Customer Relationship Management Literature Review
Customer Relationship Management Literature Review
Customer Relationship Management Literature Review
ORIGINAL ARTICLE
ABSTRACT: Customer Relationship Management (CRM) is the entire process that focuses on the
interface between the organization and its customers. The objectives of CRM are to enhance profitability,
income, and customer satisfaction. Customer satisfaction and customer loyalty are two main criteria for
every organization to get success. A satisfied customer plays a role as a free advertiser for every
organization. It was argued that, customer satisfaction alone is not enough to be successful in todays
competitive market. Previous researchers proved that the cost of retaining the exits customer is less than
the cost of finding the new one. Therefore, customer loyalty must be considering as an important issue
and it is required to increase the customer loyalty by positive impact of CRM strategy and customer
satisfaction. In spite of the most essential advantages of CRM, there are some difficulties in CRM
implementation for different organizations. Therefore, this study attempt to review the effective
relationship between CRM, customer satisfaction and customer loyalty of the selected organization by
investigating the key elements factors of CRM.
Key words: Customer Relationship Management; Relationship Development; Customer Loyalty;
Customer Satisfaction; Interaction Management
INTRODUCTION
Customer relationship management (CRM) is basis on the idea that developing a relationship with customers is the
most excellent way to find them to become loyal and that loyal customers are more profitable than non-loyal customers. The
objectives of CRM are to enhance profitability, income, and customer satisfaction. To attain CRM, a companywide set of
tools, technologies, and procedures support the relationship with the customer to enhance sales. Therefore, CRM is mainly a
strategic business and process issue rather than a technical issue (Dowling, 2002).
The significance of customer satisfaction cannot be dismissing while happy customers are like free advertising. It is
necessary to put the customer at the centre of the business according to its strategies, events and processes. In fact, it is easier
and more profitable to sell to presented customers than to find new ones. Organizations are ever more setting themselves
strategies to determine and make sure customer retention, and charging their employees to be more customer-focused and
service-oriented (Mohsan et al., 2011). As Baker (2003) indicates, all businesses have been affected to some degree of root
and branch evolution which is happened in the global market place. Now, not only the organizations aim to satisfy the
customers but they attempt to do this more efficiently and effectively that the other rivals in competitive market place to
attain their goals (Kotler and Armstrong, 2011).
The most important goal that companies follow up is to maintain customer loyal to the firm so they more focus on
customer centric approach in their organizational and marketing strategies (Jain and Singh, 2002). Bowen and Chen (2001)
said that having satisfied customers is not sufficient, there has to be really satisfied customers. This is because customer
satisfaction has to direct to customer loyalty. Sivadas and Baker-Prewitt (2000) said there is a rising recognition that the last
objective of customer satisfaction measurement should be customer loyalty.
Many organizations merely categorize customer satisfaction measurement as a type of marketing intelligence instead
of using it as a management tool to build the customer into their quality improvement processes and increase profit. As a
result, companies often know the cost of providing good service but they seldom know the cost of providing bad service
(Linnell, 2006).
MATERIALS AND METHODS
To cite this paper: Sang Long Ch., Khalafinezhad R. 2012. Customer Satisfaction and Loyalty: A Literature Review in the Perspective of Customer Relationship
Management . J. Appl. Bus. Fin. Res. 1 (1): 06-13.
Operational model of CRM: There is another name available for operational CRM which is front office CRM. The
front office refers to the areas which are in direct contact with customers in an organization that also known as touch points.
The touch points divide to inbound customer contact and outbound customer contact, for example if a customer call to a
hotline customer service means he/she has a inbound contact and some promotions such as in person sales call or email refer
to the outbound contact points (Dyche, 2002). In fact the application of operational CRM is capturing the data from
customers.
Actually, operational CRM at the primary level consists of contact software that acquires the information from
customers, stores and retrieves them in a standalone pattern, as an example we can refer to the Microsoft outlook contact
application (Zikmund et al., 2003). In other scale CRM consists of a large number of integrated and complex IT components
such as data stores, data markets and analytical tools and software to capture data from inbound touch points and At the other
end of the scale, CRM consists of a number of complex, integrated IT components including data warehouses, data marts,
analytical tools and applications used to capture and analyze customer information from a variety of inbound touch points,
and make them integrated to outbound touch points (Turban et al., 2003). Figure 2 shows the framework of operational CRM.
