Customer Relations Management (CRM) Reflection
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Introduction
Customer Relations Management (CRM) is a package of processes and technology that is used as a tool in the management of business relationships to make them more efficient by managing customer information by capturing, storage and analysis of customer, vendor, partner, and internal processing of the information. Many companies have adopted Customer Relations Management, and failed in their implementation. Customer Relations Management system is a tool for better utilizing the data and processes that are currently in place and improve the processes and the main reason for its failure is looking at Customer Relations Management as a technology rather than a strategy, others include not gaining user support and involvement, and not making the necessary changes to the organization and its culture which needs to become more customer oriented to successfully implement Customer Relations Management and remain competitive in today’s economy
Customer relationship management projects are more destined to address the components of efficiency and effectiveness as on one hand the company needs to be effective on the market in order to manage relationships with customers, maintain its market share and improve its market penetration and on the other hand efficiency need. Hence this calls for the information technology departments need to conduct careful evaluations of information technology investments and projects, as it is very difficult to understand whether initiatives have a return on investments or at least a direct and clear payback, (Rajola, 9)
The evolution of CRM applications
The steps in the evolution of management information systems are as a result of a large number of technological innovations allowed the development of some decision supports which were mostly not integrated into the existing information system. The reconsideration of the strategic value and matters are attributed to reasons such as the progressive evolution of the internet, the increased competition level, and the ability to operate in geographically distant markets through e-business initiatives; therefore integrated solutions that are well-suited to allowing for automation of company-customer interaction are being looked for, in order to gain a durable competitive advantage.
Evolving technology and the constant changes affecting the banking industry are increasingly pushing toward research into integrated solutions, in order to maintain and enhance customer relationship; it is not only about seeking technically updated solutions: the practical issue is how to intervene in businesses such as banks so as to turn banks into customer centered organizations
Today’s technology allows the easy replication of products as on the other hand provides a push towards mass personalization, with creation of tailored products per customer profile at the most appropriate time and through the proper channel. In its turn, the offer of customized products and services which satisfy all customers’ needs requires a thorough redefinition of the sales processes as on the other hand the ability to intervene effectively by way of internal organizational variables is one of the critical factors in the success of customer relation management projects and this requires the transition from a product-oriented to a customer-oriented business process, (Rajola, 18).
The goals of in depth understanding of customer’s purchase preferences and the ability to anticipate their needs seem to be within reach and in fat industries such as the banking sector have an information base potentially available to them that remains mostly unused: transactions carried out. Every time a customer is in touch with this bank, he implicitly provides information on his characteristics, needs and preferences as the transactions carried out are a powerful data and information, which, used properly, allow elaboration of the individual customer’s purchase profile and determination of the elaboration channel that suits him best, and outline his life cycle in such a way that the bank can understand how the relationship evolves over time
Its purpose is to help enable an increase in sales through customer acquisition, retention, and service and not simply a software package for storing customer and business information, but a concept that can vary from one organization to another though one sized doesn’t fit all, so implementations can vary greatly. There are a variety of benefits involved in the putting up of a Customer Relations Management solution but at the same time it might involve a lot of time and expense to implement one. A business becomes more successful depending on the type of relationship it has with its customers and therefore IT systems like point of sale terminals deal with this problem of dealing with the customers on a daily basis
Categories of CRM
Customer Relations Management solutions can be broadly categorized into several groups; Outsourced solutions, where the application service providers provide web-based Customer Relations Management solutions for the business and this approach is ideal if you need to implement a solution quickly and your company does not have the in-house skills necessary to tackle the job from scratch and is also a good option if the business is already moving towards online e-commerce. Off-the-shelf solutions, that is provided by software companies and therefore integrates with the packages that already exist in the business. Smaller businesses only need a miniature version of this software, which is a cheap option as the investment is in standard software components even though the software may not always do precisely what you want and you may have to trade off functionality for convenience and price.
Custom software is one where the consultants and the software engineers will create a Customer Relations Management system that suits the business needs specifically. The downside is that this will be expensive and time consuming and thus if this option is chosen make sure you carefully specify exactly what you want. Managed solutions, is a compromise between the custom and outsourced solution that involves renting a customized suite of Customer Relations Management applications as a tailored package which makes it cost effective but it may mean that you have to compromise in terms of functionality, (Effy, 91)
Tesco
According to Rainer & Cegielski (325), Tesco is a British multinational grocery and general merchandise retailer headquartered in Cheshunt that is second in the world in terms of profits and third-largest retailer in the world in terms of revenue; Tesco has stores in 14 countries across Asia, Europe and North Americaand it has now grown to be the biggest grocery store in the United Kingdom; the company was started as a group of market stalls in 1919 by HYPERLINK “http://en.wikipedia.org/wiki/Jack_Cohen_%28businessman%29” o “Jack Cohen (businessman)” Jack Cohen and the name Tesco first appeared in 1924, after Cohen bought a shipment of tea from T. E. Stockwell and combined the initials with the first two letters of his surname it is then that first Tesco store opened in 1929 in HYPERLINK “http://en.wikipedia.org/wiki/Burnt_Oak” o “Burnt Oak” Burnt Oak, HYPERLINK “http://en.wikipedia.org/wiki/Middlesex” o “Middlesex” Middlesex and by 1939 there were over 100 Tesco stores in the whole country then since the early 1990s Tesco has increasingly HYPERLINK “http://en.wikipedia.org/wiki/Diversification_%28strategy%29” o “Diversification (strategy)” diversified geographically and into areas such as the retailing of books, clothing, electronics, furniture, petrol and software; HYPERLINK “http://en.wikipedia.org/wiki/Financial_services” o “Financial services” financial services; HYPERLINK “http://en.wikipedia.org/wiki/Telecoms” o “Telecoms” telecoms and internet services; DVD rental; and HYPERLINK “http://en.wikipedia.org/wiki/Music_downloads” o “Music downloads” music downloads and this has made it grow from 500 stores in the mid-1990s to 2,500 stores fifteen years later.
