Forming Long Term Customer Relationships

Published Date: 02 Nov 2017

In today’s modern business world, Customer Relationship Management (CRM) has shown to not just only be a simple software package, but a real fundamental organisational issue that has to be considered and remedied, in fact. A series of conducted studies based on CRM and Electronic CMS (ECMS) have proven that there are strict relations amongst CRM and organisational performance, while culture helps to support organisations in taking full advantage of customer values, besides enhancing customer loyalty. (Ryals, 2005)

According to Darvish et al. (2012), Customer Relationship Management (CRM) is defined as a customer focussed managerial strategy that sets out to create long-term relationships with lucrative customers, through employing inclusive customer knowledge. Therefore, in reflection to this definition, CRM is essentially a customer focussed strategy that has a lot of emphasis on sustaining long-term customer relationships and customer knowledge.

In light of the CRM definition, it can provide organisations with a series of benefits as follows (Anabila and Awunyo-Vitor, 2013):

Drive down costs on forming customers as a result of reduced marketing costs, contract follow up, fulfilment service, and so on.

Enhanced customer loyalty

Increased customer profitability as a result of customer wallet-shares rising, up-selling, cross-selling and follow-up sales, as well as more referrals tending to result in better existing customer satisfaction.

A good example of organisations embracing CRM is Dell, who are one of the world’s leading organisations that take full advantage of their CRM systems, or in particular Electronic CRM systems (ECRM). In the past and currently, they have implemented three types of software to assist their CRM, there are, marketing automation software, custom designed web pages that consist of purchasing data, and a system that supports Dell’s business sales, marketing, financial and management segments, which at the same benefits those organisational aspects. (Klinker, et al., 2006)

Appendix 1 illustrates a diagram of CRM to ECRM integration when organisations decide to adopt ECRM systems (Given, 2006).

Forming Long-term Customer Relationships

According to Gray and Byun (2001), there is a huge belief that the involved costs to sustain a customer is around 5-10 times bigger than the cost involved to generate one. Given the significantly quick or diversifying shift in customer preferences, the additional incurred costs through promotional programs can be substantial. Consequently, it is vital that there is an emphasis on organisations considering forming more long-term customer relationships, in addition to retention, which is the most important purpose of CRM too.

The objective that Dell looked to accomplish was to effectively give their customers technological, along with customer service needs. How Dell achieved this was to implement the idea of customer interactions by means such as the Internet or phones for custom built computers, besides swift and timely delivery by means of improvements in their Supply Chain Management (SCM) (Klinker, et al., 2006). Prior to this modern approach, customers had no choice but to visit electronic stores or retailers in order to purchase computers, meaning there was not that much interaction with the manufacturer who was involved in the computer production process and had more detailed knowledge about all of the organisation’s products, better than the stores sales people did. This timeworn method was suddenly proven unproductive and useful for customer sustainability, given the ineffectiveness of salespeople that organisations infrequently have control over, may indeed steer customers away from their products.

A solid example of an effective use of the modern Internet as a part of an organisation’s electronic CRM is Dell’s method in making full use of social media, in particular, Facebook. Looking at Dell’s Facebook page as of 12th April 2013, there are over 5.3 million followers. This method allows Dell to generate awareness and to promote their latest products, promotions, besides providing a huge online information base and direct customer support. This method is also applied to various other social networking websites such as YouTube, MySpace and Twitter etc. (Fitria, 2010)

Customer Information

A vital element in CRM is customer information because it directly comprises of information in regards to consumer’s’ needs, preferences and spending capacity etc. With the intention of accomplishing successful customer services, it is important that organisations have various knowledge and understanding of their intended target markets and customers, given that satisfaction data sometimes do not associate itself with organisational performance (Woodruff, 1997). Hence, the building of an extensive database of customer profiles is the basis to every single CRM activity (Winer, 2001).

Over the years, there has been a massive increase in the number of organisations that have recognised how important it is to have a customer focused strategy that consists of a highly intricate knowledge base (Croteau and Li, 2003). Surrounded by which, Dell arose as a pioneer. Dell employs database software that is efficient and effective with CRM (Klinker, et al., 2006). The purpose of these databases is to store tables of data, which users can access at any time for information based on the organisation’s customers, which can be used for a number of purposes, ranging from R&D to forming promotional programs. The data that is stored comprises of mainly personal information about customers, customer preferences and their products. These databases are deemed very important because they consist of customer information that helps to support the decision making process in regards to customer targets and segmentation, along with sustaining efficiency and effectiveness in deciding the most appropriate methods to adopt.

