The Effect of Customer Relationship Management (CRM) on Achieving Competitive Advantage of SMEs
Chapter One
Research objectives
Generally, the objectives of this research aim to identify whether customer satisfaction and retention has an impact on the competitive advantage of SMSEs. The organizational performance in this study is measured by the rate of customer satisfaction and retention.
In particular, this study aims to achieve the following specific objectives:
- To ascertain whether customer relationship management strategy increases the competitive advantage of SMSEs
- To evaluate the rate of customer retention in relation to the rate of lost customer
- Evaluate the impact of CRM on customer retention.
CHAPTER TWO
LITERATURE REVIEW
Introduction
In this chapter, based on the research problem presented in the introduction chapter, we will review an essential part of the literature concerning CRM and its effects on firm performance; especially, the ‘customer retention’. In doing so, we start by defining CRM and specifying its goals. Next, the two well known approaches namely, the resource-based view (RBV) of the firm and the process-oriented approach, are discussed. Then, we examine the CRM process and process capabilities as well as customer retention programs of CRM. At the end, a summary of the literature linking CRM to ‘customer retention’ is provided.
Definition of customer relationship management (CRM) and scope
Increased product availability and mass production techniques have given this chance to customers to be able to choose the items they really desire among the variety of products. Therefore, focusing on customers’ expectations is the most important factor for firms to survive in today market places. On the other hand, knowing customer’s needs and problems helps the companies to acquire and retain them easier and with less cost (Dimitriadis & Stevens, 2008).
Customer relationship management is built on relationship marketing philosophy and redefines the relationship between companies and their customers. Some researchers have defined CRM as a competitive strategy companies adopt to focus on their customer’s needs, but others regard it as a discipline to concentrate on development and automation of business process in companies. However, despite the variety of definitions of CRM, they all intend to build customer relationship to create superior value for both the customers and firms (Chatterjee, 2000 cited in Shahin & Nikneshan, 2008).
Today, companies have realized that the cost of acquiring new customers is far greater than the cost of retaining existing profitable customers. Therefore, with the help of CRM strategies, they are trying to build better and customized relationships with existing customers in order to increase customer satisfaction and build customer loyalty (Ang & Buttle, 2006). Based on Payne and Frow (2004) and Payne and Frow (2005), Dimitriadis and Stevens (2008) emphasizes that CRM creates long-term and profitable relationships with stakeholders and customers by uniting IT technologies and appropriate strategies. Here, the outcome is a mutually beneficial relationship between company and customers that leads to customer loyalty and therefore more profitability for the companies. Winer (2001) considers the customer retention as the final goal of firms practicing CRM programs. He suggests that if firms want to deliver their customers the performance they expect, a comprehensive set of relationship programs is a necessity. He implies that these programs include customization, customer service, rewards programs, community building, and loyalty programs. Ghavami and Olyaei (2006) argue that CRM is one of the key processes in any company and its implementation needs capital investments to integrate marketing, strategy, and technology. Using CRM, companies can achieve competitive advantage provided it is well implemented. In case it is not, customers may leave the company and never come back again. Now, a key question is: what are the elements of a successful CRM program?
To answer this question, based on Payne (2001), Ghavami and Olyaei (2006) explain the following four elements:
- Strategy assessment process
- Value creation process
- Multi channel integration process
- Data repository process
The first process must be done for both business strategy and customer strategy. The components of a business strategy include business vision and competitive characteristics and the components of customer strategy include customer characteristics, choice, granularity, and customer segmentation (Ghavami & Olyaei, 2006). The second process consists in the value customers receive, the value organization receives, and the customer segment life time value analysis. The values customers receive from a relationship with a company include value proposition and value assessment. Moreover, in a well planed and customized relationship with customers, organizations receive the values of acquisition economics and retention economics (Ghavami & Olyaei, 2006). The third process is multi channel integration process. In this step, the components which CRM tries to integrate and manage include e-commerce, m-commerce, direct marketing, sales force, telephony, and outlets. Finally, the last process contains the functions of data analysis, information systems, front office applications such as customer service and back office applications such as human resources and logistics (Ghavami & Olyaei, 2006).
CHAPTER THREE
METHODOLOGY
Research approach: case study
Saunders et al. (2009, p. 145) state that case study is: “a strategy for doing research which involves an empirical investigation of a particular contemporary phenomenon within its real life
context using multiple sources of evidence”. This strategy is very appropriate to answer the ‘how’ and ‘why’ questions and very useful for descriptive and explanatory research.
Quantitative
According to Hair et al. (2007, pp. 151–153), there are two types of research approaches available to researchers, namely quantitative and qualitative. The data in quantitative approach are numbers and lends itself to statistical analysis in order to imply the characteristics of something. An important point to consider is that structure, representativeness, and providing objectivity are important strengths of quantitative research.
From the above discussion and since the results are presented by digits and they are analyzed by statistical methods, we can conclude that quantitative approach proves to be suitable for this research.
Data Collection method
Zikmund (2000) and Sounders et al. (2009, p. 256) say there are two classifications for collected data which are: primary and secondary data. Primary data can be collected for instance through interview, observation, and questionnaire. On the other hand, secondary data is the information collected from the studies done before and can be collected from the Internet or libraries.
