International Conference on Technolgy and Business Management

March 26-28. 2012

Application of CRM Strategy

Boris Milovic boris.milovic@gmail.com Faculty of Economics, Subotica
CRM represents relatively new concept, which is rapidly developing thanks to changes in management, strategic business planning and personalized customer service. Goals of using CRM strategy are to increase revenue, increase customer satisfaction, minimize customer service and sales costs. CRM is a strategy to optimize the lifetime value of customers. Two things are included here: a better understanding of customers and proper dealing with them. Collected customer information need to be analyzed in order to provide a detailed insight into customer behavior. CRM strategy provides adequate business decisions, monitoring at all levels, reduced costs, better service, customer satisfaction increase. Keywords: Customer Relationship Management CRM, Strategic Business Planning, Business Decisions

1. Closeness to Customers and the Role of CRM Strategy

Successful organizations are trying to capture information at every possible touch point with customers. These points of contact include the customer's purchase, contacts with sales staff, service and support calls, online visits, satisfaction surveys, credit and payment interactions, market research studies - any contact between the customer and the organization. In order to solve such problems, many organizations use CRM to manage detailed information about individual customers and carefully manage the "touch points" with customers. In recent years there's an explosion of organizations that use CRM strategy. Organisations that give priority to the closeness to customers are trying to provide, in the best possible way, exactly those products and services customers require within the offer that is tailored to them. A prerequisite for the introduction of such a level of closeness with customers is the existence of organizational culture that treats every customer in a special way, according to his individual needs and characteristics, and that is interested in finding a specific and not general solutions. This type of organizational culture is trying to establish lasting relationships with its customers and it is based on the organizational structure in which decisions are often made by the individual employee who is in direct contact with the customer. Close relationship with customers does not imply that the organization is required to treat each of them the same way. This approach would probably be proven to be counterproductive to the success of the organization. An organization that is basing its competitive advantage on close relationship with customers, must focus on more profitable customers to achieve its business goals. CRM is primarily developed as a need to achieve close relationship with customers. Using CRM methodology it is possible to generate a close relationship with customers and thus contribute to the success of the organization. However, the other two core values in the organization that is oriented towards customer, may also be enhanced by introducing the concept of CRM. Fostering good customer relationships, which is the starting point for all business processes in the organization, is becoming a responsibility even more. If an organization, for example, introduces an integrated and customer-friendly ordering system, internal business processes must be re-optimized in such a way as to allow reliable data for delivery deadlines and the possibility of satisfying the conditions of the order. This reorganization of operational processes can be recognized as additional customer value and can lead to improvement of relations with them. The most common reason for failure of the concept of CRM is that organizations look at CRM only as a technology and software solutions. But technology alone can not build profitable relationships with customers. Knowing all this it should be emphasized that CRM is, at first(according to Payne, 2005, introduction): Strategy, and not group of strategies; Focused on customers, rather than an organization; Focused on business processes rather than software; Based on outcomes rather than performance; Long-term rather than short-term relationship with customers. Good CRM solution, with close relationships with customers, is bringing the possibility of early recognition of new customers and their specific requirements and this way they can be met quickly and with more quality than competition. In this way effective CRM contributes to the leadership in product quality while simultaneously increases customer satisfaction and their willingness to purchase a superior product. By combining the right 106

International Conference on Technolgy and Business Management

March 26-28. 2012

software and analytical tools, CRM helps (Hanic, 2010) organization to integrate customer data from different sources for "deep" analysis in order to gain a comprehensive view of the organization's relationships with customers. By using sophisticated analytical technique data mining on data organized in the so-called data warehouse, CRM (Hanic, 2010) helps an organization to identify skills that are "hidden" in the customer data, to identify the most valuable/profitable customers, targeting them more effectively and tailoring the offer according to the specific customer requirements. Organizations that have experience in implementing this system, realize that CRM is not only a technology and software solution, but an integral part of the overall strategy of relations with customers. With CRM methodology there is always focus on relationship with customers, and, therefore, it should be a focus on them.

