Irina Grazdane
A Customer Relationship Management
Approach for Optical Retail Business.
Helsinki Metropolia University of Applied Sciences
Master’s Degree (Master of Health Care)
Degree Programme in Health Business Management
04.11.2013
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Abstract
Author
Title
Number of Pages
Date
Irina Grazdane (Irina Graždane)
A Customer Relationship Management Approach for Optical
Retail Business.
72 pages + 2 appendices
04 November 2013
Degree
Master’s Degree (Master of Health Care)
Degree Programme
Degree Programme in Health Business Management
Specialisation option
Optometry
Instructor
Thomas Rohweder, DSc (Econ)
The aim of the present study was to explore CRM notion and examine CRM approach in
terms of one particular field – the optical retail industry.
As CRM methodology is broader than just a definition, a conceptual framework was used to
assess CRM in an organization. The main objectives for research included choice of the
conceptual framework from the already existing ones, assessment of the case company
using the chosen framework, analysis of results obtained from such assessment and
development of the one main proposal for the case company.
Two European companies were selected as Case Companies – both were operating in the
field of optical retail business, having a chain of optical retail outlets and being mainly
business-to-consumer businesses. Both companies were typical examples of companies in
their field and were not direct competitors to each other. The Case Company One was
chosen to represent a large business and the Case Company Two - a mid-sized business.
Both companies were observed within a six-month period, as well as assessed using
qualitative methods. The assessment was made in order to explore their approach to CRM,
and compare it to the model chosen from relevant academic literature.
The rationale for the present study was the fact that optical retail industry in the countries of
interest was experiencing significant amount of pressure due to the worsened economy and
higher than before levels of competition. Therefore, for both companies retaining existing
customers and improving weaknesses in their CRM approach was considered a great
alternative to otherwise inevitable price war.
Five conceptual frameworks for CRM were reviewed and The QCi or The Customer
Management Model was selected. The assessment of both companies using this framework
revealed that the model is suitable for the assessment of large and middle-sized businesses
in the optical retail industry. Weaknesses of various significance were found in eight main
elements of The Customer Management Model for each company. Comparison to another
study based on The Customer Management Model showed that about a half of the
businesses had similar problems regardless of their industry.
After the review of results one major proposal to each case company was created.
Keywords
a conceptual framework for CRM, a model for CRM, optical
retail business
Contents
1 Introduction 1
1.1 Background of the problem 1
1.2 A case company 2
1.3 Research objectives 3
1.4 Research design 4
1.5 Research process and methods 5
2 Customer relationship management 7
2.1 Definition of CRM 7
2.2 Origins of CRM: relationship marketing 9
2.3 Understanding relationships 11
2.4 Building customer value 13
2.5 Customer satisfaction 14
2.6 Customer segmentation. 16
2.7 Customer relationship management 18
2.8 The role of CRM 20
2.9 Types of CRM 21
2.10 Types of business 22
3 CRM models 24
3.1 The IDIC model – Identify, Differentiate, Interact and Customize 24
3.2 The CRM Value Chain 25
3.3 A conceptual framework for CRM strategy: The Five-Process Model 27
3.4 The Gartner’s competency model: Eight Building Blocks of CRM 29
3.5 The QCi Model: The Customer Management Framework 31
3.6 CRM model for optical retail business 34
4 Customer management value chain in case companies 39
4.1 Customer management value chain 39
4.2 Analysis and Planning 40
4.2.1 Analysis and Planning in the Case Company One 41
4.2.2 Analysis and Planning in the Case Company Two 42
4.3 Proposition 42
4.3.1 Proposition of the Case Company One 43
4.3.2 Proposition of the Case Company Two 44
4.4 Information and Technology 45
4.4.1 Information and Technology: the Case Company One 45
4.4.2 Information and Technology: the Case Company Two 46
4.5 People and Organization 46
4.5.1 People and Organization in the Case Company One 46
4.5.2 People and Organization in the Case Company Two 47
4.6 Process Management 47
4.6.1 Process Management in the Case Company One 48
4.6.2 Process Management in the Case Company Two 48
4.7 Customer Management Activity 49
4.7.1 Customer Management Activity in the Case Company One 50
4.7.2 Customer Management Activity in the Case Company Two 51
4.8 Measuring the effect 51
4.8.1 Measuring the Effect: the Case Company One 52
4.8.2 Measuring the Effect: the Case Company Two 52
4.9 Customer experience 52
4.9.1 Customer Experience: the Case Company One 52
4.9.2 Customer Experience: the Case Company Two 53
5 Discussion 54
5.1 Analysis and Planning 55
5.2 Developing proposition 56
5.3 Communicating proposition 56
5.4 Information and Technology 57
5.5 People and Organization 57
5.6 Process Management 58
5.7 Customer Management Activity 58
5.8 Measuring the Effect 59
5.9 Customer Experience 59
5.10 A proposal for the Case Company One 60
5.11 A proposal for the Case Company Two 63
6 Conclusion 65
6.1 Executive summary 65
6.2 Ideas for future research 67
6.3 Evaluation 67
References 68
Appendix 1. Checklist: readiness to create CRM vision. 1
Appendix 2. Interview questions. 1
1
1 Introduction
1.1 Background of the problem
The aim of present study was to explore a CRM notion and examine a CRM approach in
terms of one particular business field – optical retail industry.
The interest for such study arose from two main factors – authors almost a decade long
experience in given business field; and discussion around CRM which had revealed the
significant zone of ambiguity in definitions of CRM, methodology of CRM; as well as practical
application of CRM in middle-size and small businesses.
Amount literature and published academic articles on topic shows that over past twenty
years there have been an explosion of interest in customer relationship management.
Despite an increasing amount of practitioner-oriented material, there remains a lack of
common agreement about what CRM is and how CRM strategy should be developed. As
Payne and Frow (2005, p.167) note, “a significant problem that many organizations deciding
to adopt CRM face stems from the great deal of confusion about what constitutes CRM”.
As a CRM methodology is broader than just definition, for a company it is not sufficient just
to explore a notion of customer relationship management. Therefore, the tool such as
conceptual framework or model was admitted as necessary to implement or assess CRM in
an organization. In terms of present research project, a purpose of such model or conceptual
framework for CRM was to describe a CRM approach across all organization structures and
to explore a role of different business processes in creation of common CRM vision.
As regards to the business field chosen, at the period of present research, no study has
been found which would be examining a conceptual framework of CRM in optical retail
business. Examining this topic, therefore, would help the case companies as well as other
companies in given business field to access their CRM approach or to implement CRM
projects.
2
1.2 A case company
Structure of business reviewed has a unique combination of main features – most
businesses in the industry operate as retail shops of consumer goods, but at the same time
they are providing primary health care services to the public. Optical retail businesses supply
consumers with prescription eyewear through outlets, which have optometrists (Doctors of
Optometry, licensed opticians – profession status varies across different countries) who are
performing vision assessment; and shop assistants or dispensing opticians who are helping
to select and fit prescription glasses or distributing contactlenses (which includes advice and
training). In recent years, there has been growth in the amount of online businesses, but
their abilities to provide primary health care services are obviously limited.
For case study research, two companies were selected (further in the text referred as the
Case Company One and the Case Company Two). Both companies are operating in the
field of optical retail business, having a chain of optical retail outlets and being mainly B2C
(business-to-consumer) businesses. Both companies were interviewed; and observed
within six months period. Case companies were assessed with an aim to explore their
approach to CRM, and compare it to the one of the models chosen from relevant academic
literature.
Companies were chosen for being typical of a large number of other similar institutions and,
hence, some level of generalization can be made. The Case Company One was chosen to
represent a sample of large businesses and the Case Company Two for the group of mid-
sized businesses.
Both case companies assessed are located in Europe, and both are related to the bigger
international chains, as well as both operate in two high income countries as stated by World
Bank (The World Bank Group, 2013). Both companies are not located in the same
geographic area, however, the countries of location belong to the European Union. The
Case Company One is a large business according to a definition of the European
Commission (company employs more than 250 people and its turnover is greater than 50
million euros) (European Commission, 2003). The Case Company Two is a middle-sized
business according to the definition of the European Commission (company has less than
250, but more than 50 employees, and turnover less than 50 million euros but more than 10
million euros) (European Commission, 2003).
3
Local optical associations’ reports in countries of interest state that optical retail industry is
experiencing a significant amount of pressure due to the worsened economy and higher
than before levels of competition (for the list of optical associations in European countries
see: The European Council of Optometry and Optics, 2013). Therefore, for each of
companies to retain existing customers and improve weaknesses in their CRM approach
would be a great alternative to otherwise inevitable price war.
1.3 Research objectives
As stated earlier, the aim of present study is to explore CRM notion and examine a CRM
approach in terms of optical retail business. The value of a model for CRM methodology is
discussed in Payne and Frow (2005, p.167), and authors admit that “a conceptual framework
for CRM helps broaden the understanding of CRM”; as well as its “role in enhancing
customer and shareholder value”.
It states following set of goals for current research – to explore a notion of CRM, conceptual
frameworks or models of CRM already available, all with aim to choose one best suitable
conceptual framework for assessment of business in optical retail industry. Above
mentioned steps will be followed by study in case companies with aim to explore their
approach to CRM and compare data to a chosen model.
In conclusion, a present project has four main objectives of research. Those are as follows:
1) To choose a (theoretical) conceptual framework (a model) for CRM suitable for
assessment of a company operating in optical retail industry;
2) To assess a CRM approach in both case companies using a model chosen;
3) To analyse and discuss the results of an assessment of CRM approach in both case
companies and identify possible weaknesses that may be found;
4) To develop one major proposal to each one case company which would help to
overcome weaknesses in CRM approach found during assessment.
Some expectations for results of current research arose from preliminary research on
literature and author’s own experience. As Buttle (2009, p.5) note, many businesses of any
size claim that they are “on mission to satisfy customer needs profitably” and are customer-
4
oriented; but few actually are. Based on that, it is expected to find a higher company’s self-
assessment results for CRM vision than it actually is, as well as weaknesses in CRM
approach.
As regards to CRM technology, it is expected to find that small and middle-sized businesses
won’t have CRM systems in use; instead they most likely will have sales force automation
systems.
1.4 Research design
Based on research objectives, research design had five major stages which are shown in
Figure 1.
Figure 1. Research design: five major stages.
A comparison of research results in case companies to a chosen CRM model. Data obtained
from each case company was analysed and compared to the best practices. Possible gaps
and solutions discussed.
Interviews with persons responsible for and involved in CRM strategy in case companies.
The choice of a model for optical retail industry using ongoing discussions among researches
and practitioners as well as researcher’s own experience within this field.
A review of different strategic frameworks or models of CRM.
A review of current CRM knowledge in academic literature.
5
At the moment of creation of research design the biggest challenge for the whole research
was getting access to the case companies.
1.5 Research process and methods
Before conducting research within case companies, literature research with aim to explore
the actual notion of CRM and models of CRM was necessary. A creation of a conceptual
framework usually is based on the best practices and researches in numerous amount of
companies. Therefore, the descriptions of the best practices listed together with strategic
frameworks were admitted appropriate source for development of questions for a case
company assessment.
As the aim of the study was to evaluate a CRM approach, the interpretative epistemology
supported by data collected through interviews was admitted as the most appropriate for
this purpose. The questionnaire or other quantitative methods were excluded as a main
research tool as those serve better in providing statistical results over a large amount of
data. However, although interviews were chosen as a primary data collection method, there
was a necessity in observational techniques where they seemed appropriate. Therefore,
observation of the company’s work, information on the internet, activity in social media and
study of employee-oriented educational material if available were as well assisting in the
collection of data and creation of analysis. Questions for interviews were created as open
questions with no possible answer just yes or no. In such way a researcher would ensure
that interviews are providing more insight in approaches, and reasons for such approaches.
It was done also in order to avoid too positive results which may occur due self-assessment.
For example, when interviewee was asked about a company’s strategy s/he was asked to
define it; a researcher recorded statement, and after analysed and compared it with the best
practice, as well as made conclusion whether it is customer-centric. The set of questions
was sent to a company’s human resources department with an explanation on main issues
of research, data collection methods and information about study program. The human
resources department was asked for help in the choice of a purposive sample.
To help respondents to feel at ease, and enable them some degree of control over a data
collection process, interview questions were sent to interviewee before the actual interview
6
happened; as well as no tape record of an interview was done. Researcher was using own
laptop during an interview and an interview transcript was made simultaneously. If
respondent expressed interest, the interview transcript was sent or showed right after an
interview happened. Due confidentiality issues no financial, supplier or other potentially
sensitive data were provided, as well as all names and positions of respondents were
disclosed in the research report. The fact that interviewee was familiar with interview
questions ensured avoiding a waste of scarce time resources; as well as ensured that the
interview is conducted in a very intense manner. Due the same confidentiality concerns no
transcripts or other data from the interviews will be published or otherwise distributed.
To evaluate a company’s position in relation to its rivals the activity in social media for both
companies and their direct competitors was followed for over a half of year long time. To
measure customer experience and efficiency of a value proposition, one “mystery shopping”
case for the Case Company One was evaluated; and observation of everyday work of the
Case Company Two for two days in different units was used. All information was assisting
in assessment and served its purpose in helping to broaden information obtained from the
interviews.
A brief review on CRM technologies made an impression that small or medium size
enterprises won’t be amongst early adopters of CRM, and many even nowadays wouldn’t
have any CRM solution or analytic tools mainly because of the size of business. It was tested
in current research, as one of the companies assessed is a middle-sized business according
to a definition of the European Commission (European Commission, 2003).
Results of an assessment for both companies presented in this thesis are results of the
analysis of the interviews. It was made by comparing answers with a description of the best
practice for the case. Besides techniques mentioned before or during an interview each
interviewee was asked to perform a self-assessment of a company’s readiness to create a
CRM vision using a self-assessment questionnaire created by Brown and Gulycz (2002).
