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CRM in tourism: Customer relationship management (CRM)

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Chapter 2
CRM in Tourism:
Customer Relationship Management (CRM)

Roya Rahimi
University of Wolverhampton, UK

Vipin K Nadda
University of Sunderland, UK

Hui Wang
University of Sunderland, UK

ABSTRACT
Businesses tend to operate under the influence of their internal and external environment for favourable
outcome and competitive sustainability. Under such circumstances, it becomes critical to develop and
maintain mutually beneficial relationships with the variety of stakeholders and customers being of para-
mount importance, especially in the tourism sector. The recent time has seen dramatic growth in tourism
industry and tourism has been considered as one of the largest global export industries (UNWTO, 2003).
In order to strive, it has to meet the competitive challenges of the future where quality will be the main
driving force which mainly focuses upon the satisfaction of all the legitimate product and service needs,
requirements and expectations of the consumer, at an acceptable price, in accordance with the underly-
ing quality determinants such as safety and security, hygiene, accessibility, transparency, authenticity
and harmony of the tourism activity concerned with its human and natural environment. These expected
needs correspond to what the customer expects to receive and to what is experienced as important. These
needs can be expressed by the customer and if these expectations fulfilled, will lead to satisfaction and
doing so the service provider creates expected quality (Kvist and Klefsjo, 2006). Recognizing this value
of end user’s opinion, more and more business organizations are focusing towards customer relation-
ship management (CRM) for building and facilitating ever lasting relationship with them (Richard and
Johns, 2008). The competitive marketing environment characterized with the availability of differentiated
products (Gartner,2009),availability of low switch over options(Massey et al,2001) and the increasing
cost of attracting new customer(Peppard, 2000) not only threaten the loyalties but also raise customer’s
expectations thus necessitating the need for CRM (Pan &Lee,2003). Buttle (2009) projects that the core
aim of CRM is towards managing customer relationship shifting the focus from transaction to acquisi-
tion, development and retention.
DOI: 10.4018/978-1-4666-8699-1.ch002

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CRM in Tourism

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CRM DEFINITION

Definition and History of CRM

There are several attempted definitions made on CRM, Swift (2001) states CRM as “an enterprise ap-
proach to understanding and influencing customer behavior through meaning communications in order
to improve customer acquisition, customer retention, customer loyalty, and customer profitability”. The
word “enterprise” in the definition above holds immense importance since CRM is an approach that
must be integrated into everything a company does and must involve the whole company (Swift, 2001).
Furthermore, Bose (2002) has stated that, “at the core, CRM involves the integration of technology and
business processes used to satisfy the needs of a customer”.
Started in the early 1990s, Customer Relation management (CRM) is a marketer’s term for “a group
of ideas and technologies created to help improve customer- related business practices” (Bligh P. and
Turk D, 2004, pp 7-8). It certainly was the logical extension of long term efforts by companies in order
to keep up with ever changing buyers, markets and competitors, and use of PCs and the internet in the
1990s magnified these challenges. Though CRM nurtured from the desire of merging customer support,
the helpdesk, enterprise resource program and data mining, it is still unclear who introduce the term CRM
to the business world, but the term emerged is still ongoing trill and error approaches(Oberkamp, 2002).P.
Bligh and D. Turk further added that “the use of technology in CRM increases pressure for companies
to satisfy the customer expectations and needs, as a result, CRM has become a main tool for effective
sales, customer service and marketing of any business enterprises” (Bligh P. and Turk D., 2004, pp 7-8).
Kincaid (2003, p. 41) viewed CRM as “the strategic use of information, processes, technology, and
people to manage the customer’s relationship with your company (Marketing, Sales, Services, and Sup-
port) across the whole customer life cycle.” According to Parvatiyar and Sheth (2001, pp. 5), “Customer
Relationship Management is a comprehensive strategy and process of acquiring, retaining, and part-
nering with selective customers to create superior value for the company and the customer. It involves
integration of marketing, sales, customer service and the supply chain functions of the organization to
achieve greater efficiencies and effectiveness in delivering customer value”. Marketing, Sales, Services
and Support are the three major functional areas that CRM consist of and IT and IS are the other vital
components in supporting and maintaining these three functional areas as well as the whole CRM process
(Kincaid, 2003, E.W.T. Ngai, 2005).
According to Newell (2003?), the sole of the CRM is knowledge. The value of any company lies in
what way it is using the knowledge to manage their customer relationship. If the customer relationship is
built, it will lead to loyalty followed by profit (Newell, 2003?). The company can be benefited in many
ways through CRM which are mainly found in one of these areas(Swift, 2001) such as higher customer
profitability, no need to recruit so many customers to preserve a steady volume business, lower costs of
recruiting customers, reduce cost of sales, evaluation of customer profitability and increased customer
retention and loyalty(Rahimi,2008).

