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International Journal of Management & StrategyJuly-Dec.

2010

Vol.1,No.1

CRM IN RETAILING: A BEHAVIOURAL PERSPECTIVE
Rajnish Jain,Professor, Nirma University,Ahmedabad,India Shilpa Bagdare,Lecturer, Devi Ahilya University, Indore,India ABSTRACT Retail industry is going through a paradigm shift in its structure, composition and practices in India. Emergence of organized retailing in the recent past has strongly influenced the lifestyle of every consumer. Increasing levels of competition and spiraling demands of customers are posing serious challenges for retaining customers. Be it a traditional grocery store from unorganized sector or a chain of retail stores from organized sector, each one of them is finding out innovative and superior ways to attract and keep customers for market share and profitability. Managing effective relationships with customer is the key to achieve sustainable competitive advantage in today’s business environment. Understanding and responding to cognitive and emotional expectations serve as the core for developing, nurturing and sustaining lifelong relationships with customers. CRM has been widely accepted and practiced as the most effective marketing technique involving human and technical dimensions. It involves an all round customer centricity and commitment of the entire organization to align its people, process and technology to serve customers. The present paper provides insights into behavioral dimensions of CRM in retailing and proposes valuable implications for professionals. Keywords: CRM, Retailing, Customer Orientation, Behavioural Dimensions

INTRODUCTION

Customer Relationship Management has no longer remained as a science of customer satisfaction but has moved towards being an integral part of corporate strategy. Customer service, delivery methods and price have become more predominant factors influencing customer decision-making. Companies are adopting latest tools and techniques for enhancing customer value through sophisticated CRM programs. CRM applications have significant relevance in the services sector in general and retailing in particular.

CRM is emerging as a core marketing activity for business in fiercely competitive environment. Therefore many firms are paying more attention to their relationships with existing customers to retain them and increase their share of customers‟ purchases. Service organizations are shifting 1

trust. development. Researchers have linked increased CRM expenditure to greater customer satisfaction (Srinivasan and Moorman. In the current era of hypercompetition. 1992) and shareholder value (Anderson et al. 2005). 2005). cooperative and collaborative relationship with customers seems to be the most prudent way to keep track of their changing expectations and appropriately influencing it (Sheth and Sisodia. Customer expectations have also rapidly changed over the last two decades. maintenance and optimization of long-term mutually valuable relationships between customer and organizations. customer expectations are changing almost on daily basis.. The shift from transaction marketing to relationship marketing has not been sudden.International Journal of Management & StrategyJuly-Dec. Customer satisfaction is also linked with increased customer loyalty. commitment. 2005). 1995). Fox and Stead (2001) have described customer relationship management as the establishment. 2 . Morgan and Hunt (1994) and Groonroos (1994) emphasized relationship marketing as set of activities towards developing and enhancing customer relationship for mutual exchange and fulfillment of promises.1. loyalty. retaining customer is less expensive and perhaps a more sustainable competitive advantage than acquiring new ones.1 their focus from “transactional exchange” to “relational exchange” for developing mutually satisfying relationship with customers (Jain at al. marketers are forced to be more concerned with customer retention and loyalty. Consumers are less willing to make compromises or trade-off in the product and service quality. Long time customers tend to be less price sensitive and provide free word-of-mouth advertising. relationship quality.No. Levitt (1986) introduced the concept of augmented product stressing that consumers are interested in the total buying experience not just the core product. service quality.2010 Vol. The scope of CRM is very wide and includes different aspects like customer satisfaction. Strengthening relationship is reported to have a significant impact on profitability and customer life time value. Fueled by new technology and growing availability of advanced product features and services. As several studies have indicated. The need for mutual benefit through relational exchange has also been explained in many studies. customer retention etc. people technology and practices. They further mentioned that successful CRM focuses on understanding the needs and desires of the customer and is achieved by placing these needs at the heart of the business by integrating them with the organization‟s strategy. In the world of ever-changing customer expectations. 1984). Marketers are realizing that it costs less to retain customers than to compete for new ones (Rosenberg and Czepiel.. reduced customer complaints (Bolton and Forenell.