This questionnaire allows to assess overall level of readiness towards a CRM vision for the
company. Authors suggest to use it as a guide for reading their book, and divide all
companies to three groups where companies (1) aren’t ready for CRM vision and need more
improvement, (2) partially ready and need advice on major issues and (3) are completely
ready and only need advice on advanced techniques. (Brown & Gulycz, 2002) A
7
questionnaire was used to evaluate where a company sees itself. A research was using it
also as a source assisting in the main analysis.
2 Customer relationship management
First, before starting to review which models of CRM are the most suitable for organizing
business practices in optical retail industry, it is necessary to clearly define what CRM
means. Research on the topic showed a certain level of ambiguity for the meaning of this
three-letter acronym (CRM) in relevant literature. Therefore, the following section
represents review of different publications regarding the topic of CRM.
Definitions aside, to describe a CRM, there is a strong need in reviewing relationship
marketing, relationship aspects and customer value creation in terms of CRM frameworks,
as those all are important aspects in building customer-centric strategy.
2.1 Definition of CRM
Literature on the topic quite clearly indicates that expression customer relationship
management, or CRM, or even closely related to the topic term ‘relationship marketing’ have
been in use only since early 1990s. (Gamble, et al., 1999; Kotler, et al., 2009; Baron, et al.,
2010). According to Gamble, et al. (1999), a customer relationship management is relatively
immature business or organizational practice, and even consensus has not yet emerged
about what counts as CRM.
The meaning of the CRM acronym varies as well. For example, it may be used both in
relation to customer relationship management, and in relation to customer relationship
marketing. (Gamble, et al., 1999; Payne, 2009). Furthermore, in more contemporary
sources, authors suggest that customer relationship management should be replaced by
term ‘customer management’ or CM, but a two-letter acronym is RM are widely used for
relationship management (Baron, et al., 2010; Woodcock, et al., 2003; The Customer
Framework Ltd, 2011-2013). Quite often CRM is used to refer a specific technology-based
solution, such as data warehouse, or even one specific application such as campaign
8
management or sales force automation. (Payne, 2009) From the following sample of
definitions shown in the Table 1. it can be clearly seen that meaning of CRM varies greatly.
Table 1. Definitions and descriptions of CRM.
Years
Definitions and descriptions of CRM
1995 -
1999
Data-driven marketing (Kutner & Cripps, 1997 cited in Payne, 2009, p.19).
(CRM) Seeks to provide a strategic bridge between information technology and
marketing strategies aimed at building long-term relationships and profitability. This
requires “information-intensive” strategies. (Glazer, 1997 cited in Payne, 2009, p.19)
CRM can be viewed as an application of one-to-one marketing and relationship
marketing, responding to an individual customer based on what the customer tells you
and what else you know about that customer (Peppers, et al., 1999, cited in Payne, 2009,
p.19).
A management approach that enables organizations to identify, attract and increase
retention of profitable customers by managing relationships with them (Hobby, 1999,
cited in Payne, 2009, p.19).
2000-
2004
CRM or customer relationship management is the infrastructure that enables the
delineation of an increase in customer value, and the correct means by which to motivate
valuable customers to remain loyal – indeed, to buy again (Dyché, 2001, p. 4).
A comprehensive strategy and process of acquiring, retaining and partnering with
selective customers to create superior value for the company and the customer
(Parvatiyar & Sheth, 2001, p. 6).
CRM is a business strategy combined with technology to effectively manage the
complete customer life-cycle (Smith, 2001, cited in Payne, 2009, p.19).
2005-
2009
CRM is a strategic approach that is concerned with creating improved shareholder value
through the development of appropriate relationships with key customers and customer
segments. CRM unites the potential of relationship marketing strategies and IT to create
profitable, long-term relationships with customers and other key stakeholders. CRM
provides enhanced opportunities to use data and information to both understand
customers and co-create value with them. This requires a cross-functional integration of
processes, people, operations, and marketing capabilities that is enabled through
information, technology, and applications. (Payne & Frow, 2005, p. 168)
CRM is the core business strategy that integrates internal processes and functions, and
external networks, to create and deliver value to targeted customers at a profit. It is
grounded on high quality customer-related data and enabled by information technology.
(Buttle, 2009, p. 15)
(CRM) is a business strategy the outcomes of which optimize profitability, revenue and
customer satisfaction by organizing around customer segments, fostering customer-
satisfying behaviours and implementing customer-centric processes. CRM technologies
should enable greater customer insight, increased customer access, more effective
customer interactions, and integration throughout all customer channels and back-office
enterprise functions (Gartner, Inc., 2013).
From the chronological order of various definitions presented in the Table 1. can be seen
that earlier sources emphasize information technology and marketing automation as main
determinants for CRM. More contemporary literature mentions CRM as first and foremost a
9
business strategy where appropriate business processes and CRM technologies enable
“greater customer insight, increased customer access, more effective customer interactions,
and integration throughout all customer channels and back-office enterprise functions”
(Buttle, 2009; Gartner, Inc., 2013). In terms of the present research term CRM will be used
to describe a customer-oriented business strategy in relation to business and technology
management processes used to implement it; as a business philosophy fostering customer-
satisfying behaviours across all organization levels; and as an approach used for
development of relationships with profitable or strategically important customer segments.
As mentioned previously, CRM often used in context with relationship marketing. Payne
(2009) suggests that CRM practices originate from relationship marketing principles, so a
brief review of the development of relationship marketing is helpful to an understanding of
evolution of CRM.
2.2 Origins of CRM: relationship marketing
Before reviewing relationship marketing and emergence of CRM, it is important to clearly
define what a relationship marketing and a database marketing mean. As we can see from
the Table 1. (in the previous sub-section), they often come together in definitions of CRM,
so they might be regarded as mutually replaceable synonyms. However, both are not exactly
the same.
Kotler et al. (2009), describe relationship marketing as a business process of “building
mutually satisfying long-term relationships with key parties, in order to earn and retain their
business”. According to Bruhn (2003, p.11) “relationship marketing covers all actions for the
analysis, planning, realization, and control of measures that initiate, stabilize, intensify, and
reactivate business relationships with the corporation’s stakeholders – mainly customers –
and to the creation of mutual value”.
As regards to database marketing, it is the process of building, maintaining and using
customer databases and other databases (products, suppliers, resellers) to contact, transact
and build customer relationships. Such databases can assist marketing managers in daily
operations, budget planning, market segmentation, targeting, offer development, customer
10
communication; and resource allocation. The marketing database can be used also to assist
in strategic decision processes. (Tao & Yeh, 2003)
According to Payne (2009), the emergence of CRM as a management approach is a
consequence of a number of important trends. These are described as follows:
- The shift in business focus from transactional marketing to relationship marketing
- The realization that customers are a business asset and not simply a commercial
audience.
- The transition in structuring organizations, on a strategic basis, from functions to
processes
- The recognition of the benefits of using information proactively rather than solely
reactively
- The greater utilization of technology in managing and maximizing the value of
information
- The acceptance of the need for trade-off between delivering and extracting a value for
a customer
- The development of one-to-one marketing approaches (Payne, 2009, p. 11)
Traditional marketing models are based on the exchange perspective, where a value for
customers has been pre-produced by firm. (Sheth & Parvatiyar, 1995) It “involves greater
financial outlay and risk. Focusing on single sales involves winning the customer over at
every sales encounter, a less efficient and effective use of investment” (Payne, 2009, p. 11).
As return on marketing costs cannot be calculated, it is difficult to evaluate or improve
marketing productivity. (Grönroos, 2007)
The situation is quite different according to the relationship perspective. Value for a customer
is created by the customer himself. It is a process which occurs during a relationship, partly
in interactions between the customer and the service provider. (Sheth & Parvatiyar, 1995)
As regards to return on marketing costs, new business logic offers usage of resources in an
“intelligent way”. Managing customers is a process to which all organization contributes.
(Grönroos, 2007)
A key aspect of relationship marketing is building customer value in order to retain
customers, which means building on the already existing investment in product development
11
and customer acquisition. In such way company generates potentially higher revenue at a
lower cost. (Payne, 2009)
Besides financial benefits, relationship marketing also produces significant intangible
assets. The emphasis on a customer service encourages customer involvement. It allows
to learn more about customers’ needs and use this knowledge into future product or service
development and delivery. Businesses must know their customers (and competitors) in
order to increase customer satisfaction and reduce customer attrition. This knowledge
should be used proactively, which means that company doesn’t wait for complaints to be
registered, but actively seeks to uncover and remedy customer dissatisfaction. It is important
to recognize that customers often never lodge a complaint; they simply leave or take their
businesses elsewhere. (Payne, 2009)
Modern technology can be used by the company to listen and learn from its customers; as
well as to collect and manage a complete set of information that enables value-adding
interactions with customers, often across different channels. (Payne, 2009)
2.3 Understanding relationships
A notion of relationship is quite often discussed in relation to CRM, and in all sources it
stands for R letter in acronym. In terms of the present research, therefore, the topic of
relationship in the context of business and management practices should be discussed.
According to Buttle (2009, p.27), “a relationship is composed of a series of interactive
episodes between dyadic parties over time. The parties within the dyad may have very
different ideas about their relationship status”. A relationship is a “social construct” which
exists in a case if “people believe in its existence and act accordingly”. “Relationships can
be unilateral or reciprocal; either one or both of the parties may believe they are in a
relationship”. (Buttle, 2009, p.28) Usually, it is a customer’s decision to determine whether
or not a relationship has developed, and it means a mutual way of thinking between
customer and supplier or service provider. It is an ongoing process with win-win situation for
both parties. (Grönroos, 2007; Håkansson & Snehota, 1995) Grönroos (2007) suggests that
if a relationship has been established, customers should be treated as customers,
regardless of whether at any given point of time they are making purchase or not.
12
Relationships evolve over time, they can vary considerably, both in number and variety of
episodes. According to Dwyer et al. (1987), there are five general phases through which
customer-supplier relationships evolve: awareness, exploration, expansion, commitment
and dissolution. An important aspect here is that many relationships are terminated before
commitment stage. (Buttle, 2009) Studies indicate that core attributes of quality relationship
are trust and commitment. Other attributes include relationship satisfaction, mutual goals
and cooperative norms. (Buttle, 2009)
Trust in another party is described as one party’s expectation that the other party will behave
in a certain predictable way in a given situation. If the other party does not behave in the
expected way, the trusting party will experience more negative outcomes than they
otherwise would. (Swartz & Iacobucci, 2000) Trust develops when both parties share
experiences, interpret and assess each other's motives. The development of trust is a long-
term investment into a relationship and it is a factor that ensures its longevity. (Singh &
Sirdeshmukh, 2000, cited in Buttle, 2009, p.29)
Commitment is shown by “an exchange partner believing that ongoing relationship with
another is so important as to warrant maximum effort to maintain it; that is the committed
party believes the relationship is worth working on to ensure that it endures indefinitely”
(Morgan & Hunt, 1994, p. 23). Trust, shared values, and the belief that partners will be
difficult to replace are elements that lead to commitment. It motivates both parties to
cooperate in order to preserve a relationship. (Buttle, 2009, p. 30) Deeply held commitment
or loyalty is a tendency to choose a preferred product or service in the future despite
situational influences which may have the potential to cause switching behaviour (Hamel,
1996).
However, the research supporting conclusion that trust and commitment is more for
relational customers is rather limited. Hence, there is no clear relation between trust,
commitment and the development of commercial relationships. (Grönroos, 2007)
Evidence suggests that one of the main points of improving relationship tenure and increase
retention is concentrating on building customer value and ensuring that customer
satisfaction remains on the appropriate level and is measured continuously. It is self-evident,
that the same needed to attract customers. Therefore, it is important to review what exactly
two abovementioned variables – a customer value and a customer satisfaction mean in
terms of customer-oriented business strategy.
13
2.4 Building customer value
An objective of CRM is a balance between the value delivered to customers and the value
received in return. The value proposition needs to be tailored for different customer
segments. (Payne, 2009)
According to Schieffer (2005) creating loyal customers is at the heart of every business. As
Peppers and Rogers wisely note,
The only value your company will ever create is the value that comes from the
customers - the ones you have now and the ones you will have in the future.
Businesses succeed by getting, keeping, and growing customers. Customers are the
only reason you build factories, hire employees, schedule meeting, lay-fibre optic lines,
or engage in any business activity. Without customers, you don't have a business
(Peppers & Rogers, 2005, p. 25).
Several sources repeat this views and describe effective marketing as being about the
identification, design and delivery of customer-perceived value. (Dubois, et al., 2007; Payne
& Holt, 2001; Kotler, et al., 2009) Many companies recognize the importance of satisfying
their customers in order to develop brand reputations that can deliver a sustainable
competitive advantage. Such communication is particularly important, where the vast
majority of staff are either on the shop floor dealing with customers, or behind the scenes in
areas such as the supply/value chain where they can feel divorced from central operations.
(Kotler, et al., 2009)
To reveal the company's strengths and weaknesses in relation to its competitors, a
customer-perceived value analysis can be conducted. Customer-perceived value CPV is
“the difference between the prospective customer's evaluation of all the benefits and all the
costs of an offering and the perceived alternatives”. (Kotler, et al., 2009, p. 381)
Customer-perceived value analysis consists of five major steps:
1. Identification of the major attributes and benefits that customer value.
2. Evaluation of the quantitative importance of different attributes and benefits.
3. Evaluation of the company's and its competitors' performance on the different
customer values against their rated importance.
14
4. Examination of how customers in a specific segment evaluate a company's
performance against a specific major competitor on an individual attribute or benefit
basis.
