The impact and success of CRM Systems

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1.1 Introduction

As has been commented upon in academic research, “today, in the business world, management recognises that customers are the core a business.” Expanding market share for any business relies upon the strength of their ability to be able to attract customers to purchase their product or service. However, it has not been until relatively recently that business has begun to understand that it is not solely the reliance upon attraction of customers that is important to success. Equally, if not more important, is the need to retain the customer and their future loyalty to the product offering or brand, as this is the only way in which the corporation can sustain their competitive advantage over other market players. Moreover, it has also been recognised that there is a significant cost benefit in the retention of existing customers in comparison with adding a new customer and this is especially true in an industry that has reached saturation point, which is certainly the case in the UK mobile telecommunications sector.

1.2 Background on CRM tools and systems

Consequently, it is not surprising to find that an increasing number of businesses are becoming more focused upon the need for including customer relationship management (CRM) processes, tools and systems as a key element of their corporate marketing strategy. Indeed, in a survey conducted by Boston based Bain and Company, which covered 708 corporations across the America’s, Europe, Asia and Africa and resulted in 6,373 respondents, 78% were actively using management tools as a key element of their drive for competitive advantage, with the same percentage incorporating customer surveys within this strategic area. With the advancement of technology, both in terms of software, the internet and other developments, these CRM tools and systems have become more innovative as corporations seek to improve their customer retention and loyalty. It is this particular element of the CRM discipline that forms the focus for this dissertation which, by using T-mobile as a case study corporation, intends to undertake an assessment and evaluation of the impact that such tools have upon the corporation’s marketing department.

1.3 Case study T-Mobile

T-Mobile is a wholly owned subsidiary of the German telecommunications giant Deutsche Telekom. The current brand name was introduced in 2002. Within its sector, the company is the world’s sixth largest mobile communications business, based upon the number of subscribers, and the third largest mobile multinational after Vodafone (UK) and Telefonica (Spain). Globally, the company has over 101 million subscribers. In the UK, T-Mobile has 13 Million subscribers and operates through 294 separate retail locations in addition to its online website. On the 1st July 2010, T-Mobile UK became part of a joint venture with Orange, operating through a new corporation called Everything Anywhere Ltd, which is “jointly owned by Deutsche Telekom and France Telecom.” Together the two businesses account for around 28 million subscribers and share administrative facilities.

As stated, T-Mobile is operating within a highly saturated industry sector, which can be evidenced from recent statistics. For example, as can be seen from figure 1, mobile phone ownership had increased to over 80% by 2008 . More recently, by 2010, this number had risen to around 90% ownership of 2G and 3G mobiles (figure 2), although it should be noted that the number of actual mobiles owned significantly exceeds this figure because many individuals have more than one phone.

Figure 1 Consumer durable statistics

Source: http://www.statistics.gov.uk/cci/nugget.asp?id=868

Figure 2 Communications adoption 2010

Source: OFCOM (2010)

In terms of market share, the statistics show that T-Mobile’s percentage of the UK market has remained relatively static during the course of the five years to 2009, as indeed has that of Orange, the company with which it has now formed an alliance. In contrast, O2, Vodafone and 3UK have achieved significant share growth during the same period. Superficially, at least, this appears to suggest that the latter corporations have not only managed to secure a greater rate of market share growth than T-Mobile but have also been more successful at retaining the loyalty of their existing consumer base. Consequently, this result suggests that there is a need for improvement in the T-Mobile CRM systems.

Figure 3 Mobile phone market shares

Source: OFCOM (2010)

1.4 Aims and objectives

The aim of this study is to evaluate and assess the impact and success of CRM tools and systems within a practical corporate environment, in other words, it seeks to ascertain the extent to which these tools are achieving their goals of customer retention. Therefore, it is intended to resolve the following research propositions:

1. That CRM tools are having the effect of increasing customer loyalty to the T Mobile brand and improving repurchasing levels.

2. That the marketing department at T Mobile have been successful in introducing innovative CRM tools which has provided the corporation to achieve a competitive advantage over its main competitors within the mobile phone sector.

To facilitate the robustness of this dissertation and the fulfilment of the aims that have been set, it is intended to conduct the research within the following framework of objectives. The focus of these objectives will be the mobile sector of the UK telecommunications industry, using T Mobile as the case study organisation: –

To provide a brief overview of the definition of CRM and its purpose within a corporate environment, with particular reference to its development and effectiveness of use within the UK mobile telecommunications sector

To provide a detailed examination of the main challenges faced when using CRM tools and identify the latest technologies that are being used to address these issues.

