Customer Relationship Management Practices
Communication with customers is an important development of relationship
marketing. This helps in developing relationships, fostering trust and providing
information that is needed to undertake the cooperative and collaborative activities of
relationship marketing. In several ways, it is the life force of relationship marketing.
By establishing proper communication channels to share information with the
customers of a firm enhances their relationship with them (Moriarty & Jones, 2008).
Other than communicating with customers, it is important to create intra-company
communication, especially among all the individual and company functions that
directly play a major role in handling the relationship with an exact group of
customers. Communicating with the customers not only helps in fostering
relationships and creating strong bonds with the company, it also has a more
sustaining effect on such relationships. Knowledge management is one of the
dimensions of CRM. Useful information about customers is gathered through
interactions with them however the criterions for deciding whether CRM is successful
or not, is to effectively transform customer information into customer knowledge.
Managing knowledge effectively can helps the organization to be successful in
building better customer relationship which results in a positive impact on
organizational performance (Morgan & Mason, 2010).
The realization of relationship management is determined by how the customer
information is collected and analyzed. This is because the information is utilized for
developing highly personalized offerings. This is important for firms to stay
competitive, and this cannot be accomplished except they have a wide knowledge
concerning their market, search and make use of their current information about
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customers. Dutu and Halmajan (2011) opine that the suitable use of technology in
marketing is a key enabler in assisting the organization to get the right information
from the right people at the right time, so that the right decisions can be made and
services can be rendered (Moriarty et al., 2008 ). In support with that view, Kasim and
Minai (2009) found that CRM technology dimension improved performance of
telephony firms .In this regard, new technologies are seen as key drivers for change.
Consequently, CRM based technology allows the firm to plot and implement fruitful
marketing activities for retaining customers with the help of customer database and
other information-sharing systems (Roberts, Liu, and Hazard, 2011). Chang, Park, and
Chaiy (2010) observe that CRM technology heightens marketing proficiencies by
providing valuable information about customers, which, in turn, will assist the
management and the employees to realize definite marketing goals more excellently.
Customer interaction requires a two-way communication between two parties.
Customers should be listened to and continuous solutions provided to them. This kind
of relationships increases value proposition to the customer solutions which results
into customer retention. This involves offering customers quality products and
services. Morgan et al. (2010) posit that social CRM is able to fine-tune relationships,
to achieve loyalty; the firm should gauge its actions against the needs of the
customers. Utilization of CRM tools allow the firm to exploit on their resources and
to work in the direction of new models of customer closeness. This makes it easier for
the firm to transform its customer relationship say for example vendor into supplier
and ultimately to partner (Minghetti, 2013).
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Relationship between Customer Relationship Management and
Performance
Reimann, Lunemann & Chase (2008) studied the relationship between CRM and
performance of firms in American service firms. The study used in-depth field
interviews and a large-scale, cross-industry survey. CRM dimensions such as
communication, CRM technology, interaction and CRM orientation were embraced
by most services firms. The results revealed that CRM did not affect firm
performance directly however; it led to improved sales growth and reduction of cost.
Coltman, Devinney & Midgley (2011) studied the link between Customer relationship
management and firm performance of services firms in Europe. The study adopted a
cross-sectional survey of 100 banks. Primary data was collected using questionnaires.
Data was analyzed using descriptive statistics which include mean and standard
deviation. The results of the findings concluded that CRM led to an increase in
customers which resulted into increase sales and performance.
Hyung–Su (2012) studies the impact of CRM as a strategy on performance of service
firms in Shanghai, China. The study adopted a cross-sectional research design.
Primary data was collected using questionnaires and interviews. The results revealed
that CRM technology and knowledge management were popular CRM strategies used
by service firms. Further, it was revealed that CRM as strategy improved efficiency
and reduction in marketing costs which contributed positively to towards improved
organizational performance.
Shavazi, Moshabaki & Hoseini & Naiej (2013) examined the relationship between
customer relationship management and different measures of performance in the
banking sector. Data was collected from banks in Iran, the sub-process of
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implementing CRM was extracted and also four measures of balanced scorecard were
applied to measure performance. The findings revealed that has a positive impact on
sales growth, reduced marketing costs and hence improved organizational performance.
2.5 Summary of the Literature Review and Knowledge Gaps
From the study, the conceptual discussion indicates that effective implementation of
CRM improves the firm’s relationship with its customers; this attracts new customers and
retains existing ones. The empirical findings concludes that a positive relationship exist
between customer relationship and performance. Examples include Reimann et al. (2008)
and Shavazi et al.(2013) however few studies insists that CRM does not affect
performance directly, there are other moderating factors that enhance this relationship for
example reduction in marketing costs and sales growth. These findings are unfailing with
the hypothesis of this study which predicts a positive relationship between customer
relationship and performance. This is also supported by the study theories, commitment
trust theory and customer relationship model that insists on the importance of establishing
good relationships with the customers.
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