Evolution of CRM and its Applications

Xu et al. (2002) felt that late 1980s and early 1990s saw the first surge of CRM
solutions (see Table 2.1). Clarify (now owned by Nortel Networks Corp.), Onyx
Software, Oracle, Vantive (acquired by PeopleSoft) and Siebel Systems were the
pioneers in this field. These packaged solutions recommended automation and
standardization of the internal processes, particularly those related to acquiring,
servicing and retention of customers. Internet emerged on the scene during the mid-
1990s and changed the way in which business was conducted and this involved the
CRM market and other customer related business requirements of all the companies,
irrespective of their sizes. Communication and interaction with the organization by
the already existing and potential customers became easy with the new CRM systems.
SAP’s CRM Software, newly launched in 1999, was specifically designed for
application on the Web, leading to the emergence of e-CRM market segment
(3comCorp., 2001). (Ibid)

Xu et al. (2002) add that there is infinite market for CRM applications, with a furious
demand for Web-enabled CRM applications. Considering the profitability of CRM
market, e-CRM seems a significant option. The demand for CRM-related services has
by far outstripped its availability. Definitely, the usage of CRM through Internet has
caused many of functions to be changed so that they maintain their relevance. For the
program to be suitable for Internet, CRM needs to provide the facility for online
interaction and allow the customers online transactions from anywhere in the world.
Therefore, Internet eases the application of new customer-oriented products and
services. Speech-enabled specific applications functions of some of the new CRM
packages provide innovative ways of integrating customer support, order management
and sales force automation within the individual applications. Organizations like
Siebel Systems, Oracle, and SAP are actively working to provide innovative CRM
solutions. Since the most essential part of the application is the interface which is
used, system integrators can eliminate complicated and expensive customized
development of products and their deployment (Ibid).

Table 2.1. The History of CRM

Age Year Lesson Learned Milestones

Introduction 1980s to Very expensive Focusing on automating and stan-
early 1990 to maintain dardizing the internal processes to
make the customers an asset
Growing Mid-1990 to Some vendors Due to the emergence of the Web,
end 1990 are slow to client/server architecture behind
respond to the CRM applications would disappear
Internet
Current 2000 N/A E-CRM
Future After 2000 N/A N/A

Source: Adopted from Xu et al, 2002

2.1.3. Technology Solutions for CRM

Smith (2006) compares the creation of IT package for CRM to that of building a
bridge, since it involves a thorough understanding of the requirements, techniques,
evaluation and the process of creating the package. Global competition, evolution of
Internet, newer and better business processes have led to the increase in overall
expectations of the consumers. Consumers seek value-added relationships with the
companies. It is not enough to use the facilities of mass marketing, broad
segmentation and super call centers for reaching out to the potential and existing
customers. Marketers needs to deftly use technology and improved business
processes while using customer-related data so that customer is treated as the core of
the relationship. This means that marketers need to involve their customers in
meaningful communication which would provide information which is relevant and
profitable to both marketers and consumers. Therefore, it is important that the CRM
strategy considers all the possible customer contact points so that customers can use
any points to maintain their communication with the company. This highlights the
importance of regular communication and giving the opportunity to the customer to
control the relationship (Ibid).

Smith (2006) further asserts that companies must utilize technology to maximize the
value of customer relationships across channels and product lines. The three most
important elements which require CRM applications pertain to marketing automation,
sales force automation and customer support and field service. The CRM application
vendors, therefore, provide integrated solutions which encompass the important
customer touch points in marketing, sales, help desk and the customer lifecycle
management. Siebel Branch Teller is a special CRM software developed by Siebel,
especially for banks, which a traditional teller can use for various financial
transactions even as it provides relationship functions by giving detailed customer
information. With so much customer information being available, the banking agent
can use the service tools at the point of service delivery to create a value added
experience for the customer, thereby providing him total satisfaction and in return
ensuring the retention of the customer along with greater share of the wallet through
cross selling and outselling activities (Ibid).

Lindgreen and Antioco (2005) recommend the deployment of information technology

for CRM applications in order to acquire, develop and retain customers. However, it
must be clarified that CRM is not dependent on information technology.

