Magazine article Journal of Services Research

Measuring Customer Relationship Management

Magazine article Journal of Services Research

Measuring Customer Relationship Management

Article excerpt

CRM EFFECTIVENESS

Relationships are the essence of life. It is difficult to think about any society or organization to survive without relationships. They are the invisible threads which build a unique bond between individuals and organizations. On the one hand these bonds may be as strong as iron pillars lasting for life time, whereas, on the other hand they are as delicate as feather which may be broken within no time. Managing relationships is a very difficult and complex phenonmenon. Organizations are realizing the importance of the vital role played by relationships in achieving and maintaining the cutting edge at the market place.

Long ago Peter F. Drucker had advocated that the purpose of any business is to create customers. It is the customer which gives an opportunity to the organization to serve him or her. The success of any organization primarily depends upon sustaining the customer advantage, that is retaining the customers for life time. Growing complexities and uncertainities at the market place alongwith intensifying global competition are forcing the business organization to invest in building customer relationships. New and sophisticated marketing tool kits are being designed to attract, satisfy and retain customers for achieving sustainable competitive advantage.

CRM has recently emerged as a strategic solution to modern business problems. It has its roots in the age old business philosophy which recognizes that all business activities must revolve around customers. CRM is about one to one relationships or personalized service which calls for total employee involvement in serving the customer. All the employees of the organization at all hierarchical levels and across all functional departments need to be oriented towards developing customer franchise. It requires redefining core business and customers, designing and integrating business processes, and implementing and monitoring programmes aimed at creating sustainable customer advantage. If implemented successfully CRM offers immeasurable benefits to the organization in terms of improved sales, market share profitability, customer satisfaction and reduced customer turnover, service cost and time.

A wide range of terms such as relationship marketing, relationship management, customer management, CRM etc. have been used to describe the process or activities aimed at building long term profitable relationships with customers. In one of the earlier studies, Levitt (1986) explained that the relationship actually intensifies subsequent to the sale and becomes the critical factor in the buyer's choice of the seller next time around. According to him the sale merely consummates the courtship. How good the marriage is, depends on how well the relationship is managed by the seller. The need for mutual benefit through relational exchange has been emphasized in many studies. Morgan (1994) and Groonroos (1994) have defined relationship marketing as set of activities directed towards establishing, developing and enhancing customer relationships for mutual exchange and fulfillment of promises. Similar views have been expressed by many researchers (Berry, 1983; Christopher et. al. 1991; Payne, 1995 ; Sheth and Parvatiyar, 1995). Customer relationship management related activities have dramatic impact on profitability (Reichheld, 1996). A comprehensive definition of CRM is given by Bennett (1996) which explains that CRM seeks to establish long term, committed, trusting and cooperative relationships with customers, characterized by openness, genuine concern for the delivery of high quality services, responsiveness to customer suggestions, fair dealing and the willingness to sacrifice short term advantage for long term gains. Bennett has tried to describe the basic issues involved and rewards of building relationships. The need for relational exchanges in contrast to transactional exchanges has been strongly emphasized in the literature on relationship marketing. …

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