To provide a critical analysis of the way in which the case study organisation, T Mobile, has introduced CRM tools and systems into their business. Moreover, this objective will also seek to investigate how these systems have been incorporated into the latest strategies developed by their marketing department.

The final objective is to use the results of the research conducted t make recommendations for improvement, if applicable.

1.5 Scope and structure of dissertation

To aid clarity and understanding of the content the remainder of this study has been formatted within the following framework. In the next chapter (2) a critical literature review is presented which concentrates upon the definition of CRM, the various tools and systems that are used to improve and enhance its management, as well as identifying how T Mobile have utilised these tools within their CRM strategy. Chapter three examines the methodology options available to the research and provides the reasoning for the methods that have been chosen, as well as indicating the limitations and how these have been addressed. Within chapter four, the research findings are presented and explained and these are further discussed in the chapter (5) that follows. The final chapter (6) brings the dissertation to a conclusion and, based upon the findings that have been discussed, also contains recommendations that are intended to assist the case study organisations and other in maximising the benefits the receive from effective implementation of CRM systems.

Furthermore, as attachments to the main dissertation, additional appendices have been added. These comprise of a biography that provides details of all the publications and other information that has been relied upon and referred to within this study. Additionally, the appendices contain details of the primary research conducted, such as the questionnaires and interviews, together with full details of the responses received.

Chapter 2: Literature review

2.1 Introduction

The academic and corporate interest in the importance of a relationship that a business can and should develop with their customers has been a part of the corporate strategy for some time . In this respect, it has long been recognised that the extent to which a corporation understands its customer and their needs will have a significant impact upon both their achievement of competitive advantage and in developing appropriate marketing strategy . However, since the middle of the 1990’s CRM has not only taken the theory and art of interacting with customers to a new, more collaborative level, but the concept itself has become almost inextricably linked with the rapidly developing area of information technology and systems . In other words, from a practical, if not psychological aspect, the majority of CRM related studies are now focused upon its development and practice within the internal and external technologies tools and systems available to the corporation.

Therefore, within this critical review of existing literature the intention, following a brief overview of the various definitions that have been applied to CRM, is to focus upon the CRM, how these are implemented in the IT environment, and to also evaluating the benefits and barriers. Following on from this the relationship between these issues and the manner in which they have been implemented within the case study corporation T-Mobile.

2.2. Defining CRM and its purpose

As has been the case with almost every theory related to corporate strategy and management, there have been a number of attempts at providing a comprehensive and robust definition for the term CRM. These have ranged from the complex to the simple. At the former end of this scale is the lengthy definition that was used by Payne and Frow for the purpose of their research study into this area.

Figure 4 CRM definition

Source: Payne and Frow (2006, p.168)

However, as Payne and Frow indicate the term, which gained prominence in the 1990’s, has in the past been defined as “CRM can be interpreted as a process of digitizing a staff’s knowledge about his or her customers.” Nevertheless, in view of the connection that exists between CRM and IT, perhaps the simplest and most appropriate definition that exists can be more succinctly described as it being “information-enabled relationship marketing.”

2.2.1 Purpose of CRM

In terms of the purpose of CRM systems, from the corporation’s viewpoint, the consensus of opinion is that this can be applied to five key areas, which are as follows:

1. Acquisition of new customers

The purpose being to secure new customers whose values equate with those that the firm or its brand is delivering. In financial terms, this will also reduce the fixed cost per customer, which can add further value by, for example, reducing product price.

2. Increasing revenue from existing customers

This is achieved by encouraging existing customers to purchase other products or accessories, which in the mobile environment might consist of additional apps.

3. Improving customer retention rates

Aimed at improving customer loyalty which will result in a continuation of their repurchasing habit

4. Reducing recurring costs

Improvements made to internal/external systems should lead to a reduction in the cost of delivering messages and services to the customer without impacting adversely on quality

5. Reduce costs of acquisition

Helps to improve the efficiency of attracting new customers, which has cost benefits

2.2.2 Key changes brought about by introducing CRM

As can be seen from the following table (1), the design, execution and implementation of the CRM process within the business has an impact upon four key areas of its operations.

Table 1 key change elements of CRM

Source: Gurau et al (2003, p.211)

It is apparent that the two main elements of this change are the effect that it will have upon firstly, the customer and, secondly, the business employee’s. From a customer aspect, the process will be focused upon understanding and satisfying their needs, which at the same time will provide them with a greater sense of being appreciated and respected by the firm as their views are being listened too. The other aspect, which is interrelated with the first, is ensuring the efficiency of understanding that the staff have in terms of operating the new CRM system as, only through this approach will the customer satisfaction determinants be fulfilled.

