ABSTRACT
The businesses today have identified the need to focus more on customer and the key to retain customer is through development of customer relations. CRM or customer relationship management is based on the idea that loyal customers are profitable for the company. The loyalty has been identified by several researchers to be linked to the level of satisfaction of customers. Organizations require attracting the customers, developing relations so that satisfaction is ensured and retain customers by maintaining the relations. Due to intense rivalry and competition, businesses require focusing on building stronger customer base by promoting goodwill and providing them better services.
This paper has focused upon four models of CRM process as a satisfied customer is considered to play the role of free advertiser for the company and so through these four models the firms can identify the method to implement. The four models include the traditional CRM model, the operational CRM model, the analytical CRM model and the collaborative CRM model. This study attempts to review the prior literature available in context to CRM, customer satisfaction and customer loyalty.
The marketers and researchers consider loyalty to be multidimensional with a particular link to the customer satisfaction. based on the studies conducted by researchers in both goods and service industries, a positive relation has been identified between both. The literature has identified certain critical elements that are closely linked to the satisfaction and loyalty of customers including employee behavior, customer service quality, and relationship development and interaction management.
Key Words: Customer Relationship Management; Interaction Management; Customer Loyalty; Relationship Development; Customer Satisfaction; Customer Service
INTRODUCTION
Research Background:
In the modern world, organizations pay heavily to identify and understand the needs of their customers. The consumers around the globe are highly sophisticated, having great knowledge, awareness and always seeking better options while making purchase decisions making relationship marketing highly significant. Due to these factors, marketers have shifted towards pull marketing as compared to push marketing. For a retail supermarket, a bank or even in the education sector, customer satisfaction can be interpreted as meeting the expectations of the customers. When the value of the service provided to the customer is either equivalent to or exceeds the expectations of the customer, the retailer achieves customer satisfaction. In case, the retailer/service provider fails in satisfying its customers, the competitors would target the customers by delivering superior values to them. Customer satisfaction is a key differentiating factor which defines the repeat visit/purchase of the customer to the organization's goods or services. In case of dissatisfaction, the customers tend to shift elsewhere; only satisfied customers remain loyal to a brand.
Relationship marketing involves building and maintaining long term relations with the customers and devising a strategic marketing plan likewise. Organizations require attracting the customers, developing relations so that satisfaction is ensured and retain customers by maintaining the relations. Due to intense rivalry and competition, businesses require focusing on building stronger customer base by promoting goodwill and providing them better services. The key idea behind the Customer Relationship Management is to develop a relation with the customers so that they remain loyal to the organization as it helps in generating more profit for the business. The aim of CRM is to improve customer satisfaction while enhancing the income and profitability of the business.
There is no denying the fact that satisfied and happy customers are similar to free advertising for the business which is why it has become highly imperative to focus on the customers as the central point while planning the events, activities and devising strategies. Organizations are investing more on customer retention than finding new customers and the strategies have become customer-driven (Mohsan et al., 2011). Due to the root and branch evolution, the organizations today are aiming to satisfy the customers in a highly effective and efficient manner in order to achieve a sustainable competitive advantage over other rivals (Kotler & Armstrong, 2011).
Retaining customers and maintaining their loyalty is the most significant goal of the companies while applying a customer centric approach of business. Researchers have pointed to the fact that satisfied customers are lesser affected by price sensitivity which is why they stay loyal rather than switching. Merely satisfied customers are not required by companies as the level of satisfaction should be to the extent that it triggers customer loyalty. According to Sivadas and Baker-Prewitt, "there is a rising recognition that the last objective of customer satisfaction measurement should be customer loyalty."
The paper focuses on analyzing the literature that is available based on the prior conducted researches and studies relevant to the issue of linking the level of satisfaction and loyalty of the customers and how customer relationship management plays its role to provide this link between the both.
MATERIALS AND METHODS
Traditional CRM Model
The CRM system works as one of the most critical components of the IT to enhance the relationship with customers and improve their satisfaction. According to Zikmund (2010), CRM could also be identified as the method to apply the IT where the collection requires a storehouse of data as well as the involvement of the delivery system. Along with these, certain tools of management and analysis are also present. In the traditional model, the CRM process consists of five basic steps including (Zablah et al., 2004; Ngai, 2005):
continuous collection of customer data
Data implementation for contact management
Developing both business and marketing strategies
Developing the marketing programs
Evaluating the effectiveness (success) while modifying the database.
So, the traditional approach of CRM aims at collecting customer information on regular basis and making use of the data at appropriate times. The information collected is stored and refined regularly so that the staff may contact the customer when required. Once the analysis is complete, programs related to information marketing are developed and approved; the ongoing feedback and control system helps in updating the programs as well as the information. In simpler words, the traditional process of CRM is a continuous system as is given below in the figure.
