6.c. sunanda yadav - serialsjournals.com · “the key difference between the two is the necessity...

IMPACT OF CLIENT RELATIONSHIPS IN

BUSINESS TO BUSINESS INDUSTRY

C. SUNANDA YADAV*

INTRODUCTION

Motivation for this thesis is driven by two trends in the marketing andinformation technology (IT) environment. First, the growing requirement andacceptance in business for marketing and IT to work closely together to delivervalue to the organization and the customer. Second, the growing importanceof market orientation, and relationship marketing in particular, as an effectiveorganisational business strategy. With the rapid development of the Internet,e-commerce and self-service customer support, there are increased expectationsfrom customers for improved, personalized service and immediacy.

Customer relationships are considered superior to transactional exchange intheir ability to create sustainable competitive advantage and superior businessperformance. As a consequence, due to the impacts of globalization and masscustomization, there is an increased focus on IT to provide applications andinfrastructure in support of appropriate business-to-business customerrelationships. The marketing, management, and IT make numerous referencesto client relationships impact on business orientation and performance. Business-to-Business (also known as B2B and industrial buyer-seller) relationships havegenerally been the focus of relationship marketing research because B2Brelationships are considered more regular, formal, constructive, and intense.

Business interactions and B2B relational exchanges in particular, progressover a period of time, from initial introduction through contractual negotiationsand delivery of promises, reflecting an ongoing process. As well, B2Brelationships are considered to be based on rational behavior and mutualacceptance of reciprocity with a strong likelihood of shared benefits andburdens, whereas consumer buyer behavior is more emotional, less routine orregular, and largely non-negotiable. B2B relationships are closer, more intense,regular and interactive than consumer (B2C) relationships.* [email protected]

International Journal of Business Intelligence and ManagementVolume 3 ◆ Numbers 1-2 ◆ (January-December, 2011) IJBIMIJBIMIJBIMIJBIMIJBIM

|56| C. SUNANDA YADAV

“The key difference between the two is the necessity and value of the B2B exchanges;there are dependencies and the potential for competitive advantage, as well as socialand attitudinal dimensions from the buyer’s perspective.”

Customer Relationship Management (CRM) is a business strategy,organisational culture, focused on creating quality (profitable) relationshipswith customers. CRM is a technology which provides a comprehensive, reliableand integrated view of customers, delivering seamless personalized servicethrough all customer touch points.

Market orientation is a business philosophy that focuses the firm’s resourceson gathering, collecting, analyzing, disseminating and responding to customerand competitor information in order to provide superior customer value.Relationship marketing builds from a market orientation approach andencompasses the concept of establishing, maintaining, enhancing andcommercializing customer relationships in order to achieve mutual objectives.

Relationship marketing researchers have focused on what constitutes B2Brelationships – how they are created, enhanced and sustained – in an effort tounderstand relationships between customers and vendors.

This research explored the relationship between CRM technology adoption,market orientation and relationship marketing, and the subsequent impact onbusiness relationships and relationship performance.

A conceptual model was developed based on the literature and informationobtained through one-to-one in-depth interviews. The model incorporated keyrelationship constructs; trust, commitment and communications quality, andinvestigated the impact of CRM technology adoption on these constructs andrelationship performance. In addition the firm’s market and technologyorientation was considered as critical antecedents to the adoption of CRMtechnology. The research incorporated a two-phased, cross-sectional design.The first research phase was exploratory, utilizing one-on-one in-depthinterviews with key informants.

The objective was to explore the conceptualized CRM technology adoption–customer relationship model for robustness and realism. These findings wereused to refine the CRM technology adoption – customer relationship modeland the measurement instrument before proceeding with the explanatory phaseof the study.

With advances in technology, the proliferation of the Internet, and theemphasis on one-to-one marketing techniques, customer relationshipmanagement (CRM) has become a key focus of marketing.

Predicated on the views that (a) strong customer relationships are importantcontributors to customer loyalty which leads in turn to corporate profitabilityand (b) information technology contributes to building strong customerrelationships, customer focus and relationship management have becomefundamental marketing and business philosophies for many companies seekingcompetitive advantage.

