powerful data infrastructure that are supported by both hardware and software infrastructure that can make the organization to make a fast data recovery [36].

Goodhue et al (2002) further suggested that the first step for each organization is to have an integrated system across the organization. The organization must first "put in place a data resource that is integrated across various source systems and customer touch points, using a single unique identifier for every customer; and keeps the data intact, timely and reliable". Though IT department understands the benefits of these infrastructures, but the challenges that most organizations may have is that "infrastructure investments are costly, and the gains are not really immediate. To convince the company’s management; IT department must tell them on the concrete business value of such infrastructure investments" [36].

The implementation of this approach enables the enterprise to have successful CRM programs by first focusing on their infrastructure, thereafter extending it and capitalizing on it to deliver value. This can help organization with some important benefits such as laying foundation for other CRM activities and identifying key loyalty drivers [36].

3.3.3 Organizational Transformation

The number three target is organizational transformation. To be a strictly customer-centric, an enterprise needs the shift in their culture and business practices. Changes in the enterprise can involve things like "information systems to business processes, incentive structures, organizational structures and employee roles. Firms that embrace CRM generally make this organizational transformation slowly, even if that is not intended. Although organizational transformation is difficult and risky but has potentially very high payoffs as the organization shifts its business processes, culture and technology to truly become customer-centric" [36]. According to views of Goodhue et al (2002) "companies can reduce their risk of failure by having a clear vision of CRM infrastructure, target application and transformation".

3.3.4 Other Researcher Viewpoints

Other researches see these three points as a main business benefits. Chen and Popovich (2003) are of the same viewpoint to these business benefits. They submitted that business process change, technology and people change are the major targets that will propel an enterprise to high profitability and good customer loyalty [30].

But Harej and Horvat (2004) in their own research noted that "business processes have to be integrated across marketing, sales and customer support. Also processes in connection with business partners and employees have to be considered. Knowledge about specific customers is needed before an organization establishes such change management". They emphasize that total commitment of company’s management is imperative for the success of the organizations [37].

Hoon and Gul (2003) believe that for an organization to have a successful management, managers of such enterprise must have to "support diverse customer information – such as of-the-customer, for-the-customer, and by-the-customer information". They also demonstrate the key role customer information system (CIS) plays in managing and distribution of customer information. Their research also emphasizes on customer information and encourages improvement and enhancement of the IT department. This they said will reflect on whole business process that the organization is customer centered, and consequently help the managers to consolidate the customer information and have a better idea about their needs, and as result enhance the overall business of the organization [38].

3.3.5 Customer support

Application of CRM systems enables an enterprise to support their customers so that they can have high level of value from the customer purchases. Using CRM systems assists an organization in finding new market opportunities and to make a competitive advantage over other competitors. A CRM system enables customer support service to evaluate customer support needs during the new product development process [39].

3.3.6 Customer segment

If an organization segments its customers, such organization could gain the customer preferences in order to efficiently distribute resource according to information. The segmentation enables the organization to "differentiate themselves by providing appropriate and suitable services for their customers’ needs, therefore building up a competitive advantage, and second direct companies to where their most valuable

customers are located and helps allocate major capital, effort and time to generate the most profit" [39].