5. Monitoring of customer values over time. (Kotler, et al., 2009, pp. 385-86)
With the rise of digital technologies such as the Internet customers become more and more
informed; they expect companies to connect with them and to listen to them. Customers are
gradually becoming more demanding and instantly looking for better value (Urban & Hauser,
2004; Grönroos, 2007). In relation to that, Pine & Gilmore (1999) speak about an emergence
of experience economy. In the experience economy customers are looking for more than
ordinary goods or services and are prepared to pay substantially more for experience
services. Similar ideas are expressed also by Grönroos (2007) - customers do not look for
goods and services “per se”, they look for a solution that serves their own value-generating
processes. Sometimes this service requirement can be offset by a low price, a brand image
or a technologically more advanced solution. Often the act of rapidly recovering from a
mistake, not the brand attribute of flawless service, is what wins customers loyalty and
returns business (Kotler, et al., 2009).
The value proposition of a company is more than the core positioning of the offering. It
consists of the whole cluster of product and service attributes (benefits) the company
promises to deliver. The company's ability to manage its value delivery system is crucial in
keeping this promise. (Lanning, 1998) Important to remember that the value delivery system
includes all the experiences the customer will have on the way to obtaining and using the
offering. A good value delivery system is a set of core business processes that help to deliver
promised value and ensure that the customer has a pleasurable purchasing experience.
(Kotler, et al., 2009)
2.5 Customer satisfaction
Evidence suggests that despite the amount of research on the topic customer satisfaction
has been defined many ways as well. Buttle proposes to define customer satisfaction as
“the customer's fulfilment response to a customer experience, or some part thereof” (Buttle,
2009, p. 44). For customer-oriented companies, a customer satisfaction is both goal and
15
marketing tool. Companies even include customer satisfaction ratings in their advertising
once high ratings occur. (Kotler, et al., 2009)
Kotler, et al. (2009) suggest that companies should measure customer satisfaction regularly
as it is an important key to customer retention. Usually satisfied customers are customers
that stay loyal longer and buy more as the company introduces new products and upgrades
existing ones. Such customers are less price sensitive and tend to promote the company by
word of mouth, as well as pay less attention to competing brands. The cost to serve for loyal
customers is lower because transactions can become routine. Greater customer satisfaction
has also been linked to higher returns and a lower risk in the stock market. (Kotler, et al.,
2009)
There are several main methods to measure customer satisfaction - periodic surveys, a
customer loss rate monitoring and a “mystery shopping”. Periodic surveys are methods that
measure customer satisfaction directly. Besides, the company can also ask additional
questions to measure repurchase’s intention and the respondent's likelihood or willingness
to recommend the company and brand to others. As regards to customer loss rate
monitoring – a company can do more than that and contact customers who have stopped
buying or who have switched to another supplier to find out why. Quite often companies hire
“mystery shoppers” to pose potential buyers and report on strong and weak points
experienced in service or products both of the company researched and of its competitors.
In a situation where they are unknown, managers themselves can enter either company or
competitor sales situations. In such way they can experience at first hand the treatment
they receive, or they can phone their own company with questions and complaints to see
how employees handle the calls. (Kotler, et al., 2009)
According to the expectations-disconfirmation model of customer satisfaction, a buyer’s
satisfaction after purchase depends on the offer's performance in relation to the expectations
of its performance, and whether any deviations between the two are found. If the
performance matches the expectations, the customer is satisfied. Dissatisfaction occurs if
the performance falls short of expectations. High levels of satisfaction occur when an offer’s
performance exceeds expectations. (Grönroos, 2007; Kotler, et al., 2009; Buttle, 2009) As
Grönroos (2007) note, for customer satisfaction it is always better to underpromise and
overdeliver.
16
Expectations are formed by past buying experience; a friend’s or associates’ advice; and a
marketers' or competitors’ information and promises. As discussed, if marketers raise
expectations to high, the customer is likely to be disappointed. However, “underpromising”
should be used with caution. If the company sets expectations too low, it will not attract
enough buyers. As regards to the quality of service or product received, it is also perceived
trough comparison between expectations and experiences. (Grönroos, 2007; Boulding, et
al., 1999; Kotler, et al., 2009)
Although a customer-centred company seeks to create customer satisfaction, it should not
be its ultimate goal. To achieve success, a company must take into consideration its
resources and operate on the philosophy that it is trying to deliver both a high level of
customer satisfaction and acceptable levels of satisfaction to the other stakeholders.
(Johnson & Gustafsson, 2000)
In the case of mistakes, the best thing the company can do is to make it easy for a customer
to complain. Studies of customer dissatisfaction show that customers are dissatisfied with
their purchases about 25 percent of the time, but that only 5 percent complain. The other 95
percent either feel complaining is not worth the effort, or they do not know how or whom to
complain, or they just stop buying. A customer who have complained to an organization and
had their complaints satisfactory resolved tell an average 5 people about the good treatment
they received. The average dissatisfied customer, however, complains to 11 people. (Kotler,
et al., 2009, pp. 392-93)
2.6 Customer segmentation.
For the effectiveness of the business it is important to start with a good foundation and build
an ability to recognize those customers that will have a greatest impact on successful
performance (Brown & Gulycz, 2002). Importance of customer segmentation should not be
underestimated as the mass market has disappeared, and a better targeting of offers saves
money, improves profitability of the business and serves as a way to explore untapped
business opportunities (Wong, 2011).
17
There are many variations on the theme of segmentation. Payne (2009) lists segmentation
by service or by value sought; geographic, demographic, socioeconomic, psychographic,
benefit, usage, loyalty; and occasion segmentation.
Wong (2011) suggests following eight key characteristics of market segment:
1. Each segment should be homogeneous within itself
2. Different segments should be heterogeneous between themselves
3. Each segment should demonstrate measurable difference
4. Segmentation should be justifiable financially
5. Each segment should be durable
6. Each segment should be large enough to be economically sustainable
7. Each segment should not only be identifiable but also actionable through segment
profiling
8. Each segment should be accessible through regular media and distribution
channels. (Wong, 2011)
Traditional methods of segmentation start with breaking down a customer base into
recognizable and manageable groups. For example, a segmentation can be done using a
cluster analysis (demographic, psychographic and behavioural characteristics). One of
popular variations of segmentation practices is based on the customer value. It is a concept,
in which business decisions are not based on the revenue amount, but on the total value of
a customer for an organization. A company determines its customers’ value by looking on
both quantitative and qualitative data, evaluating such issues as a potential growth, a
sensitivity to the price and a possibility of selling value-added enhanced services or
products. (Brown & Gulycz, 2002)
By profiling customers and dividing them into segments a company gets a tool for creation
of more targeted offers. Additionally, it allows to measure actual behaviour of those groups
over time against expected results. However, dividing customers into groups and gathering
information sporadically will not drive an enhanced ability to create lasting CRM.
Segmentation should be done at least once a year or whenever significant changes are
made in the company’s business model. (Brown & Gulycz, 2002)
18
Besides abovementioned types and aspects of segmentation, it is important to consider the
relationship mode with a firm in which customer is at the moment. According to Grönroos
(1997), in a given marketing situation the customer is either in a relational or in a
transactional mode. Consumers or users in a relational mode can be in an active or a
passive relational mode.
Transactional customers are customers that look for solutions to their needs at an
acceptable price. They do not appreciate contacts from the supplier or service provider in
between purchases. Active relational customers are customers looking for opportunities to
interact with the supplier or service provider in order to get additional value. Such customers
get disappointed if a contact with supplier or service provider is not possible. Passive
relational customers need an opportunity to contact service provider or supplier if they
wanted to, but they seldom respond to invitations to interact. (Grönroos, 2007)
Although it might seem that for the customer it is better to stay in a transactional mode and
look for the most acceptable offers at moment, there are several benefits for the customer
in relationship with service provider. According to Gwinner et al. (1998) those are confidence
(e.g., reduced anxiety and faith in service provider), social benefits (such as personal
recognition by employees) and special treatment (it includes extra services and special
prices, as well as higher priority than other customers). However, the ultimate benefits for
customers of being involved in a relationship should be financial such as increased wealth
and/or revenue-generating capability or lower costs of being a customer. (Grönroos, 2007)
2.7 Customer relationship management
CRM is relatively recently emerged business concept, but, as Dyché notes “talk to a
marketing executive for a large bank or credit card company, and she or he might claim to
have been doing CRM long before the tem was invented” (Dyché, 2001, p. 10) It means,
that principles and approaches of CRM are not completely unfamiliar, and were used by
organizations long before the whole concept has emerged. (Buttle, 2009; Payne, 2009)
Despite this, as can be seen from a wide variety of definitions, there are still numerous
misunderstandings about what CRM is.
19
Buttle (2009) suggests that there are at least five major misunderstandings about CRM.
Those are listed as follows:
1. CRM is database marketing. As discussed previously, database marketing is a tool that
can assist marketing managers in different tasks. CRM has much wider scope.
2. CRM is marketing process. CRM is a business strategy, and the deployment of a CRM
software means that customer-related data is shared across all organization
departments. Customer-related data can be used to produce customized products or
services, to help recruit and train customer-facing staff; and to develop new products.
Such misunderstanding arose from the fact that many CRM software applications are
used for marketing activities such as market segmentation, customer acquisition,
customer retention; and customer development.
3. CRM is an IT issue. A goal of CRM is the development of relationships with profitable
customers, as well as retention of those that worth retaining. This is not necessarily
related to IT investment; those may be behavioural changes in store employees, an
education of call centre staff, and a focus on empathy and reliability from salespeople. IT
is used to enable development and implementation of those processes. The importance
of people and processes should not be underestimated, as a CRM software cannot
compensate for bad processes or unskilled people. Successful CRM implementations
involve people designing and implementing processes that deliver value to both a
customer and a company.
4. CRM is about loyalty schemes. Loyalty schemes provide a company with information
about customers and may serve as an exit barrier for a customer. But not all CRM
implementations are linked to loyalty schemes.
5. CRM can be implemented by any company. A strategic CRM indeed can be
implemented by any company. Every organization can be driven by desire to be
customer-driven. Any company also can implement an operational CRM by using sales
force automation, lead management and contact management processes. However,
analytical CRM is based on customer-related data. If data is missing or is of poor quality,
then analytical CRM cannot be implemented. (Buttle, 2009, pp.12-14)
CRM, also more recently called "customer management", is a business approach that seeks
to create, develop, and enhance relationships with carefully targeted customers in order to
improve customer value and corporate profitability and thereby maximize shareholder value.
(Woodcock, et al., 2003) CRM is aimed at increasing the acquisition and retention of
20
profitable customers by, respectively, initiating and improving relationships with them.
(Payne, 2009)
CRM is not simply a software application or system for tracking client data and activities. It
is a strategic business tool that can be used effectively for business growth. CRM should
serve as the single point of contact to help understand customer’s needs, and apply
knowledge from previous interactions with customers to design better products, services,
and business processes for your target customer segments. (Wong, 2011).
2.8 The role of CRM
Many discussions about the role of CRM in businesses start with often-quoted factoid that it
costs a company six times more to sell a product to a new customer than it does to sell to
an existing one. Although six times is acknowledged as the prevalent figure, reports on new-
customer acquisition costs vary, from low as three times to as high as thirteen times. (Dyché,
2001) However, two main aspects should be taken into consideration when we discuss a
role of CRM. First, it may not always be a profitable strategy for a firm to be relationship-
oriented. And second, a customer relationship strategy takes time to provide a value, it is
not seen in first quarter report. It is definitely not a short-time fast profit strategy. (Grönroos,
2007) If the firm has shareholders who reacting on quarterly results, it is difficult to establish
the long-term relationships with customers. The same applies also to partnerships with
suppliers, distributors and other network partners that may be needed. It forces
management to focus on short-term value-creating decisions. (Reichheld, 1996)
CRM needs an appropriate CRM vision, strategy, action plan and implementation. To ensure
success of CRM, a mechanism to measure, monitor, and manage its performance is
required. (Brown & Gulycz, 2002)
From previous section can be clearly seen that CRM is about understanding customer
needs, attracting new customers and retaining them, and all that became more easily
achievable with relative recent advancements of technology. But what is more important,
CRM helps companies to understand, which customers they are willing to keep. Costs of
serving certain customers may be higher than the profit they bring, so it is wise for the
company to let them to churn. And last but not least – a CRM helps businesses to save
21
money using more targeted marketing campaigns and not overspending on customer
segments which may not bring any profit at the end. Therefore, the main reason for building
relationships with customers is economic. (Buttle, 2009)
The customer base should be created with the goal to retain existing customers and recruit
new customers that have future profit potential or otherwise important for strategic purposes.
Customers are not equally important, some may not be worth recruiting or retaining at all.
Those who have a high cost-to-serve, debtors, late payers or promiscuous (in the sense that
they switch frequently between suppliers) are not worth investment. (Buttle, 2009)
Improving valuable customer retention rates reduces company's marketing costs and gives
better customer insight. The cost-to-serve of existing customers also tends fall over time.
Besides better understanding of customer requirements and expectations by a company,
customers themselves also come to understand what supplier or service provider can do for
them. (Buttle, 2009).
2.9 Types of CRM
According to Buttle (2009), there are four major types of CRM: strategic, operational,
analytical and collaborative CRM. Payne (2009) classifies CRM into three types: operational,
analytical and collaborative CRM; as well as mentions strategic CRM, e-CRM and partner
relationship marketing. Four types of CRM – strategic, operational, analytical and
collaborative are presented in Table 2.
All three types – operational, analytical and collaborative are often referred as three
components of CRM, needed to create a successful CRM. (Buttle, 2009; Payne, 2009)
Similar idea is expressed in Grönroos (2007), where relationship strategy has three main
tactical elements:
1. Direct contacts with customers and other business partners
2. A database covering necessary information about customers and others
3. A customer-centric service system. Employees, technology, customers and time are
central resources to development of a successful service system. It creates extra cost if
central resources are badly managed. (Grönroos, 2007)
22
Table 2. Four types of CRM.