Different Types of Customer Relationship Management (CRM)

It is worth mentioning that information technology (IT) plays a significant role within CRM arena. In
fact, IT has long been accepted as an enabler to thoroughly assist redesign of business processes in order
to achieve organisational objectives (Chen and Popovich, 2003). Over the last decades the CRM technol-

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ogy has gained a significant concern, particularly from the Hospitality Industry. According to Kasim and
Minai (2009), CRM technology is firmly related to hotel performance. In this regard, an appropriate use
of technology needs to be considered to accompany hotels on improving their performance. In the mean-
while, this technology orientated view can be regarded as the level of information applied in building and
sustaining customer relationships. As a critical enabler, CRM technology assists organisations to cultivate
better relationships with a wider view of the customer behaviour and value (Thompson et al., 2006).In
an effort to fulfil the CRM scholarship, an industry standard definition by the META group identifies
three main types of CRM system, namely operational, analytical and collaborative (Meta Group, 2001).
The three types of CRM system extensively categories conceptual efforts regarding CRM terminology.

Operational CRM

The operational type of CRM deals with automation of business processes (Rababah et al., 2011).
According to Chen and Popovich (2003, p.672), operational CRM is termed as “a customer-facing ap-
plications of CRM, including sales force automation, enterprise marketing automation and customer
service automation”. This definition indicates the essence of operational CRM that is an integration of
both technologies and business processes to achieve customers’ satisfaction within an interactive context
(Bose, 2002). Importantly this concept is centred in helping organisations to improve the efficiency of
customer operations on a daily basis (Peppers and Rogers, 2011).
The general objectives of operational CRM is to support the front-office workers in terms of data
collection, transaction process, and controlling workflow in the field of sales, marketing, and services
(Zhang et al., 2006; Lun et al., 2008). Of this, all communication with the customers can be tracked and
stored in the database and can be retrieved whenever required (Xu and Walton, 2005, p.961). It is clear
that the advantage of this approach facilitates various communications at a multichannel environmental
level. For instance, operational CRM enables the hotel front-office staffs to have actual interactions with
customers. In other words, it helps these staffs to access their customer information as well as gives actual
views of customer needs through integrating hotel websites, hotel call centres, data aggregation systems,
and hotel weblogs. This type of channel integration is crucial for operational CRM, as it brings together
customer enquiries, reservation fulfilment, and hotel company-customer interaction during the booking
procedure. Therefore, to successfully serve the function of CRM, hotel companies should invest more
efforts on the requirement of customers. In addition, improving the speed and quality of information
flow is called for to enable consistency in communications (Iriana and Buttle, 2007).

Analytical CRM

The most critical CRM component is the analysis (Reynolds, 2002). According to Buttle (2004), the
term of analytical CRM is defined as “a bottom-up perspective, which focuses on the intelligent mining
of customer data for strategic or tactical purposes.” It is clear that this earlier definition emphasises the
necessity of employing analytical tools to drive strategy and tactical decisions. Building on operational
CRM, this analytical type of CRM enables organisations to examine customer behavioural patterns in
order to develop marketing and promotional strategies (Xu and Walton, 2005, p.961). With the help of
IT, customer data can be processed, interpreted, distributed, exploited and reported that creates more
profitable interactions between organisations and customers (Greenberg, 2004; Iriana and Buttle, 2007).
In this regard, analytical CRM supports organisations’ customer management strategies, in terms of

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customer characteristics and behaviour analysis. By the same token, this analytical type of CRM helps
organisations to better target their profitable customers through an effective resources allocation (Ngai
et al., 2009).
In a word, analytical CRM is all about customer data analysis using statistical analysis tools such as
data warehousing and data mining to enhance both customer and organisation value (Foss et al., 2008;
Ranjan and Bhatnagar, 2011). In a hotel, for instance, the analytical CRM plays a significant role through
enabling insight into customer behaviour and achieving the goals of the CRM initiatives. Inside the ana-
lytical CRM framework, hotel managers can make use of guest history information to understand their
behaviour, both in the check-in and check-out processes. Also, they can analyse guests’ request based on
the feedback to the hotel and adjust their marketing strategy accordingly. It is believed that the insights
obtained from the customer data analysis could be used as a criterion to help to model and predict future
guest satisfaction in a more accurate manner. More importantly, the analytical type of CRM might form
a quantified infrastructure for strategic decision making.

