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Customer Relationship Management and Technology Customer Relationship Management and Technology Mohammad Hassan Yousefi , Department of Business Administration and Marketing, Allameh Tabatabayi University/ Market Research Head in Hooshmand Tadbir Research Institute, Tehran, Iran [email protected] Mohammad Hossein Jarrahi , Department of Information Systems, London School of Economics and Political Sciences, London, UK [email protected] Keywords Information Technology, Customer Relationship Management, eCRM Abstract During the last decade, increasing attention has been given to relationship marketing as a way to enhance cooperation between a selling company and its customers and bring benefits to both parties. Globalization and technology improvements have exposed companies to a situation with tough competition. Relationship marketing allows a selling company to better meet competition and exceed their competitors, and hence relationship marketing becomes an important determinator of success in the increasingly competitive business world of today. One method of relationship marketing is Customer Relationship Management (CRM). Nowadays, new technologies have empowered customer relationship management (CRM) to dominate marketing paradigms. However, a large proportion of CRM practices do not yield expected profits. Yet, this phenomenon is attributed to a misconception of CRM and the role of technology in its implementation as there are diverse attitudes toward this issue. Some interpret CRM through a technological framework, and assume software solutions are what the organization mainly needs for leveraging CRM whereas others contend that CRM is more than a technology, and underscore some required considerations including formulating customer-focused strategy, user involvement, and process alignment before CRM execution. Here, these different perspectives are organized into two main groups of technological and non-technological perspectives, and consequently the position they appreciate for technology in CRM will be pondered and compared. 13 – 14 ﺷﻬﺮﻳﻮرﻣﺎه September 4- 5 2006 / 1385 www.irmmc.com Introduction The term CRM, promising to considerably enhance management of customer affairs, has overtaken the market and is revolutionising marketing as well as reshaping entire business models. Over the past decade, CRM has fascinated not only academics but also practitioners. It is estimated that annual investments in CRM technology will surpass $76 billion within the next three years (GartnerGroup 2001). However, a substantial number of CRM initiatives do not produce advantageous results. Gartner Group report that CRM technology could not lead to the targeted performances, as between 55 and 75 percent of all CRM implementations ends in failure, and more than 50 percent of all CRM projects are disappointments from the standpoint of customers (GartnerGroup 2001). Many studies assert that these failures probably stem from the executives’ insight into technology and its primacy granted in CRM (Rigby, Reichheld et al. 2002) Indeed, one of the most disputable constituents of CRM is the technology, particularly information technology. To date, an increasing amount of research addressing success factors of CRM implementations has been published. These have dealt with CRM from different slants in terms of the role of technology. Equally important, the way in which CRM is defined is not exclusively semantic, but impacts immensely on the implementation approach (Payne and Frow 2005). In this paper, the literature is first separated into two groups based on how the technological aspects of CRM are analyzed. The core ideas about critical factors and stages, in CRM practices will then be explored. Technological Perspective Whilst its underlined epistemology comes from positivist traditions, the first group of literature refers to technology as a self-ruling driver of change in organization. Hence, no critical position is acknowledged for other agents such as people (Orlikowski 1996). Definitions of CRM It is very common amongst this group to define CRM as a sort of technology or application; therefore, CRM is often equated with technology(Payne and Frow 2005). To some, CRM means information-enabled relationships marketing (Ryals and Payne 2001) or data-driven marketing (Kutner and Cripps 1997; Hansotia 2002); some describe it as an eCommerce application (Khana 2001) ; others conceive it as methodologies or technologies, ranging from a database to internet solutions (Stone and Woodcock 2001) (Burghard and Galimi 2000). In this term, CRM products are categorized into operational (e.g. for automating the sales forces), analytical (e.g. for building a CRM data warehouse) and 13 – 14 ﺷﻬﺮﻳﻮرﻣﺎه September 4- 5 2006 / 1385 www.irmmc.com collaborative (e.g. for