Customer Relationship Management

A Global Perspective

Gerhard Raab, Riad A. Ajami, G. Jason Goddard

• Publisher: Routledge
• Year: 2016
• Print ISBN: 9781032838021
• eBook ISBN: 9781317155430
• Topic: Business
• Subtopic: Business General
• Index: Business

Customer Relationship Management is the first book to explore the benefits to the firm of a globally integrated approach to the management philosophy of Customer Relationship Management (CRM). The best hope for achieving a sustainable competitive advantage in a global marketplace is by means of better understanding which customers are in the best position to experience long-term, profitable relationships for the globally oriented firm. This book offers both an academic and a practical viewpoint of the importance of CRM in a global framework. It integrates the topics of knowledge management, total quality management, and relationship marketing with the goal of explaining the benefits of CRM for internationally active firms. The authors have included six case studies which allow the reader to undertake the role of CRM consultant in a 'learning by doing' approach. The book should be required reading for all business executives who desire a customer-oriented approach to success, and for all students of business who desire to gain insight into a relationship management approach which will become ever-more important in the years ahead.

Chapter 1
Customer Relationship Management: Global and Local Dimensions

Chapter Objectives:

• Understand the global significance of Customer Relationship Management (CRM).

• Identify the primary sustainable competitive advantages.

• Discuss the pros and cons of international strategic theories.

• Elaborate on the primary components of international strategy.

• Discuss the three pillars of Customer Relationship Management (CRM).

• Elaborate on the advantages and objectives of Customer Relationship Management (CRM).

Global Perspective on Customer Relationship Management

As global markets become increasingly integrated, all firms from the largest multinational to the smallest entrepreneur must be able to find a market niche which enables the firm to survive in highly competitive markets, and to prosper by finding the best ways to meet the needs and desires of the target consumers. This introductory section of the book will discuss current international strategies for success, and the tradeoffs that companies face with each strategic alternative selected.

History is littered with examples of situations where an appropriate strategy was not selected, to the downfall of the decision-makers or firms who failed to plan appropriately. An example of strategic error happened long ago during the reign of Genghis Khan. His empire was one of the largest in the history of the world, and spread from Mongolia through modern day Russia, and into Poland. The dynasty was short lived primarily due to the lack of adequate feedback between the leadership, which was centralized at the top, and the common villagers, who were spread over the vast terrain. Without a strong communication mechanism, the empire was doomed to a short lifespan. The same could be said for the modern corporation. Effective feedback is required for any entity or business, and in today’s global economy the successful corporation will be the one that formulates a management structure conducive to timely feedback as it regards the wants and desires of the customers.

A comprehensive framework for achieving success is today a fundamental requirement, and this is where Customer Relationship Management (CRM) figures into the global economic landscape. In order for a firm to create and sustain international competitive advantages, there must be strong competency in understanding which customers provide the best long-term opportunities for profitable relationships. In the pages that follow, we will discuss how CRM can be utilized in order to increase the level of customer orientation, product quality, customer satisfaction, and customer retention in a global context. Successful CRM programs allow firms large and small to achieve efficiencies which would not be possible in an environment that does not include an accurate, timely, and sustained feedback mechanism necessary to anticipate the future needs and desires of the customer. At the multinational level, global efficiencies can be achieved via economies of scale and scope, and by catering to the specific desires of a firm’s most profitable customers. As Genghis Khan found out long ago, you cannot be everything to everyone. His example proves that knowing your customer, and knowing what you represent as an organization, are key components to the success of any modern corporation. This is also essential for a successful CRM implementation.

Sustainable Competitive Advantages in a Global Economy

International businesses have the ability to exploit three sources of competitive advantage. All three of these advantages are enhanced or made possible via the implementation of CRM practices.

The first competitive advantage is global efficiency. By expanding internationally rather than remaining in its country of origin, a firm can lower its costs and improve the bottom line performance via location advantages. CRM is very important in this context, as a firm must fully understand the customer profile that is most likely to provide them with a profitable, long-term relationship.