2.3 CRM theoretical models

There have been several theoretical CRM models developed over recent years, which have set out to provide an understanding of the way that these processes work and the interaction between the various elements. Of these, it is considered the two that provide the greater amount of detail about these processes are the QCI (figure 5) and Payne’s five processes (figure 6) models.

Figure 5 QCI model

Source (Buttle 2009.19) QCI model developed by a consultancy firm

Figure 6 Payne’s five processes m model

Source (Buttle 2009, p.20) Payne’s five process model

The benefit of the QCI model is that it shows the revolving and continuing cycle of the CRM customer based element. In other words, it defines the triple task of which is to win-back old customer, target new ones and continue to learn from the information gathered from the consumer so that the value of the product and brand can be constantly evolving to meet their changing needs and demands. Another important element of this model is that it indicates the bi-directional approach or communication between the various elements, which is essential in the development of a successful customer relationship programme.

Conversely Payne’s model, which has been adapted from Michael Porter’s ‘value chain,’ takes a straight line approach and splits the process into two distinct parts, these being the primary steps, related to external and customer activity, and the supporting direction, which is related to internal operations. In focus therefore, this model is targeting the impact of the relationship between the customers on the one hand and the profitability of the business. Nevertheless, it is apparent in both cases that there needs to be a robust link between all of the component parts and it is this link which has been found to be best created through the adoption and implementation of appropriate CRM IT systems.

2.4 CRM and IT

As this review has revealed earlier, most CRM tools and systems are now implemented through the use of information technology and this is increasingly being seen as the most appropriate manner of controlling and measuring customer relationship. Nonetheless, in terms of corporate acceptance of this situation, this has been slower in materialising. However, this position is rapidly changing as indeed can be evidenced from a survey conducted in 2002 which showed corporate employee’s satisfaction with IT CRM systems increased from 35% in 2000 to 78% in 2992.

It is apparent from this change of opinion that corporate employees have now begun to recognise the main advantages that exist within the new IT developments in CRM, which have been clearly identified within academic research (Table 2).

Table 2 difference between old and IT based CRM

Source: Gurau et al (2003, p.201)

One interesting observation becomes immediately apparent from a review of this list is the increased interactivity force and power of the customer and the impact that this has upon the corporation’s and its drive for competitive advantage. For example, not only does the Internet provide bi-directional between the customer and the corporation, it also allows for the same to occur between customers, which means that their influence upon other and potential customers is much greater within the World Wide Web environment. For this reason, it is important that the best practice is adopted for the CRM systems.

2.4.2 Best practice for CRM in IT

The first important factor to remember, which is linked to that discussed in the previous section is that CRN management tools usage on the internet should not be confined to just being price driven. The reason for this is that most online retailers have resorted to this approach, which reduces its competitive advantage for the firm. In addition therefore, the Internet message also has to achieve customer satisfaction “to increase competitive advantage” against other online competitors.

The level of the customer satisfaction both with the product and with the relationship that he or she enjoys with the firm is a key factor in determining the extent of their loyalty to the firm and their repurchasing behavioural patterns. Moreover, as indicated within the following diagram (figure 7), if there is a significant level of dissatisfaction being experienced, the person in question can act as a disruptive force. Through the communication means available on the Internet, these ‘dissatisfied’ customers can create adverse perceptions in the minds of potential new customers about the quality and appropriateness of the product and brand. This could act as a deterrent, dissuading these new customers from an initial purchase trial.

Therefore, to ensure competitive advantage is maintained a high level of customer satisfaction with both the product and the brand and its service and promotion must be maintained, to such an extent that, as Shrimp and Madden “a triangular love relationship” develops between the brand product and customer.

Figure 7 Customer satisfaction matrix

Gurau et al (2003, p.201)

2.6 CRM tools, systems and their objectives

2.4.1 Use of Internal Tools and systems

With regard to the internal implementation and management of CRM processes, the core factor is for the business to comment this process using a two-step process:

Step one

This step focuses upon the business and customer strategy review. Business strategy is to commence with an overview of the internal and external business environment. Customer strategy involves examining the existing and potential customer base to identify which segment is most appropriate for the business product

Step two

Consists of building a multichannel objective, which means that s number of channels must be managed in an integrated manner

The multiple channels that are referred to in step two above will include a number of activities. For example, perhaps the most important of these is the need for a data depository (or memory bank) from which information can be mined and retrieved. In addition, the business will need to have front and back office applications which a) interface with customers, and b) include back office applications that support internal administrative, supply and logistical processes. All of these elements must be aimed at improving the quality of service marketing that is applied to the external CRM tools. In other words, they should be designed to enhance the service value chain operated by the business and from the business viewpoint, the effective management of its customer base.