2. Defining the CRM Strategy Concept

In contemporary conditions, collecting, analyzing and using customer information, in most of the organization is done systematically. A popular term for the comprehensive process is a Customer Relationship Management (CRM). Customer Relationship Management can be defined as a business and customer communication strategy aimed at gathering information about the customer that are used to increase customer satisfaction and loyalty so that relationship with them could be better, longer and more profitable. There are many definitions of CRM: CRM (Foss & Stone, 2001) is a term for methodologies, technologies and e-comerce opportunities for companies that use customer relationship management. Traditionally, companies have developed a database to record customer information, including details such as customer profiles, demographics, range of products purchased and other information of interest to them. These data are used by management, vendors, staff and others to identify market trends, customer preferences and services to meet the demands of customers, etc. CRM (Payne, 2005.) is a strategic approach that deals with the creation of additional shareholder value by developing appropriate relationships with key customers and customer segments. CRM unites the potential of IT and marketing relationship strategies. It is important that CRM provides the capability to use data and information so that clients could be understood and to implement strategies of longterm marketing relations. This requires cross-functional integration of people, business processes and marketing opportunities, which is enabled by information technology and applications. CRM (F Buttle, 2009.) is essentially a business strategy that integrates internal processes and functions with external networks and creates value for the targeted clients. CRM is based on qualitative data about customers and it is realized by using information technology. CRM is not just about IT. CRM integrates internal processes and functions. In other words, it enables departments within the business to demolish the walls that separate them. Access to customer data enables synergy of sales, marketing and service functions that are mutually aware of interaction with customers. Access to customer information allows members of external business network to align their efforts with the efforts of the organization at the center. Other definitions describe CRM as a process that deals with all aspects of identifying customers, creating customers, building customer relationships and shaping their perceptions of the organization and its products. Strategic barriers are suggesting vague definition of CRM strategy or the existence of a number of strategies that overlap. CRM strategy is in fact a description of how a company defines its offer to customers, how it creates a value for different customers, how it communicates to create this value and delivers it to the customer. CRM strategy should define the procedures that the company will act by in the entire customer lifecycle. On the one hand, company needs to win over customers with direct contact, effective implementation of marketing campaigns, effective establishing of databases of potential customers etc. Companies need to know the customers, understand their habits and needs, with the optimal use of technology and personal dealing with them. Furthermore, it should increase the customer value in order to take advantage of all the cross-selling opportunities, the identification of profitable customers (those who have the easiest passing for sales transactions) and focus on those customers who have a potential value increase. In the end it is necessary to keep the customer, ie. prevent their departure towards the competition, which includes the different measures of preventing cancellation of the contract, recapturing customers who have already gone and developing loyalty programs. CRM, the term is defined in several different ways, with no clear consensus. Some authors emphasize that it is a call center, while for other it is customer data warehouse. Without consensus, it is quite difficult for managers to understand how the functional areas of organizations interact within the CRM. Simply put, CRM is a strategy for identifying and meeting customer's needs and behavior, and doing so results in a stronger relationship with them. Greenberg defines CRM as "the obligation of companies to put customer's experience at the center of its priorities and to provide incentive systems, processes and information sources powers by upgrading relations obtained by experience" (Greenberg, 2001). According to this definition, the 107

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experience of customers is cumulative consequence of multiple interactions. The purpose of CRM is essentially to improve these interactions and to win customer loyalty.