Sounders et al. (2009, p. 360) state that questionnaire is one of the most widely used techniques to collect data within the survey strategy and since each respondent answers the same set of questions, it is an efficient technique of gathering responses from a large sample. For this study, primary and secondary data seems to be the most suitable one. The questionnaire has been used as the instrument to collect the primary data in this research. Our questionnaire has been distributed to the employees and customers of the selected store branch.
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS AND INTERPRETATION
Data presented here are those collected from the field survey on the study. This would form the basis for the research hypotheses. Data presented using frequency tables, percentages and charts. Indeed, this section constitutes one of the most important parts. It is of great significance in studying the accuracy of hypothesizes. This chapter is divided in two parts. The first part, constitute the analysis of the demographic data is and in the second part will focus on providing answers to the research questions.
CHAPTER FIVE
FINDINGS, CONCLUSIONS AND RECOMMENDATIONS
Introduction
Chapter five (5) consists of the findings which sought to study whether there is significant relationship between customer retention and customer satisfaction in the retail industry and also whether there is relationship between the competitive advantage of SMSEs and the customer satisfaction and retention, the conclusions and recommendations of the study.
Summary of Findings
The study sought to examine the Impact of Customer Relationship Management on the Performance of Organization in the retail industry. First, the customer care practices of Amek Stores Nigeria Ltd, Ikeja with its customers were assessed. Next, the rate of customer retention in relation to the rate of lost customer and the impact of CRM on customer retention were further analyzed. It was found that what customers perceived as a good customer care relationship was not significantly different from the customer care that was being practiced by the store.
The study revealed that the ability of the branch to retain its customer is directly proportional to their satisfaction level, in other words, where customer satisfaction is high the retention rate is also high; consequently this study aims at establishing that there is a relationship between these two variables. The researcher therefore ascertains that there is significant relationship between customer retention and customer satisfaction. Customer retention is a direct result of customer satisfaction.
Customer dissatisfaction
Customers complained about the time they waste in queues in the retail hall. They explained that this was due to the number of serving tellers. Comparing the number of customer that transact business on the daily basis against the number of tellers that serve them, the finding revealed that the number of customers a teller handled on daily basis was relatively high thus causing delay in the transaction. However, customers today are looking for better place to transact their businesses in a record time so as to be able to save time for other things. Therefore the recurring expression that kept on coming from the customers was:” time is money”. Indeed time is money. Any CRM programs in the retail sector must focus on the mutual benefits of both the company and the customers.
As stated earlier in the study, the organizational performance in this study is measured by the rate of customer satisfaction and retention. The survey undertaken therefore has revealed that the performance of the branch is related to the customer relationship strategies which are translated into the customer satisfaction.
Conclusion
The study conducted has identified some findings that have been observed by the strategies and practices put in place by the branch. The literature reviewed in chapter two has revealed that customers’ long term loyalty with a branch will depend on how they are treated (satisfactorily). It is therefore imperative for the branch to note that the degree of responses to the needs of the customers forms a significant part in their decision to stay with the branch (retention and growth). In this case, it was identified that the branch resolves customers’ complaints within a short period and has put in place channels to address such grievances that are brought before the branch officials. The employees of the branch confirmed that when it comes to customer service delivery, a fast, friendly and efficient service offer is their top priory.
Good customer care relationship had contributed to the satisfaction of customer, therefore the decision to stay and continue patronizing the branch’s service becomes very important.
These findings also reveal that the branch should not compromise on its relationship with the customers if it has to retain these customers, satisfy them so they stay loyal. Moreover, the store benefits from referrals of loyal customers.
The overall strategies put in place by the branch were also matched against what the customers identify to be effective. This was made possible by interviewing management staff of the strategies the store has in place and how they prioritize these strategies to support their business policies. The general satisfaction at the retail halls by the customers was positive except that the majority of the customers complained about the time they waste in the queues in the retail hall.
This also tells that though customer might not be totally satisfied, but they will prefer to stay with their branch because of convenience furthermore, they believe a 100% satisfaction might not be possible, hence no matter the effort of the branch to satisfy them, some customer will still complain for one thing or another.
Recommendations
The retail industry must understand the importance of customer relationship management in improving the organizational competitive advantage of SMSEs. They should also realize that:
Effective customers’ relationship management is a reliable tool to increase customer base.
Hence, every single need aspect of the customer must be attended to and ensure customer satisfaction at all time.
The branch should increase its serving teller base in order to reduce the long queues.
Customer should be encouraged to use ATM outlet for certain basis withdrawal in order to further reduce long queue.
References:
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- Arbore, A & Busacca, B 2009, Customer satisfaction and dissatisfaction in retail retail: Exploring the asymmetric impact of attribute performances,‘ Journal of Retailing and Consumer Services, vol.16, pp. 271–280
- Bethke, Clinton & Williamson, 1994, The impact of technological and organizational implementation of CRM on customer acquisition, maintenance, and retention‘, Intern. J. of Research in Marketing, vol. 26, pp. 207–215
- Blery, E & Michalakopoulos, M 2006, Customer relationship management: A case study of a
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- Chatterjee Ang, L & Buttle, F 2006, Customer retention management processes: A quantitative study,‘ European Journal of Marketing, vol. 40, no. 1/2, pp. 83–99. Bligh, P., and Turk, D. (2004) CRM Unplugged: Releasing CRM’s Strategic Value Hoboken, New Jersey, USA.
- Coltman, T 2007, Why build a customer relationship management capability?,‘ Journal of Strategic Information Systems, vol. 16, no. 3, pp. 301–320.