Additionally, in attempt to enhance their CRM, Dell partnered with IS Partners, which is an information systems (IS) company, and applied an advanced CRM system that fundamentally consists of detailed information based on customer sales history, trade relationships and customer demography. Therefore, this can assist sales management through giving information in regards to activities within accounts, besides helping them with track lapsed quotes, and at the same time, helps the marketing department in tracking the activities of customers, product sales and marketing mixes. (Klinker, et al., 2006)

Overall, CRM certainly gives organisations a large amount of support in forming and sustaining long-term relationships with customers, along with making customer focussed decisions through offering underpinning knowledge in the shape of a customer database. Therefore, having an entirely technical and fully optimised ECRM system, along with systematic consideration and analysis throughout the implementation process, and organisations’ to focus on supplying the best customer experiences where possible. Dell is a perfect example, given that they had the ability to successfully develop and maintain trust amongst their targeted customers, being ranked in the top 50 (#49) of Forbes 500 (Durgy, 2013). Moreover, there are certain reason as to why companies such as Dell and IBM are known as some of the leading organisations in the world in terms of satisfying customers, reliability and advancements in technology. Appendix 2 illustrates the ECRM lifecycle, showcasing the steps to successful ECRM implementation (Habib, 2012).

An Information System Strategy’s (ISS) Role in Organisations

Information Systems (IS) within organisations largely comprise of the information technology infrastructure, data, application systems, and the staff that employ IT in order to distribute information and communication services within the organisation (Chen, et al., 2010). Contrariwise, the term Information System Strategy (ISS) can be defined as an "organisational viewpoint" based on the investment, application, monitoring and management of an organisation’s IS (Minzberg, 1987). ISS is theoretically concerned with describing the vision of how the organisation’s information and systems demands will be aided through the use of technology, and in turn is fundamentally concerned with IT supply (Ward and Peppard, 2002). Therefore, this is a vital IS and organisational characteristic, because many organisations in several sectors of industry, commerce and government in the modern business world, are essentially dependent on their information systems (Ward and Peppard, 2002).

ISS Benefits

In an ISS study by Cassidy (2006), he mentioned that there are a number of benefits that help organisations when they adopt information systems, these are:

Managing Information Effectively: A Costly and Grave Asset to Organisations. Most modern organisations do not realise or recognise IS as a grave business characteristic, which tends to lead to communication failures and lack of functionality (Cassidy, 2006). Usually, there are a number of factors that cause economic pressures on the budgets of organisations, along with IS budget, for example, a recession in the market or speedy developments of technology that is abundantly used, can carry forth competitive advantages. In this case, IS requires to show how it enhances value to the business, and organisations have to take into account and adopt the most reliable technology (Cassidy, 2006). Consequently, ISS serves as a tool that supports organisations in balancing the above-mentioned conflicting forces, along with proactively handling the direction of IS. Hence, through defining the organisation’s need or demand for information and systems, ISS helps to support the complete organisational business strategy (Ward and Peppard, 2002).

Improvements Regarding Communication and Relationships Amongst Business Organisations and IS Entities. When management of a business acquires a lot of knowledge about IS and the attributes needed to recognise business opportunities and threats, the IS department starts to grasp the organisational goals and directions, much improved communication and thus better relationships amongst management, and at the same time forms the establishment of the IS department. (Ward and Peppard, 2002)

Alignment of Directions and Priorities from an IS Focussed Method to an Organisational Business Method. ISS alignments in most cases significantly impact on organisational performance (Chan and Reich, 2007). The alignment of business and IS happens when ISS provides full support on the organisation’s objectives and strategies. Though, values conveyed through strategic alignments in IS tend to not always be calculable in financial terms (Silvius, et al., 2009). In addition, it is also important for organisations to uphold a flexible and issue related strategy formulation process, along with concurrent procedures taking place at the different levels of the organisation (Ward and Peppard, 2002).

Being able to recognise technological opportunities in order to form competitive advantages, besides value added to organisations. Although the adoption of IS alone cannot result in significant competitive advantage, it can however, serve as a fundamental weapon in an organisation’s strategic Arsenal (Rackoff, et al., 1985). This is because ISS provides an awareness of the necessary tools, frameworks and techniques for higher management in order to formulate reliable alignments amongst IS/IT and the business, besides identifying opportunities via the application of revolutionary technologies (Wijaya and Manongga, 2012).

To plan the flow of information and procedures. An organisation’s most important asset is its Information. Consequently, it is also vital for organisations to have an in-depth planning process to support the flow of information. Effectively planning and managing the flow of information all through organisations can reduce the redundancy of data, labour costs, discrepancy, along with enhancing information quality and precision. (Cassidy, 2006)

Allocating Effective and Efficient IS resources. It is the role of the IS department to handle both tangible and intangible resources, flexibility in design and finding skills for the planning process, to make sure that when allocating resources, they have to be done so in an effective and efficient manner, along with optimising cost reductions in re-designing, re-implementing and corrections (Cassidy, 2006).