Another of the beneficial uses of internal CRM tools is that it can be integrated with other computerised systems, providing information to areas such as the supply chain, resource planning and even financial systems

2.4.2 Use of external CRM tools

In essence, most of the external CRM tools will be related to marketing , especially those that are focused upon the Internet and, in this respect can provide opportunities that can be used to adopt new marketing models that will enable the marketer to get “inside the lives [and minds] of your customer.”

Within the offline environment, many businesses have used these systems for the purpose of direct mailing and the creation of loyalty and reward programmes, all of which are designed to improve customer retention and loyalty. Alternatively, in the online environment the marketers are provide with three main marketing opportunities, which include the development of a brand website and involvement with social networking, as well as online advertising. In relation to all of these opportunities, the focus for the marketer must be upon the creation of an interactive dialogue between the business and the customer to ensure the objectives and needs of each party are met.

However, it is equally important, having implemented these processes, that their performance is monitored, which means that control systems, such as a KPI’s or Balanced Scorecard approach needs to be also included within the process.

2.7 CRM at T-Mobile

In relating the above elements of the literary review to the case study organisation, T-Mobile, the extent to which this corporation has followed the advices and processes described in the previous section can now be identified. It is apparent from a visit to their website that the company is offering similar promotional material and product descriptions to those of other mobile organisations. Furthermore, in terms of building a customer relationship the site also offers a discussion forum, although it has to be said that this is not immediately apparent unless one visits the ‘contact us.’ Similarly, with the same criticism, the company has also engaged with online social networking, though this appears to be limited to the ‘Twitter’ site at present.

Consequently, when all of this activity is added to the data that is collected from the contact us site and the further customer details that are required when requesting help, or making a payment, it is also apparent that the organisation must have the internal CRM systems available to enable it to develop a data depository. From this, the business would be able to produce a targeting programme that can design offers for a specific group of customers, where existing or new.

2.8 Summary

In summary therefore, it can be concluded from this review that the main elements required for the implementation of a successful CRM system that will deliver the goal and objectives of the business, must be based upon the following key factors:

Mission vision

Creating basic functions, structure and content that are designed to deliver customer satisfaction and are designed to prevent the death of the relationship

Commitment

Ensuring clarity of definition, good leadership and help from the supply chain to achieve objectives

Monitoring

Effective management, use and control of the information acquired and evaluating the ongoing performance

Customer orientation

Focus on committed customers and a loyalty programme with financial incentives tend to lead to a greater level of customer satisfaction. Also learning to see the brand through the customer’s eyes

Marketing

Concentrate upon firing up the front line

Within the following chapters, it will be discovered the extent to which T-Mobile’s current CRM tools and systems have succeed in these goals and objectives.

Chapter 3: Research methodology

3.1. Introduction

One of the most essentials prerequisites for the conduct of any study of this nature, which includes both an understanding of the theoretical processes and their transition into a practical commercial environment, is ensuring that the appropriate methodology is chosen for use . The following sections outline the approach that has been adopted for this dissertation.

3.2 Research philosophy

The philosophy adopted for the study has been based upon a combination of the positivism and interpretivism approach. In relation to the former, the benefit is that it allows the researcher to introduce previously published facts and concepts that can be reviewed objectively, for example, in this case such a modus would include previously published academic literature and the opinions of expert observers. Interpretivism, on the other hand, permits the researcher to observe the reactions and perceptions of individuals, which in this case would be those who supply mobile product and the consumers who use them.

3.3 Methodology strategy

With a study that combines the theoretical with the effectiveness of its transitioning into a practical environment, the methodology chosen would rely upon either the quantitative or qualitative approach, or a combination of the two. The former allows for a more detailed and study of specific elements or opinions, for example, as would be gained from the use of an individual case study organisation or the conducting of interviews. The latter relies upon a large scale of investigation and, in this respect the use of existing academic resources or the conducting of a survey would have the desired outcome.

3.4. Choice of research methodology

In considering the appropriate approach that would be suitable for this dissertation, the author has heeded the advice from other academics that a combination of the qualitative and quantitative approach might enhance the results and findings and has therefore decided upon this method. The reason for this choice is based upon the fact that, although only one organisation is being included as a case study, the size of the consumer market is considerable. The intention with the latter is to seek a consensus of opinion from these consumers as to what CRM strategies and tools are most likely to affect their purchasing and loyalty choice and for what reason. The data and information required from these approaches will be amassed through the secondary and primary data collection processes.