Collaborative CRM

This collaborative type of building block applies technology across organisational boundaries. In other
words, it manages all types of interactions between an organisation and its customers. It uses a collab-
orative services and infrastructure to enable interaction between an organisation and its multi-channels
possible. According to META Group (2001, p.5), collaborative CRM is termed as “the components and
processes that allow an enterprise to interact and collaborate with their customers, including things
like voice technologies, Web storefronts, e-mail, conferencing and face-to-face interactions.” This type
of CRM provides an opportunity for information sharing and cooperation across different distribution
channels, as well as all departments in an organisation (Dyche, 2001). Importantly, it is regarded as a
“top down perspective on CRM, which views CRM as a core customer centric business strategy that
aims at winning and keeping profitable customers” (Buttle, 2004, p.3).
The goal of collaborative CRM is to maximise sharing of relevant information acquired by all depart-
ments with the focus on increasing customer service quality. According to Payne and Frow (2005), an
important goal in collaborative CRM is to align the broader business strategy with customer strategy
through creating a corporate vision and competitor profiles. Referring to a hotel context, it is clear that
collaborative CRM is a smooth and consistent interaction between a hotel and its guests via various
communication channels. Noticeably recent emergence and development of technological infrastructure
enables organizations to align their efforts to serve customers more effectively and efficiently. Hotel
Web forum, for example, provides a possibility of allowing valuable hotel information to be shared.
To sum up, the existing literature studies on CRM has identified three different but related types of
CRM – operational, analytical, and collaborative. In this regard, CRM can be interpreted as a customer-
centred approach accompany with the IT to support operational, analytical and collaborative CRM
processes and thus contribute to customer profitability and retention (Rainer and Puschmann, 2004).

CRM BENEFITS AND OBJECTIVES

Companies can gain a lot of tangible and intangible benefits from their successful CRM strategies. Based
on Xu & Walton (2005), the major reasons company managers are implementing CRM are:

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• Improving customer satisfaction.
• Retaining existing customer.
• Providing strategic information.
• Improving customer lifetime value.

Gummerson in 1994 explains that building and keeping a relationship with customers is the key to
reach and maintain successful market share and will bring customer retention, intimacy and profits to
businesses.
Swift (2001) mentioned that CRM benefits for businesses could be found in:

• Higher customer retention and loyalty.

• Increase customer profitability.
• Reduces cost of sale.
• The lower cost of recruiting customers.
• No need to recruit so many customers to preserve a steady volume of business.

Liou (2009) mentioned that with the ever-increasing competition for market dominance, many firms
have utilized the CRM system for improved business intelligence, better decision making, enhanced
customer relations, and increased quality of services and product offerings. Jiang (2003) mentioned
that an integrated e-CRM or CRM strategy would allow organizations to manage customer and supplier
relationships more effectively than ever before. It would also help organizations to build long-term cus-
tomer relationships, brand loyalty and repeat sales that at the end will result in increased and sustained
profitability. Jiang also mentioned that a successful CRM strategy could mean millions of dollars in
incremental revenue from increased customer retention and revenue per customer. Xu et al., (2002) dis-
cussed that CRM strategy do not only improve customer loyalty and retention but it also improves the
internal processes. On one side CRM helps companies to identify and target their best customers and on
the other side it helps them to manage their marketing processes with more clear and measurable goals.

CRM Components

To achieve the CRM objective, there is a set of factors involved, which are also known as CRM compo-
nents (Mendoza, 2006: 934). Ali and Alshawi (2004?) defined CRM as major components of technology,
people and process. Customer Relationship Management (CRM) is a combination of people, processes
and technology (Chen and Popovich, 2003?). For achieving current research’s objectives, CRM is consid-
ered as a strategic application of these three components to improve and sustain profitable relationships
with customers and partners of a company. Based on this purpose, these components and their aspects
are described with more details in the below sections.

PROCESS

CRM necessitates Business Process Reengineering (BPR) and change in business processes from being
product-centric to customer-centric. According to Mendoza et al. (2007: 935) the main business pro-
cesses that should be addressed for change in CRM implementation are: marketing, sales, and services.

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• Marketing: New approach of marketing should be updated with focusing and keeping customer
needs at the centre of the business .CRM implementation should influence the way in which the
process incorporate with the rest of the organization
• Sale: Within the CRM framework the relationship between the client and sales person should
become face-to-face, essential and long-term (Mendoza, 2007).
• Services: Within the CRM strategy environment, customer services and quality of services should
become critical.

PEOPLE

People have a key role within CRM strategy, both on behalf of employees and customers. It is evident
that the human factor is crucial in a CRM strategy. Even with the best definitions of processes and the
most advanced technology, the relation between people has determining effect in any business strategy.
It is important, then, to get those people involved with the strategy and motivate them to reach the ob-
jectives. This way we can use the technology as a complementary tool to achieve the proposed goals
(Mendoza, 2007: 935). Aspects Related to Customer: In order to achieve CRM benefits and having
long-term relationships with customers, companies must follow threes key steps related to their cus-
tomers. Firstly, they should know how the clients define value. Then they should meet these needs and
values and provide customer satisfaction. Finally they should try to keep these relationships and work
toward retention and loyalty (Barnes, 2001).Aspects Related to Employees: The full commitment of
the organization’s staff/management and change in culture within the company staff is essential for an
effective CRM implementation to best serve customers and satisfy their needs (Almotairi, 2009).