Park and Kim (2003) assert that collecting volumes of data about their customers is
easy for companies who employ advanced information technologies and this
information can be transformed into strategic data suitable for enhancing business
opportunities. The most important aspects relates to: the identification of information
needed; identification of the individuals about whom the information has to be
collected; identifying the potential usage of this information. This would indicate that
CRM starts with the identification of the customer. Park and Kim (2003) present a
classification of the customer information into three types, based on their content and
interaction types: information of the customer; for the customer; and by the customer.

First, “of-the-customer” information involves personal data about the customer along
with the details of the transactions with the organization. Most CRM applications
require this type of information. Firms use this personal data to identify the sales
volume that can be attributed to the customer, profitability, purchasing patterns,
frequency of purchase, preference and so on. Banks and credit card firms, for
example, create a large database of “of-the-customer” information in their systems for
opening, maintaining and customer accounts billing as well as to identify the most
profitable or the least profitable customers. Target marketing or database marketing,
therefore, uses “of-the-customer” information rather strategically (Park & Kim, 2003).

Second, “for-the-customer” information involves information related to the product-

service of the organization which might be considered useful by the customers. The
various media of communication present this type of information to facilitate its
acquisition and utilization in order to enable the customer in making informed
decisions. Direct mail, automatic response system (ARS), or Internet home pages are
some of the common ways of providing such information (Ibid).

The third type is “by-the-customer” information, which involves non-transactional

information like customer feedback, complaints, propositions, claims, etc. This type
of information becomes a part of the expanded customer profile and enables more
meaningful interactions of the customer with the organization (Lindgreen and
Antioco, 2005). Considering that this information involves complaints, needs and
suggestions of the customers, it can be of immense value of the organization for
developing new products and services and streamline the more important business
processes (Ibid).

Park and Kim (2003) propose a structure of vibrant CRM taken from the perspective
of marketing and recommend adopting relevant IT strategies to support the
framework. Figure 2.1 presents such a framework depicting the customer relationship
management based on the customer information types and the various stages of
evolution of a relationship. They believe relationship begins with the identification of
the customers and assimilating vital “of-the-customer” information. A firm will
typically use membership programs or bonus points programs to identify these
customers. Firms then provide “for-the-customer” type of information for the
identified customer through newsletters, special promotion notice, bonus points status,
order status, etc. and particularly by offering customized service. After going through
a certain period where the customers feel satisfied in their relationship with the firm,
they evolve into core customers even as they satisfy one or more parameters of core
customers. This is the “expansion phase” of the firm’s CRM, since in this phase core
customers begin meaningful interactions with the firm and help to increase the
number of firm’s customers through friendly endorsements. Customer feedback and
suggestions from these core customers form “by-the-customer” information and the
firm can use this information to launch innovative products, enrich their business
processes and satisfy the needs and requirements of the customers (Ibid).

Gurau (2003) believe that Internet with its flexibility and interactive nature has
immense scope for gathering vital information about online customers and their
experience with the company. The company can use this data to accurately segment
the market, to be able to predict customer behavior and to implement customized
marketing campaigns. However, online marketing can be rather volatile, therefore, it
is important for the company to keep track of customer relationship and customer
loyalty using other sources.

2.1.4. Functions of CRM

Rowley (2002) recommends that CRM systems are relevant during the entire
experience or dealing of the customer with the organization starting from the stage
where the customer places the order up to the delivery of the product and even
involving the after sales service. Therefore, functions like online transactions, e-mail,
programs to generate customer profiles or to provide customized services, automatic
generation of response to our customers e-mail and other health facilities are all
covered in the CRM systems. She further proposes some of the important functions
covered by a CRM application:

Figure 2.1. A Framework of Dynamic Customer Relationship Management Source:

Adopted from Park and Kim, 2003, p. 656

2.1.5. CRM and Distribution Channels

Payne and Frow (2005) recognize the importance of multi-channel integration process
to be one of the most significant processes in CRM. This involves considering the
outcomes of business strategy and value creation processes as vital for providing
value-added experience to the customers. They also suggest that firms use various
channels as interface while dealing with a customer. These may include field sales
forces, Internet, direct mail, business partners, and telephony, which they have
classified into six broad categories according to their relevance in physical or virtual
contact. These categories are; Sales force; Retail Outlets; Telephony; Direct
marketing; E-commerce; and, M-commerce. (Payne & Frow, 2005)

Payne and Frow (2005) recommend using a combination of these channels in order to
create optimal exposure for the customer and returns for the company.