Strategic CRM
Strategic CRM is a customer-centric business culture and strategy that aims
at winning and keeping profitable customers. (Buttle, 2009, p. 4) It involves
the development of an approach to CRM that starts with the business
strategy of the enterprise and is concerned with development of customer
relationships that result in long-term shareholder value creation. (Payne,
2009, p. 24)
Operational CRM
Operational CRM focuses on the automation of customer-facing and
customer-supporting processes such as selling, marketing and customer
service. Major CRM software applications within operational CRM are
enabling marketing automation, sales-force automation and customer
service automation. (Buttle, 2009)
In the mid-1990’s term CRM is often used to describe technology-based
customer solutions, such as sales force automation (SFA). (Dyché, 2001;
Buttle, 2009; Payne & Frow, 2005) According to Buttle, SFA was the original
form of operational CRM. (Buttle, 2009)
Analytical CRM
Analytical CRM focuses on the intelligent mining of customer related data
for strategic and tactical purposes. Analytical CRM is concerned with
capturing, storing, extracting, integrating, processing, interpreting,
distributing, using and reporting customer-related data to enhance both
customer and company value. (Buttle, 2009)
Collaborative
CRM
Collaborative CRM involves the use of collaborative services and
infrastructure to make interaction between a company and its multiple
channels possible. This enables interaction between customers, the
enterprise and its employees. (Payne, 2009, p. 23) Collaborative CRM is the
term used to describe the strategic and tactical alignment of normally
separate enterprises in the supply chain for the more profitable identification,
attraction, retention, and development of customers. (Kracklauer, et al.,
2004)
2.10 Types of business
Customer-centricity competes with other business logics. Kotler (2000) identifies three other
major business orientations: product, production, and selling.
Product-oriented businesses believe that customers choose products with the best quality,
performance, design or features. In these firms it is common for the customer’s voice to be
missing when important marketing, selling or service decisions are made. Little or no
customer research conducted and management makes assumptions about what customers
want. These are often very innovative businesses with overspecified and overengineered
23
products for the requirements of the market. They usually are oriented price-insensitive
“innovators”, which is 2.5% of the market. (Kotler, 2000)
Production-oriented businesses base their strategy on low-price products. Consequently,
these businesses do all efforts to keep operating costs low and to develop low-cost routes
on the market. (Kotler, 2000)
Sales-oriented businesses invest in advertising, selling, public relations and sales
promotion. Their strategy is to persuade customers to buy. (Kotler, 2000)
Customer- or market-oriented companies are putting the customer first. Their strategy based
on collection, dissemination and use of customer or competitive information in order to
develop better value propositions for their customers. A customer-centric firm is a learning
and adaptive enterprise. It constantly adapts to customer’s requirements and competitive
conditions. Evidence suggests that customer-centricity correlates strongly with overall
business performance. (Deshpande, 1999)
As Buttle (2009, p.5) states, “many managers would argue that customer-centricity must be
right for all companies. However, at different stages of market or economic development,
other orientations may have stronger appeal”. It is not always profitable for the company to
be customer-centric. (Buttle, 2009; Grönroos, 2007)
As regards to the industry I am reviewing in this Thesis, it is first and foremost service
business. According to Grönroos,
A service is a process consisting of a series of more or less intangible activities that
normally, but not necessarily always, take place in interactions between the customer
and service employees and/or physical resources or goods and/or systems of the
service provider, which are provided as solutions to customer problems. (Grönroos,
2007)
Important generic characteristic of services is that services are produced and consumed
simultaneously and the customer is a co-producer of the service, at least to some extent. As
services don’t exist before they are consumed, the quality of particular product or service is
whatever the customer perceives it to be (Grönroos, 2007).
24
3 CRM models
As can be seen from the previous chapter there is a wide variety of different aspects of CRM.
Creating a model or a conceptual framework is a good way to apply rich theoretical
information to practice. A company can use such model in evaluation of its processes and
organization structures, step by step, in order to see where present processes create or
destroy value for customers and, therefore for stakeholders of the company.
Following subsections are representing descriptions and basic elements of five main models
of CRM.
3.1 The IDIC model – Identify, Differentiate, Interact and Customize
The IDIC Model has been developed by Peppers and Rogers in 2004. According to its main
concept, companies should take four actions in order to build closer one-to-one relationships
with their customers: Identify, Differentiate, Interact and Customize. Relations between
mentioned actions are presented graphically in Figure 2. (Peppers & Rogers, 2004)
Figure 2. The IDIC model of CRM: Identify, Differentiate, Interact and Customize (Peppers & Rogers,
2004).
Four suggested actions are as follows:
25
1. Identify. The company should identify who are its customers and build a deep
understanding of them.
2. Differentiate. The company should differentiate its customers in order to identify those
who have or who will have the biggest value. The differentiation can allow the company
to formulate and implement customer specific individual strategies for different customers
or customer groups.
3. Interact. The company should interact with its customers in order to ensure that customer
expectations are understood. It allows also to evaluate customer relationships with other
suppliers or brands. Each successive interaction with a customer should take place in the
context of all previous interactions with that customer. A conversation with a customer
should pick up where the last one left off. Effective customer interactions provide better
insight into customer’s needs.
4. Customize. The company should tailor its offer and communications according to
expectations of its customers. In order to involve a customer in a relationship, the
company also should adapt some aspects of its behaviour toward a customer, based on
that individual’s needs and value. (Peppers, et al., 1999; Peppers & Rogers, 2004)
3.2 The CRM Value Chain
The CRM Value Chain is a model developed by Francis Buttle (see Figure 3). According to
Buttle, the “CRM Value Chain is a proven model which businesses can follow when
developing and implementing their CRM strategies. The ultimate purpose of the CRM value
chain process is to ensure that the company builds long-term mutually-beneficial
relationships with its strategically-significant customers”. (Buttle, 2004)
The model consists of five primary stages: customer portfolio analysis, customer intimacy,
network development, value proposition development and managing the customer lifecycle.
Those are supported by four conditions: leadership and culture, data and IT, people; and
processes.(See Figure 3).
26
Figure 3. The CRM value chain (Buttle, 2004).
Five primary stages create and deliver value propositions that acquire and retain profitable
customers. Four supporting conditions enable the CRM strategy to function effectively and
efficiently. (Buttle, 2004)
The five primary stages are as follows:
I. The “Customer Portfolio Analysis” step analyses the customer base to identify customers
to target with different value propositions. The main question to be answered on this phase
is “Who are our strategically significant customers?” for companies which have no
customer history, Buttle suggests to use segmentation approaches.
II. Choosing the right customer stage is followed by next, the “Customer Intimacy” step. It
involves processes of getting to know the selected customers as segments or individuals
and building a customer data-base which is accessible to all those whose decisions or
activities impact upon customer attitude and behaviour.
III. The “Network Development” step involves building a strong network of relationships with
employees, suppliers, partners and investors who understand the requirements of the
chosen customers.
IV. The “Value Proposition Development” step involves developing of propositions of mutual
value for the customer and the company which should be in compliance with the networks
from previous step.
V. The “Manage the Customer Lifecycle” stage stands for management of relationships with
customers. The focus here is on both structure and process. (Buttle, 2004)
27
Further Buttle (2004) suggests that CRM solutions cannot be transplanted into any
organisation in the absolute certainty that the business will flourish. CRM needs a supportive
culture as it is unlikely to yield dividends in companies which only pay lip service to customer
focus. Information technology, human resources and procurement processes should be
aligned with the CRM agenda. One of arguments to support this view is that CRM
implementation will not succeed in organisations wedded to product-based structures or
reward systems based on sales volume. (Buttle, 2004)
3.3 A conceptual framework for CRM strategy: The Five-Process Model
Figure 4. A Conceptual Framework for CRM Strategy (Payne & Frow, 2005; diagram; found on p.
171).
This model was developed by Payne & Frow in 2005 with an aim to identify the key generic
processes relevant to CRM. In their interactive research, Payne & Frow integrated a
synthesis of the literature with learning from field-based interactions with executives to
develop and refine the CRM strategy framework. The model was developed after workshop
with 34 highly experienced CRM practitioners, interviews with 20 CRM executives and six
executives from large CRM vendors. Payne and Frow emphasize the need for a cross-
28
functional, process-oriented approach that positions CRM at a strategic level. The
conceptual framework based on five key cross-functional CRM processes (a strategy
development process, a value creation process, a multichannel integration process, an
information management process, and a performance assessment process). The framework
explores the role and function of each element in the framework. Payne & Frow emphasize
that a single, process-based framework provides deeper insight into achieving success with
CRM strategy and implementation. (Payne & Frow, 2005)
The strategy development process includes the business strategy and the customer
strategy. The business strategy determines how the customer strategy should be developed
and how it should evolve over time. The customer strategy examines the existing and
potential customer base and identifies which forms of segmentation are the most
appropriate. (Payne & Frow, 2005)
The value creation process transforms the outputs of the strategy development process into
programs that both extract and deliver value. The three key elements of the value creation
process are (1) determining what value the company can provide to its customer; (2)
determining what value the company can receive from its customers; and (3) maximizing
the lifetime value of desirable customer segments by successful management of this value
exchange. (Payne & Frow, 2005)
The multichannel integration process is one of the most important processes in CRM. It
takes the outputs of the business strategy and value creation processes and translates them
into value-adding activities with customers. The multichannel integration process focuses
on decisions about what are the most appropriate combinations of channels and how to
ensure that customer experiences within those channels are highly positive. If a customer
interacts with more than one channel, this process creates and presents a single unified
view of the customer. (Payne & Frow, 2005)
The information management process is collecting, collating, and using customer data and
information from all customer contact points in order to generate customer insight and
appropriate marketing responses. The key material elements of the information
management process are the data repository, IT systems, analysis tools; and front office
and back office applications. (Payne & Frow, 2005)
29
The performance assessment process ensures that the organization’s strategic aims in
terms of CRM are being appropriately delivered and that a basis for future improvement is
established. This process can be viewed as having two main components: shareholder
results, which provide a macro view of the overall relationships that drive performance, and
performance monitoring, which provides a more detailed, micro view of metrics and key
performance indicators. (Payne & Frow, 2005)
3.4 The Gartner’s competency model: Eight Building Blocks of CRM
Figure 5: Eight building blocks of CRM (Gartner, Inc., 2001).
Gartner is the world's leading information technology research and advisory company.
Founded in 1979, Gartner is headquartered in Stamford, Connecticut, USA, and has 5,700
associates, including more than 1,435 research analysts and consultants, and clients in 85
countries. Company takes a significant place in CRM research. (Gartner, Inc., 2013)
The Gartner competency model (see Figure 5) suggests that companies need competencies
in main eight areas to company’s CRM initiative to be successful. Eight main areas of
competence are based on profile of the eight Fortune 1000 companies, which were noted
30
growing revenue year-after-year (all but one was profitable in 2000, which is the year of
research), and all ranked high in their respective industries. (Gartner, Inc., 2001)
Eight main competencies are CRM vision, CRM strategy, consistent valued customer
experience, organizational collaboration, CRM processes, CRM information, CRM
technology and CRM metrics. Those are described in Table 3.
Table 3. Eight main areas of competence. (cited from Gartner, Inc., 2001)
CRM Vision
Successful enterprises display inspirational leadership, building a
market position against competitors with defined value propositions
based on requirements, personified by the brand and communicated.
CRM Strategy
A successful enterprise should understand how the customer base can
be turned into an asset through the delivery of a customer value
proposition. It should provide objectives, segments and customers, and
it should define how resources will be used in interactions.
Consistent Valued
Customer
Experience
This involves ensuring that the propositions have value to the customer
and the enterprise, achieve the desired market position and are
delivered consistently across channels.
Organizational
Collaboration
This involves the transformation of culture, structures and behaviours to
ensure that staff, partners and suppliers work together to deliver what is
promised. Critical to ensuring end user acceptance of new behaviours
and enabling technology is a solid change management strategy.
CRM Processes
This area involves the management of the customer life cycle and
processes relative to analysis, planning and knowledge management.
CRM Information
Quality data is collected and used to make decisions supporting
business processes.
CRM Technology
Successful enterprises leverage data and information management,
customer-facing applications, and supporting IT infrastructure and
architecture to enable CRM. With an antiquated system and manual
processes, fulfilling customer needs is impossible.
CRM Metrics
It is important to track internal and external measures of CRM success
and failure. Increasingly, enterprises will begin to establish the key
elements of their value proposition and service delivery that really drive
customer loyalty — as the customer sees it. At the same time, they can
establish areas in which they are overdelivering on customer
requirements and, thus, can make cost savings without affecting
loyalty.
As Garner Research Inc. homepage states, “Gartner is the IT professional's best first source
for addressing virtually any IT issue because of our world-class, objective insight, the rapid
access to that insight, and the low cost compared to the impact and other alternatives”
(Gartner, Inc., 2013)
31
3.5 The QCi Model: The Customer Management Framework
Figure 6: The QCi Customer Management Model (Woodcock, et al., 2003).
The QCi model is a product of consultancy firm “The Customer Framework”. Authors of this
model describe it as a customer management model, excluding the word "relationship". At
the heart of the model they put “customer management activity”, a set of processes that
companies need to implement in order to acquire and retain customers. The model
emphasizes significance of people performing “customer management activity” processes.
Technology is used to assist in those activities. The model has eight major elements –
analysis and planning, proposition, information and technology, people and organization,
process management, customer management activity, measuring the effect and customer
experience. (Woodcock, et al., 2003; The Customer Framework Ltd, 2011-2013)
The main value of this model for present research is that it puts customer management
activity at the heart of model, with people and organization as immediate supportive process.
