Saturday, February 12, 2011

Customer Relationship Management (CRM) as a Strategic Approach

Throughout the last decade, organizations have continued to look for ways to create new strategies in order to retain customers, while improving service quality based on new competitive measures. One such way these organizations are creating, these new strategies are through advancements in technological programs such as CRM. (Wu, 2010) describes CRM as “a 360 degree projection which requires not only technology implementation but also strategic making and other integration in an organization” (p. 187). Additionally, CRM can be defined as those tools or technological advancements that help organizational leaders manage, develop, or assist employees in the day-to-day interactions with customers, suppliers, and other business partners. Wu quotes Giga (2001) who discovered that only 30.7% of companies worldwide actually consider CRM as a strategic tool that can help their respected organizations achieve some of their long-term goals, which in turn makes it very difficult for others to adopt this as a strategic initiative, hence why some 70% of companies overall fail to implement or utilize CRM correctly. However, if CRM is used correctly within an organization the research shows that companies are better able to build relationships (internally or externally), target new customers more effectively, and assist others by providing consultative solutions for a distinct product or service. There are four characteristics of a well-defined CRM system

(1) A CRM system that provides a 1-to-1 solution to a customer’s needs which will enhance communication, relationships, satisfaction, and service.
(2) A CRM system that provides a company’s sales force with a better way to track client interactions while providing useful information for follow-up, repeat, or future sales.
(3) A CRM system that allows employees to warehouse, mine, and customize data, which helps a company, stay ahead of its competitors.
(4) A CRM system that provides predictable sales demand, growth, and prospects in order to meet the needs of a company’s current and future clients.

(Wu, 2010) found that those organizational leaders, which understood the four main characteristics of CRM systems, would be the ones that could take advantage of its competitors, thus creating a competitive advantage within any given industry. However, before any CRM system implementation (Wu, 2010) suggests that these same organizational leaders also carefully analyze five important aspects referred to as “Porter’s Five Forces (1) Bargaining power of customers, (2) Threat of substitutes, (3) Threat of new entrants, (4) Extent of rivalry between existing competitors, and (5) Power of suppliers” (p. 195).

(Wu, 2010) provides readers with some of the reasons that CRM system implementation succeeds, while at other times fails because of the lack of understanding about what CRM actually is. The fact of the matter is many CRM system implementations fail because organizational leaders lack experience, knowledge, and a clear strategic vision of what they can or cannot do with such a system. Therefore, before a company decides to invest or re-invest in a CRM system it is clear that more organizational leaders need to develop a clear-cut strategy to adopt in order to avoid any potential risks that such a system implementation may cause. Although there are tremendous, amounts of benefits that CRM systems can provide organizations (i.e. reduced costs, increased customer satisfaction, along with gaining new and retaining other customers) a proper system implementation will only occur if leaders strategically plan for its integration and use. This is the beginning of my in depth analysis of one of the most important variables that make up the foundation of my Dissertation and I look forward to exploring this concept more and reporting my results in the weeks if not months ahead.

Wu, Y. Applying the strategic approach to assess customer relationship management. International Journal of Organizational Innovation (Online), 2(3), 186.

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