2001). In year 2006..No. return on customer quantifies how well company creates value from its customers. In general. RETAILING SCENARIO The retail sector in India is witnessing the major transformation in its size. the retail industry was estimated to be nearly Rs 10. Modern retailers are using sophisticated and technologically enhanced clues to attract and hold the shoppers. 2001). rising income level and its influence on aspirations and life style of people. It is the perceived quality that is the key driver of perceived value. evaluating product variety and quality. which determines the strength of company customer relationship (Berry. economic development and growth of retailing are highly correlated. However. Kotler and Keller (2005) further explain the concept of Customer Lifetime Value (CLV) in terms of the present value of the stream of future profits expected over the customers‟ life time purchases. One of the determinants of the success of the relationship marketing strategies of a firm is how the customers perceive the resulting service quality. and the changing value orientation of population from austerity to conspicuous consumption are some of the important factors that fuel the growth of organized retailing. Delighted customers have engaged in referrals leading to increase sales (Biyalogorsky et al. 1983). organized retailing is expected to grow significantly in coming years. According to a report. Peppers and Rogers (2005) have pointed out that while return on investment gives an indication on how well the firm creates value from its investments. Mulky and Nargundkar (2003) report that the Indian retail sector 3 . In addition. search for merchandise. demographic profiles of the country such as proportion of young people in the population. structure.4% of total retail. growth. and interaction with store personnel (Terblanche and Boshoff. CRM enables companies to get a better grip on the customer equity and offers a realistic indicator of the worth of the customers. this is likely to reach about Rs 17800 billion by 2010 indicating the growth rate of about 32% to 40%. increasing number of working women and double. and format.1 Buttle (1998) and Silverman (1997) opined that companies are aware of the need to manage customer referrals. Several factors contribute to the growth of modern organized retail. price comparisons. In India the share of organized retail accounts for only about 3 . The share of modern organized retailing in the region currently constitutes only a miniscule proportion of the total retail industry. due to a verity of favorable factors.International Journal of Management & StrategyJuly-Dec.1. It is this perceived value. A retail store experience involves activities such as browsing. It will be imperative for retail companies to focus on developing long term relationship with their customers.income families. It is the largest industry as this sector accounts for over 14% of country‟s GDP and above 8% of its employment.800 billion.2010 Vol.

1 is largely traditional. The data was analyzed using Principal Component Analysis of Factors by Varimax Rotation Method.603)”. “the organization uses latest technology to give better quality services (.638)”.509)”.542)”. developed by Jain and Jain (2005). Vorhies and Hunt (2005) also emphasized that information processes and capabilities within the firm should be established to understand the needs and wants of customers thus making firms more effective and efficient in managing customer relationships. new format stores are pre-engineered retail outlets. self service.509)”.2010 Vol. They seem to attract and influence young minds by satisfying both hedonic and utilitarian needs. Major constituents of this factor are “customer is given due importance in organization (. (Jain and Bagdare. characterized by well designed layout. ambience.502)” and “store carefully evaluate the evolving needs of the customers (. CRM has gathered a lot of attention from scholars. Customer needs have to be placed in the core of the business strategy formulation for creating winning services. technology based operations and many more dimensions with modern outlook and practices. researchers and practitioners with the result that a lot of research work has been done on the CRM and its applicability in service industry. 4 . “service providers are very enthusiastic to serve the customers (. Due to its increased applicability in service sector. Behavioural dimensions have found to play a critical role in determining the effectiveness of the CRM programmes (Jain and Jain. 2009).Customer Orientation This factor has emerged as the most important dimension of CRM effectiveness in organized retail Industry. “customer suggestions are valued (. The data was collected using a standardized five point Likert type scale of CRM effectiveness. containing 33 items. Before trying to build deep relationship with customers the service provider has to be very sound. but stores in modern format are emerging.International Journal of Management & StrategyJuly-Dec. The purpose of the present research is to explore the dimensions of CRM effectiveness in Indian Retail Sector. As compared to traditional stores.728)”. Factor 1 . “service providers are flexible to accommodate changes (. “service provider effectively communicate with customers (. display. METHODOLOGY A convenient sample of 105 retail customers with experience of shopping in organized personal lifestyle retail stores was taken for conducting survey. “customer satisfaction is asse d regularly (.No.1. value added services.411). 2005). “the organization strives for customer satisfaction (.509)”.