Another strong point is that the QCi model omits using “relationship” part of CRM. As Ward
and Dagger have found, relationship strength varies “significantly between service products
and individual customers, and the impact of duration of relationship and the frequency of
purchase on relationship strength depends greatly on the nature of the service product”.
32
(Ward & Dagger, 2007, p.281) Therefore, this model will be the most suitable for adequate
assessment of service business.
Following Table 4. represents a brief overview of model’s main elements by its authors,
Woodcock, et al. (2003).
Table 4. The Customer Management Model: main elements. (cited from Woodcock, et al., 2003,
pp.12-18)
Analysis and
planning
Everything starts with understanding the value and behaviour of different
customers and different customer groups. Once a clear and comprehensive
understanding has been developed, customers and prospects need to be
segmented so that planning activity can be as effective as possible. This planning
will be focused on enabling the organization to REAP the value of its customer
base, focusing on retention, efficiency, acquisition and penetration (REAP).
Proposition
Once the customers to be managed (or explicitly not managed) have been
defined, propositions need to be developed that will match the needs of these
customers and that will be attractive to new customers. There will often be
different propositions for different groups, so a customer need’s research by
segments is needed. These propositions need to be defined at detailed level that
drives the experience the customer can expect in dealing with the organization,
its products, and its partners or channels. Development of service standards is a
useful tool at this stage. It is therefore critical that the propositions are
communicated effectively to both customers and the people who deliver them.
Information
and
technology
Technology exists to help organizations acquire, manage and use the vast
amount of information involved in managing customers. It is an enabler rather
than a deliverable in its own right, but managed badly it can also be a stopper.
An organization needs to understand what information it has available, what is
missing and how to manage information. The technology then needs to deliver
the current information to relevant people at the right time in order for them to
fulfil their role in managing customers. Of course, technology must be reviewed
constantly against changing needs and development in the technology itself. Key
processes in information and technology part are sourcing and understanding
customer information, information planning and quality management, review of
current systems and development of new ones.
People and
organization
Customer management people need to be recruited, managed, developed and
motivated within a supporting structure. The term ‘customer management people’
also needs to be considered in its widest context, extending to suppliers and
channels as well.
Main variables for people and organization are organizational structure, role
identification, competencies definition and gap analysis, training requirements
and resources, objective setting and monitoring and supplier selection and
management.
Process
management
Processes are often difficult to implement and manage formally in an
environment with so many sales and marketing people. But clear, consistent
processes are essential to all areas of customer management and to achieving
constant and step-change improvements. Also, processes need to be reviewed
constantly for acceptability from both the customer’s point of view and the
organization’s point of view.
33
Customer
management
activity
Customer management activity is about implementing the plans to deliver the
proposition across the customer lifecycle. Customer management includes
targeting, enquiry management, welcoming, getting to know, customer
development, managing problems and winning back activities.
Measuring
the effect
Measurement of all elements of customer management activity forms feedback
into the planning process ensuring continual improvement and thus building
sustainable competitive advantage. It also enables individuals and channels to
understand how well they are performing their roles and how much they are
contributing towards the overall customer management success of the
organization. Measurement of the effect is done using strategic measures, key
performance indicators and corporate measures cascading down to individuals,
campaign measurement and channel management.
Customer
experience
Measurement activity needs to be supplemented with an understanding of the
customer experience of dealing with the organization. The links between what
customers say they feel, what they actually feel and what they do need to be
understood clearly if loyalty is to be maximized. Every opportunity also needs to
be taken to ensure that people at all levels within the organization are very clear
about how their activity appears to customers.
Customer experience is measured using satisfaction monitoring, event-driven
research, loyalty analysis, mystery shopping and benchmarking techniques.
A “customer management activity” is the most important part of the whole model. It has
seven major elements (represented in the Figure 7):
Figure 7. Customer Management Activity (Woodcock, et al., 2003).
1) Targeting. The defined propositions should be accurately delivered to the customer
and prospect groups identified in the planning activity.
2) The management of enquiries. It is the vital link between campaign or trigger-
based promotional activity and successful sale. Enquiries start as soon as an
individual expresses an interest and continue through qualification, lead handling
and result reporting.
34
3) Welcoming. This activity ranges from often forgotten simple ‘thank you’ through to
sophisticated contact strategies. Welcoming activity needs to ensure that new
customers are comfortable dealing with the organization and that they know how to
get the most out of their relationship.
4) Getting to know. Information about customers is vital for a long and valuable
relationship. New customers need to be convinced that there is something in it for
them if they are to give more information about themselves. When information is
collected it needs to be used and maintained.
5) Customer development. This a set of processes geared towards development of
valuable customer groups.
6) Managing problems. All relationships will go through difficult phases. The best
organizations are able to predict and identify problem areas before major complaints
and relationship breakdowns occur. But even when these do happen, it is important
to remember that a well-handled complaint is often communicated to more ‘referrals’
than a well-handled sales cycle.
7) Winback. It is the least exploited method of customer acquisition. It is important to
ensure that only valuable customers are targeted for winback activity. (Woodcock,
et al., 2003, pp. 14-17)
3.6 CRM model for optical retail business
All five models described are of great value for a CRM implementation. However, two of
them – the IDIC model (Figure 8) and the CRM Value Chain (Figure 9) present a scheme
for one variable of the CRM business model – the customer strategy for former and the value
chain creation for the latter.
The IDIC methodology presents not a model but a general overview on how customer
relationships should be managed. It doesn’t take into account a complex organization
structure and don’t offer connection between all units of the company in terms of building
and implementation of customer-oriented strategy. The model has four main determinants
mainly concentrated on “serving selected customer groups customers at a profit” where all
steps are geared towards successful segmentation and tailored proposition. This model
offers great approach and philosophy for customers’ segmentation and tailoring offers
35
according different customer groups. But it doesn’t explain the whole work of an
organization, and the role of different organization silos in a value creation for the customer,
as well as technology role in building CRM based approach. In terms of CRM as a business
strategy, such variables as environment or organization structure should be taken into
consideration as well.
Figure 8. The IDIC model (Peppers & Rogers, 2004).
Another weakness of this model in terms of present research is that it is built on philosophy
that for development of a relationship it is sufficient to create a value for the client, i.e.
relationship is developed when a customer gets a tailored product. This is in conflict with the
actual notion of a relationship discussed previously. Despite the fact that the IDIC model
doesn’t serve the purpose of present research, the value of IDIC model for such process as
the customer segmentation should not be underestimated.
Figure 9. The CRM Value Chain (Buttle, 2004).
36
The CRM Value Chain model discusses mainly value chain, not the whole organization
network, as well as misses performance measurement variable. The model also puts people
factor as human resources management process in middle-importance supporting condition
section. Such approach won’t benefit for optical retail business where all activities are
organized around retail units. A model for such business should put people and organization
to a more significant place within a model.
Three other models reviewed – Gartner’s eight building blocks of CRM (illustrated in Figure
11), Payne’s the five-process model (all five processes are illustrated in Figure 10) and the
QCi or the Customer Management Model (Figure 12) have many common characteristics –
customer strategy, segmentation of a customer database, value proposition, information and
human resources management processes; and performance measurement processes. All
three models review the whole network of processes involved in CRM. Garner’s and Payne’s
frameworks have major parts of their models dedicated to information and technology
processes.
To choose a model from all three left, it is important to review a distinctive qualities of optical
retail business. First, all processes of the organization usually support activities in retail
outlets, and customer facing processes and people are crucial to the performance of the
whole business. Second, it usually consists of small and middle size businesses, due what
they unlikely will use advanced information systems and analysis tools. Third, it is a service
business, as many products sold does not exist before they are consumed and all products
need tailoring for each particular customer. (Cegarra-Navarro, 2007; Yavas, et al., 2008)
Figure 10. The five-process model. (Payne & Frow, 2005, p.171)
37
Figure 11. Eight building blocks of CRM. (Gartner, Inc., 2001)
Figure 12. The Customer Management Model (The QCi model). (Woodcock, et al., 2003)
Studies in the field of optometry and optical retail business indicate several important trends
– often value proposition and important aspects of it perceived differently by optometric
service providers and their customers, as well as information available at retail units is not
the same which company CRM uses. (Cegarra-Navarro, 2007; Yavas, et al., 2008) Those
facts indicate a need for all processes to be organized around customer management
38
activity. It should be done in order to ensure that everyone in the back-office supportive units
has immediate access and can take corrective action.
Research of CRM approaches in optical retail industry is rather limited. Data of research for
service business indicates that the nature of the service product has a significant impact on
a relationship or relationship strength. The belief that organization must take relationship
marketing activities to the same degree to remain competitive will almost certainly have a
different level of relevance in different services. The difficulty form managerial perspective
is that firstly, managers have no control over customer preferences. Some customers want
strong relationships while others do not. Secondly, managers cannot normally measure
individual perspectives to find out where each individual customer stands. Only research to
identify the overall customer profile according to segment and relationship development
propensity is possible. (Ward & Dagger, 2007) Based on this, performance measurements
based mostly on relationship development and relationship quality would always show that
a service business is underperforming. Hence, a business model which has major part
dedicated to maintaining and developing relationships will be a waste of resources and will
always show that company is underperforming in building a conceptual framework for CRM.
However, unlike other consumer products retail, given industry also specializes in providing
primary health services. In research by Ward and Dagger (2007), many customers wanted
closer relationship with medical service providers. It leads to a conclusion that, although,
emphasis on relationship elements should not be emphasized, it shouldn’t be also excluded
from the model.
All facts about optical retail industry and service business are in favour of the QCi model,
which omits the relationship part and proposes to use term customer management.
However, the model doesn’t exclude “relationship” element out of the framework. The QCi
model also puts customer management activities to the heart of the model and connects it
to all other processes of an organization. Significant point in favour of this model is that
people and organization are being involved in all major value creation processes and are
having significant place in the model. Such structure is crucial for a business operating in
optical retail.
39
4 Customer management value chain in case companies
Results of interviews in both companies showed that relationship quality control is not
possible and at some point even not being done at the moment. It supports the previously
explained choice of the model. Hereinafter I will discuss the model chosen in detail as well
as results of analysis for assessed case companies. In aspects of the model I will review
value adding and value destroying activities according to The Customer Management
Framework.
Due to confidentiality reasons for both case companies’ only results of analysis will be
presented. Analysis was done by comparing answers obtained from interview and other data
about the company with the list of best practices and value creating or destroying activities
listed for each of eight elements of The QCi Framework. The set of questions for assessment
for both case companies was exactly the same, and it can be found in Appendix 2.
4.1 Customer management value chain
The graphical representation of the QCi model chosen as well as eight main elements of it
were discussed in the previous chapter. However, the function and relations between
elements in the QCi model should be clarified in order to analyse the contribution of each to
the value chain of a company.
Value to the customers usually measured in terms of the appropriateness of benefits they
receive relative to their direct or indirect investment (for example, user costs, taxation, time).
As discussed previously, enhancing customer value is critical for most organizations. As can
be seen from figure, customer value can be created through the development and effective
delivery of the right proposition to the right customers. However, customer management is
not the only route to enhanced customer value. It can be done simply by producing excellent
products and at low cost. (Woodcock, et al., 2003)
40
Figure 13. The Customer Management value chain (Woodcock, et al., 2003).
However, besides profit customer management influences also the share price in the stock
market. If company is perceived to be managing customers and opportunity well, its share
price may go up. (Woodcock, et al., 2003)
4.2 Analysis and Planning
Analysis of the best practices in high-scoring companies of customer management study
indicates following. Successfully performing companies have determined their competitive
arena, understand their competitors; have determined customers’ groups they can manage
at the moment; know what they need to change and how much they can spend on the
attraction of different customer groups. They also have clearly communicated their strategic
CRM objectives throughout organization; and objectives they set are linked to and influence
retention, efficiency, acquisition and penetration of customer markets. It is important to be
41
clear about the profit of the company and from where it comes from. Successfully performing
companies understand acquisition, retention and development behaviour of their customers,
as well as the cost of acquiring and managing customers. (Woodcock, et al., 2003)
On the stage of analysis and planning value can be created through insight, knowledge and
effective planning. It includes understanding which customers a company wants to be
managed, as well as how much you can afford to spend in acquiring and retaining different
customer groups. It is important to retain those customers that are worth retaining and to
efficiently develop those with potential. Planning is also used to match resources to gross
value. Time spent on attracting, retaining or trying to develop customers should be relative
to a planned perceived value. (Woodcock, et al., 2003)
Value at the stage of analysis and planning is destroyed through a lack of customer
knowledge and insight, absent (or poor) data quality and/or data analysis, a mismatch of
costs and revenues; and missing or ineffective planning. (Woodcock, et al., 2003)
4.2.1 Analysis and Planning in the Case Company One
Results of interview and evaluation of data available from internal statements of the
company indicate that the Case Company One has a customer-oriented strategy which
takes into consideration all stakeholders interests, as well as manages well overall customer
management planning. The Case Company One has clearly defined its competitive area, a
target market and geographic area as well as has a clear understanding of its profit sources.
It uses a traditional approach for customer segmentation such as cluster analysis, main
variable used is purchasing behaviour. The time when last segmentation activity was done
is about three years ago. According to Brown& Gulycz, 2002, the segmentation should be
done at least once a year or when major changes take place (Brown & Gulycz, 2002).
The Case Company One has found it difficult to clearly define how much it can spend on
acquisition, retention and development of different customer groups.