IMPACT OF CLIENT RELATIONSHIPS IN BUSINESS TO BUSINESS INDUSTRY | 57|

Marketing academics have begun to explore and understand the linkagebetween CRM technology, relationship marketing and business relationshipsas providing opportunities for sustainable competitive advantage.Improvements in technology enable businesses to implement CRM systemsthat can create practical mass customization marketing programs, based onone-to-one marketing techniques. This linkage between marketing andtechnology is viewed by some academics as providing the opportunity toestablish, cultivate and maintain long term, mutually beneficial interactionswith large numbers of customers in a cost-effective manner.

Despite these technological advances and high levels of investment CRMfaces serious difficulties and implementation failures. CRM projects suffer fromhigh failure rates, resulting from a range of problems which include lack ofcorporate customer focus, management commitment, change management, andpeople, technology and process issues. It has been estimated that 55-80% of allCRM projects fail to produce results. “A survey of 1,500 companies found that91% of businesses plan to or have deployed CRM technology, yet 41% of thefirms with CRM projects been experiencing significant problems; up to 70% ofcompanies do not realize any benefit from CRM projects.

Such negative outcomes impact an organization’s ability to meet customerexpectations, build strong relationships and improve performance. Despite theongoing implementation problems to date, many academics and practitionerscontinue to believe that CRM technology offers the potential for substantialbenefits to corporations through improved customer relationships, customerretention, satisfaction and enhanced profitability. The challenge manyenterprises face is realizing the considerable advantage brought about byleveraging CRM technology and relationship marketing effectively.

Key dimensions of relationships include trust, commitment andcommunications, although a range of other factors also influences thedevelopment and maintenance of relationships. CRM itself is viewed by some


researchers as a practical application of relationship marketing. CRM involvesIT to a significant degree, yet little research exists on the design, use or successof systems to support CRM from the marketing perspective. Introducing CRMis a major IT and management undertaking for any organization.

PROBLEM DEFINITION

The fundamental problem is the exceptionally poor business performance from CRMimplementations: Prior marketing and IT research indicates that CRM applicationsare not uniformly delivering anticipated business improvements and that theproblem may stem from factors such as lack of customer orientation, ITmanagement practice and issues around people, process and technology.Furthermore, the available IT and marketing research indicates that customersmay be suspicious of CRM implementations and that CRM applications maynot actually assist in the creation or maintenance of customer relationships.One of the issues leading to confusion in the research is the lack of an agreedCRM definition of what constitutes CRM and how the outcomes are determinedand measured.

RESEARCH OBJECTIVES

The objectives of this research are to:(1) Determine whether maintaining Client relationships using CRM

technology adoption has a positive effect on business-to-businessrelationships and the extent of that impact.

(2) Determine whether the supplier firm’s market orientation andtechnology orientation has a positive effect on CRM technologyadoption and the extent of that impact.

(3) Contribute to the current marketing and IT literature on CRMtechnology and relationship marketing.

Conceptualization

Based on an extensive review of the market orientation, relationship marketingand IT literature it is proposed that CRM technology adoption has a strongpositive effect on customer relationship development and maintenance. Inaddition the firm’s initial market orientation and IT management orientation isconsidered to positively affect the successful adoption of CRM technologywithin the firm.

The market orientation (MO) of the firm and IT management orientation(ITMO) (i.e., IT management practices) of the firm are considered to havepositive effects on CRM technology adoption. MO is viewed as positivelyinfluencing the strength of the customer relationship.

The CRM technology adoption (CTA) construct is positively linked tocustomer relationship strength and relationship performance. The dependent


variables are relationship strength, and relationship performance. Relationshipstrength is also considered to positively affect relationship performance.

The CRM technology adoption – customer relationship (CTA – CR) linkage isused to address how CRM technology adoption affects the ability of firms tocreate, enhance, and sustain customer relationships in terms of the impact ofCRM technology on key relationship constructs and relationship performance.

RESEARCH MODEL

The research outlines the relationships between RM and CRM, the significantresearch gaps, and presents the research model and hypotheses to be tested.

Relationship marketing (RM) is considered an emerging dominantmarketing theory and CRM is an example of a RM application. However, it hasbeen observed how relationship marketing principles, transformed intocustomer relationship management software (eCRM), partially get lost by theneglect of human aspects”.

This apparent disconnect between CRM technology adoption and RM, aswell as the gap in knowledge and understanding between CRM applicationand RM theory is important for academics and practitioners. The value andimpact of CRM technology adoption on relationship strength and relationshipperformance requires better understanding and clarification. The research gaplinking CRM technology adoption with the relationship side of RM is the focusof this study.