All these measures help develop an emotional bond between the customer and the retail store which goes a long way in maintaining a long-term relationship with the store which is one of the major aims of CRM. ”store‟s service providers are reliable (.96 and is composed of “customer leave organization with a wish to visit again (. They not only require that their service needs be fulfilled but also they be recognized as important entities in the organization.622)”. “retail store is able to establish a relationship of trust and faith (.810)”.1.36%.364)”.524)” and “service providers are co -operative (.Relationship Orientation This factor has a variance of 8.International Journal of Management & StrategyJuly-Dec.711)”. “customers do not feel ignored in the store (. “store sends greetings to customers on special occasions (. “store provides relevant information to customers (. “customer can rely on store for their benefit and welfare (.385)”. In order to make shopping a pleasure for customer‟s personal attention need to be given to them so as to make them feel important.713)”. retailers are integrating relationship orientation into all their operations and performances.574)” and “store generally sacrifices short-term gain for long-term benefits (.586)”. Factor 4 – Personalization This factor has a variance of 6.600)”. It is composed of “store gives special incentives and privileges to its regular customers (.509)”. Each customer craves for recognition by the service organization. Factor 3 .1 Factor 2 – Responsiveness The dimensions covered under this factor are “store‟s service providers take genuine interest in customer‟s problems (. Considering the immeasurable mutual benefits of developing and sustain long term relationships.600)” and “providing personalized services (. “store fulfills its promises (. This also includes going out of the way sometimes by the customer service officers to fulfill their service requirements. Many retailers now identify their long time profitable customers and provide them with added services like sending greetings on birthdays and special occasions and providing them special discounts and free gifts.No.647)”. “customer complaints are promptly attended (. 5 .2010 Vol. Service propositions like “what can I do for you” clearly underline the importance of customers.678)”.

people.1 Factor 5 – Consistency This factor has a variance of 5.411)”.No.1.Modesty 6 . which understands the needs/expectations of the customer and addresses four key areas of business: strategy. Positive expressions result into happy feeling and vice versa..425)” and “store maintains consistent service standards (. Factor 7 – Gestures This factor has a variance of 4.644)”. it is very necessary that processes and people in organized retail store should be reliable.73% and is composed of “store personnel are expert in their area of operations (. “store makes effective use of IT facilities to enhance customer services (. Factor 8 . 1988).739)”. “strong desire to maintain a valued relationship with customers (.366)”. Hence organizations should develop a program. which depends on customer‟s perception of service quality.358) and “showing keen interest in knowing customer‟s preferences (. Factor 6 – Reliability Reliability is defined as performing the task dependably and accurately (Parasuraman et al.644)”. Customers feel emotionally elevated by the service provider‟s attitude reflected through their facial expressions. “customer recommends the store to other people (. A large number of retailers train their sales personal in non verbal communication. and process. “service performance is regularly assessed (. This factor has a variance of 5.54% and is composed of “store is known for et hical business practices (9. An important component of CRM is customer satisfaction. To win customer trust.International Journal of Management & StrategyJuly-Dec.2010 Vol. Parasuraman et al. (1988) found that customer‟s perception of quality is a function of the gap between customer‟s desires/expectations and their perception of the service that is actually received. technology. particularly in managing body language – gestures and postures.65% and is composed of a single item but most important in retail services that is “facial expressions of service providers (. which is an important part of CRM.588)”.681)”.