42
4.2.2 Analysis and Planning in the Case Company Two
Results of interviews and study of provided documents indicate that a company has
customer-oriented strategy, a clear understanding of its profit sources, geographic area and
target market. Customer segmentation is done as traditional cluster analysis using
geographic and demographic data and purchasing behaviour. However, the time when the
last segmentation activities were done suggests that there is acute need for more recent
data. The Case Company Two has no data on how much it can spend on acquisition,
development and retention of different customer groups.
4.3 Proposition
At this stage main task is to create value through a proposition that helps to find, keep and
develop those customers a company wants to manage. The proposition should be
developed to attract similar customers, retain them and develop their value. It is suggested
that a company’s proposition should involve all supply chain providers to ensure that the
proposition is actually delivered. A communication of the proposition to staff who actually
manage customers and to their immediate managers is an essential part of a company’s
proposition. The poor communication of a value proposition to people delivering it is
destroying all value of a good proposition. Propositions should be also clearly defined and
articulated and go further than a set of brand values.
In the case on poor analysis and planning (see the previous stage of the model) the
proposition may be aimed at low value customer groups. (Woodcock, et al., 2003).
Based on study of success stories Woodcock, et al. (2003) suggest following check-list for
management of a company’s proposition (development of customer proposition is shown in
Figure 14):
Develop clear differentiated propositions aimed at those customers you want to manage.
Determine how you can build loyalty amongst key value groups.
Translate the proposition from high-level brand values to simple statements that can be
used to influence the behaviour of people who manage customers. A proposition is
43
meaningless unless it can be delivered. In fact, an undelivered promise is worse than no
promise at all: customers will feel let down.
Communicate the proposition well to employees, partners and customers.
Measure the behaviour and attitude change resulting from improved communication of
the proposition. (Woodcock, et al., 2003)
Figure 14: Development of the customer proposition. (Woodcock, et al., 2003)
Evaluation of the proposition of both companies was based both on the data obtained from
the interview, and the study of available information such as homepage, activity in social
media and own experiment based on mystery shopping.
4.3.1 Proposition of the Case Company One
The Case Company One regularly performs wide customer needs research and collects
feedback using different channels across the whole value chain. The Case Company One
has service standards formulated and those together with the value proposition of the
company are communicated to the staff which direct interaction with customers. Besides
44
abovementioned an effort is done to collect feedback from immediate interaction with
customers.
The results of study of information available in media and internet indicate that an overall
proposition of the company is clearly communicated; however, there are weaknesses in
communication of the proposition in social media, as an activity of the Case Company One
in this field is significantly weaker that of its direct competitors. However, evidence shows
that the importance of social media is growing, and many people are obtaining information
using those sources.
4.3.2 Proposition of the Case Company Two
Initial proposition of the Case Company Two is based on the study of customer behaviours.
Those include, e.g. warranty time. It is extended accordingly to an actual use of the product
not the standard time mentioned in EU legislation.
The Case Company Two does an effort to ensure that value proposition is communicated
at each transaction or enquiry, as well in media, internet and social media. The company
makes a significant effort to ensure that customers are informed and as well as feedback
from each customer is collected simultaneously. Each employee is trained accordingly to
carefully created service standards of the company. Present customer needs research is
performed using feedback from employees of each unit. The company quite actively
employs social media in communication of value proposition and monitoring of feedback
from customers.
Some weaknesses in the development of proposition were discovered during interviews.
The Case Company Two does not perform market research and its proposition is based on
previously made studies and feedback from shops. However, the company does effort to fix
this issue using instant marketing campaigns where a significant discount is offered for
certain customer groups (such as each month people of certain occupation or age get a
special price offer). During such activities customer has a chance to get to know the
proposition of the company from its employee which simultaneously collects feedback;
obtained data then collected from each unit separately.
45
4.4 Information and Technology
Companies successfully implementing CRM have three common characteristics of their
information and technology processes: improved data understanding, increased visibility of
customer data to employees and partners, and increased visibility of data to customers.
(Woodcock, et al., 2003)
The requirement of European data protection legislation is forcing European organizations
to understand better the information they have and to ensure that data is more accurate than
it was in the past. Customer databases are becoming more valuable. More possibilities of
data sharing lead to wider customer information accessibility to customer-facing staff as well
for all partners in collaborative CRM. Some organizations even open some or all of customer
information to customers themselves. This enables those customers to take some control of
their relationships and to maintain their own information, which also increases accuracy and
value of such information. (Woodcock, et al., 2003)
Based on the study of Woodcock, et al. (2003), the most often mistakes made in information
and technology processes are poor quality of data, poor maintenance of data, limited or no
access to systems at key customer points, limited capabilities due fragmentation of CRM
systems. Quite often data is stored with no specific purpose or customer access is not
provided.
4.4.1 Information and Technology: the Case Company One
The Case Company One has a CRM system developed for its own needs which contains
basic (e.g., geographic and demographic) information and purchases of the customer. The
company also shares data with partners and participates in a nationwide collaborative
customer loyalty program.
In terms of present research it was impossible to evaluate quality, maintenance and
accessibility of data stored in CRM, as this information is confidential to an outside
researcher.
46
4.4.2 Information and Technology: the Case Company Two
The Case Company Two uses a sales force automation (SFA) system which contains basic
data and past purchases as well as a number of patient card in a patient record database.
In a discussion of importance of sharing data between different units of the company, future
plans to introduce a CRM system to the Case Company Two were revealed.
4.5 People and Organization
According to Woodcock et al., the overall business performance is related to the
performance of “people and organization” variable. Interestingly, that good performance in
this area usually is correlated with weaker performance within systems and process areas.
One of conclusions are that over-systemizing customer service has a negative effect on
customer-facing employees and reduces the quality of customer interaction and service.
(Woodcock, et al., 2003)
Best-performing companies in the field have clear visible leadership of customer
management, internal communication that works smoothly, especially between customer-
facing departments and the rest of the organization. Ability to execute should be as well
made practical through an appropriate strategy and governance system. (Woodcock, et al.,
2003)
Evidence shows that customer management value is destroyed when incompetent people
or ineffective systems influence the customer experience, or when employees are not
motivated and rewarded or when suppliers are badly managed. It is easy to destroy all efforts
when objectives set are misaligned with the goals of organization. (Woodcock, et al., 2003)
4.5.1 People and Organization in the Case Company One
The Case Company One has an employee appraisal system according to the best practices
of service business. An employee evaluation takes into consideration the quality of service
47
and feedback from customers. The company also has workforce management processes in
order to ensure efficiency for each unit. The customer-facing staff undergoes mandatory
training.
4.5.2 People and Organization in the Case Company Two
The Case Company Two has a mandatory training of new employees and a mandatory
service model continuous training. In such way the company ensures that customer-facing
staff has everything to be competent. Despite this, the company had encountered problems
with employee competence and recently conducted a study with a purpose solve a problem
with appropriate evaluation of personnel. The results of this study indicated weak connection
between upper-level management and front-line office employees. To solve this problem,
the company introduced a system of customer service managers at each unit who also serve
as a bridge between above mentioned, and inform upper-management of the company
regarding customer feedback. It appeared, that new introduced system allows also better
workforce management. The company has a new appraisal system which takes into
consideration the quality of service. Previously only sales per person were taken into
consideration; which was admitted as inefficient. As the new system was introduced
relatively recently, results on its efficiency are not yet available.
4.6 Process Management
Customer management is a set of processes aimed to creation of value by being customer
centric. The best performing companies have processes which are defined with a customer
proposition in mind. All processes should be based on in-depth understanding of how they
will affect customers. Value for the customer, and therefore company, is destroyed when
processes are inflexible or confront or conflict with good customer management.
(Woodcock, et al., 2003)
48
4.6.1 Process Management in the Case Company One
Unfortunately, documentation for process management in the Case Company One was not
available for study. Evidence suggests that the company has processes for customer
segmentation, order processing, complaint management; and enquiry and workforce
management.
4.6.2 Process Management in the Case Company Two
The Case Company Two has created documented process models for enquiry management
and dissatisfaction management; the main algorithm of enquiry management is presented
in Figure 15.
Each employee undergoes mandatory training for each step of both models where possible
situations are discussed and documented as well. This guideline is available at every unit of
the company.
Figure 15. The enquiry management process of the Case Company Two. Source: the Case Company
Two process management documentation.
49
The whole enquiry management process of the Case Company Two is described both with
algorithm seen in Figure 15, and with possible phrases, hints, and examples of cases. This
document gets updated when new information becomes available.
Besides abovementioned, the Case Company Two has processes for order processing.
4.7 Customer Management Activity
Customer management activity is the most important part of the whole model, included
variables usually describe how customers are managed on a daily basis. It includes
acquisition, retention, development and recovery activities. (Woodcock, et al., 2003)
Success stories reveal that best-performing companies are very practical about their plans
and application of the principles of customer acquisition, retention and development.
Customer acquisition includes targeting, enquiry and winback activities. The best
performance in this area is achieved when company makes the most of all enquiries
received and targets right customers efficiently. Customers should easily configure what
your company offers to meet their needs.(Woodcock, et al., 2003)
Early retention of customers includes welcoming and getting to know activities. It is
suggested to provide thanks, as courtesy and reinforcement of purchasing decision. It is
important to ensure new customers understand, use and enjoy the company’s product, as
well as ensure that early relationship service management works. For the company is critical
to build an understanding of customers, how they want to be managed and what their
potential may be. (Woodcock, et al., 2003)
For the retention of customers in important not to underestimate the value of good customer
service, as well as to manage customer dissatisfaction effectively. As regards to high value
groups, they should be actively managed and contacted regularly. All abovementioned can
be done through a variety of channels, which are appropriate both to the customer and
business. (Woodcock, et al., 2003)
A value in this part of the model can be destroyed simply through inactivity, poor control and
inefficiency (e.g. enquiries wasted) and badly handled customer dissatisfaction. It is crucial
to control that customers don’t leave without being asked why and that company is focusing
50
on customer service excellence. Good practise in this part of the model would be to let
customers service or manage themselves, but enable them to obtain personal service when
they want it. All efforts should be made to predict defections from customer feedback and
contact analysis. (Woodcock, et al., 2003)
4.7.1 Customer Management Activity in the Case Company One
Customer marketing activities in the company are performed using all channels such as
media, Internet, radio and television. However, social media is used only for one customer
segment (in comparison with direct rivals, the company is twice less active both in
communication and encouragement of dialogue with customers).
Early retention practices are done accordingly to the best practices listed previously - new
customers are welcomed and enquiry management is effectively performed; comparing to
only 26% of CMAT assessed companies that say thank you to a new customer (Woodcock,
et al., 2003). The Case Company One doesn’t have different welcoming strategies for
different types of customer, but only 6% of companies in CMAT study have found to have
different welcoming strategies for different types (Woodcock, et al., 2003).
The Case Company One employs partially outsourced trigger-based targeting, which is a
great result. According to CMAT study, only 2% of companies use trigger-based marketing
(Woodcock, et al., 2003).
Management of dissatisfaction is done using mostly via retail outlets and a call-centre,
offering in some cases even opportunity for a customer to contact upper management of
company.
As regards to retention and winback activities as well as analysis of customers won – all
those processes can be performed only to a limited extent or are not done at all. No “health
check” of an ongoing relationship with a customer is possible as well.
51
4.7.2 Customer Management Activity in the Case Company Two
Company has developed detailed process documentation for enquiry management, as well
as service standards. This result is contrary to CMAT study where 60% of companies do not
have defined enquiry management process (Woodcock, et al., 2003).
However, the Case Company Two doesn’t have a process for targeting, winback or
welcoming; and nothing from abovementioned is being done. Only large corporate
customers included in the welcoming program, however, no welcoming or an early retention
process available for this as well.
For getting to know and retention the Case Company Two uses dissatisfaction management.
The company tries to resolve all complaints openly at the retail outlet, letting others to
witness each particular case. In such way company tries to encourage a dialogue with each
client who might be potentially unsatisfied.
Marketing activities are done via television, internet and radio; the company employs actively
different social media, and has assigned a person responding to customers’ posts and
following feedback.
4.8 Measuring the effect
The best performing companies are measuring the relationship between customer
behaviours and attitudes, CM activities and the effect on return on investment; as well as
measuring the impact of different media on customers, and learn from campaigns. Besides
this, measurement of the effectiveness of individuals is important. As regards to the impact
of different media and channels, it is crucial to evaluate its role in the acquisition, retention
and development processes. (Woodcock, et al., 2003)
The value for the whole model is created when the relationship between resource, activities
and performance is understood. All this should be done in order to ensure effective
management of CRM resources. The value is destroyed when effectiveness and efficiency
are not measured and then action taken and the organization does not learn from its
activities, successes and failures. (Woodcock, et al., 2003)
52
4.8.1 Measuring the Effect: the Case Company One
The Case Company One measures the effect of campaigns, the effect of individuals and
performs customer satisfaction surveys. Currently only limited measurement of the
relationship between customer behaviours and attitudes and CRM activities is possible. An
effect of different media and channels mainly evaluated by its role in the acquisition of new
customers.
4.8.2 Measuring the Effect: the Case Company Two
The Company Two measures the effect of individuals, the effect of channels and campaigns.
Customer satisfaction and feedback is collected from customer service managers at each
retail unit, no customer satisfaction surveys are done at the moment. An effect of different
media and channels mainly evaluated by its role in the acquisition of new customers.
4.9 Customer experience
It is the most sensitive part of the whole model where value built in other framework parts
can be easily destroyed. The most dangerous are poor customer experiences; ignored or
unclear proposition of the company. It is important to measure the experience of customers
against that provided by competitors. (Woodcock, et al., 2003)
The best performing companies in the field understand not just customer satisfaction, but
commitment as well; and they recognize that the customer experience is dependent on
being able to understand and respond in a timely and appropriate manner when the
customer needs change. (Woodcock, et al., 2003)
4.9.1 Customer Experience: the Case Company One
Customer satisfaction is measured using surveys after purchase, as well as evaluating
feedback from retail units. Customer experience after purchase is measured using email,
53
where response rate is considered as good. There is no possibility to check whether a
customer remains loyal or establish the quality of existing relationship.