TECHNOLOGY

IT plays a key role in implementing CRM via making it possible for companies to collect, organize, save,
and use data about its customer. Integration technology allows organizations to develop a better rela-
tionship with customers by providing a wider view of the customer behaviour (Thompson et al., 2006).

CRM SUCCESS AND FAILURE FACTORS

What makes CRM strategies succeed or fail once implemented? It is often assumed that a CRM system
goes hand in hand with stimulating growth and achieving success. However, according to noted re-
search institute, Gartner Inc., between 50-80% of CRM implementations had failed. CRM solutions and
implementation are expensive and time consuming, thus it is crucial for companies to find the obstacles
and the way that they can overcome these barriers. They also need a good view about success factors
that should be taken into account for a successful CRM implementation. This section is a summary of
previous researches on CRM success and failure factors. Although there are a lot of good stories about
successful CRM implementation, the failure percentages are not low, which limits the expected outcomes
of these implementations. This problem has motivated many researchers and practitioners to contribute
literature on CRM failure and its causes (Rigby, 2002; Zablah et al., 2004). There are wide ranges of

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possible causes that limit CRM’s potentials and different reasons may cause the failure of CRM to meet
its objectives. While some of these reasons are inevitable, many can be avoided (Payne, 2004). In general,
CRM failure is caused by the complexity of technical and organizational issues that are associated with
CRM implementation (Almotairi, 2009 quoted in Goodhue 2002). In the study performed by Forsyth
(2001) with a sample of about 700 companies, the main causes of CRM failure ranked as follows:

• Organizational change (29%)

• Company policies/inertia (22%)
• Little understanding of CRM (20%)
• Poor CRM skills (6%)

Almotairi (2009) conducted a comprehensive literature review on previous studies of CRM failing
factors and according to his study, six factors indicated below are considered as the main and most re-
peated reasons for failing CRM projects (figure 1):

1. Poor CRM strategy,

2. Lack of top management support,
3. Poor management of change,
4. Lack of skilful human resources,
5. Poor customer-centric orientation and
6. Lack of assessment process.

CRM Success factors which also known as Critical Success Factors (CSFs) received increased
popularity in different fields of study and cited by many researchers. According to Mendoza (2006) it is
considered that a factor is critical for running a CRM strategy when its presence in a CRM program of
the company can guarantee that the implementation of this strategy will be successful. Others, such as
Oakland, defined CSFs as critical areas in which the organization must succeed to achieve its mission
through examination and categorization of their impact. Hence, the result of a CSF analysis provides
a number of areas in which satisfactory results will ensure successful competitive performance for the
individual, department, or organization (Almotairi,2009) in his studies reviewed 15 studies on CSFs of
CRM. The purpose of this review was to organise CSFs and discover similarities among the factors over all
studies in order to identify most common factors. A summary from these studies is presented in Table 1.
After reviewing the preceding studies in the field of CRM success factors ranked a group of com-
mon CRM success factors cab be ranked (figure 4). Some of the most important factors are explained
in below section (Almotairi 2009).

• Top Management Support / Commitment: The role of board level is essential in backing the
CRM implementation process and securing required amount of financing for putting CRM proj-
ects into action.
• Defined CRM Strategy: A clear definition of the CRM strategy and alignment of this strategy to
the company’s strategy would facilitate the transition of changing work structure and environment
toward customer-centric approach.

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Figure 1. Main CRM Failing Factors based on the Previous Academic Literatures (Almotairi, 2009)

• Cultural Change: CRM success needs to realize its objectives and organizations should develop
a culture where all staffs are encouraged to share and learn from the new work structure and in-
formation (Alexander, 2004).
• Inter – Departmental Integration: CRM has a wide organization influence and need all depart-
ments’ involvements.
• Skilful Staff: Employees play the key role in CRM implementation.

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Table 1. CRM Success Factors (Almotairi, 2009)

          Author (s)           CRM success factors

          King and Burgess (2008?)           Top management support
          Communication of CRM strategy
          Knowledge Management capabilities
          Willingness to share data
          Willingness to change process
          Technological readiness
          Cultural change / customer orientation
          Process change capabilities
          System Integration Capabilities
          Alt and           Evolution Path
          Puschmann           Timeframe
          (2004)           Organisational redesign
          System architecture
          Change management
          Top management support
          Saloman et al           Top management commitment
          (2005)           Change in corporate culture
          Significant customer data
          Clearly defined CRM processes
          Sufficient resources
          Understanding of customer behaviour
          Extensive IT
          Support

• Key Information on Customers: The right information is the base for designing customized
products and services.

