Friday, March 11, 2011

Measuring Customer Relationship Management (CRM) Effectiveness in Order to Reduce Costs and Increase Sales

There are a number of applications or systems that an organization can use evaluate their current market share, profit margins, customer relationships, loyalty, and satisfaction. One such application or technological system most commonly used to analyze these trends is referred to as Customer Relationship Management (CRM). According to (Ja-Shen, Yen, Li, & Ching, 2009) CRM systems are a major marketing and/or services tool that can help an organization take full advantage of its customers by identifying trends in their customers buying behaviors, needs, and future expectations in order to maintain and grow relationships. Although a number of studies have researched and proven that a CRM implementation can enhance an organizations performance with increases in sales, few have focused on how these same systems can further develop more customer relationships, while increasing a company’s market share. As a result of these findings (Ja-Shen, et al., 2009) recent study examined three other factors (marketing, operations, and human resources) of CRM, which they believed could help organizations improve or grow their customer relationships, thus creating more organizational profitability and market share.

When an organization improves its relationship between marketing, operations, and human resources, they become better equipped to disseminate CRM data, which can then lead the organization to make additional innovations, while taking responsive actions. (Ja-Shen, et al., 2009) refer to this dimension of CRM as the Information Technology (IT) or Customer-Focused Information Technology (CFIT) segment, which is the first of three dimensions of interest in their analysis that supports the operations of a company’s CRM processes. The second dimension of interest in (Ja-Shen, et al., 2009) study was referred to as Relationship Marketing (RM), which was identified as the root efforts of a CRM process that can help an organization manage and improve its new and existing relationships with its customers in order to increase customer satisfaction, all while creating additional long-term profitability. Finally, (Ja-Shen, et al., 2009) referred to the third dimension of interest in their study as Customer-Focused Organizational Climate (CFOC) or the human resource side, which deals with an organizations culture to accept, use, and build upon any CRM system in order to help the organization develop, maintain, and grow customer relationships.

(Ja-Shen, et al., 2009) empirical study found that together (marketing, operations, and human resources) with (CFIT, RM, and CFOC) the most common view of CRM as a marketing application or complement of a company’s information technology or CFIT should also include the other two dimensions (RM and CFOC). If an organization wants to excel in the global market it is imperative that more organizations focus not only on advancing their information technology through systems such as CRM but that they also need to use CRM system data to create additional programs that focus more on the retention of current customers (needs) and acquisition of new customers (expectations). Only then will more businesses develop deeper understandings of their customer bases, while being able to target and market more effectively, resulting in more value, satisfaction, and cross or up-selling possibilities.

While the concept of CRM is an increasingly popular and hot topic throughout the world, research into the systems effectiveness on increased market share, profitability, customer relationships, and satisfaction is rather limited. Therefore, (Ja-Shen, et al., 2009) analysis provide three important dimensions (1) RM, (2) CFIT, and (3) CFOC of Customer Relationship Management Effectiveness (CRME). In order to improve the understanding of CRM systems it is dimensions such as these that managers will need to consider as they are continuing to identify the strengths and weaknesses of these programs, so they can continue to retain, update, and analyze the mass amounts of data collected to develop a deeper understanding of customers needs and wants. More importantly, these factors are even more important for individuals that want to reduce costs, while finding new ways to increase sales, Return on Investments (ROI), or enhancing their business’s performance.

This analysis of CRM systems is yet another example of the type of benefits that this supply chain function can provide organizations that truly are looking to grow their business. Therefore, I will continue to provide additional updates into this niche market, as I continue to refine my research in hopes of finding the supply chain function that can contribute most to the additional growth of Small-to-Medium Enterprises (SMEs). Of course, your opinions are always welcome as I truly welcome any additional insights that you may be able to provide. Otherwise, keep smiling since it really does look good on you—Cheers!!!

Ja-Shen, C., Yen, H. J. R., Li, E. Y., & Ching, R. K. H. (2009). Measuring CRM effectiveness: Construct development, validation, and application of a process-oriented model. Total Quality Management & Business Excellence, 20(3), 283-299.

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