CHAPTER – 1 CUSTOMER RELATIONSHIP MANAGEMENT: AN INTRODUCTION

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CHAPTER ? 1 CUSTOMER RELATIONSHIP MANAGEMENT: AN INTRODUCTION The emergence of services organizations in the corporate sector, the growing competition due to liberalization, and the growing expectations of customers propelled by globalization and facilitated by IT revolution - are defining new rules of game for existing private and public enterprises in India. Telecom is one of the fast growing sectors among the services. The mobile revolution has created a new wave of interest among people to utilize telephone services. The firms offering the services are vying with each other to capture this sudden spurt in demand. They are using their technology and marketing prowess to attract new customers and simultaneously retain their existing customers, make inroads into competition and at the same time build entry barriers to competition to defend their position. Customer-driven initiatives to attract, retain and build intimate long term relationship with profitable customers, innovation and delivery of Quality Service have become the key elements in the marketing strategies. Relationship Management with the three focal points ? Customer Perceived Value, Customer Satisfaction and Customer Loyalty ? has become key success factor in achieving sustained customer patronage and profitability to the firm. Customer Relationship Management (CRM) is an effective tool to achieve this goal. The philosophy and practices of CRM in telecom has caught the attention of policy makers, academicians and researchers.

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1.1 EMERGENCE OF CRM The origins of a relationship-based approach to a firm's management

emerged from academics and practitioners in the fields of strategy, marketing and supply chain management (Bagozzi, 1974, 1975; Berry, 1983; Osarenkhoe, 1992; Gummesson, 1999; Zineldin, 2000; Nielsen et al., 2003; Martin and Bush, 2003).

In the mid-1970s, Bagozzi (1974, 1975) began to gain an understanding of marketing activities as an exchange between the seller and buyer ? thereby forming a basis for subsequent conceptualization of relationship marketing. The question is to understand how the relationship develops and changes over a period of time. The possibility of delineation of phases within a relationship makes it necessary to explicitly design relationship marketing. This conceptualization first appeared in the early 1980s in the research field of services marketing (Berry, 1983; Dwyer et al., 1987; Ford, 1980; Hammarkvist et al., 1982; Jackson, 1985; Kim and Kim, 2001; Guenzi and Pelloni, 2004; Matthing et al., 2004; A kerlund, 2005). Concept of Relationship Marketing

The concept of Relationship Marketing was born within the field of service marketing and industrial marketing (Berry, 1983; Gummesson, 1987; Christopher, Pyne, and Ballantyne, 1991). In 1992, Webster reported that there has been a paradigm shift from a `transaction' to a `relationship' focus. From a narrow focus on `volume and profit-maximization' marketing has

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matured into a broad orientation with emphasis on establishing `long-term

customer relationships' and managing strategic alliances with customers

directly and through their other supply chain associates.

Table 1.1: Relationship Marketing vis-a vis Traditional Marketing

Base

Relationship

Traditional marketing

marketing

Orientation

Customer retention

One time sales

Contact with Continual

Episodic

customers

Focus

Customer value

Product features

Time horizon

Long term

Short term

Customer

High

Low

service

Emphasis

Quality

Entire organization

Limited to productions

concerns

/ operations

Source: F. Robert Dwyer, Paul Schurr, and Sejo Oh, "Developing Buyer-seller

Relationships." Journal of Marketing, Vol. 51, April 1987, pp. 11-27.

Drivers of CRM Jagadish N.Sheth (2002) observes that energy crisis that led to

stagflation and competition in industries like consumer electronics, textiles, steel and chemicals made industry to realize that retention of customers is more important than acquiring new ones. Possibilities in management of services such as telephones, health care and power, to keep record of transactions over a period of time for analyzing the quality of customer service and response patterns etc. has increased the scope to analyze the implementation of tactics and their outcomes. Practice of business partnering by way of offering consultancy and collaboration to B2B customers for improving the outcomes of service, encourages industrial marketers to opt to

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directly service key accounts. In the supply chain the collaborative relationships have become common practices. Information technology has increased the scope to adopt innovative styles in customer service. The sales automation, customer data bases and cross-functional integration through Enterprise Resources Planning (ERP) have expanded the scope for relationship marketing since the mid-1990s.

1.2 DEFINITIONS OF CRM The term relationship marketing was first coined by Berry in the context

of services marketing. Relationship marketing is `attracting, maintaining and enhancing customer relationships'. Servicing and selling existing customers is viewed to be as important to long-term marketing success as acquiring new customers (Berry 1983).