Figure 4. The integrated framework for customer value and CRM performance. Source: Wang et al.,
2004, p. 171

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• Manage IT Structure: Considering CRM as a technological solution is one of the main reasons
resulted in increasing failure of CRM projects. CRM need to be considered as a strategy and IT
solution should be used in facilitating the implementing of this strategy.
• Customer Involvement: Such an involvement helps the organization to analyse the customer
relationship life cycle and consequently find the areas of problems that can be managed by CRM
solutions (Rigby and Ledingham, 2004).

TOURISM MARKETING AND CRM

Marketing managers face Pressure to accommodate customers, business pressure from executives to
meet corporate goals, and pressure for key marketing functions. Customer expectations are increasing
and satisfaction is becoming increasingly difficult to control in as customers today have more and more
choices. Best-in-class companies enjoy a performance advantage (Annual increase in gross revenues,
Annual customer retention rates and Return on investments) over their competition in understanding not
only who their customers are, but what type of relationship their customers want with them. The best
companies that practice the capabilities that drive market awareness, creating demand, growing customers,
and accelerating sales. Best organizations often utilize “customer lifetime value” metrics in modeling and
predicting which mix of customers, portfolio products, sales, marketing, or media channels will support
them in attaining their revenue targets and goals (The CMO’s Strategic Agenda Series, 2006). Customer
achievement at a reasonable cost continues to be a significant success factor. To succeed, enterprising
companies know they must combine permission-based marketing and automated regulatory compliance
with powerful targeting analytics(www.infor.com). CRM for tourism is a multi-channel customer interac-
tion solution that helps companies to creates a single view of the customer at every stage enabling them
to offer a unique experience. CRM helps a tourism organization to:

• Understand customer behavior.

• Create targeted, segmented campaigns.
• Initiate event-based marketing programs.
• Conduct real-time marketing.
• Analyze campaign effectiveness.
• Increase cross sell and up sell.
• Increase customer loyalty

Customer Relationship Management has always covered the broad set of sales, marketing and cus-
tomer service activities associated with serving customers. It has received considerable amount of interest
and attention from service oriented sectors for its vital role in increasing customer satisfaction, loyalty
and retention. The effective implementation of CRM can provide the maximum benefit to any industry

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CRM MODELS

CRM and TQM

Total quality Management involves set of techniques focused on the improvement of internal and ex-
ternal procedures influencing the operational relationships within the organisation for staff as well as
customer’s satisfaction (Tena, et al., 2001, p.933). All TQM dimensions are complementary to the CRM
practices due to their focus on customer oriented improvement practices. Copulsky and Wolf (1990)
considers CRM as a customer care approach which can help to gain strategic advantage by developing
a long term relationship with customers which seeks consistent quality to retain the loyal customer base
(Clark et al., 1994).
This clearly indicates towards a strong connection between TQM and CRM with a common objec-
tive and both need to be implemented by the organisation at the same time to reap real benefits from
the change initiatives.
Figure 2 shows many common concepts and dimensions between TQM and CRM.

Knowledge-Based CRM Models

A knowledge-based CRM model introduced by Lambe (2001) focused on two laws, three main activities
and two main tools (Figure 3). The two laws and three activities of CRM are dependent upon technology
and knowledge management.
It needs sophisticated knowledge to identify high value potential customers and the range of profiles
among current customers. Knowledge use technology to process the available information in an effec-
tive way.
Anticipation of customer needs and further interaction require strong grasp of tacit knowledge exchange
which can further be delivered competently using statistical methods with technology.(Lambe, 2001, p.2).
Another knowledge based CRM model is proposed by Henning et al.(2003) by integrating KM with
CRM. It consisted of six relevant business processes: Campaign management, lead management, offer
management, contract management, service management and complaint management. They are further
supported by four relevant knowledge aspects: content, competence, collaboration and composition.
These aspects help in the identification of business process improvement opportunities through Knowl-
edge Management.

Customer Value Based CRM Model

Customer value has been the major focus of this model. It was developed by Wang et al. (2004) integrat-
ing customer value and CRM performance based on the identification of the key dimensions of customer
value. It further explores the decomposed effects of customer value on CRM performance in terms of
relationship quality and customer behaviours and is shown in Figure 4.

Customer Relationship Leadership Model

This model was proposed by Galbreath and Rogers (1999) and provides an opportunity to the leaders
to embrace, to recreate or readjust their leadership styles to help develop a conducive atmosphere to

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Figure 2. Shared Concepts between CRM and TQM

their businesses to implement the principles of CRM. It needs a strong leadership to initiate new CRM
practices to improve business performance.