A second competitive advantage is multi-market flexibility. Large multinational firms must respond to changes in numerous markets that are all inter-related. Successfully understanding the differences in markets worldwide will provide for a competitive advantage over the long-term. Small business enterprises are now realizing that the failure to understand market differences could make them vulnerable to foreign competition. Since at the core of CRM is the need to understand the customer, this strength can be utilized in achieving first-mover advantages against the competition.

A third competitive advantage is achieving worldwide learning in the modern corporation. The need for understanding the customer in various markets is essential, but so is the need for listening to the internal customer as well. As W. Edwards Deming, one of the doyens of the Total Quality Management movement has stated, if something cannot be measured then it cannot be improved. Thus, having measurable goals of determining best practices in numerous operating environments is of paramount importance. As many executives in today’s business world can attest, a company with too much centralized control loses its ability to innovate as well as to adapt and respond locally to the needs of its customers. In the United States, there is a movement in the banking industry toward decentralizing the loan approval authority at the local level, rather than utilizing centralized lending departments. The goal is local responsiveness as well as collecting as much market knowledge as possible throughout the entire geographic region where the firm conducts its business. As will be discussed in later chapters, data collection strategies as achieved via CRM can aid a firm in retaining customers in a profitable fashion.

Overview of International Strategic Theory

Before we discuss the CRM perspective in detail, it will be helpful to briefly discuss the commonly accepted international strategic directions from which most corporations have to choose. At the heart of all of these strategies is the trade-off between the pressures for responsiveness to local tastes and preferences on the one hand, and the pressures for efficiency in an effort to reduce total cost on the other hand. As will be made evident throughout the course of this book, CRM is an example of a managerial philosophy that helps firms find the appropriate level of balance between these two pressure points via elucidating which customers are the most important for a given firm, and what is the most efficient way to satisfy the needs of this customer base.

One common strategy for internationally active firms is an attempt to replicate how business is conducted in the domestic market in all international markets where a firm competes. Home replication strategy is typically the default international strategy for firms that believe that their customers’ tastes and preferences are consistent throughout the world. Firms engaging in this strategic alternative believe that the core competencies exhibited in their home markets should be reproduced in other markets. In some cases, markets can be highly similar, and home replication strategy can be a successful strategy for firms that compete in international markets that are very similar to the home market. More often than not, however, taking what you do exceptionally well at home and attempting to duplicate it in a foreign market may require at least some alterations, or a competitor would probably have already penetrated the market! In terms of the balancing act of local responsiveness and corporate efficiency, this strategy is short on the former, but long on the latter.

Another of the commonly accepted forms of international strategy is called multi-domestic or multinational strategy. Executives at firms that opt for this strategic alternative often view themselves as a collection of relatively independent operating subsidiaries, each of which focuses on a specific domestic market. The strategy is akin to a decentralized atmosphere, with the advantage of being highly customized to the markets in which the firm competes. As is often the case in a decentralized management framework, best practices from the alternative sites may not be communicated, and the firm loses valuable data collection ability from the lack of communication. Thus, this strategy is strong on local responsiveness, but is more than likely lacking in terms of corporate efficiency.

A third international strategic alternative is a global strategy. Under this scenario, the corporate leaders view the world as a single marketplace, with the primary goal of creating standardized goods and services that will meet the needs of customers worldwide. Coca-Cola is typically held up as an example of a corporation that is conducting its business via this alternative. Global strategy is the direct opposite of multi-domestic strategy, as the ‘one size fits all’ mentality is in opposition to the desire for customization for each market. The difference between this strategy and that of home replication is the need for determining an overall company focus that would best suit all of the markets where a firm competes, rather than simply replicating the home strategy in all markets. This strategic option requires diffusion of market-specific knowledge in order for the overarching strategy to be realized. This strategy attempts to capitalize on economies of scale and scope, and is thus typically strong in terms of corporate efficiency. The success of this strategy in terms of local responsiveness is directly related to the success of data collection in terms of understanding the tastes and preferences of the target customer, as well as the effectiveness of communicating these differences when deciding upon the global strategy.