Tesco is different from other companies because if does not put all its priorities on investors but rather focuses on serving the customer as the ultimate priority and this makes Tesco stand out. Tesco knows how to adapt themselves properly to every country as they learn the way things work locally, and interact with the local community as it plans to expand all over which also makes them unique. Corporations have used manual Customer Relations Management system for many years until the electronic Customer Relations Management systems came into play in the mid 1990’s when organizations began using the internet and other electronic points to manage customer relationships. Customers thus have a direct interaction with these systems rather than the representatives as is the case with customer-facing applications that are known as customer touching Customer Relations Management applications or electronic Customer Relations Management applications; with these applications, the customers are able to help themselves, (Rainer & Turban, 17).
At one time, Tesco struggled to remain the number two store in Europe since it had poor customer retention and same-store sales that eroded the company’s market position and profitability. It had to improve its sales, market share and also profitability and therefore in an attempt to do this they implemented a loyalty program called the Tesco Club Card. Tesco had information systems that were designed around a product based cost approach in that most stores would maintain their own profit margin through managing the cost of products and partnerships with suppliers yet this did not support the customer- centric approach that was needed to revive its business.
The Club Card program
Tesco thus corrected this issue by implementing a Customer Relations Management system that covered all their stores called the Club Card program which enables Tesco to collect, store and analyze data that is generated by the customers by placing each customer in one of three categories; cost-conscious, mid-market and up-market and this segments are further divided into shopping tendencies such as healthy, gourmet, convenient, family living and others. Tesco then targets communication to each customer segment then tailors communication according to the customer’s individual behavior and needs thus helping Tesco reach the right people in the right way and with the correct communication.
Dunnhumby, a marketing research firm in Britain was hired by Tesco to develop its Consumer Relations Management system. What Dunnhumby does is that it gets data from credit card companies and analyses to find out the information about their client’s current customers and their behavior in terms of shopping. They analyze three types of data, customer data, sales data and the normal traditional market research data to provide valuable insights into customer behavior. Dunnhumby then uses the information they get to create customer oriented action plans which are ideas to make their clients business better by matching aspects of clients retail operations with the customer’s needs and aspirations, (Rainer, 21).
Its competitors did not realize that Tesco was capturing valuable information with every swipe of the card and building a powerful database of customers, which it gained through card membership information and its competitors dismissed the whole idea as nothing new. But in fact, it was the idea that greatly contributed to the stores success, (Manfred, 54)
The Club Card provides important information to the company about the customer behavior in the store such as product that they bought or didn’t buy, where they spent most of their time in the store, and where they were not as measured by their purchases. The customers then received offers to visit parts of the store that they hadn’t visited and seen and Tesco also created a variety of lifestyle magazines for different customers and the higher value customers got calls from the manager of the stores and also valet parking and other special treatment and privileges.
Tesco built virtual warehouses as opposed to physical warehouses that are devoted to specific product ranges and many of these were created in partnership with specialist suppliers using the Club Card to target potential customers after monitoring their shopping behaviors. Tesco insisted that the Club Card was a part of shopping online and this created a strong link between the physical and online sides of business since the card allowed customers to shop online as they would if they went to the store based on their choices and they got the same rewards for loyalty. This in turn made shopping online equally as popular as going to the stores physically
Clive,Hunt, & Phillips (244), argue that the Club Card program now has over 10 million active households and Tesco’s Customer Relations Management system provides multidimensional customer segmentation and tailored communication that was able to print and mail 4 million unique quarterly club mailing coupons targeting particular customer segments thus proving to their customers that their grosser understands what they need and want. The club card program delivers loyalty rewards to its customers where they earn meals out, travel, dry cleaning and even car maintenance. The loyalty program extends up to the company’s business partners and thus introducing the Tesco customers to other businesses that meet customer specific objectives
How the Club Card works
In 1996 Tesco created two new cards for their customers, a student card and another card for mothers, with offers particularly suited to their individual needs. Tesco then added a travel service through a partnership with Lunn Poly, giving discounts off high-street prices and then combined its card with Visa through the Royal Bank of Scotland, and gave discounts on do-it-yourself (DIY) goods through well-known home improvement chain B&Q. Customers collect one Club Card point for every £1 (or one point for €1 in Ireland and Slovakia or 1 point for 1zł in Poland) they spend in a Tesco store, or at Tesco.com, and 1 point per £2 on fuel (not in Slovakia) also, Customers can also collect points by paying with a Tesco Credit Card, or by using Tesco Mobile, Tesco Home phone, Tesco Broadband, selected Tesco Personal Finance products or through Club Card partners, HYPERLINK “http://en.wikipedia.org/wiki/E.ON” o “E.ON” E.ON and HYPERLINK “http://en.wikipedia.org/wiki/Avis_Rent_a_Car_System” o “Avis Rent a Car System” Avis.