building web and online communities) as exemplified by (Chang 2001; Firth 2001; Karimi, Somers et al. 2001) Many executives and practitioners also regularly have the same outlook on CRM. Payne and Frow (2005) report that a manager, who spent $30 million on IT systems integration, defined CRM in terms of sales force automation project. Similarly, Corner and Rogers(2005) state that some managers take are concerned only with the mechanistic aspect of CRM systems and fail to consider the people who will use it. The role of technology in CRM implementation Accordingly, technology is viewed as a main driver of CRM and its most significant success factor. Ling and Yen (2001) contend that technologies such as data warehouse and parallel computing have metamorphosed into the main enabler of CRM. Researchers have identified some key technological aspects, particularly sales force automation, as the critical factors in the success of CRM projects (e.g.; (Morgan and Scott 2001; Pullig, James et al. 2002). Accordingly, Gray and Byun (2001) believe that, although some argue that CRM has a meagre role in CRM success, each key CRM tasks relies upon technology significantly. Yong Ahn et al (2003) indicate revolution in marketing paradigms to be chiefly based on the rapid advances of IT in areas involving data warehousing and data mining. Sandoe et al (2001) characterize in similar fashion the functionality and efficiency of CRM in terms of database technologies. Therefore, IT plays a major role in developing CRM. One of the senior CRM managers of J.P. Morgan states: “ Early on there was a real focus on technology and the idea that technology was going to make it happen”(Fung 2002). In addition, it is assumed that off-the-shelf CRM packages propose a wide and comprehensive range of required technology for running customer relationship management initiatives (Greenberg 2001). These could be executed for CRM planning as is done for ERP and advance database systems (Day 1994; Sivadas and Baker-Prewitt 2000). Moreover, it is sometimes assumed that CRM solutions sold over and over again are appropriate and usable because they have been thriving in analogous environments (Corner and Rogers 2005). As such, this point of view represents a sort of technology determinism in which design drivers are heavily technological rather than social (Fleck and Howells 2001).This means that by implementing a particular technology, certain changes which are technically possible are made incontestable and inevitable due to the intrinsic nature of technological progress (Leonardi and Jackson 2004). Correspondingly ,many companies assume that by installing the tools (CRM software) the CRM will be rolled out (Rheault and Sheridan 2002). Thereupon, actual implementations tend to be substantially technologically biased and pay 13 – 14 ﺷﻬﺮﻳﻮرﻣﺎه September 4- 5 2006 / 1385 www.irmmc.com little attention to managing the changes in processes (Fleck and Howells 2001). For example, the finance sector and bank industry have had a tendency to leverage advanced IT practices before any other considerations (Ryals and Knox 2001; Goldberg 2003). Such a context has consequently influenced many proposed frameworks of CRM implementation. Winner (2001) suggests a CRM model which starts with creating a customer database. Meltzer(2005) suggests establishing a customer information infrastructure as the starting point of his framework. Likewise, a number of proposed models suggest technical aspects, particularly data warehousing, as the first step of embracing CRM. These sorts of implementation often continue with data mining or data analysis (Cunningham, Song et al. 2004) (Ahn, Kim et al. 2003; Pan and Lee 2003). Wilson et al (2002) suggest that the majority of managers suppose it to be easier to proceed with hard facets like technology than softer ones like strategy and so frequently start with hard issues first. Non-technological perspective This group, with their relatively interpretive research, have a more holistic view of CRM and thus do not limit the CRM concept to the technology. To them, CRM means more than a software solution (Boon, Corbitt et al. 2003) and is not devised by installing a software package (Close 2001; Amerongen 2004). They generally argue that the belief of those managers who assume CRM software plus a data warehouse will make profit is the origin of the CRM failures (McKim 2002; Newell 2003). Wehmeyer (2004) believes that pursuing CRM implementation as simply an IT project leads to trouble. Rigby et al (2002) question the perception which associates CRM with a customer relationship handling software tool and prove this assumption to be the source of several perils. They also report that in a survey of 451 executives many of those who held this line of thought found that not
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