JetBlue Case Study

Based on many entrepreneurial assumptions, they would opt to go for a more modern and profitable market to enter as opposed to one that is declining. In light of this, JetBlue would argue against such beliefs, due to the company entering the US airline industry after it had gone through a series of terrible events. Since then, JetBlue have been highly profitable, as well as Southwest Airlines, thanks to the likes of the company’s clever uses of IS.

Also, thanking and crediting Open Skies, which is a piece of software developed by JetBlue’s current CEO, for helping the organisation being able to accomplish enormous automation, in spite of being a service based company. It is essentially a mixture of a reservation system and an accounting system, which also helps to support customer service and the tracking of sales. Therefore, through adopting reservation agents who work from their own homes and in telecommunications, the company managed to drive down the cost of paper handling and other expenses, given that all of the issued tickets are electronic.

In addition, JetBlue also mechanises most of its operational aspects. For the company to facilitate the process of maintenance, they adopted a maintenance information system (MIS) in order to track and log all of the parts of each and every airplane and their time cycles. As a result, the system has proved to be exceptionally efficient, given that there was a significant reduction in costs relating to manual tracking. Furthermore, in regards to JetBlue’s flight planning, it is executed through an application, which helps to reduce planning costs, thus making operations highly efficient. The organisation also uses its in-house developed application called Blue Performance, which helps to track the updated operational data on a per-flight basis. Lastly, the company’s Intranet also enables its employees to have access to performance data, as well as management being able to respond to problems instantaneously (JetBlue, 2013). Appendix 3 illustrates diagrams based on the role of IS strategy in modern organisations and the relationship between business strategy and IS strategy (Robson, 1997; Bocij et al., 2006).

IS Planning Tools in IS Planning Frameworks Roles and their Significance in Forming an IS Strategy

Strategic Information Systems Planning, or SIS planning, has grown into something that is a significantly fundamental aspect to IS researchers and experts. In addition, there is a broad assumption that SIS planning is among one of the main concerns to organisations, besides organisational management too (Moynihan, 1990). In the case of organisations wanting to develop a certain SIS plan, the likes of IS frameworks are essential, as they consist of the necessary tools that offers help in the SIS planning process.

Throughout the process of SIS planning, each and every organisation seeks to acquire the best benefits from obtainable resources in an effective, efficient and competitive manner, while at the same time to possibly reduce existing or future risks as much as the organisation can see fit. Consequently, there are times that arise where there is a requirement for a profound connection and incorporation of resources in a way that enables these resources to be controlled or handled, creative, flexible and educational, which therefore highlights how important IS Planning methodologies are to organisations (Basahel and Irani, 2009).

As a result, according to Basahel and Irani (2009), a series of techniques and methods were developed, the majority in which holding an essential role in IS frameworks to facilitate the process, along with support management through simulating a state of affairs or to discover the many ways to solve problems. However, there are a variety of different methodologies, and because of the complexity and the enormous differences in regards to structure amongst organisations, choosing the correct methodology and its implementation playing a vital role in the SIS planning process. However, there are a variety of different methodologies, and given the complexity and the enormous difference regarding structure amongst organisations, choosing the correct methodology and its implementation plays a vital role throughout the IS planning process.

These techniques are split into two groups: Impact and Alignment, accompanied with impact techniques whose aim is to form and justify novel and unconventional uses of IT, while alignment techniques are aimed at assisting organisations to accomplish their business goals. (Vitale, et al., 1986).

Impact Techniques

Value Chain Analysis

Based on Michael Porter’s Value Chain (1985), which centres around specific operational value adding activities as opposed to organisational structure, this approach decomposes the operations of an organisation into different processes, thus providing space for management to carry out an evaluation based on the importance value of individual processes and to define which processes are key to an organisation’s strategic objectives (Pant and Hsu, 1995). Furthermore, this approach also assists the construction process of IS, which improves the likelihood for businesses to fulfil its larger portion of profit capacity. It also supports organisations to discover potential joint business advantages with module businesses from connected industries though information interchange. Given that this approach is based on the work of Porter’s Value Chain concepts, it steers IS in the direction of value adding as opposed to cost cutting (Pant and Hsu, 1995).

Critical Success Factor Analysis (CSF)

Contrary to Porter’s Value Chain analysis, a critical success factor analysis (CSF) belongs to both alignment and impact groups; particularly in the context of IS frameworks. The purpose of this approach is for interpreting business objectives, tactics and operational objectives more clearly in terms of an organisation’s most important information requirements, management, and the organisation’s current systems strengths and weaknesses (Pant and Hsu, 1995). However, CSF seems to mostly appeal to senior management. Its potential to turn attention to the key organisational issues seemed useful in a variety of different areas associated with the organisation (Shank and Boynton, 1985). Therefore, this enables organisations to focus its assets on IS development that conform to the needs of the organisation.