3.5. Secondary data collection process

Secondary data comprise two areas of research, both of which will have been pre-published and generally available in the public domain. For the first part, this will include publications related to theoretical concepts related to the key elements of CRM and the models and tools developed which are available in books and journals located in either bookstores, libraries or reputable online publishing websites. The second part is the collection of statistics and other external opinions that have been made available from the Office of National Statistics, the OFCOM regulator and other NGO organisations or expert observers.

3.6. Primary data collection process

Regarding the collection of primary data, three approaches have been used. The first of these was the case study itself, for which T-Mobile’s own website has been used in conjunction with reviews related to the corporation that have been published by other industry observers. However, to appropriate and robustly address the aims and objectives of the dissertation it was also determined that there was a requirement for the researcher to gather information, opinion and evidence from those considered to have a more intimate involvement with the industry sector . To achieve this situation it was decided to use an approach that combined the use of semi-structured interviews together with consumer surveys .

3.6.1. Semi-structured interviews

For the purpose of semi-structure interviews, two employees from the case study corporation were chosen and, in addition, a representative from the OFCOM regulator and a consumer group . The benefit of this approach was that it provided the researcher with the ability to achieve an understanding of the CRM tools and strategies implement by the T-Mobile Corporation, as well as their views and opinion as to the success of these methods.

3.6.2. Questionnaire and survey

The questionnaire took the form of an online survey , which was targeted to social networking groups as well as a similar survey conducted at one of T-Mobile’s retail location, where the corporation’s customers formed the respondents. These surveys, to which only the researcher had access to the results, were aimed at providing a collective consumer view and opinion in relation to the benefits the considered applicable to them from CRM processes. The questionnaire itself was constructed with a range of question styles. From the closed type which was used for responses such as age and gender, to the ‘linert’ style, which is designed to test the degree to which the consumer agrees or disagrees with a specific statement, with five choice options being available.

3.6.3. Ethical issues within primary research

There are issues that need to be appropriately addressed with any primary research. Predominantly, these are related to data and privacy protection. In the design, construction and implementation of the semi-structured and survey used within this particular dissertation the ethical issues were dealt with in the following way. Firstly, as can be seen from the questionnaires, there were no questions that required the divulgence of any person data save for age and gender. In other words, no information of a personal or financial nature was requested. Furthermore, it was made clear to the respondents that their involvement with the survey was a matter of personal choice. With the interviews, again it was confirmed that participation was voluntary and, moreover, that privacy would be protected by not indicating the interviewee by name. In addition, in this case transcripts of the interview were sent to each participant for their agreement prior to the results being included within this study.

Therefore, it is considered that the primary research processes have been implemented in a manner that cannot be seen to have caused harm to the respondents and, furthermore, comply with current protection legislation and codes.

3.7. Limitations

The limitations that can be seen to ‘potentially’ affect the chosen methodology can be described as follows. Concerning the secondary research process, the main concern is to ensure two things. Firstly, it is important to ensure that the data has been collected from reliable sources and is, as far as can be assessed, free from bias or inaccuracies. Secondly, it is also important to ensure that the research relied upon is the most current available.

With the primary research, it is equally essential to ensure that bias is not allowed to affect the design in terms of things like questions. In addition, the other limitation is related to the sample size selected for these events.

Within reason it is considered that, taking into account the restrictions in relation to issues such as time, cost and geographical locations, the research conducted for secondary and primary purposes has reduced the impact of these limitations to acceptable levels.

3.8. Summary

It is the researcher’s considered opinion that the methodology adopted for this study, as set out within this chapter, was sufficiently robust as to add value to current research into the area of customer relationship management and, in addition, has adequately addressed the aims and objectives..

Chapter 4: Findings and data presentation

4.1. Introduction

The findings presented within this chapter include those related directly to the case study data provided in the introductory chapter, as well as the results of the primary interview and questionnaire results.

4.2. Case study and interview findings

One factor that has become apparent about T-Mobile and its development over the past few years is that the UK market share for the business has not increased, in other words, if there has been any customer gains, these have been countered by similar levels of losses. This result appears to indicate that, to date at least, the business CRM process is not perhaps as robust as other competitors are, particularly when compared with O2 and Vodafone. However, this view of the CRM process does not appear to be a viewed shared by the two representatives of T-Mobile who took part in the semi-structured interview.

4.2.1. Interview findings

The full transcri