CRM technology and applications has evolved (and continues to evolve)primarily through IT capability and pragmatic business requirements, whilethe marketing and IT research literature has focused on uncovering andanalyzing the technical and more general managerial aspects of CRM. Thereappears to be little published research focused directly on the antecedents andrelationship factors that affect the creation and improvement of businessrelationships through CRM technology. In addition, the linkage between marketorientation, IT management orientation and CRM technology adoption needsto be better understood. Understanding these gaps and the CRM applicationdrivers will have implications for the managerial, technical implementationand application development dimensions of CRM technology.

Sampling techniques: Interviews over phone & personal contacts.

DATA ANALYSIS & RESULTS

Status of CRM in Hyderabad

Successful implementation of CRM required a strategic approach, whichencompasses developing customer centric processes, selecting andimplementing technology solutions, employee empowerment, customerinformation and knowledge generation capabilities to differentiate them, andthe ability to learn from the best practices.


The research was done on the following major issues:1. Do managers in service firms believe that their processes are customer

centric and select the technology on the basis of understanding theneeds?

2. Have they empowered their employed to deliver superior services andhave the customer knowledge strategy to manage the customerrelationships?

METHODOLOGY

The research was exploratory in nature and adopted a two-stage process. Duringthe first stage, 50 IT managers of service firms operating in Hyderabad areawere surveyed through respondent administered questionnaires. Thesemanagers belonged to the following three categories:

(a) Hospitality Industry encompassing hotels.(b) Information technology and telecom industry which included software

firms and telecom providers.(c) Financial services included commercial banks and mutual funds.

The survey focused on the quality and the customer centric processes,technology selection, employee empowerment and customer knowledgestrategy to gauge the status of CRM practices in these firms.

In the second stage, managers of select firms in each category of serviceswere interviewed to understand the relationship marketing practices adoptedby them.

These interviews explored the following issues:


1. What are the various CRM initiatives undertaken by the firm?2. How do they develop these programs?3. How do they measure the effectiveness of these programs?4. How successful are these programs in retaining the customers?

PROCESSES

The managers reported a wide divergence with respect to the adoption of qualityassurance across the three sectors. The IT and telecom sector is at the forefrontof adopting a formal quality management organization. Most of players in thehospitality and the finance sector report having some methods in place to ensurequality management initiatives. About 8% of the overall samples have indicatedthe absence of any quality initiatives in their organizations.

At the broad level, most managers believe that they understand most ofthe interactions between customers and their business processes. About 50%of them have indicated that they have a full understanding of all possibleinteractions between customers and their business processes. Customer–centricmarketing emphasizes understanding and satisfying the needs, wants, andresources of individual customers rather than those of mass markets.


Therefore, it is very important to have an understanding of alllinkages between customers and the business processes which help fulfill thecustomer needs.

TECHNOLOGY SELECTION

Information Technology (IT) is a major facilitator for CRM implementation. Inresponse to the question on whether they take into consider customer’s needwhen selecting and implementing information technology, about 30% ofmanagers have indicated that they have considered customer needs. Only 14%of managers in financial services do customer validation when selectingtechnology. While only 23% of the managers in information selections arecustomer centric whereas this was over 50% in the other two sectors.

EMPLOYEE EMPOWERMENT

When asked whether their employed are empowered to make decisions in favorof the customers, less than a quarter of the managers across the three sectorsindicated that every employee is empowered to take actions to ensure theultimate satisfaction of the customer. Most of them feel that their employeeshave been empowered to take independent decisions within the guidelines.Over 18% of the respondents across the sectors have reported no linkages oruse of ad hoc methods to reward the customer centric behavior.


Information technology helps employees respond to customer queries andprovide support in a fast and timely manner. It helps employee responds tocustomer queries and provides support in a fast and timely manner. It helpsthem access information, which is normally spread across the organization.Over 54% of IT and Telecom firms have provided the most effective technologyto all employees who interact with customers. This reduces to 42% for thehospitality and 19% for the financial services sector.

CUSTOMER KNOWLEDGE

Customer knowledge strategy gets built when information is collectedsystematically over a period of time .this can be done through regular surveysand also during customer interactions. But importantly this information has tobe combined with the organization’s experiences with customers to build richcustomer profiles, buying behavior, preferences and usage patterns.