Given its nature, CSF is involved directly with the most fundamental areas of an organisation and thus tends to require special attention. In addition, adopting a CSF approach on its own would most likely not suffice because it does not express data architecture or automated backing for analysis. Also, while the truth suggests that the CSF approach facilitates the process of discovering and acknowledging the needs of the organisation and its resources for IS development based upon those information requirements, and that the value derived from these systems tend to be overlooked. (Pant and Hsu, 1995)

Alignment Techniques

Business System Planning (BSP)

Business System Planning (BSP) is a method that was established and revised by IBM. It combines top-down planning and bottom-up implementation. It is completely emphasised on business procedures, in order to define data needs and data classifications. Thus, comparable data classes are merged for the development procedure of databases. Basically, the concluding BSP plan outlines a complete IS architecture, along with an individual system’s installation schedules. (Pant and Hsu, 1995)

Same as CSF, BSP as well deeply considers the overall understanding of business objectives and mutual discussions, and given that IBM is the seller of this technique, BSP is broadly known to above management as opposed to others. However, given the above-mentioned nature, BSP needs much involvement and commitment from top management, and top exclusive sponsorship tends to came across as critical. (Lederer and Sethi, 1988)

Strategic System Planning (SSP)

On the other hand, Strategic System Planning (SSP), also called PROplanner, was coined by Robert Holland, and has similar characteristics to BSP. SSP, however, is defined as a business function model through analysing the most functional areas of an organisation. A data architecture is taken from the business function model through a combination of information needs into common data entities and databases. New systems are then identified by an IS architecture and its implementation schedule. While the stages of SSP are supposedly the same to those of BSP, there is a huge difference between them, which is SSP’s mechanisation in the storage process, handling and presentation of gathered data throughout the SIS planning process that BSP does not have. (Lederer and Sethi, 1988)

Information Engineering (IE)

Coined by James Martin, the Information Engineering (IE) technique contrariwise, offers support in fabricating enterprise, data and process models. These three models will therefore help to create and mix an all-inclusive knowledge base that then forms and maintains information systems (Lederer and Sethi, 1988). A simple fundamental philosophy of this method is to utilise structured techniques in all tasks that are associated with planning, analysing, designing and constructing organisationally extensive information systems. Hence, these kinds of techniques tend to result in better integrity of information systems. Moreover, the automation tools that IE offers to organisations is a vital aspect that vividly distinguishes IE from other methodologies, and its purpose is to tie its output with ensuing systems, and development efforts that is a huge advantage to IE as well (Pant and Hsu, 1995).

The Importance of IS Planning Tools in IBM

Adopting Strategic System Planning (SSP) methodology as a foundation, IBM has had the ability to form a group level IS strategy and establish communication amongst different divisions. Based on divisional levels, the formulation of an IS strategy is based on a group level strategy, and therefore communication with the necessary functional measurement units are created. (Pant and Hsu, 1995)

In addition, IBM has taken full advantage of a number of other methodologies that have evidentially been considered as valuable, these are: User-IS Priorities Survey, this is a methodology that considers what users want from IS, a Stage Analysis, which is another user based methodology, a Management Responsibility Analysis that considers the effective management of IS and an Interpretive Structural Model, which is an interactive tool for IS implementation. (Pant and Hsu, 1995)

Contrariwise, in terms of IBM’s IS Strategy Planning process, seemingly none of the above-mentioned methodologies do in fact form an entire strategy, but alternatively, a combination of these methodologies helps organisations to develop an entire strategy. They fulfilled their promise of giving user descriptions and the IS environment, which helped to facilitate strategic analysis, along with discovering important issues and opportunities that would not be proven if not. Moreover, the above-mentioned methodologies also show the considered possible alternative strategies for the future. Appendix 4 illustrates a diagram of an existing IS framework used modern organisations such as IBM and Dell (Cite).

Final Thoughts

Overall, throughout the process of forming an Information Systems Strategy, many organisations such as IBM and Dell have indeed adopted a multiple method that primarily supports the development of the entire organisation’s objectives and scopes (contextual aspect), corporate strategy, along with a framework that helps to support the formulation of more precise divisional strategies. Also, it assisted IBM to discover, evaluate and adjust methodologies that facilitated the development of the strategic process at operational levels. Therefore, these methodologies were chosen given that they deeply focus on the most important areas of organisational strategy, which in turn are completely compatible with and corresponds to IBM’s strategic direction.