A final selection available to corporate managers is transnational strategy. This strategic alternative is considered to be the ‘Holy Grail’ of corporate strategies at the international level. The firm attempts to combine the benefits of global scale efficiencies with the benefits of local responsiveness. This strategic alternative involves compromising with complexity, and trying to balance multinational and global concerns. This is typically done via assigning tasks and responsibilities to areas best able to achieve the desired balance between efficiency and flexibility. As we have seen over the last decade globally, firms have chosen to outsource many tasks offshore rather than simply opting for a centralized or a decentralized management platform. More often than not, CRM as a management alternative has been brought into practice via companies that are attempting to conduct business under this strategic direction than in any of the other alternatives. In today’s global economy, those firms that can reduce cost while at the same time realizing and anticipating the needs and desires of their target customers will be most successful.

Components of Synergy and Strategy for Cross-border Operations

Now that we have discussed the most common forms of international strategy, another important topic deals with the components of a successful strategy. These components are a series of questions that a firm’s leadership team should resolve in order to determine the strategic vision of the company over the long term.

One component of international strategy is determining the distinctive competence. This deals with an area, or areas, where a firm excels in relation to its competition. This could be due to a cutting-edge technological application, an efficient distribution network, a well-respected brand name, or other such advantages. In terms of CRM, answering this question is not an exercise conducted simply by a firm’s leadership team. The customers must also be consulted in this process, as will be discussed in subsequent chapters of the book.

Another component of international strategy is the scale or scope of operations. This is certainly related to CRM, as the focus of this component concerns where a firm plans on conducting its business, as well as with whom. Scope may be defined in terms of geography, or it may be concerned with deciding on the appropriate product or service niche in which to compete. Strategic goals in this area must be measurable, feasible, and time-limited in order to be successful. Strategic goals that are not measurable, or have an excessively long gestation period, may prove to be unattainable.

A third component of international strategy deals with resource deployment. Once the determination has been made concerning what makes a firm successful, as well as where and how it desires to compete, the next phase in the strategic process is to decide on how resources can be allocated. Depending on which of the four international strategic alternatives have been chosen, resource deployment can be determined from a centralized platform with the intent on global efficiency, or in a more decentralized environment.

A last component of international strategy that we will cover is synergy. Firms that are engaged in a CRM environment often ask probing questions concerning how best to maximize profitability via cross-selling to its existing customer base. This is the essence of synergy. If a firm is able to identify which customers are of paramount importance, as well as how best to meet and exceed their expectations, the firm will benefit via increased profitability. As will be discussed in subsequent chapters, it is more expensive to attract new customers, than it is to sell complementary products and services to those customers who already are within the existing customer base of the firm.

The McNeely Principle

To conclude with this introductory section on international strategy, it is important to understand that strategic alternatives are not made in a vacuum. When deciding on how to compete in a given market, firms must be careful in understanding what distinctive competencies are at play by their competitors, so as to not get caught competing with a bigger, stronger firm in the same way. Even a perfectly envisioned strategy can wind up as a disaster if a firm decides to compete for the same business, in the same form or fashion, as a larger, more financially secure competitor. This may remind readers of the case of the professional boxer ‘Hurricane’ Peter McNeely. During the middle 1990s, Mr. McNeely was a young contending heavyweight boxer from Massachusetts, who received the chance of a lifetime. He was the first opponent of Mike Tyson, during his comeback campaign after serving time in prison. Since even the most casual boxing fan was aware of Tyson’s strengths (raw power and speed), McNeely shocked...

Table of contents

• Cover Page
• Half Title page
• Title Page
• Copyright Page
• Contents
• List of Figures
• Chapter 1 Customer Relationship Management: Global and Local Dimensions
• Chapter 2 Customer Orientation
• Chapter 3 Product Quality
• Chapter 4 Customer Satisfaction
• Chapter 5 Customer Retention
• Chapter 6 Customer Value
• Chapter 7 Company Success: Customer Relationship Management and the Balanced Scorecard
• Chapter 8 Challenges for Global Customer Relationship Management
• Appendix: Case Studies on Customer Relationship Management
• Case Study 1 Customer Satisfaction at Paradorn Bank
• Case Study 2 The Case of Discovery1
• Case Study 3 AB Swedish Lumber*
• Case Study 4 The Case of Leban, Inc. and the Croatian Frozen Packaged Foods Market
• Case Study 5 Customer Orientation at Tesco1
• Case Study 6 Mikhak Fresh Cut Flowers
• Bibliography
• Index
• About the Author