2.1.6. CRM Classification

Xu and Walton (2005) put forth the following four CRM categories which have been
proposed by Chaudhury and Kuiboer (2002) and Sap.com (2003):

• Operational: Various touch points such as contact centre, contact management

system, mail, fax, sales force, web, etc. are vital for collecting the relevant
customer information. This information is then stored systematically in the
customer centric database and can be retrieved during the interactions with a
customer. Therefore, contact center and contact management are the typical
instances of operational CRM, since contact management enables the firm to
keep a complete track of all interactions with the customers. With total focus
on the customer (Kotorov, 2002), this system enables the firm to maintain a
personalized relationship with the customer and ensure promptness of
response to the needs of the customers (Xu & Walton, 2005).

• Analytical: Various analytical tools are employed to create customer profiles

from the data that has been stored in the customer central database.
Identification of relevant behavior patterns, satisfaction level and customer
segmentation are also possible through such a system. Therefore, analytical
CRM enables the firm to use the information to develop appropriate marketing
and promotion strategies. Kotorov (2002) considers it as a 360° view of the
customer. CRM portals, data warehouses, predictive and analytical engines
(Eckerson and Watson, 2001); pattern discovery association rules, sequential
 patterns; clustering, classification and evaluation of customer value (Ahn et
al., 2003) are some of the technologies which support analytical CRM.
Analysis of the customers allows the firm to create appropriate segments
among its customers so that it can offer products and services relevant to their
buying profiles. (Ibid)

Bradshaw and Brash (2001) point to the presence of a "virtuous triangle" in

CRM (see Figure 2.2). This involves integration of the front office, the back
office and the analytical systems to ensure all the information about customer
has been recorded, thereby keeping their needs and the organization’s
profitability in proper perspective.

Customer requirements are handled in the back office with actual contact
functions being the billing aspect and logistics part, i.e. the delivery of goods,
with even these functions being performed through the front office (Ibid).

Analytical software enables the firm to seek out patterns in consumer behavior
from the data that has been collected. The information emerging from
understanding of patterns can be used strategically and tactically by the
organization while planning future strategies and looking for ways to improve
the existing business processes. The tactical information comes in handy
during customer interactions (Ibid).

Figure 2.2. The "Virtuous Triangle" of CRM (Source: Adopted from Bradshaw D. and
Brash C, 2001, p. 525)
• Collaborative: This involves the assimilation of CRM systems into the overall
systems of the enterprise in order to make the entire supply chain responsive
to the demands of the customers (Kracklauer and Mills, 2004). Therefore,
employees, suppliers and partners also need to be integrated in a CRM
program. This would enable the enterprise to derive benefits of a CRM
program and every possible channel, ranging from the call center to the
Internet (Ibid).

• e-CRM. This category of CRM enables all the customer touch points within
the company and its external business partners, through the Internet or
intranet, to utilize the available customer information. This means that the
customer related information can be accessed by the internal or external users
via the Internet and the intranet in order to avail the advantages of e-
commerce. Rowley (2002) favors e-CRM by attributing to it special features
like online ordering, e-mail, apart from its utility in creating customer profiles
using vast knowledge base, facilitating personalized service, generating the
prompt and automatic response to e-mail and extend automatic help (Xu &
Walton, 2005). Various multimedia channels like call center, Web site, online
chat rooms and e-mail services form the e-Contact Center, leading to
enhancement of the marketing function from its traditional domain (Scullin et
al., 2004).

Xu and Walton (2005) rue the fact that most organizations limit the utility of CRM
systems by using limited customer knowledge gained from current CRM applications
for their operational applications like contact centers, sales and marketing solutions
functions. It is unfortunate that organizations do not appreciate the true power of
CRM, and as such only a few large organizations have been able to adequately exploit
the analytical CRM to its full potential. The efficacy of CRM systems lies in
enhancing the ability of the organization for interacting with the customers, attracting
the customer and building personal relationships as well as improving the knowledge
base about the customer. Therefore, a properly functional CRM must be applicable
for internal or existing purposes as well as external or for attaining knowledge about
prospective customers. In essence, the system provides a wide view of an
organization’s customer base through proper profiling of the customer, highlight
customer behavior patterns and anticipate future actions of its customers (Ibid). This
area of study, with its interesting possibilities and conclusions of a few earlier
researches, fascinated the author to the extent that he decided to explore this subject in
greater detail.