Collaborative model of CRM: The most common definition of collaborating CRM implies that collaborative CRM
share different information from captured from customers by different departments such as sales, marketing, customer
service, technical support services and so on. For example, the feedback from customers gathered by customer service could
aid marketing department to know more about the potential services those are interest of customers. In fact, increasing
customer loyalty and satisfaction is the main aim of the collaborating CRM by improvement of customer service quality.
On the other hand, the principal application of collaborative CRM is making online communities, development of
business to business (B2B), and personalizes services (Rollins and Halinen, 2005; Adebanjo, 2003).
Collaborative CRM is divided to two broad aspects:
The first one is Interaction Management, which implies that, designing the appropriate interaction channel process
within the firm in association with customer could increase the extent communication between both the parties. The
interaction channel varies according to the variety of the customers, for example some of the customers prefer to have
communication via telephone, or email result in comfort ability or less time consuming, however, some others prefer to
contact via online web such as online chatting or web meeting to reduce the travelling cost and also saving time. There are
some customers who prefer to have face to face meeting through the agent conduct services as they believe this method is
more reliable. So this is very important for the organization to implement these methods into the CRM to meet the customer
needs and enhance the interaction power for collecting the best information firm customers.
The second aspect is Channel Managementafter implementation the interaction channels. The latest technological
aspects have to be applied to improve the channel communication that aid organization to contact with customers in best
ways to understand customers requirements more. Therefore, clearly arrangement of the channel duties is very important in
an organization.
Previous Studies on the Relationship between Effectiveness of CRM, Customer Satisfaction and Customer
Loyalty
Khaligh et al. (2012) investigated the impact of CRM in enhancement of customer loyalty and retention in telecom
industry in Iran. The result collected from 200 Iranian telecom services users. Finding shows that, commitment and vision of
the management system is highly required for a successful CRM implementation. The structure of the strategy should be
based on flexibility and explicitly of the policies especially pricing policies. In fact, the mentioned factors are very important
to increase customer loyalty and therefore to increase benefit of the firm (Khaligh et al. 2012).
According to the research have been done by Bhattacharya (2011), CRM, implemented in a firm or organization to
reduce cost and increase company performance which means profitability result in customer loyalty. Indeed, in a successful
CRM, data are collected from internal and external source of data sales department, customer service, marketing, after sales
services, procurement, and so on to obtain a holistic view of each customer requirement in a real time system. This
information could aid employees who are faced with customers in different area of the organization to make a fast and well
informed decision from up and cross selling target market strategies to form the company in a competitive position in the
market between rivals.
In fact, according to finding, this model believes to the customer perception to know more about their needs and treat
each of the customers as they are only customer of the organization to solve the customers problems. Then customer
satisfaction and loyalty would be achieved through a successful CRM implementation. Therefore, organization should
discover different requirements of the customer and adjust their policies according to the needs to increase the firms profit.
According to the conceptual framework proposed by Faed (2010), customer relationship management amplifies the
relationships of customers and competitors in a firm to increase the share of the organization in marketplace by integrating
technology, procedures and people. In fact, the aim of CRM is to maintain the customer and increase customer loyalty and
organization profit result in strategies and business function transformation. Customer satisfaction and pleasing are two
main elements in a successful CRM implementation for retaining customers loyalty to a firm.
Kim et al., (2003) stress that each perspective of the CRM framework is evaluated by a set of related metrics. In this
regards, a case study has applied by Kim et al., (2003) to a company identified a K company that is an online shopping
company in south Korea that sales 30,000 products in 12 categories. This company ranked as 18 th online shopping mall in
South Korea.
Data collected through experts interview, questionnaires and weblog analysis Kim et al., (2003). Findings illustrates
that, the factor which is very important to increasing customer satisfaction, customer loyalty and benefits of the firm is
measurement of the performance as all the vagueness and implicit problems are exist in the top level strategic managements
would be cleared, the single and explicit language would be provided in for accurate communication in the organization the
speed of the change would be accelerated and facilitated.