3. Reasons for Implementation of CRM Strategy

CRM is continuous business process at all organizational levels, aimed to attract and retain customers. Basically, CRM is a synthesis of business processes, human resources and software. The quality of such a synthesis will enable the establishment of strong mechanisms for customer relationship management, whose results will be: customer satisfaction with good cooperation, this satisfaction will result in customer loyalty, loyalty will prevent the customers leaving to the competition. Customers are the most valuable asset which company has, and the whole wisdom of CRM is contained in two words long-term and profitable relationships. In contemporary conditions, one of the basic parameters of successful business is the quality relationship with customers. Customer satisfaction with good business cooperation, as well as the knowledge of customer needs, habits and desires, are indispensable factors for increase of customer loyalty in the conditions of dynamic market competition. Research has shown that there are numerous reasons why loyalty, and therefore the retention of existing customers, are very important. There is a whole set of reasons why CRM technology is on top of priorities of organizations around the world. By helping in adapting and directing the organization around customers, CRM technology can be very effective. In addition it will create profits and gain market advantage over competition. On the other hand in complex business environment, it is almost impossible to be customerfriendly without the use of CRM technology. Every company, especially today because of the impact of the crisis, is faced with the question of how to increase sales. One dimension is the competitive environment in which companies are forced to lower prices or add new services to retain their customers because of the competition. But sometimes that's not enough to keep the customer because customers become more demanding and it's harder to meet their requests. This raises a question of what customers actually need to do their job and how companies can help them, and the question of who are the best (most loyal) customers. All communication towards customers cost and businesses are faced with the question of how to effectively spend the money intended for communication with customers. The implementation of CRM strategy achieves: Faster response to customer needs; Increased efficiency through automation; Deeper understanding of customers; Strengthening the potential of marketing and sales; Identifying the best customers; Systematic use of CRM applications is well established for the purpose of providing benefits for organizations who want to automate their sales, marketing and customer service functions. Loyal customers are with no intangible assets and provide a real competitive advantage to any organization. It is estimated that the cost of acquiring new customers is around five times more than regular retention of customer (Goldenberg, 2008). This stands for a reason, and that is to pay closer attention to the needs of today's customers. Improved customer retention/loyalty has been an important goal for most organizations, as well as for an area that is directly related to the previously mentioned advantages, organizations in the United States are losing about half their customers over a five-year period. It is shown that if a customer is retained longer, he is more profitable. Effective CRM system will help organizations to retain most of their customers over time.

4. The main Advantages of using CRM Strategy

Before deciding if a CRM strategy is suitable for organization, all potential benefits that will be realized with this implementation should be reviewed. In CRM decision making it is necessary to notice all tangible and intangible benefits of CRM (Goldenberg, 2008). Tangible benefits of CRM can be defined as the ones that can be measured in numbers. This includes increases in the following dimensions: Time that sales staff spends with existing customerts Willingness of sales staff to answer on the large number of calls, an increased number of hours spent by sales staff in the interaction with existing customers; The number of potential new customers obtained by the sales representatives Since most sales representatives prefer to refer to existing customers with whom they have actual relationship, therefore the new customers are key to future development; 108

International Conference on Technolgy and Business Management

March 26-28. 2012

Time spent by the sales manager in communication with customers and working with sales representatives which results in saving time; Efficienty of customer service Customer service can represent key difference between competitive advantages of companies; Time constraints in monitoring the customers/potential customers Shortened number of days between the date when the customer/potential customer has been contacted and the date when the supporting information has been sent to him; CRM helps potential customers to move more efficiently throughout the sales path This important feature of CRM depends on the careful management to ensure time savings as a result of automation of organizational sales, marketing and customer service functions which are more productively utilized for greater sales; The overall business results Healthy rivalry between staff leads to a significant increase in the general performance; Customer satisfaction; Better communication within the company the more time staff spend with customers and potential customers, the need for effective communication among staff continues to grow; Increased percentage of conducted business orders, which can be determined by the ratio of orders before and after CRM system application.

Intangible benefits are defined as those estimated using a "soft" criteria. Management may seek more numbers but senior managers can also benefit from the soft criteria when they are played the right way. Intangible benefits (Goldenberg, 2008) include the following: Better overall functionality within the company Less time spent which sales staff spend on unnecessary administrative items as well and time spent by a new sales staff to navigate the new territory; Increased motivation and satisfaction of employees; Better trained and more qualified sales staff, marketing and customer service staff CRM can provide an excellent foundation for the staff in order for time to be spent in learning the facts about products and services; Increased use of mobile devices for assessment This benefit is important because each of us is adopting technological knowledge differently; Better information update and their easier assessment - updating information and easy access have been achieved by the end users; Improved reacting on customer/potential customer requests; Improved company image - Effective customer relationship management can play an important role in building the company's image in the eyes of customers; The ability to separate the company from the competition; Supporting organizational changes within the organization; Improved understanding and better cost control CRM can help in this process, since the costs of sales, marketing and customer service relate to individual sales staff and/or accounts. CRM can be implemented within the company regardless of the size of company or the amount of goods or services sold; large and small businesses assess the quality of customer service, customer loyalty, which are less sensitive to price changes and recognize that attracting new customers is expensive. CRM decisions are of interest to: retail networks, telecommunications operators, banks, insurance companies, travel agencies, advertising and public relations agencies, wholesale and logistics companies that have a lot of customers. While setting up the CRM, the dilemma of how to properly select the structural elements that will show the existence of the system and guarantee its implementation needs to be faced. First of all for a successful CRM project there must be a set of criteria. Choosing a reliable and flexible solution is one of the key success factors. The recommendation is to focus on solutions that are highly acceptable for use. If the system is not accepted and not used there will not be a return on investment. Also, the problem about determining the level of ROI is very present. Many companies require evidence of success rate in cost-effectiveness of investing in CRM systems. In a particularly awkward position are IT managers who need to win the steering committees for investment in CRM. Given that technology alone rarely achieves success (CRM is primarily operational strategy), IT managers are often in a position to defend their claims. On the other hand, all effects of the implementation are not clearly visible, and for a while behind it may hide failed implementation and wait to obtain positive effects 109