Value Compass CRM Model

The value compass CRM model proposed by Wayland and Cole (1997) is based upon four dimensions
of the value compass model: customer portfolio management, value proposition design, value-added role
and reward and risk sharing provide ways for the business to identify and manage customer relationships,
to measure the business’ contribution to its customer value chain, to decide the position of the company
within the industry value-added chain, and to decide, on this basis, which customers and suppliers can
create and share better value.

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Figure 3. Knowledge-enabled CRM Model. Source: Lambe, 2008?, p.1

CRM Value Chain Model

Buttle’s Value Chain Model considers CRM as the core business strategy that integrates organisation’s
internal processes and functions, and external networks, to create and deliver value to targeted custom-
ers at a profit. It is based on customer’s database and enabled by information technology (Buttle, 2004).

Performance of CRM

The performance of CRM is measured in terms of customer behaviours as they are the major sources
of value of current customers of any industry and have the potential to increase the future revenue
streams. The customer behaviors that might bring revenue streams are strategically significant because
the fundamental objective of CRM is to ensure steady streams of revenue and maximization of customer
lifetime value or customer equity. Many researchers have attempted to comprehend relationship length,
depth, and breadth in terms of customer intensity, retention, customer behaviors that might bring revenue
streams become strategically significant, or usage level of services or products over time, cross-buying
or add-on purchase, and word of mouth, which generally implies a fundamental growth of customer
lifetime value or customer equity. Thus social, Emotional, Functional value has a direct and positive
effect on customer behavior-based CRM and ‘sacrifice negative effect (Yonggui Wang, Hing Po Lo,
Renyong Chi and Yongheng Yang; 2004). Nevertheless, other studies have shown that such customer
behaviors are also influenced by factors such as customer satisfaction and brand loyalty (Reichheld and
Teal, 1996). the role of relationship quality is emphasized as an intangible aspect of CRM performance

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Figure 5. Buttle’s CRM Value Chain Model (2004, p. 40)

by many researchers, and dimensions such as commitment, satisfaction and trust have been used to
measure the complicated concept “relationship quality” (Crosby et al., 1990). The high cost is involved
in gaining new customers. So acquisition of new guests certainly makes the early stages of a new cus-
tomer relationship unprofitable (Reichheld, 1990). However in the later stages, with the reduced costs
involved in serving a loyal customer, makes such a relationship more profitable and fruitful. There are
different streams of research on the concept of loyalty, the individual who buys the same brand consis-
tently is said to be “loyal” to this brand (Kuehn, 1962). Assael (1992), on the other hand, defined brand
loyalty as “a favorable attitude towards a brand, thus resulting in consistent purchase of the brand over
time”. According to the findings of Zeithaml et al. (1996), loyal customers tend to build and strengthen
the relationship with a firm and behave differently from non-loyal customers. Loyal customers pass on
favorable word-of-mouth referral.

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The Relationship Marketing

With reference to the definition of Shani and Chalasani (1992, pp. 44), relationship marketing is “an
integrated effort to identify, maintain, and build up a network with individual consumers and to continu-
ously strengthen the network for the mutual benefit of both sides, through interactive, individualized,
and value-added contacts over a long period of time”. Thus the relationship marketing is performed to
benefit both the company and its customers. Through it, an increasing fraction of each customer’s busi-
ness is received. It aims at building long term, mutually satisfying relations with customers, suppliers and
distributors with the objective to earn and retain their long-term preference and businesses (Armstrong
and Kotler?, 2000, page 13). A database of customer profiles should be made if the business wants
relationship marketing to be most effective which can be quite difficult and time consuming where the
number of customer is large (Ellaine K. Harris, 2006). By this program, the important information such
as their birthday, anniversary, favorite dish and drinks is known upon their arrival. To create the task
easier and quicker, my companies use their own specifically designed computer program. Thus hotel
can provide service to the guests according to their preference quickly. Bulger (1999) has highlighted
that how relationship marketing can increase profitability or caution that the program must be managed
carefully to achieve the desired profitability. Peppers et al. (1999) use the concept of reducing the cus-
tomers’ transaction costs as a way of promoting customer retention. Some of the popular relationship
marketing comprises rooms upgrade in hotels, privileged check-in-facilities at hotels, access to loyalty
promotions and late check-out privilege without making an additional charge. Further, Peppers et al.
(1999) added that “relationship marketing is a way in global corporations that allows customers to feel
cared for, to acknowledge their individuality, and to provide personal attention” (Geddie M.W. And
DeFranco A. L.,2005).