According to the results of a study of the CRM-implementation at 100 firms who are active in different area of
industry such as: manufacturing, communication, financial and so on, Bohlinget al. (2006) develop a number criteria to
implement CRM successfully which are divided to three main groups:
Project focused
Internally oriented metrics, employees adoption
Externally oriented metrics, customer satisfaction and loyalty
According to the findings, the most important externally oriented criteria are as follows:
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Critical elements of CRM: Base on the above review, four critical elements of CRM are identified which are
interaction management, relationship development, customer service and employees behavior.
Interaction management
According to the Brown and Gulycz (2002), if an organization willing to make a stable relationship with its customers,
there are different ways to have an interaction with them including interaction along touch points and distribution channels.
As some scholars indicate that, the main purpose is to find out how and when the customers would like to interact with the
organization (Prahalad and Ramaswamy, 2001). The interaction activities should be well customized and organized through
the available tough points. The touch points provided in relation to the customers profiles developed by data gathered from
the former records of the customers. In fact, as Peppers and Rogers (1997) indicated, the touch points must use for
distribution of different products and services and make a communication with the customers. According to the works of
Lindgreen etal. (2006), Navarro et al. (2004), and Peppers et al. (1999), interaction management is implemented by a few
methods such as:
a) Getting customers feedback.
b) Provide variety of entertainment and promotion to the customers.
c) Increase the interaction with customers by attractive ways such as using social network like Facebook.
d) Record the customer purchasing trend to evaluate their bonuses and vouchers entitlement.
Relationship development
According to the Ford (1980), the study of relationship development primarily involves research into structures and
processing the dyadic relationship between customer and supplier. Hakansson and Snehota (1995) argue that the relationship
development process concerns an interaction where connections have been developed between two parties and relationship
structure includes 3 layers including activity link, resources and actor bonds those could be used to characterize the nature of
relationship between customers and organization.
The most important activity to achieve the organizations objectives and relationship development known as
monitoring of the relationship management process such as service or complaint management (Brown and Gulycz 2002;
Woodcock et al., 2003) this relationship process are including procedures, mechanisms, schedules, and activities in which the
products and services have been delivered to customers (Christopher et al., 1991). The key performance indicators such as
rate of retention, life time value of the customers, and customer satisfaction should be set by the organization (Brown and
Gulycz, 2002).
According to the works of Hanley (2008), Lindgreen et al. (2006), Navarro et al. (2004), relationship development is
implemented by a few methods such as:
a) Inform customers about promotions, discounts and other facilities of the organizations.
b) Encourage customers to purchase more by showing appreaciation.
c) To convince customers that their feedback are taken seriously.
Quality of services
According to Gee et al (2008) in an attempt to understand the factors that induce customer satisfaction, the concept of
service quality is increasingly common in the literature. Studies show that service quality has a positive effect on satisfaction
that consumer satisfaction has a significant effect on customer loyalty, and then the profitability of firms. According to the
works of Hanley (2008), the quality of services could be implemented by a few methods such as:
a) Meeting customer expectation of good service level and having many varieties of products.
b) Provide good quality products with reasonable price.
c) To handle the customer complains about the products and services tactfully.
Behavior of the employees against customers
An employee that confirms the employees organization behavior is therefore likely to strengthen the connection
between the consumer and the firm. A reverse pattern of effects is to be expected when the employee disconfirms the
organization personality through its employees behavior. In these cases, a consumer may think that the organization
actually does not deliver the symbolic benefits that s/he had expected for and may evaluate the organization in a more
negative choice as a result. In sum, under circumstances such as the ones described an employee will probably exert a strong
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impact on organization reputation and attitudes (Coulter, 2002). According to the works of Hanley (2008) and Coulter
(2002), the behavior of the employees could be implemented by a few methods such as:
a) Increase the speed of employees response to the customer.
b) Ensure employees are friendly and respectful to customer.
c) Employees to show care and concern to the customers.
CONCLUSION
This paper concentrates to the literature on the impact of customer relationship management on customer satisfaction
and customer loyalty. Base on the above literature review on various CRM models and previous studies, several critical
elements that link closely with customer satisfaction and loyalty are behavior of employee, quality of customer services,
relationship development and interaction management. Therefore a conceptual framework is developed as illustrate in figure
4.
Figure 4. Conceptual Framework
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