CRM Adoption and Implementation

This section is divided in two parts. The first part concerns CRM adoption factors. More precisely, how managers perceived CRM benefit and how they can extract value from it.

The second part is related to a CRM project’s implementation, its key success factors and its failure factors.

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Adoption factors:

As stated Reichheld, Sasser, and Earl’s (1989) research on defecating customers had a huge impact on the business world. They showed how important customer knowledge and customer retention is for firm profits. In the following decade (1990s), when software companies promised systems that would allow managers to identify their most profitable customers, and target them with campaigns to increase both purchasing and loyalty. Many managers couldn’t resist (Gillies, Rigby, & Reichheld, 2002). But, as we already know, many CRM systems failed to deliver their promises with failure rates estimated between 50%-75% (O’Reilly & Paper, 2014).

Thus, this section will look at the benefits of CRM adoption. Our literature review highlights two studies that were aiming in the same direction. The first one, Boulding et al. (2005) listed studies that show positive impact of CRM over firm performance but didn’t do any further analysis. Richards and Jones (2008), created a model for value creation that was defined through an extensive literature review, which revealed seven core CRM benefits.

Looking more deeply into Richards and Jones (2008) model, they developed a conceptual framework of ten propositions that link CRM’s most cited benefits to positive impact over customer equity (Figure 4). They constructed their model based on previous work on customer equity (CE), which they define as: “the discounted sum of each customer’s Customer Lifetime Value (CLV) less any on-going investment required to maintain customer relationship”, and CLV was defined as: “the net present value of a single customer’s value”.

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So, they based their model construction on prior work concerned with customer equity that had already proven a positive impact over firm profits. They also used a previously developed model that linked three types of equity as antecedents to customer equity i.e.

value equity, brand equity, and relationship equity, saying that each CRM value driver should have an impact over one of the equity types.

Figure 4 - Conceptual model relating CRM value drivers to customer equity (Richards & Jones, 2008)

Moreover, during their literature review researching value drivers, they also stated a few important points like those hypothesized by some CRM researchers that CRM benefits would vary by industry. But this was later disproved by Reinartz et al. (2004), which supports the idea that core benefits associated with CRM initiatives exist across contexts.

Also they explain that each benefit was selected upon two criteria. The first one is that each benefit should be a value driver for CRM, and that they should be associated with the goal of improving customer relationships. The second one is that they should be

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consistent with their definition of CRM, which like the current research emphasizes implementing a strategic component.

The seven core benefits are defined as follows:

1) Improved ability to target profitable customers:

Multiple researchers show that profitable customers can be found across a multiple range of acquisition cost, and retention rates. A CRM system can be used to help identify those customers.

2) Integrated offerings across channels:

When firms sell across different channels, it shatters customer information resulting in an erosion of customer loyalty. CRM can bridge all the information in a centralized and conceiving customer image.

3) Improved sales force efficiency and effectiveness:

Studies indicate that marketers learning how to better infuse CRM technology into the sales team will have a positive impact on the ability of salespeople to establish profitable, long-term relationships.

4) Individualized marketing messages:

One-on-one marketing and customized marketing messages bring added value to the usual mass marketing messages. CRM capabilities, designed to understand the individual customer, fully support the effort of firm marketers to become more customer-centric.

5) Customized products and services:

Service industry development and production capacity often require a co-creation process, between the customer and the firm. Technological innovations of the manufacturing industry also permit them to quickly respond to customer

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demand in order to customize or modify a product. CRM can help firms to understand their customers’ needs and allow them to increase their ability to customize their products and services.

6) Improved customer service efficiency and effectiveness.

Customer service is an important part of the firms’ communication with its customers; efficiency and effectiveness are two critical factors. CRM can be used for providing support for the customer service personnel and improve the firm’s knowledge of the customer issues and their expectations.

7) Improved pricing:

Often costs are averaged across customers and accounts which may obstruct the true cost of serving different customers. CRM systems aid in allocating costs to different customers and reduce the need for averaging between large customer groups. Moreover, CRM can help marketers to make better pricing decisions as they better understand individual needs and wants, they can adjust prices accordingly.

Implementation:

This section will look at important factors for successful CRM implementation. It will be divided into two main sections; first, the success factors, and second, the failure factors.

Early literature already shows important factors for a successful information technology project implementation. They are: clearly defined goals, a competent project manager, top management support, competent project team members, sufficient resource allocation, adequate communication channels, control mechanisms, feedback capabilities, and a responsiveness to clients (Pinto & Slevin, 1987).

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And, when looking at critical factors in cases of successful CRM project implementation they don’t change much. Our literature review reveals that on top of the above mentioned factors, a few others are specific to successful CRM implementation.

King and Burgess (2008) list nine Critical Success Factors (CSF) linked to CRM.

• Top management support

• Communication of CRM strategy

• Knowledge management capabilities

• Willingness to share data

• Willingness to change processes

• Technological readiness

• Culture change/customer orientation

• Process change capability

• Systems integration capability

Payne and Frow (2006) argue that success CRM implementation depends on four critical factors : CRM readiness assessment, CRM change management, CRM project management, employee engagement. Osarenkhoe and Bennani (2007) noted, on top of the usual firm commitment, the importance of cross-functional communication and the necessity of a customer loyalty training program for all employees.

As for the failures factors, several authors have listed the most critical items. Piskar and Faganel (2009) point out a few factors that caused project implementation to fail.

• Disconnection of CRM vision and execution

• Rising standard for CRM excellence

• Lack of knowledge pertaining to the concept of CRM

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• Bad choice in sourcing CRM software

• Impossibility of integration with other companies applications

• The selection of the project team whose members were selected at random

• Over stressing the functionality of CRM

• Not having a front-to-back CRM solution for customers

• Not having the corporate culture to support the implementation of CRM

Foss et al., (2008) mentions that organizations can have different levels of success in their CRM implementation; adding that: “their success was determined mainly by the relationship between the complexity of the system and the speed and phasing of its development and roll out” (Foss et al., 2008, p. 72).