Retailers need to address all the important issues brought out in the present issue while designing strategy for managing customer relationships. MANAGERIAL IMPLICATIONS Today‟s buyers are smart buyers. not just the core product. IMPLICATIONS FOR FUTURE RESEARCH The present research has explored important dimensions of Customer Relationship Management. Any argument or heated discussion may adversely affect the operating environment and create negative publicity. In depth analysis of each factor can be further conducted to bring out better insights.No. 2003). (Knauer. promptness. which leads to augmentation. 1992). informed. In retail services customers seek an ongoing relationship with the store to reduce perceived risk and saving of time and energy. Customer is regarded as the most important person in the organization. understanding.1. no surprises. As a result the customer tries to associate many things with the product and services. which depends on customer‟s perception o f service quality. security. They are aware. Levitt (1986) also stressed that customers are interested in the total buying experience. follow up. Type of retail stores may also require different treatment. demanding and well equipped with the latest tools of technology and want to enjoy the best experience. accuracy. accessibility and one to one interaction. Disputes or conflicts over any issue needs to be approached in a very modest and humble manner to avoid any negative consequences. Employees are the face of the organization and hence a good rapport amongst employees and customers help in maximizing service proposition. which establish faith of customers in company‟s efforts. Another aspect of CRM which needs to be attended is customer trust. Hence retail stores should focus more and more on relationship marketing. An important component of CRM is customer satisfaction.578)”. Few other elements which customers look in a service are responsiveness.2010 Vol.International Journal of Management & StrategyJuly-Dec.63% and is also composed of only one item “service providers do not involve in arguments with the customers (. Role of employees in a retail outlet is of significant importance in determining customer retention.1 This factor has a variance of 4. knowledgeable people. Processes and practices should be developed in firms. communication. Studies across a variety of retail stores may to lead to 7 . Delivering a product after studying the type and nature of customers and their buying patterns increases the return on investment and makes the marketing strategy more scientific and goal driven (Panda. promises being kept. Thus employees should be more empowered to be able to cater to customer‟s needs effectively.

662 11.653 52.424 31 .047 6.390 1.100 56.465 77.633 56.353 4.102 6.529 4.230 12 .320 1.253 92.077 27 .786 72.813 2.647 85.685 4 1.556 10 1.466 1.242 .734 98.959 8.982 16 .920 84. TABLE – 1 Total Variance Explained Initial Eigenvalues Componen % of Cumulative t Total Variance % 1 6.517 15 .075 3.368 36.193 80.525 1.790 20 .736 42.829 5.804 5.634 1.432 1.1 customized CRM solutions.1.414 1.456 88.966 2.853 8 1.364 4.169 93.156 13 .021 2.417 63.557 24 .724 2.652 5.308 91.International Journal of Management & StrategyJuly-Dec.560 48.690 30 .608 99.257 67.204 33.000 Extraction Method: Principal Component Analysis.505 4.467 39.261 .850 2.053 2.973 11 1.128 3.837 22 .543 1.900 29 .575 75.926 70.005 28 .286 9.007 44.590 87.223 18 .049 82.201 .158 6 1.152 5 1.667 1.295 .157 2 2.928 96.143 19 .481 1.789 97.570 33 .157 20.652 20.380 21 .324 27.134 52.676 2.No.189 3. Micro level studies using demographic correlates may further help in identifying specific issues considered by different customer segments leading focused marketing activities.096 3.952 9 1.979 26 .893 5.412 90.249 23 .032 32 .430 100.096 11.968 30.098 95.952 8 .386 1.481 3 2.177 .719 7 1.535 4. Rotation Sums of Squared Loadings % of Cumulative Total Variance % 3.362 1.174 17 .538 99.919 2.306 .604 60.810 25 .958 21.142 .417 7.542 47.895 96.125 1.2010 Vol.942 14 .