Technology and CRM

The advancement of information communication technologies (ICT) and the internet is dramatically
changing communication between consumers and vendor. The internet provides better facilities for re-
lationship building compared to conventional means (Niininen O., Buhalis D., March R,2007). IT has
made it possible in acquisition of customer profiles, tracking of customer purchase patterns and trends and
interactive service provision (Chattopadhyay, 2001). Technology has provided tools for the organization
to adapt proactive and reactive marketing strategy towards customizing products while enhancing the
channels of communications and satisfying the consumers. The emerging technologies have revolution-
ized the tourism, travel and hospitality industries by interacting with customers and industry structures
have also experienced dramatic changes in the last decade. It facilitates the expansion of the industry and
changed the dynamics of the tourism industry marketplace (Niininen O., Buhalis D., March R, 2007).

Customer Value

Customer value has become one of the most significant factors in the success of both manufacturing
businesses and service providers because it is acting as a strategic weapon in attracting and retaining
customers (Zeithaml et al., 1988; Parasuraman, 1997). Customer value has been defined and measured
in terms of get (benefit) and give (sacrifice) components by Woodruff (Woodruff, 1997). As believed
by many researchers, firms should move towards the creation and delivery of superior customer value if

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they are to improve their CRM performance (Jensen, 2001). According to Zeithaml (1988), “customer
value is considered to be the customer’s overall assessment of the utility of a product based on the per-
ception of what is received and what is given”. Similarly, Kotler (1997) states that the customer value
can be understood in terms of service value, product value, employee value, and image value. Sheth et
al. (1991) further added that five dimensions of value from the customer’s perspective are emotional,
social, functional, epistemic, and conditional(Wang Y., Po Lo H., Chi Renyong, Yang Y,2004).

Customer Satisfaction

Customer satisfaction is viewed as “a post-choice evaluative judgment of a specific purchase occasion”

(Oliver, 1981). In contrast, cumulative customer satisfaction is an overall evaluation based on the total
purchase and consumption experiences with a product or service over time (Fornell et al., 1996). Like
brand loyalty, customer satisfaction is also influenced by customer value, and these two concepts (brand
loyalty and customer satisfaction) employ their effects on customer behavior-based CRM performance
simultaneously. Thus a satisfied customer will show a strong tendency to be loyal and purchase the goods
or services again and again. This kind of customer’s behavior definitely increases a firm’s market share
and profits. If the customer satisfaction is developed and maintained then it will lead to deeper relation-
ship between the customers and the company which results in increased customer loyalty and there is a
good prospect of attracting potential customers (Turban et al., 2004).
Rust and Zahorik (1993) that “perceived service quality leads to satisfaction, and that satisfaction, in
turn, had a significant positive effect on purchase intent”. Those satisfied customers are more likely to
respond to cross-selling efforts. Therefore, improvement in customer satisfaction means more sales and
more profit. A ‘customer satisfaction programme’ is a comprehensive systems approach that effectively
manage customer needs and experiences by listening to multiple customer voices, analyzing, prioritiz-
ing and responding to customer issues. So if any company wants to maximize the value it provides, it
must maximize its understanding of its customers (Unisys, 2001). According to Garver, S. Maguire and
S.C.L. Koh C. Huang (2007) a more detailed and comprehensive customer-driven improvement model
includes six stages which are as below:

• Examine performance-importance analysis with multiple customer listening tools;

• Conduct complementary improvement analysis;
• Assess firm capabilities;
• Examine improvement costs;
• Estimate return on investment of improvements; and
• Select attributes, set goals, and monitor improvement performance.

Customer Loyalty

In recent years, the topic of loyalty has received increased attention in tourism and hospitality research
(Bowen and Shoemaker, 1998; Oppermann, 1999; Shoemaker and Lewis, 1999). Customer loyalty can
also be defined as the likelyhood of a customer returning to a hotel and to performing partner like ac-
tivities for the hotel, like by giving favorable recommendation about the hotel to their friends, family or
business partners. Therefore it can be said that customer loyalty constitutes the prominent factors in the
success of a business organizations rather then customer satisfaction (Kandampully and Suhartanto, 2003).

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Loyal customers add financial and spiritual input to any business. However, it has become well known
today that in balance of establishment–customer relation, customers had gained big advantage(www.
caterersearch.com). Loyal customers not only remain loyal to the company but always acts as an excellent
public relation device, spreading the good word thereby recruiting new customers if they find organisa-
tional product and its customer service staff responsive to their unique needs (Frederick Newell, 2003).
An effective CRM is able to satisfy and please the customers by placing him at the level that makes
any business ‘customer centric’ as the customer is considered as god. A loyal customer symbolizes a
source of positive word-of-mouth communication, frequently resulting in recommendation or referral
business. There are many benefits such as reducing the risk of service variability, the customization of
service to his/her specification and allowing for the development of a social rapport with the provider if
the customer is loyal to the company. According to Bowen and Shoemaker, (1998:15), “A customer who
receives what she or he expected in a hotel stay is most likely to be satisfied. If the guest’s expectations
were exceeded, she or he ma be extremely satisfied. Customer satisfaction of this kind is a requisite for
loyalty, but satisfied customers may not become loyal customers”(Rahimi,2008).