Operational CRM Model
The operational or the front office CRM deals with the touch points of an organization; these refer to those areas where the organization has a direct contact with the customers. There are two kinds of touch point: first is the inbound customer contact where the customer comes into contact with the customer service directly by calling the hotline; while the second is the outbound customer contact point where the customer is called or emailed by the company for either notifying them about new promotions and products or as a service follow up. The Operational CRM can be referred to as an application through which data is obtained from the clients. At the very basic level, the operational CRM involves the contact software that obtains the customer information from stores and the customers themselves so that it could be used in the future. On the other hand, this model refers to the process in which complex yet integrated IT components like the data marts, data stores, data warehouses as well as the tools and applications for analytical purposes work together to obtain, analyze and retrieve information about the customers from numerous inbound touch points and then integrate with the outbound touch points. The model is shown in the figure given below.
Analytical CRM Model
The analytical CRM is also referred to as the back office CRM and as is evident from its title, it involves analyzing the customer activities that occur at the front office. While all kinds of systems make use of technology but in this type, technology plays a major role as it not only helps in customer data compilation but also facilitates and refines the practices for data analysis. Further, the analytical CRM makes use of technology to modify the customer dealing practices by updating the business processes so that both the loyalty of customers and the business profitability is enhanced (Dyche', 2002).
Analytical CRM is one of the most dynamic tools of managing customers that allows the measurement of customer satisfaction while identifying the customer trend. Since CRM acts as a glue that integrates the back office with the front office, it is highly significant for the company. Moreover, analytical CRM has been defined by Adebanjo (2003) as "a tool to build data storehouses, increasing relationship, and analyzing the captured data from customers." Some of the possible reasons how this model helps the company through data analysis include:
Optimize the effectiveness of marketing with regards to the most suitable target market implementation
Devising and executing strategies in order to acquire as well as retain customers
Analysis of the behavior and customer inquiries so that effective decisions regarding the products and services can be made.
Conducting churn analysis in order to predict the defection of customers.
Collaborative CRM Model
This is one of the highly significant and commonly implemented model of CRM by organizations today; it involves collaboration of all the acquired information regarding the customers from the different departments. Here, the customer services team gathers the data and provide it to the sales team which collaborates with the marketing department and share their data so that the team may be able to identify the most suitable potential services that interest the customers and so on. Considering the mutual interest of all the teams, the basic aim of this model is to enhance the level of satisfaction among the customers to the extent that they remain loyal to the organization and would not consider switching brands at any cost. The collaborating CRM focuses on customer satisfaction and loyalty by bringing improvements in the quality of service provided to the customers. Organizations apply collaborative CRM in the form of providing personalized services to the customers, developing business to business (B2B) services, and also in the form of making online communities (Rollins & Halinen, 2005).
The collaborative CRM consists of two aspects that are related to each other. Interaction Management is the first aspect which states that the communication between the firm and the customer can be enhanced by designing a channel process that is interactive. Choosing the medium for interaction depends on the customer preference as well as their demographics; for example, some customers may prefer communicating via phone call while some may find it comfortable to interact through an email, but there may be others who would prefer communicating through online chats or web meetings so that the time and cost are saved. Regardless of the high integration of technology in the lives of people, there are still some customers specially those dealing on huge investment projects that prefer meeting personally considering the face-to-face meeting a reliable method. So, the organizations require implementing the most suitable method into its CRM so that the needs of the customers are duly met while the interaction power is enhanced that eventually leads to ensuring that best information is collected from the customers. Once, the firm has implemented the interaction channels, the second aspect of collaborative CRM known as Channel Management takes place.
RESULTS
Relationship Marketing:
Relationship marketing a relatively new version of marketing that typically refers to the relationship with external customers. According to Berry (1983), "Relationship Marketing is a strategy to attract, maintain and enhance relationship with customer." Gronroos (1994) has further enhanced this definition stating that the actual aim of relationship marketing is not only building and enhancing relation with customers but also establishing a relation with other stakeholders. Traditionally, the focus was only on attracting customers but Mcllroy and Barnett (2000) redefined the objective focusing on the development of long term relation of the organization with the customer which is also cost effective. Customer relationship marketing concerns the relation between organization and customer aiming at retaining and providing value to the customers (La and Yi, 2015).