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March 26-28. 2012

with specific corrections. All this points to the problems of measuring ROI and defining the criteria for assessing the success of the implementation of CRM solution.

5. Conclusion
Organizations that are ready to implement CRM solutions are aware of the existence of different contacts with customers, they are very competitive and constantly perform differentiation to others. When properly performed, CRM implementation is designed as a cycle that continues to improve itself in order to create longterm competitive advantage. When a company uses CRM technology and redefines its business processes related to acquiring new customers and retain existing ones, it strengthens capabilities in key areas that determine customers' decisions regarding the purchase, including price, product quality, marketing, sales, services for creating a cycle of digital loyalty. CRM can reduce costs related to communication with customers, optimize work flow, as a result of integration with other systems in the enterprise, enable better market segmentation, enable improved interaction with customers and relationships with them, and create the opportunity for personalization. The goal of CRM system (Milovic, 2011) is to improve customer service, to retain profitable customers and to create support in providing analytical capabilities within the organization. CRM applications, thanks to the great advantages of technological innovations, enable collection and analysis of customer data, interpretation of customer behavior, development of predictive models, timely and effective communication and delivery of customized products and services to individual customers. Using technology to optimize interactions with customers of the company they have a comprehensive view of customers in order to learn from past interactions to optimize the future ones.

6. Bibliography
1. Buttle, F. (2009). Introduction to customer relationship management. In F. Buttle, Customer Relationship Management (pp. 1-25). Oxford: Butterworth-Heinemann is an imprint of Elsevier. 2. Bibiano, L. H., Mayol, E., & Pastor, J. A. (2007). Role and Importance of Buseness Processes in the Implemntation of CRM Systems. I Taller sobre Procesos de Negocio e Ingeniera del Software (pp. 5662). Zaragoza (Espaa): Universidad de Castilla-La Mancha. 3. Domazet, I. (2006). Unapreenje konkurentnosti preduzea primenom CRM strategijskog koncepta. Beograd: Ekomimski institut . 4. Goldenberg, B. J. (2008). CRM in Real Time - Empowering Customer Relationships. Medford, New Jersey: Informatino Today, Inc. 5. Greenberg. (2004). CRM at the Speed of Light, Third Edition. New York: McGraw-Hill. 6. Hani, H. (2010). Savremeni koncepti marketing menadmenta. Meunarodna konferencija, Menadment 2010. Kruevac. 7. http://en.wikipedia.org/. (n.d.). CRM. Retrieved avgust 05, 2011, from http://wikipedia.org: http://en.wikipedia.org/wiki/ECRM. 8. Jobber, D., & Lancaster, G. (2006). Prodaja i upravljanje prodajom. Beograd: Clio. 9. Milovi, B. (2011). The Basic Reasons for the Failure of CRM Implementation. Eighth AIMS Internacional Conference on Management (pp. 1-4). Ahmedabad: AIMS. 10. Payne, A. (2005). Handbook of CRM, Achieving Excellence in Customer Management. Oxford: Butterworth-Heinemann is an imprint off Elsevier Linacre House. 11. Tumbas, P. (2004). E-marketing i automatizacija odnosa sa kupcima. Anali Ekonomskog fakulteta u Subotici, (11) , 105-111.

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