458 .428 .273 .014 .056 .041 .262 .600 .165 .160 .264 .509 .125 .713 .335 -.266 .728 .159 -.673 .244 .178 .105 .035 .542 .1.186 .152 -.467 .057 .662 .009 .097 .147 7 Vol.057 .314 .013 -.241 -.190 .155 .229 -.166 .124 -.168 .012 .032 -.085 .068 .167 .186 .079 -.188 .145 .074 -.023 .091 .062 .355 .130 .509 .524 .031 -.200 .115 .509 .230 -.095 .160 .2010 TABLE – 2 FACTORS DETERMING CRM IN RETAILING 1 VAR000 06 VAR000 07 VAR000 08 VAR000 04 VAR000 09 VAR000 24 VAR000 17 VAR000 05 VAR000 27 VAR000 15 VAR000 16 VAR000 22 VAR000 10 VAR000 18 VAR000 26 VAR000 29 VAR000 25 VAR000 19 VAR000 30 VAR000 23 VAR000 11 VAR000 12 VAR000 .005 3 .190 .236 .093 -.280 .294 .069 .136 .009 .638 .149 .711 .026 -.264 .275 .096 .075 -.647 .050 -.269 -.017 .502 .033 .033 .114 .151 .1 8 .124 -.157 -.072 -.586 .109 .042 -.140 -.038 .207 -.103 .068 -.012 .117 -.151 .048 .385 .257 .411 .185 .300 .168 .032 .027 .206 -.047 -.007 -.122 .600 .057 -.037 -.280 -.383 -.070 .810 .424 -.320 .644 6 .416 -.102 .043 -.173 .220 .169 -.013 -.003 .158 .243 -.341 .217 .038 .016 .006 .220 .116 .122 -.059 .021 .513 .278 .059 .100 2 -.045 -.110 -.098 .058 .114 .093 .132 -.010 .346 .139 -.083 -.144 .603 .257 .115 .International Journal of Management & StrategyJuly-Dec.065 .No.335 .463 -.041 -.150 -.393 -.101 .147 .300 -.020 .063 9 Component 4 5 .574 .096 .045 .137 .197 .

054 -. a Rotation converged in 16 iterations.044 .366 .739 -.110 .335 .067 .052 -.056 -.088 -.061 -.037 -.107 .086 .013 .303 .664 .119 -.061 -.015 .045 .024 .181 -.334 .026 .681 .1.060 -.588 .108 .269 -.174 .261 .1 . 10 .070 .169 .167 -.307 .110 .111 .012 -.575 .001 .271 -.063 -.230 .223 -.300 -.370 .341 -.International Journal of Management & StrategyJuly-Dec.069 -.092 .097 .299 .001 -.142 .364 -.175 -.143 .358 . Rotation Method: Varimax with Kaiser Normalization.425 .240 .011 .044 -.101 .116 -.010 -.255 -.031 -.066 .263 .138 .411 -.No.069 .040 .217 .578 Extraction Method: Principal Component Analysis.241 -.018 .248 -.083 -.146 .2010 28 VAR000 32 VAR000 31 VAR000 21 VAR000 20 VAR000 33 VAR000 02 VAR000 03 VAR000 01 VAR000 14 VAR000 13 Vol.

Service providers do not involve themselves in arguments with the customers. 15. 11 . Customers‟ complaints are promptly attended to. 11. Customers‟ suggestions are valued. The organization uses latest technology to offer better quality service. 9. 19. The service providers show keen interest in knowing customer preferences. The organization sends greetings to customers on special occasions. 6. The organization gives special incentives / privileges to regular customers. 23. Service providers are very enthusiastic to serve the customers. Customers don‟t feel ignored in the organization. The organization provides relevant information to customers. 14. Organization offers personalized services. Service providers take genuine interest in customers‟ problems. The organization fulfils its promises. Service providers effectively communicate with customers. The service providers are flexible to accommodate changes in them services offered. 10. 28. The service providers have a strong desire to maintain a valued relationship with customers. 20.1. Customer satisfaction is assessed regularly. sometimes senior managers also interact with customers to assess service performance. 21. The organization carefully evaluates evolving needs of the customer. Vol. 22.1 3. The organization is known for ethical business practices. The organization strives for customer satisfaction. 25.International Journal of Management & StrategyJuly-Dec. 26. The organization maintains consistent service standards. Service providers are reliable. 24. 18. 17. The service providers are experts in their areas of operation. 8. 30. The service provider is able to establish the relationship of trust and faith with customers. 5. 31. Customer is given due importance in the organization. 27. Besides customer contact managers.2010 TABLE – 3 LIST OF STATEMENTS USED IN THE SCALE 1. The customers can rely on the organization to take decision for their benefit and welfare. Customers leave organizations with a wish to come again. 13. The organization generally sacrifices short-term gains for long-term benefits. 12. Facial expressions of the service providers make people feel good. 29. 7. 4. Service providers are co-operative. 2. 16.No.

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