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The Impact of CRM on Customer Retention 2006:02 PB MASTER’S THESIS The Impact of CRM on Customer Retention Arezu Ghavami Alireza Olyaei Social Science and Business Administration Programmes Department of Business Administration and Social Sciences Division of Industrial Marketing and e-Commerce CONTINUATION COURSES Supervisor: Esmail Salehi Sangari 2006:02 PB • ISSN: 1653 - 0187 • ISRN: LTU - PB - EX - - 06/2 - - SE The Impact of CRM on Customer Retention Supervisor : Dr. Salehi Advisor : Dr. Abili Arezu Ghavami Alireza Olyaei Social Science and Business Administration Programs Lulea University of Technology Department of Business Administration and Social Sciences Division of Industrial Marketing and e-Commerce Acknowledgments With every step forward we achieve the understanding as to the sweetness of endeavor to gain knowledge and to explore and find facts, through which we will learn to appreciate the beauty of search for knowledge and exploration of mysteries. We thank Lord the Almighty to have bestowed such consciousness and chance to have disclosed this fact to us with the firm intention to continue this endeavor onward. We acknowledge our thanks and appreciation for the esteemed people who have graciously helped us in this challenge. First of all, we extend our deepest gratitude to Professor Esmail Salehi-Sangari, who was the supervisor for this thesis, for all his continuous support and guidance. Then we would like to thank our advisor Dr. Khodayar Abili for his useful advices and encouragement. Finally we would like to give our deepest thanks to our close ones, colleagues and friends who have effective role in our success and our findings in genuine thinking : Again Dr. Salehi, Mr. Ghalambor , Dr. Jelasi , Dr. Farhang , Eng. Keshmirian , Mr. Nematollahi , Mrs. Shirazi and Dr. Eradati . Last, but not least, we highly appreciate continuous support of our loving family for which words are not enough to express our “ THANKS ”. Page 2 PDF created with FinePrint pdfFactory trial version http://www.fineprint.com Abstract The purpose of this thesis is study of Customer Relationship Management process in Customer Retention . We describe the objectives of Customer Relationship Management (CRM) in Customer Retention which is very important for the survival of companies in today competitive environment. Today, “CUSTOMERS” are very important factors in companies management with the power to change their short-term and long-term polices and strategies. Therefore enough knowledge of environment, expectations of customers and their desires are very important to find the best solution for facing un-expected behaviors of customers and then behave in such a way to change the mind of customers in the direction of companies’ profit . It’s an art to absorb customers by using different techniques such as CRM in order to manipulate companies’ policies a head of them . Page 3 PDF created with FinePrint pdfFactory trial version http://www.fineprint.com Note to Readers We selected the “Literature Review” research method because of the following reasons: 1. The CRM applications are a new concept in Iran and not that many organizations have been able to establish a production-level system. Although some governmental institutes and organizations are completing their research and analysis regarding CRM systems, but still there were not enough real world practices and executions that can be researched by our group. 2. Since most of the Iranian large companies (governmental or private) have monopoly on the products and/or services that they provide, customer satisfaction and retention have not been the first priority. In most of the cases, there is no competition for them. 3. In general businesses in Iran are not “customer-oriented”. High demands and shortage of products usually provides more customers that they can handle. As a result, it was not possible for us to collect enough reliable data from local sources for using in our research. Therefore we decided to use available written materials (hardcopy and online) for the project. Many books, magazines, articles along with online resources such as company websites, newsgroups, online reviews and discussions have been referenced to assemble valuable information for preparing this document. A list of references is provided at the end of the thesis as well. Page 4 PDF created with FinePrint pdfFactory trial version http://www.fineprint.com Table of Content 1 Introduction ......................................................................................................7 1.1 Marketing..................................................................................................8 1.2 CRM in Marketing ......................................................................................9 1.3 Customer Relationship Management (CRM)................................................10 1.4 Customer retention..................................................................................12 1.5 Impact of CRM in customer retention ........................................................13 1.6 Research Problem....................................................................................14 1.7 Research objectives .................................................................................15 2 Literature Review.............................................................................................16 2.1 Marketing................................................................................................ 16 2.2 Customer Relationship Management..........................................................17 2.2.1 Goals of CRM.......................................................................................19 2.2.2 CRM Process........................................................................................21 2.2.3 Characteristics of CRM..........................................................................26 2.2.4 Elements of CRM..................................................................................27 2.3 Customer retention..................................................................................29 2.4 Customer value and satisfaction................................................................ 31 2.4.1 Customer satisfaction ...........................................................................32 2.4.2 Customer perceived value.....................................................................32 2.4.3 Conceptual differences between satisfaction and customer perceived value...................................................................................................33 2.5 Summery of The Literature.......................................................................34 3 Frame of Reference..........................................................................................36 3.1 Customer satisfaction...............................................................................36 3.1.1 Investing in your best customers first ....................................................36 3.1.2 Towards a single view of the customer ..................................................37 3.1.3 Optimizing 'exchange of value' between company and customer ..............37 3.1.4 Some simple tactics for improving best-customer satisfaction...................37 3.2 Customer Loyalty.....................................................................................38 3.2.1 Assessing customer value and motivating loyalty ....................................38 3.2.2 Cost efficiency .....................................................................................39 3.3 Customer Retention .................................................................................39 4 Methodology....................................................................................................40 4.1 Research approach ..................................................................................40 4.1.1 Quantitative approach ..........................................................................41 4.1.2 Qualitative approach ............................................................................41 4.2 Research Design......................................................................................42 4.2.1 Data Collection.....................................................................................42 4.2.2 Data Analysis.......................................................................................43 4.3 Content Analysis......................................................................................43 5 Analysis...........................................................................................................45 5.1 About Customer Relationship Management (CRM) ......................................45 5.2 Technology & Process ..............................................................................45 5.2.1 Segment and Profile the Market.............................................................46 5.2.2 Design Communication Strategy............................................................46 5.2.3 Implement Designed Strategies.............................................................46 Page 5 PDF created with FinePrint pdfFactory trial version http://www.fineprint.com 5.2.4 Evaluate the Results.............................................................................46 5.3 Why CRM? ..............................................................................................47 5.4 Capitalization on CRM ..............................................................................48
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