In a retail market, relationships are maintained through a higher degree of personal interaction with the customers; similarly, to enhance relation with the customers, it is also imperative to enhance sales which again depend on the quality of service provided to the customers by the retailer. In order to achieve a sustainable competitive advantage, the retailer requires developing a trusting and loyal relation with the customer (Mollah, 2014). For the customer, this relation is beneficial when they gain high value product and service at cost effective price while for the retailer, increased sales, positive consumer perception, word-of-mouth publicity and most significantly, consumer loyalty is the greatest benefit.
After identifying the significance of relationship building, it becomes imperative to identify the factors that could help in enhancing the relationships with customers. The first and the key factor that helps in executing the relationship marketing is the customer satisfaction. A satisfied customer becomes motivated to repeat the purchase and also spread word by referring to others (Oakley and Bush, 2012). Satisfied customers, willing to have repeat visits become loyal to the firm. Another key element that ensures enhancing customer relationship is provision of quality service to the customers. Segmentation is the third factor that tends to categorize the needs of customers, as well as the product customization; Tesco makes use of segmentation in its club card magazines where the demographic variables are used. With segmentation, the firm can identify the group of customers to be targeted and devise strategies to build relations with them.
Customer Satisfaction:
The intensity of competition has increased duly among supermarkets due to globalization and the rise in customer awareness; the satisfaction of customers has a significant impact on the profitability of the organizations that eventually becomes key issue for the survival of the retailers in the global corporate market. Customer satisfaction has been defined by Kotler (2000) as the feeling of pleasure or resentment that a person develops by comparing the outcome/performance of any product with what she/he expected from it. Hence, the perception of the customer after the purchase is complete or when the service has already been rendered is termed as the customer satisfaction. The comment or feedback which the customer provides after experiencing practically defines whether the customer is actually satisfied or not (Nasrin Danesh, Ahmadi Nasab and Choon Ling, 2012). There are numerous variables that influence the satisfaction of the customer like the price, lead time, responsiveness and the reliability of the product/service.
While a product/service is purchased, the aim of the customer is to gain maximum satisfaction. The feedback of the consumers regarding the extent of satisfaction they get notifies the organization about the quality and value of their service perceived by the customer; if the perceived value of the quality of service is considered higher by the customer, then the level of satisfaction shall also be higher (Kotler & Keller, 2009). For a company like Tesco, that has a business model oriented towards its customers in UK, satisfying the customers is a major concern. Moreover, it is also the reason why customers make repeat visits to the store and hence, their loyalty depends on their satisfaction. Certain factors identified by Plimmer (2010) that impact the level of satisfaction of customers at Tesco include:
managing the complaints of customers
service provided to the customers
capability of the supplier to meet the deadlines efficiently
supplier responsiveness
managing the departments at the store
Some other researchers state that the quality of the product/service (Shamdasani et al., 2008) and the mood (Johnston, 1997) with which the service deliverer handles the customer are the keys to customer satisfaction. Kotler et al. (2016) believe that customers are only satisfied when their needs are met when the product as well as the service given by the retailer is regarded as superior (Thomas, 2013). for a retail market like Tesco, customer satisfaction depends on format of the retail (selecting the target group, e-store selling, and market segmentation); collaborating and managing the value chain of the retail (immediate response, managing the supply chain and efficient handling of customers); managing the demand of the products which also includes space management; handling the store operations (including the orders, customer service, store renovations and the process of product replenishments); and last but the most significant one is the loyalty programs at Tesco as well as the use of customer data which helps the store provide customized shopping experiences (Hassan and Parvez, 2013). Further, the satisfaction is directly related to the value that the customer considers of the quality and price of the service. In the highly dynamic corporate world today, the quality of service is closely linked to the level of satisfaction of the customers.
Customer Loyalty:
According to Toporek (2011), "Customer loyalty is the continued and regular patronage of a business in the face of alternative economic activities and competitive attempts to disrupt the relationship. Customer loyalty often results in other secondary benefits to the firm such as brand advocacy, direct referrals, and price insensitivity." Being a customer-oriented business, Tesco aims at offering customers service of higher quality for their money. Rai and Srivastava (2013) identify that loyalty of customers is "a psychological character formed by sustained satisfaction of the customer coupled with emotional attachment formed with the service provider that leads to a state of willingly and consistently being in the relationship with preference, patronage and premium." In order to grow the business, enhancing the loyalty of customers is the most cost-effective strategy.
Customer loyalty has also been defined by Lovelock and Wirtz (2011) as "the willingness of a customer to continue patronizing an organization over a long period of time, prefer the organization for shopping on an exclusive basis and continue to recommend the product or service of the organization to friends, family and associates." Four factors affect the loyalty of customers: handling conflicts, communicating with the customers, commitment and building trust (Oly Ndubisi, 2007). Blokdijk (2008) states that apart from these factors, good promotion, incentives by the retailer and the level of differentiation for the product also tends to influence the customer loyalty.