Over 60% managers in the hospitality industry have indicated that theyhave a continuous strategy for collection customer information. In most of theservices, opportunities to come in direct contact with their contact with theircustomers are high in comparison to other businesses that have intermediariesand hence have an arm’s length relationship with their customers. Therefore itis natural for service firms to collect customer information on the regular basis.

But information collection is just the first step in generating customerknowledge. This information has to be combined with experiences to developconsumer insights which help them serve their customer better.


When it comes to combining customer information with experiences, servicefirms seem to be economizing. Most of them seem to be doing it for selectcustomers. Hotels do it for their regular guests specially those who have enrolledfor their membership schemes. Financial service providers selectively do it fortheir high net worth individuals who typically use multiple offerings of theservice provider.

Most service firms rely on periodic surveys to understand their customers’expectations and also understand and anticipate their behaviors. Over 40% ofmanagers in the financial services have indicated that they work with customersas a team to ensure that their expectations are met or exceeded. It is veryimportant to work with customers to understand their expectations as researchhas consistently indicated that one of the major reasons for poor service qualityis the gap between manager’s perceptions about customer’s expectations andactual customer expectations.

The purpose of collecting customer information and developing knowledgeis to be able to differentiate customers and meet their specific requirements.

Over 50% managers in financial services have indicated that they havecritical business information about their relationships with individualcustomers. This falls to about 40% in the hospitability and IT services. Customerknowledge can be used to initiate customerisation of the service for customersbased on their needs. By tailoring the elements of services marketing mix, firmscan customerised their offerings to all or select customers.

A majority of the marketing programs are targeted for smaller segments ofthe markets. But there is a growing trend towards individualizing theseprograms. With the emergence of e-commerce, this trend is going to furtherintensify.

FINDINGS

Some of the important findings of the depth interviews with managers of theseservices are:


(a) The relationship initiatives undertaken by firms have been directedtowards customer retention. The initiatives were mostly membership/privilege schemes with graduations based on frequency and value ofusage/ purchase.

(b) Most of them also indicated that these schemes were table stakes i.e.they cannot survive in the business without these schemes if everyoneelse offers them. But the race is always to differentiate on the basis ofconvenience for customers.

(c) The source and reasons for adopting these programs were found to bediverse – frontline initiatives, adaption of successful programs in parentorganizations abroad especially for the multinational firms, or copyingcompetitor’s offerings. Pioneers in the industry like one of themultinational bank, which introduced the concept of relationshipmanager, adopted the practices of their parent organization.

(d) A common finding, across sectors, was the absence of measures fordetermining the effectiveness of these programs. Managers wereconvinced that these retention programs had long-term benefits butthey were still grappling with metrics which would indicate that theinvestments were paying off.

(e) In several cases, there was a lack of coordination across functionaldepartments. Although managers admitted that cooperation andcoordination were crucial, they accepted that many a times, onlymarketing and customer service ended up as the ‘program champions’.This had impact on the success of the overall program.

(f) The managers of firms who have been successful in relationshipmanagement reported strong top management support for theirinitiatives as well as complete employee involvement cutting acrossdepartmental boundaries.

CONCLUSIONS

Relationship marketing is emerging as a new area of focus for service firms inHyderabad. But these are mainly based on some loyalty programs andinvestments in technology for enhancing the capability of databases. Managersshould ensure that while investing in databases, technology, human resourcesand relationship marketing programs, attempts should also be made to developmilestones, which help them sustain these initiatives. These milestones becomebenchmarks against which future programs get evaluated. MeasurementMetrics get developed over a period of time when one starts collectinginformation about customers, their buying patterns, usage behavior, referrals,etc and start linking them to the marketing programs.

Successful firms tale a long term strategic view of customer relationshipmanagement. It cannot be solely managed through periodic program. To be


successful, firms need to be marketing oriented before initiating relationship-marketing initiatives. A holistic approach which leads firms to develop customercentric process, integrate technology though customer oriented approaches,motivate employees to perform to their full potential through empowermentare prerequisites for firms to successfully utilize their customer knowledge forcustomerised or even one to one marketing.

References

Relationship Marketing: The route to marketing effectiveness and efficiency.

www.crmguru.com

www.crmsearch.com

Marketing Management – Philips Kotler.

6.c. sunanda yadav - serialsjournals.com · “the key difference between the two is the necessity...

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