Overall customer experience is enhanced by user-friendly company’s homepages and broad
choice of appointment reservation options. Research experiment showed that value
proposition of the company is clearly communicated, communication is easy and customer
experiences good service; but some aspects may be enhanced.
4.9.2 Customer Experience: the Case Company Two
The Case Company Two doesn’t have any satisfaction survey system. Customer
satisfaction is measured using feedback from customers in the retail unit or using social
media.
Event-driven satisfaction research performed by each unit’s customer service manager. It is
usually documented or verbally reported. In comparison to CMAT data – only 6 % of
companies use event-driven satisfaction research (Woodcock, et al., 2003). However, there
is still no possibility to check ongoing relationship quality, or establish whether a customer
remains loyal; as well events researched usually are complaints.
The overall customer value proposition is communicated clearly, significant emphasis
recently put on social CRM development. Homepage is informative and bilingual, but doesn’t
have an online appointment system. Such feature is available only via phone or personal
visit.
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5 Discussion
In following chapter data obtained from both case companies will be analysed against the
best practices and compared to overall trends from results of CMAT study. CMAT is a
research tool used by creators of The QCi Model to assess CRM approach in companies.
In this research data from CMAT assessment of 250 companies will be used, studies were
carried out in Europe, North America and Asia Pacific, and results reflected in the book “The
customer management scorecard: managing CRM for profit” (Woodcock, et al., 2003).
Each company was evaluated according to eight main elements of The Customer
Management Model. Those are analysis and planning, proposition, information and
technology, people and organization, process management, customer management activity,
measuring the effect and customer experience. Relations between each of elements in the
model are presented in Figure 16.
Figure 16. The QCi customer management model. (Woodcock, et al., 2003)
Before or during an interview each interviewee was asked to perform a self-assessment of
a company’s readiness to create a CRM vision. A self-assessment questionnaire created by
Brown and Gulycz served this purpose. (Brown & Gulycz, 2002) This questionnaire allows
to assess overall level of readiness towards CRM vision for the company. Authors suggest
to use it as a guide for reading their book, and divide all companies into three groups.
55
Both companies assessed themselves, and results placed them in the group three where
CRM vision is strong, and only advices on advanced techniques are necessary.
The research revealed that there are several major weaknesses in the CRM approach of
both companies; and re-assessment using obtained data placed the Case Company One
closer to the level between a second and a third group, and the Case Company Two to the
second group. It supported another initial expectation that businesses tend to evaluate their
CRM initiatives more positively than they are.
Based on assessment and suggested elements from the CRM model reviewed, one major
CRM-related proposal for improvement for each case company was created.
5.1 Analysis and Planning
Both companies have indicated difficulties in understanding how much they can afford to
spend acquiring, developing and retaining different customer groups. According to
Woodcock, et al. (2003), it is quite common for the companies to have weak points in
customer acquisition, retention and development processes’ evaluation. The results of the
CMAT study indicate that 62% of companies do not use target acquisition costs, 63% of
companies still do not measure retention rates, 39% do not consider propensity to buy in
their cross-selling activity; and 45% do not use cross-sell triggers. A sales plan of many
companies is based on the ‘acquisition at any cost’. Target acquisition costs (allowable cost
of sale) are rarely used. Few companies employ targeted contact strategies even for high-
value customers. 49% of the companies do not recognize and do not use triggers (during
an inbound service call for instance) to identify cross-selling opportunities. (Woodcock, et
al., 2003)
One way to solve this issue, according to Woodcock et al., is to determine the net present
value (NPV) of different customer segments; apply percent probability (that is, to what extent
company is sure of achieving planned amount of NPV) to this and determine what percent
company can afford to spend on acquisition and retention. (Woodcock, et al., 2003)
Another common issue for both companies is segmentation activity’s time. According to
Brown and Gulycz, the time when segmentation of both companies is done is obviously
56
outdated as it should be done at least once a year (Brown & Gulycz, 2002). In Payne, Buttle
or Woodcock, et al., there is no suggestion that segmentation should be done with such
frequency (Buttle, 2009; Payne, 2009; Woodcock, et al., 2003).
5.2 Developing proposition
The Case Company One working on proposition creation performing market and customer
needs research, whereas the Case Company Two uses previous studies and customer
feedback from the shop. Obviously, it shows weaknesses of the Case Company Two in the
development of its proposition, but currently interesting methods to solve this problem are
used.
According to CMAT research, only one out of four companies (24%) does carry customer
true needs research. Other types of research are carried, often focused on views about the
current or future product range; but those do not reveal customers’ underlying needs.
Evidence shows that only about one in ten carry out needs-based research by segment.
(Woodcock, et al., 2003)
5.3 Communicating proposition
Both companies are working on their value proposition and communication, carry needs
research and tailor proposition accordingly. “Mystery shopping” experiment in the Case
Company One and direct observation of the working routine of the Case Company Two have
supported this view. However, the Case Company One would benefit from a more active
use of social media, and the Case Company Two from a customer needs research.
According to Woodcock, et al. (2003), approximately a third of companies do not formally
check that their customers or their own staff understand their proposition. Dissatisfaction
studies have shown that a significant amount of complaints are caused by a mismatch
between what customers think they are entitled to and what the organization thinks it is
providing. Interesting, that actual service or product failures do not cause so many
complaints. (Woodcock, et al., 2003)
57
5.4 Information and Technology
There are certain restrictions regarding information openness and availability within this
field. Customer data usually contains geographic/demographic and purchase data as well
as medical records – an information which is partially or entirely confidential. In most
companies in the field you would expect to have gender, age, address and purchases data
used in CRM or SFA system with a separate medical record unit due confidentiality.
As regards to common trends, only 37% of companies within CMAT study have robust
programmes for data protection compliance and only 26% have formal quality standards for
imported data. And only about 1 out 10 companies store in their customer databases activity
records that reflect also customer plans besides past information. (Woodcock, et al., 2003)
This is most likely a reason for ongoing discussion on the right way of CRM solution
introduction, as some companies find it difficult to see its benefits.
5.5 People and Organization
Both companies use employee appraisal system for retail staff according practices
recommended for a service business (see Grönroos, 2007) and make efforts to ensure
employee competence. The Case Company One has a well-established practice of doing
that, the Case Company Two just had started the initiative. Results for both companies
indicate that management principles are facilitating customer orientation for customer-facing
employees.
The limitations of the present study don’t offer to establish whether the same level of
customer-centricity exists for employees having no direct contact with customers of both
companies.
According to previously cited CMAT study, only 11% have formally identified all the staff
roles that impact on customer management. Usually the staff in retail outlets, call centres,
customer service and field are considered as having impact on it. Important to understand
that the staff of logistics, credit control, technical support, problem development, accounts
and security departments are also influencing customer management. Besides this, only
58
14% of assessed companies have shared objectives across departments. (Woodcock, et
al., 2003)
5.6 Process Management
Unfortunately, documentation for the process management in the Case Company One was
not available for study. Evidence suggests that the company has processes for customer
segmentation, order processing, complaint management and enquiry management.
The Case Company Two provided the researcher with available documentation on enquiry
management as well as briefly described a complaint management process. The Case
Company Two also has process for order processing.
The results of assessment of the Case Company Two suggest that it has only partially
identified process that may have impact on customer management. However, according to
CMAT study data only 6% of the companies usually have formally identified all customer
management processes (Woodcock, et al., 2003). The following processes may have impact
on customers: new product development and launch, product withdrawal, customer
segmentation, contact planning, volume/margin forecasting, order processing, customer
deliveries, returns and credits, enquiry management, prospect conversion, customer
upgrade, key account management, complaint management, invoice payments, credit
control, customer defection and customer return. (Woodcock, et al., 2003)
5.7 Customer Management Activity
As previous research showed, developing of a relationship, evaluating its quality in the case
of optical retail business is difficult or impossible. Both companies have weaknesses in
winback activities; the Case Company Two doesn’t have any of early retention processes.
The Case Company Two has an original solution to this problem by encouraging clients to
complain, in that way developing dialogue with its customers. To prove efficiency of this
approach more research needed. Therefore, it should be carefully considered whether to
apply such technique as it brings necessity to assign extra resources.
59
The Case Company One would benefit from more active use of social media as a part of
targeting, retention, winback and managing dissatisfaction processes.
Winback is considered as a challenge in CMAT study as well - 46% of companies have
never run formal winback programmes and less than 1 out 20 do it regularly. According to
Woodcock et al., winback is a huge ‘lost opportunity’ in general and is consistently
overlooked. (Woodcock, et al., 2003)
5.8 Measuring the Effect
Both companies perform campaign measurement and contribution of the individual to
performance, but don’t have retention, efficiency, acquisition and penetration measurement
processes.
The results of CMAT study indicate that 70% of companies don’t have such processes as
well. Generally companies are better at measuring specific things such as campaigns,
channels and people than measuring customer retention, acquisition, penetration and cost
to serve. Although 3 out of 10 companies have such measures in place, only 1 in 20 have
measures covering all areas. (Woodcock, et al., 2003)
5.9 Customer Experience
Both companies make efforts to improve customer experience, but still there is a room for
improvements. For example, the Case Company Two would benefit from customer
satisfaction surveys; and the Case Company One from more active use of social media.
However, customer satisfaction survey data should be properly evaluated; and for the Case
Company Two used only to leverage an existing customer service management at each
retail unit. According to CMAT study, 60% of companies do not compare what customers
say with what they mean. Most companies carry out satisfaction surveys. The results are
usually aggregated to provide a ‘feel-good’ indicator to senior management, with all retail
60
detail lost. These high-level aggregated scores provide little insight into determinants of
commitment and repeat purchase. (Woodcock, et al., 2003)
Data of CMAT study also indicate that 32% do not know how they compare with competitors
in terms of customer management, but, nevertheless it is useful to compare performance
against competitors and best practices (Woodcock, et al., 2003). Present research provides
help with comparison against the best practices; as case companies are not competing nor
operating in the same market.
5.10 A proposal for the Case Company One
Assessment of the Case Company One against the best practices revealed several issues
for future improvement. Such customer management segment processes as retention,
winback or “health check” of ongoing relationship are not done because it is not feasible
using current system. As mentioned previously, the Case Company One would benefit from
more active use of social media as a part of targeting, retention, winback and managing
dissatisfaction processes. In the light of above mentioned and discussed facts, the adoption
of social CRM (SCRM) practices would be seen as a possible solution to address gaps
discovered.
According to Woodcock et al. (2011, p.54), social CRM or SCRM is “the connection of social
data (wherever it is) with existing customer records (customer database) that enable
companies to provide new forms of customer insight and more relevant context. Harnessed
with customer relationship management, social media can deliver financial benefits to
companies no matter what sector”.
The companies deciding to adopt social CRM approaches can benefit from increasing
customer insight and engagement. Social media enable the brand to extend its personality
to engage with consumers on consumer terms, such at the time, place and location they
want, as well through channels that they choose. Increased customer insight helps to drive
real customer-centric innovation; and the knowledge gained on customer behaviour,
attitudes and mood will help to enhance value chain, such as help in forecasting demand or
shaping in-store promotions. (Woodcock, et al., 2011) Benefits of social CRM are presented
in the Figure 17.
61
Figure 17. Benefits of social CRM (Woodcock, et al., 2011).
It is important to remember that not all customers have the same type and level of the usage
of social media. The currently accepted rule is that 90 percent of social media users only
view content, whereas 9 percent edit it such as provide a comment or review; and only 1
percent create a brand new content. This percentage profile is very different in some
segments of the population. (Woodcock, et al., 2011) However, if in a given situation the
check of an ongoing relationship is only partially possible or is not possible at all, the social
media is a good enhancement of current approach and valuable addition to classic customer
satisfaction surveys.
It is self-evident that organisations need to prepare for social CRM. Following presents a
check-list which large organisations have found helpful in their effort to integrate social CRM
with the way they manage customers (see Figure 18):
1) Ensure leadership buy-in and support. As with any other change, the first step is to create
a sense of urgency. (Kotter, 2007)The pressure for change needs to be clear, together
with the potential prize of getting social CRM integrated into the marketing mix.
62
2) Build and retain talent. The capability of an organisation’s people is unlikely to match the
ambition of the vision, and capable people in this area will be a desirable commodity for
other companies.
3) Evolve working culture. The norms of ‘the way we work round here’ will evolve, and it
needs to be more real time, agile, rapid response and collaborative. The close contact
with and knowledge of consumers will allow for greater innovation and co-creation (for
example, of content, promotions, products, offers, channels, services).
4) The way the brand teams plan, create, execute, and review should be evolved. Brand
teams need to treat SCRM both as a part of the marketing mix and as a relevant and
appropriate method to develop consumer engagement.
5) Reconsider measurement and evaluation techniques. Traditional brand metrics will be
enhanced by the consumer engagement rates, the number of fans, an influencer
strength, content ‘shares’, top conversations, top channels and so on.
6) Develop the right IT and data architecture. The SCRM world is open low-cost source
with flexible and rapid response. SM data and tools will need to be integrated with
traditional CRM systems to paint a full picture of a consumer’s behaviour. (The Customer
Framework Ltd, 2011-2013)
It is necessary to add that before deciding to upgrade from CRM to SCRM, the improvement
of activity and content in social media is essential.
Figure 18. Mind map: Organizing for SCRM in large organizations (picture in Woodcock, et al., 2011,
p.58; source of the picture: The Customer Framework Ltd, 2011).
63
As already stated, a SCRM approach need to be evaluated and decision is not quick, as
financial evaluation is needed. Therefore, the results of discussion of such improvement are
out of time scope of present research.