Club Card statements are sent to the holders 4 times a year to update them on their loyalty points, which often feature extra point coupons and money-off coupons which can be spent in the store, online or on various Club Card deals. It was in 1997 that it added a full range of financial services, and the Tesco Direct service where adding value was mandatory to these functional items so, for instance, the expectant mothers got priority for parking outside the store, had changing facilities available for them, and were provided personal shopping assistants to help themaround when they came to the store. In 1998, after the U.K.’s deregulation of utilities, Tesco began to offer electricity and telecommunications products and services and also in the same year, clothing was added to the range of products through Next. By this time, Tesco had identified 108 customer market segments and by the year, 2000, collaboration with General Motors enabled customers to buy cars from Tesco directly. The company is now on the path to becoming a successful international brand, expanding into Asia by taking over the Lotus supermarket chain in Thailand, where customers can now buy scooters (tescooters) and have them delivered to their homes but adding value to the customer relationship is still the driving force behind Tesco’s success.
Noting the interest of some customers in the Internet, Tesco also sells goods online, and deliver products to the customer’s door, by refrigerated truck, if necessary and by visiting the company’s website (www.tesco.com) you get the same friendly look and feel that people get in Tesco’s physical stores. Everything is made easy, and you can buy a variety of products that include groceries, books, CDs, furniture, videos, and other items, as well as arrange your personal finance and, of course, every time there is a transaction, the loyalty points mount up. And as the points accumulate, more and more relevant special offers and privileges are given and therefore all in all, the company offers great value and a great experience.
Tesco’s expansion strategy
For technical support, Tesco acquired a small company called The PC Guys in 2008, and were able to launch Tesco Tech Support in December where Teams of Advisors were put into all Extra stores with the sole job role of answering technical questions on Tesco’s range of electrical products and also are responsible for advising customers on extended warranties, electrical returns and a range of finance options; via their Customer Service Centre located in Cardiff in the United Kingdom, Tesco Tech Support provides UK and Ireland customers with technical support via telephony system on the electrical products sold in their stores
Successes of the Club Card program
Since Tesco started the program, its sales increased by 52 percent and they are still rising, while the cost per redemption has lowered and the club coupon redemption is in the range of 20-40 percent. The quick growth in revenue is proof that the company achieved its customer focus since the customers began to feel appreciated and thus developed a liking for the company. The success is so great that their website also has 500,000 or more transactions per week.
Challenges of the Club Card program
Although the Club Card has a lot of merits, it has a few demits of its own, it is expensive to develop a database and even more expensive to maintain it yet this is what is needed to sustain the loyalty program. Keeping the loyalty scheme alive is also a tremendous task but in this case Tesco got it right by micro segmentation, adding financial services, creating a retail that is multi channeled and includes the web etc. to sustain the growth achieved through the launch of Club Cards, Tesco decided to adopt a four pronged approach of launching better and bigger stores on a frequent basis and offering competitive prices for example offering everyday low prices in the staples business and increase the number of products offered in the Value range; and focus on remote shopping services which included the online shopping venture.
Some customers may not want close relationships or be too keen on having information about them collected, In “Scoring points”, there is a story of a wife that complained about condoms that out of the blue showed up on her custom online shopping list, since her husband never used them but then it turned out that he did use them, but not with his wife and his is fault was that he bought the condoms in a Tesco shop with his Club Card that was integrated to the web solution which is how it was shown to his online-shopping wife. This case is an extreme example that is very illuminating for the sensitivity of data that the store handles, (Ralph & Reynolds, 48).
Works Cited
Humby, Clive, Terry Hunt, and Tim Phillips. Scoring Points: How Tesco Is Winning Customer
Loyalty. Sterling, VA: Kogan Page, 2004. Internet resource.
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Rainer, R K, and Casey G. Cegielski.Introduction to Information Systems: Enabling and
Transforming Business. Hoboken, NJ: Wiley, 2012. Print.
Rainer, R K, and Efraim Turban.Introduction to Information Systems: [enabling and
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Rainer, R K. Introduction to Information Systems: Enabling and Transforming Business. S.l.:
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Rajola, Federico. Customer Relationship Management: Organizational and Technological
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