This concept is extended by Gro?nroos to include channels and some operational aspects. "Relationship marketing is to establish, maintain and enhance relationships with customers and other partners, at a profit, so that the objectives of the parties involved are met". This is achieved by a mutual exchange and fulfillment of promises (Gro?nroos, 1994). He indicates that beyond commercial interest, partners recognize the mutual benefit to be derived from such relationships.

Christopher et al. (1991) define the function of relationship marketing as "getting and keeping customers". They highlight the importance of customer

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service and quality if the firm is to gain and maintain a long-term relationship with the customer.

According to Shani and Sujana (1992), relationship marketing is "an integrated effort to identify, maintain and build up a network with individual consumers and to continuously strengthen the network for the mutual benefit of both sides, through interactive, individualized and value-added contacts over a long period of time''. They contend that developing a long-term relationship with the customer enables the firm to add value to its offerings.

Gummesson (1995) defines relationship marketing as "relationships, networks and interactions". He emphasizes that the strength of the relationship can be enhanced through the networks that the firm is able to develop, and from which all stakeholders benefit.

Morgan and Hunt (1994) refer to relationship marketing as "those activities directed towards establishing, developing and maintaining successful relational exchanges''. They emphasize on maintenance of relationship and highlight the importance of trust, cooperation and shared values in maintaining a successful relationship.

In the next phase the relationship management has gone beyond marketing function and the word customer relationship management was coined to broaden the scope of relationship creation, development and maintenance.

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The Gartner group (2000) defines CRM as "Management discipline and a philosophy that requires businesses to recognize and nurture relationship with customers. With CRM, a customer's needs and preferences are available to anyone working in the business at the customer interface, regardless of channel. Each customer is treated as an individual in a relationship that creates feeling of one-to ?one.

Woodlock et.al. (2000) define CRM as `finding the right customers (those with current and future net value, viable for establishing durable relationship), getting to know them (as individuals and as groups), growing their value (if appropriate and viable) and retaining their business in an efficient and effective way'.

The different definitions on CRM are philosophically similar but operationally differ by their emphasis. Some highlighted objectives, some others laid emphasis on approaches and others talked about benefits. In defining what is to be done, some have chosen the broad areas like establishing, maintaining and retaining whereas others talked about specific acts like selling and servicing etc. Characteristics of CRM

CRM as compared to traditional marketing involves series of transactions, regular and continuous interactions beyond simple exchange process, long term objectives, bonds involving investment of time and energy to produce positive interactions, investment by the parties, some switching

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barriers, elastic and permeable boundaries, holistic approach and systematized offers.

In India CRM have deep roots in the practices of business. The business men used to establish bondages with customers at emotional level, especially in small towns and villages. However, in modern corporate world, CRM has appeared as a new concept in the mid-1990s, more as a technology that would change dramatically the way corporations managed their networks and interaction points with customers (Rado Kotorov,2003). Thus the modern CRM, in its early stages, was deployed as a technology solution: a software package that was bought and installed to facilitate or automate some marketing functions. The terms "sales-force automation", "campaign automation", "customer support automation" were often equivocated with CRM, even though they stand only for different components of the enterprise-wide CRM strategy. Shortly after the deployment of such packages it became evident that they were not used as planned and remained as show pieces. (Albert Stroucken, CRM, August 2002).

As the technology/project approach failed, discussion on strategic approach took place with a need to focus on customer and consider technology only as a tool. In mid-1990s, it was thought that merging customer data collected from the field by sales force with call center interactions would result in more informed interactions with the customers. The concept resonated with user organizations. Soon mergers and acquisitions gave rise to a host of

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software vendors, all claiming to have an integrated set of capabilities that became known as CRM. On a parallel track, internet-based tools such as ecommerce, internet marketing (Yang and Fang, 2004), personalization (Jun and Cai, 2001) and self-help (Walters and Lancaster, 1999; Parasuraman et al., 2005) were evolving. Owing to the newness of the technology, these products competed outside of the CRM sphere and were referred to as "e-business". When the concepts of CRM and e-business molded together (Light, 2003; Fjermestad and Romano, 2003; Bull, 2003), there was a short period where vendors talked about e-CRM. Similarly, ERP vendors realized that the 360degree view of the customer had to include transaction data, so they developed an integrated package with CRM capabilities. Thus, from a technology perspective, CRM consists of a set of applications that address the needs of customer-facing functions that in turn feed a common database that is supported by business analysis tools.

Models of CRM Philosophically, CRM is seen from three perspectives.

(i) Stakeholder model: Relationship management and marketing are powerful tools for developing long-term relationships with clients, suppliers and distributors. (ii) Supply chain model: Relationship between channel participants is the key strategy for pursuit of efficient supply chain. This minimizes the costs of

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