5.11 A proposal for the Case Company Two
Discussion with the Case Company Two revealed that of gaps in their CRM framework such
as welcoming of customers may be cost-efficiently solved using technology. As the
company’s business is growing, current sales force automation doesn’t serve scope of
operations. The upper-management of the Case Company Two currently discusses plans
to implement CRM solution in nearest future. Therefore, in the case of a positive decision,
a proposal for the Case Company Two consisted from guidance on CRM system
implementation. Such guidance was done in order to ensure that overall value of such
decision is perceived by employees and maximum benefits are obtained.
The importance of the following best practices in CRM project implementation shouldn’t be
underestimated, as reports dating back to the mid-1990s quote alarming failure rates for
CRM programmes – depending on the definition of failure and the questions asked, between
18% and 70%. (Krigsman, 2009) Surprisingly, the trend does not appear to be improving;
results for 2009 suggest only 32% of projects succeeded in delivering on time, on the budget
and with all objectives met. 44% did not meet expectations (late, over budget, did not deliver
all requirements) and 24% completely failed (were cancelled; delivered, but never used).
(Standish Group, 2011 in Woodcock, et al., 2011)
To ensure success of the project of introduction of CRM technological solution and avoid
failures in implementing CRM, following steps are advised by Buttle (Buttle, 2009)
1) Develop CRM strategy. CRM strategy is a high-level plan of action that aligns people,
processes and technology to achieve customer-related goals.
- Situation analysis. Describe, understand and apprise current customer
management strategy. Use on of CRM models available.
- Commence CRM education. It is important that all stakeholders have a clear
understanding of what CRM denotes.
64
- Develop CRM vision. CRM vision is a high-level statement of how CRM will change
your business as it relates to customers.
- Set clear priorities for action, normally focused on cost reduction or enhanced
customer experience.
- Establish goals and objectives: enhancing customer satisfaction or loyalty, growing
revenues or reducing costs.
- Identify people, process and technology requirements for the goals and objectives
to be achieved.
- Develop the business case, built around costs and benefits of CRM implementation.
2) Build the CRM project foundations
- Identify stakeholders – any party that will be affected by the change.
- Establish governance structures.
- Identify change management needs. It worth using Kotter’s eight-step approach
(Kotter, 2007).
- Identify project management needs
- Identify critical success factors – attributes and variables that can significantly
impact business outcomes.
- Develop risk management plan
3) Specify needs and select a partner
- Process mapping and refinement – identify processes to be made more effective
and efficient using automation.
- Data review and gap analysis
- Initial technology needs specification, and research alternative solutions
- Write request for the proposals
- Call for proposals
- Revise technology needs specification
- Assessment and the selection of the partners
4) Implement the project
- Refine project plan
- Identify technology customization needs
- Prototype design, test, modify and roll out
5) Evaluate performance
- Project outcomes
65
- Business outcomes (Buttle, 2009, pp.63-65)
As can be seen from this CRM project design and planning process, the assessment of the
Case Company Two made in terms of present research helps with first three steps.
Basically, such assessment stands in a very beginning of such initiative. Therefore,
assessment results are submitted to the company together with this CRM project
implementation process proposal.
6 Conclusion
6.1 Executive summary
The aim of this research was to explore CRM notion and approaches within optical retail
industry. The model approach was considered the most appropriate for such research, as it
helps in “understanding of CRM and its role in enhancing customer value” (Payne & Frow,
2005, p.167).
The following four objectives were set at the beginning of the study
1) To choose a theoretical conceptual framework (a model) for CRM suitable for
assessment of a company operating in optical retail industry;
2) To assess a CRM approach in both case companies using a model chosen;
3) To analyse and discuss the results of an assessment of CRM approach in both case
companies and identify possible weaknesses that may be found;
4) To develop one major proposal to each one case company which would help to
overcome weaknesses in CRM approach found during assessment.
Prior to review conceptual frameworks for CRM, essential topics for understanding the
notion of CRM and role of CRM in business were explored. In terms of the present research
term CRM was used to describe a customer-oriented business strategy in relation to
business and technology management processes used to implement it; as a business
philosophy fostering customer-satisfying behaviours across all organization levels; and as
an approach used for development of relationships with profitable or strategically important
66
customer segments. Besides definition, several major topics important for understanding
frameworks for CRM were discussed, such as a relationship, the creation of customer value,
customer management and the role of CRM to name but a few.
Five main frameworks for CRM were reviewed, and one model out of five was selected using
studies of optical retail industry and researcher’s own experience in the field. Selected model
was the QCi model or the Customer Management Model created by consultancy agency
“The Customer Framework” and based on research by Woodcock et al. (Woodcock, et al.,
2003; The Customer Framework Ltd, 2011-2013). Reasons for selection of this framework
were emphasis on customer management instead of relationship management; emphasis
on people and organization processes within the whole model; and the idea of customer
activity management being central and the most important part of the model. Studies in the
field of optical retail industry indicated that relationship quality control is a problem for many
businesses. However, businesses in the field are still in a better position in comparison with
other service business because they are providing primary health care services.
Two case companies were chosen for being typical of a large number of other similar
institutions, which allowed some level of generalization. The Case Company One were
chosen to represent a sample of large businesses and the Case Company Two for a group
of mid-sized businesses. Both companies were assessed in eight major elements of the QCi
model, such as analysis and planning, the company’s proposition, information and
technology, people and organization, process management, customer management activity,
measuring the effect; and customer experience. The results were analysed using
comparison to the best practices and value creating activities described in literature
reviewed. Assessment results were discussed using results from the CMAT study based on
the Customer Management Model.
The assessment of both case companies’ revealed weaknesses and in all eight elements of
The Customer Management Model. Several findings might have only minor impact on
overall CRM performance, whereas some require immediate attention.
Results also supported expectation that businesses tend to evaluate their CRM initiatives
more positively than they in fact are. Comparison to the CMAT study showed that about a
half of businesses had similar problems in all elements of The Customer Management Model
regardless of their industry.
67
6.2 Ideas for future research
During research, several topics for future research were discovered.
A model choice for the assessment of the companies within the optical retail industry was
based on evaluation of a main elements and their importance for the field of study. The
decision was made based on the main ideas and overall vision of CRM provided by
conceptual framework. However, all conceptual frameworks reviewed are based on studies
in a numerous amount of companies within different fields, which makes all of them universal
and, to some extent, applicable for an assessment of CRM approach in any company. It
would be useful to have a tool of validation of a conceptual framework’s suitability for a
particular industry or for a particular business. It would provide more stable foundation for
the process of choice of the conceptual framework in the case of similar study.
As mentioned, all conceptual frameworks are based on the studies in a numerous amount
of companies. However, many of them are large businesses. Optical retail field usually
consists of a significant amount of small businesses. To create a separate model of CRM
entirely for optical industry, an additional research within a purposive sample of small and
middle size companies in the field would be needed. It might be the topic for future research
within this business field. Besides this, as optometry status is different amongst different
countries, it would be interesting to examine a conceptual framework for customer
management in relation to status of health care professional and healthcare system of the
country.
6.3 Evaluation
During a review of results for present research several points for criticism were discovered.
Those are as follows:
- The Customer Management Model was chosen based on its main elements and
overall philosophy, but research would benefit if a tool to test compatibility between
a conceptual framework and a business field, or a conceptual framework and a
particular company, would be available.
68
- Confidentiality issues (the researcher was outside person for case companies) led
to some restrictions of the study. Evaluation according to some elements of The
Customer Management Model could not be performed or was done only partially.
- Research in the Case Company Two supported an initial expectation that a middle
size businesses will employ sales force automation systems instead of CRM solution
package. However, the plans of the Case Company Two include purchase of CRM
package in about two years’ time. More evidence is needed to establish whether it is
a new trend within industry or such changes are simply related to the growth of a
business for the Case Company Two.
The study was examining a conceptual framework and was only interested in the approach
used by the company. Time and scope of present research didn’t let to observe actual
efficiency and implementation of each of approaches within a model as well as observe
processes over longer time period. Each company would benefit from a more detailed
assessment of efficiency of such approach and more scrutinised assessment of business
processes.
Despite critical points, four objectives set in the beginning of research were fulfilled.
Based on assessment, proposals to both companies were developed. However, both
proposals require global changes, so time and scope out of terms of this project are needed
for evaluation and validation for both.
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Appendix 1
1 (1)
Appendix 1. Checklist: readiness to create CRM vision. (Source: Brown & Gulycz, 2002)
Score guide: 1: to a very limited extent; 5: to a very great extent
1.
Customer segments are well defined.
1
2
3
4
5
2.
The company uses customer satisfaction surveys for
understanding customer needs and what satisfies and dissatisfies
customers.
1
2
3
4
5
3.
Human resources management practices empower all employees
to participate in improvement initiatives.
1
2
3
4
5
4.
Employees at all levels receive the education and training they
need to participate effectively.
1
2
3
4
5
5.
Senior executives are personally and visibly involved in
demonstrating that improved customer satisfaction is a high
priority strategic goal.
1
2
3
4
5
6.
Customer service performance measures exist at the
organizational, departmental and individual job levels and are
widely publicized and acted upon.
1
2
3
4
5
7.
Communication is frequent and informative.
1
2
3
4
5
8.
All employees are aware of their internal customers and suppliers.
1
2
3
4
5
9.
The working environment is conductive to the well-being and
morale of all employees.
1
2
3
4
5
10.
The organizational hierarchy does not inhibit effective and
constructive two-way communication over process improvement
issues.
1
2
3
4
5
11.
The company's values are clearly articulated and understood by
all employees. They are constantly and consistently reinforced by
the actions of all managers.
1
2
3
4
5
12.
Goals for customer satisfaction make us stretch but are attainable.
1
2
3
4
5
13.
The company encourages close collaboration and teamwork.
1
2
3
4
5
14.
The employee performance appraisal, recognition and reward
processes strongly promote involvement in delivering customer
satisfaction.
1
2
3
4
5
15.
Business processes are regularly reviewed to eliminate nonvalue-
adding activities and improve customer satisfaction.
1
2
3
4
5
16.
Relationships with customers are managed effectively and involve
obtaining information from them to improve products and services.
1
2
3
4
5
17.
Business cases for change are clearly articulated and validated.
1
2
3
4
5
18.
Customer complaints are welcomed and resolved quickly and
positively.
1
2
3
4
5
19.
Effective processes for determining current and future customer
requirements and expectations are applied both systematically
and rigorously.
1
2
3
4
5
20.
The strategic and business planning processes have a strong
focus on customer service and produce clear objectives for
improvement.
1
2
3
4
5
Appendix 2
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Appendix 2. Interview questions.
Analysis and planning/strategy of the company
1. Please define strategy, mission, and vision of the company. Do you have company’s
objectives for 5 years period? Longer?
2. Do you have your competitive arena determined? Do you know who your competitors
are? What customers they try to win from you?
3. Is there a customer segmentation activities? When last time it was done?
4. Do you know how much you can afford to spend on acquisition, development and
retention of different customer groups? (Answer might be yes or no, no financial report
required.)
5. Do you have a target market? (Customer segment, on which you are targeted?)
6. What geographic area you are serving? On what level you are competing – national,
regional, multinational, and global?
7. Do you have a clear understanding about your profit? From which customers/what
customer segment it comes from?
The proposition (the value proposition)
8. If I am your target client, why should I use your services/buy glasses, lenses etc.? Do
you make effort to ensure that your shop assistants know answer to this question?
9. How do you perform a customer needs research?
10. How are your service standards formulated? Are they available/familiar to every
employee?
11. Describe your external/internal communication with the customer? To employees of the
company?
Customer management activity
12. How you target marketing activities? (checklist: campaign planning, buying trigger
identification, personalization, integration with channels, over-targeting prevention)
13. How do you collect feedback from employees about what customer had asked?
14. How do you manage enquires from corporate customers?
15. How do you welcome new customers?
Appendix 2
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16. How do you determine why new customer is won?
17. How you monitor first purchases and get customer view?
18. How do you collect information about customers? About their opinion?
19. How do you perform customer satisfaction surveys?
20. How do you perform a “health check” of ongoing relationship with the customer?
21. How do you know whether a customer is a “key customer”?
22. How do you tailor proposition to each customer? How do tailor proposition to each
customer segment group?
23. If I am your key customer, what you have to offer to me?
24. What is your development strategy to each customer segment?
25. How do handle complaints?
26. Do you have responsible person for complains handling in each retail outlet (e.g., trained
employee), or you have a one manager for region, and all complaints should be handled
via office? Maybe you have some criterions by which you determine whether to handle
complaint at the shop or via office?
27. How do you know when and why you have lost your customer?
28. How do you decide which customers to win back?
Measuring the effect
29. How do you perform strategic measures? What are the key performance indicators?
30. What kind of individual performance measures do you have? Employee performance
measurements?
31. How do you measure campaign success?
Information and technology
32. To what kinds of technologies you are involved in?
32.1. Do you use CRM solution?
32.2. What information you include in the customer database?
32.3. Do you use sales force automation systems?
32.4. What kind of social media do you use (Facebook, Twitter)?
32.5. Do you have a homepage? Do you have online shop, online appointment
reservation system? Is it possible for the customer to track order status online?
Appendix 2
3 (3)
32.6. How do you remind a customer about follow-up visit? Time to change contact
lenses?
Customer experience.
33. How you measure customer satisfaction?
34. How do you perform event-driven research?
35. How you ensure (check) whether customer remains loyal?
People and organization.
36. What tools you use to measure employee successful performance? (e.g., number of
sales etc.)
37. What kind of appraisal system for employees in a case of a good service do you have?
38. How you manage necessary amount of staff in the shop? What kind of measurements
you make?