Tesco is famous for its high quality customer service as well as its wide variety of products. "Club card" is a loyalty package introduced by Tesco which has enhanced a stronger relationship for the company with the customers. The club card package is a reward system where the customer earns points and flat percentage is then given to the card holder (Turner and Wilson, 2006). Through the club card magazine, Tesco segments the target customer and communicates the different promotional services to the clients.
Link between loyalty and satisfaction:
Researchers have identified that customer satisfaction has a direct relation with customer loyalty to the retail store and hence, a positive impact on the business profitability. Satisfaction of the customers is a key factor that ensures the success of a retail organization. When customers are satisfied, they spread the word, becoming loyal to the store and make repeat visits in the future.
In order to identify the impact of CRM on the level of customer satisfaction and loyalty, Khaligh et al. (2012) conducted a study on 200 telecom users from Iran. According to the findings, customer loyalty depends upon flexible strategy as well as explicit policies particularly with regards to pricing. Another research was conducted by Bhattacharya (2011) which identified that it is imperative for the firms to obtain a holistic view of the requirements by customers and so, the data collected by the firms must consist of both internal as well as external sources of all the departments of the organization. The collective information gained from all departments help the employees to deal with the customers and make quick decisions that help the company to remain competitive in the market. Moreover, the findings suggest that obtaining customer information is the key to achieving customer satisfaction and loyalty which is why implementing a successful CRM is imperative for the business.
Faed (2010) proposed a conceptual framework amplifying that a firm needs to focus on pleasing and satisfying the customer in order to retain the loyalty of the customer to the firm. The link between satisfaction and loyalty of the customers is an effective implementation of Customer Relationship Management by the business. Customer satisfaction has been identified as one of the most significant factors that determine the loyalty of the customers in the service industry (Boshoff & Gray, 2004; Lam et al., 2004). A positive relationship has been identified by researchers between customer loyalty and customer satisfaction (Streukens & Ruyter, 2004) revealing that the level of satisfaction of customer has a high impact on the level of loyalty (Lin & Wang, 2006).
DISCUSSION
Based on the above review of the prior literature, a profound link has been identified between customer loyalty and customer satisfaction while the missing key that links both is customer relationship management. The key to customer relationship management is to satisfy the customers to the extent that they become loyal to the firm and never think of switching towards the competitors. Various researches have been conducted and each emphasizing on developing a relation between the customers and the firm while making sure that the interests of both parties are taken into consideration. From the studies conducted by researchers, four elements have been identified of CRM that are highly important including the interaction management, developing relationships, service provided to the customers and the behavior of the employees dealing directly with the customers.
First of all, the organization needs to decide how to interact with the customers if it aims at developing a stable relationship with them; either the interaction is through the distribution channels or by touch point interaction. Before finalizing the interaction method, the firm needs to identify how the customer feels comfortable to interact with the organization. Interaction management involves gaining feedback from customers; providing promotions and entertainment to them; recording the trend of customer purchases and interacting with the customers through social media networks. Developing relationships with customers is an interactive process and can be implemented through: appreciating the customers and encouraging them to purchase more; persuading the customers for their feedback and convincing them that serious action would be taken based on the feedback; and by communicating to the customers about various promotions and discounts being offered on purchases. The quality of service has a high impact on customer satisfaction and loyalty which is why it requires being implemented in firms through these methods: handling queries and complaints by customers tactfully; provision of high quality products at the most reasonable price; and to ensure meeting the expectations of the customers regarding good service. Lastly, how the employees behave against the customers is one of the key elements that help in boosting the connection between the firm and the consumer. Once, the connection is strong, the commitment of the consumer towards the firm increases. In some of these ways, the employee behavior can be focused upon by the firms: the response speed of the employees to the customers must increase; the employees must be friendly and show respect to the consumers; and the behavior of the employees must be caring and full of concern towards the customers.
Based on the findings of all the relevant literature, it can be identified that in order to generate brand loyalty among the customers, the firm need to offer higher brand value so that their satisfaction is enhanced. There is a positive relation between the service quality and customer satisfaction. In fact, the higher performance of the brand tends to trigger the satisfaction of the customers and so their perceived value improves leading to a positive state of mind of the customers that leads to customer retention and brand loyalty. The firms must focus on acquiring the most updated data of the customers to understand their needs and focus their strategies on fulfilling the needs and expectations of the customers. With a customer-oriented approach, the firms succeed in managing the relation with customers and perform in a manner that the perceived value enhances of the brand that in turn positively impacts the satisfaction of the customer and makes them loyal to the firm.
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