Customer Relationship Management CRM and the Customer Differential (2.1.4)
22.214.171.124 Origin, Emergence, Change, and Aim of Customer Relationship Management
CRM results in the technology of sales automation and call centre operations since the mid-1990s with the aim to obtain information about customer preferences stored in databases.
Through interaction and processing, companies created more customized offerings; and CRM was developed to secure and manage long-term customer relationships. Similarly, e-business concepts evolved and were merged together with CRM concepts, so that it can be said that CRM consists of many applications, addressing the needs of customer-facing functions supported by business analysis tools to make use of databases (Osarenkhoe and Bennani, 2007, p.145).
Hence, Donaldson and O’Toole (2002) early stated that CRM has its antecedents in services marketing and entails a change from transaction-based to relational-based marketing. It aims at reducing costs in keeping customers rather than acquiring new ones, so that retention, loyalty and defection yield economic arguments, such as customer profitability and lifetime value of customers. In the last decade, the subject of strategic relationship management shows how relationship management and marketing became a powerful instrument to develop long-term customer relationships; the relationship-based approach became a new way for marketing management more effectively.
According to Osarenkhoe and Bennani (2007) “Trust and satisfaction are central for relationship success and constructs such as commitment, trust and relationship quality help the emergence of customer retention and long-term customer relationships” (Osarenkhoe and Bennani, 2007, pp.145-148). A consistent, positive customer experience across all channels, media, and sales, marketing and services functions can increase customer loyalty (Nykamp, 2001, p.3).
Basically, CRM focuses on providing optimal value to customers through the way to communicate how to market and also through the traditional way of product, price, price and distribution. Customers’ buying decisions are based on more than just price and product, but on their overall experience, involving product and price and also the nature of interaction with a company. So, when a company constantly delivers marketing, sales and support interactions, this will be rewarded with customer loyalty and value, leading to a significant competitive advantage. Even environmental concern might influence the buying decision of customer. The importance in this marketing field becomes more significant and has to be taken seriously by companies, as this might result in loyalty or, if done wrong, in disloyalty of consumers.
126.96.36.199 Competition Differentiation
CRM has achieved extensive popularity in business. Besides heightened customer expectations and technology enablement, one of the major reasons is an organization’s need to differentiate itself in an extremely competitive marketplace.
Customer Relationship Management CRM assures competitive differentiation in an equivalent environment where product, price, promotion strategies and distribution channels are less influential as differentiators. However, due to technological advancements, enabling the early immediate copying of product features and functions, it is increasingly difficult for organizations nowadays to compete on the basis of products, Traditionally, pricing has been another basis of competitive advantage, but actually, for many companies, price competition and complex channel agreement have promoted parity pricing. Promotions are very easy to match, so special offers, discounts and sales are expected and normal (Nykamp, 2001).
But what of eco-labelled products as differentiation from competitors and their products? Besides competitive advantage through customer relationship, the internet and e-business have built an opportunity for even the smallest business to compete. These factors are all important but cannot alone support the success of most business. Therefore, customer relationship management promises to be a mean of differentiating and providing customers with a reason to frequent a company’s business instead that of its competitors.
188.8.131.52 Heightened Customer Expectations
The increased expectations of customers are another reason that Customer Relationship Management CRM has gained importance. Customers are always searching for a better value because of the product, the price, the promotion or the place where it can be purchased. The relationship between customer’s expectations and the product’s perceived performance determines whether the buyer is satisfied with the purchase or not. The larger the gap between expectations and performance, the greater is the consumer’s dissatisfaction.
Consequently, sellers should only promise what their brands or products can deliver. Labelling for instance represents what can be expected for a product, and especially with eco labels companies have to be careful to promise what can be delivered. Customer satisfaction is a basis to build profitable relationship with customers, because satisfied customers purchase again and talk favourably about the product, paying less attention to competing products and brands (Armstrong and Kotler, 2001, pp. 144-145). Therefore, it is important to master the changes that come with customers being in control because they have to access to information about all products or services. They need to adapt to these changes on the market as fast as possible. But companies do not change until people change and increased customer’s expectations drive marketers to even more marketing opportunities.
Figure 2.1: Customer expectations driven by CRM (Nykamp, 2001).
The success of relationships is therefore to fulfil customer expectations. This depends on the ability to provide continuous value in the relationship. In increasing the benefits for the buyer, value is advanced, improving satisfaction and stimulating repurchasing. Relationship value develops when the client starts to feel safe, thus developing trust through safety, credibility, and security.
184.108.40.206 The Key Concepts in Relationship Marketing: Customer Satisfaction and Trust
As mentioned above, customer satisfaction is a measure of how customers are with their relationship with an organization. Customer satisfaction can promote loyalty, meaning that a customer’s loyalty constitutes the basis of a valuable relationship with a company (Nykamp, 2001). Highly satisfied customers make repeat purchases, communicating their good experiences.
Armstrong and Kotler (2007) state later that it is major to match customer’s expectations with company performance and generate customer value profitability. Satisfaction is achieved when expectations are fulfilled and the customer knows that supplier is able to deliver what is expected perceiving a low level of risk. Satisfaction affects the client’s decision to continue a relationship and reduce the likelihood of exit from the relationship and negative word-of-mouth. Relationships between parties develop over time as they gain experience and trust each other, reducing the perceived risk in a relationship (Selnes, 1998, pp.306-307).
Trust exists when there is confidence in reliability and integrity of a company. According to Adamson et al (2003), to achieve trust, a company’s strategy has to communicate effectively. Adopt the customer’s relationship norms and avoid negative reputation.
Therefore, communication will increase satisfaction and trust, for communication is the exchange of information between a company and its customers. Anderson and Narus (1990) early discovered that communications are a strong determinant of trust as it develops and preserves a shared understanding of the relationship and thus, preserves trust. Further is taken as an evaluation of an outcome compared to some norm and communication, expected as an important basis of trust and in some event.