Handling of Complain

The effective handling of the customer complaints not only resolves immediate problem but also acts as
an excellent way of building customer satisfaction and gaining customer loyalty (Ellaine K. Harris, 2006).
customer complaints should be take as an opportunity to know the feedback of company’s performance
and of course a way of intereacting with the guest. As complaints provide valuable feedback in number
of ways they show what is important to the customer which lead to improvement focused on customers,
they supplement market information,they connect customers to the organisation and its product more
closely than before (Ellaine K. Harris, 2006). So the effective complaint handling lead to the customers’
satisfaction while retaining the guests. one should not forget the fact that it is far more cheaper to retain
existing customer than it is to discover new ones which can be both difficult and expensive process.

Service Quality

As hospitality industry is service based, service quality plays an important role in the sucessful running
of the industry. According to shan-chun; et al(2003) “the hospitality industry recognizes that superior
quality of service is one of the crucial factor s within its control that can add value to its product and,
subsequently, lead to customer loyalty. Enhancing the quality of service at all levels of service delivery
has therfore become mandatory for organizational survival, irrespactive of the changes that might occur
inside or outside the firm”.

Customer Listening Tools

The customer listening tool plays important part in getting feedback of the customers regarding the service
and the product of the company. Through this means, the company can correct itself and bring improve-
ment where necessary. Some of the examples which customers listening tools includes are relationship
surveys, transaction surveys, and customer complaints. It was suggested that a systematic, on-going
program, which gathers customer satisfaction data, is critical to managing a sustainable competitive
advantage (Woodruff and Gardial, 1996; Gupta et al., 2004). Thus these are a variety of tools that help

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the organization listen to customers’ needs, preferences, and perceptions of a firm’s performance (Li et
al., 2006, S. Maguire and S.C.L. Koh C. Huang 2007). As customers’ expectations keep changing over
time, customer satisfaction must be measured and assessed regularly (S. Maguire and S.C.L. Koh C.
Huang 2007). Basically, large, best-practice companies use different kinds of customer listening tools
to acquire information about customers’ preferences, needs, and perceptions of their performance.

Effect of Price Attributes on Customer Relationship

Consumers tend to use price as an important indicator for product quality or benefits. By and large, they
often perceive high priced brands are as of higher quality and less vulnerable to competitive price cuts
than low priced brands (Dodd’s et al., 1991; Kamakura and Russell 1993). Hence, price is positively
related to perceived quality. By increasing perceived quality, price is related positively to brand equity.
It is believed that sales promotion, and price promotions e.g., short-term price reductions such as special
sales, and package coupons, eat brand equity over time despite immediate short-term financial gain.
The sales promotion may convey an inferior brand image in the long run. In addition, repeated price
promotions may put brands in problem in the long run because they may cause confusion to consumer
because of the unanticipated differences between expected and observed prices, which results in an im-
age of unsteady quality (Winer 1986).

Effect of promotion attributes on Customer Relationship

It is found through the several studies that a sale promotion is unsuccessful in generating brand equity,
whereas advertising is considered as successful (Maxwell 1989). As per Simon and Sullivan (1993),
they found a positive effect of advertising spending on customer loyalty. Advertising definitely helps in
increasing awareness as well as creating strong brand associations. The repetitive advertising schedules
amplifies the probability that the marketer will be included in the consideration set, which simplifies
the consumer’s hotel choice, making it a habit to choose the brand (Hauser and Wernerfeldt 1990). In
reference to an extended hierarchy of effects model, advertising is positively related to brand loyalty
since it reinforces brand-related associations and attitudes toward the brand (Shimp and Terence, 1997).
Furthermore Simon and Sullivan (1993) have mentioned that, sales force and marketing research expendi-
tures, order of entry and age of the brand, advertising share, and product portfolio along with advertising
expenditures are sources of brand and customer loyalty.

Customer Relationship Management (CRM) Implementation Process

It is clear that nowadays CRM has risen to the top of the agenda of many organisational strategies. Ac-
cording to Mendoza et al. (2007), CRM must be viewed as an essential strategy to sustain or maintain
customer relationships in a long run. Over the past decades, CRM has emerged as a powerful tool in
increasing a firm’s profitability through identifying and satisfying customers’ needs, in order to develop
their loyalty to the firm’s activities (Thomas and Sullivan, 2005). Importantly the effectiveness of CRM
implementation has become a prerequisite for the success of CRM (Boulding et al., 2005).
However, the implementation of CRM has a much higher failure rate (Zablah et al., 2004; Finnegan
and Currie, 2010). For instance, a Forrester Research report of 2006 indicates that “only 10% of the
business and information technology executives surveyed strongly agreed that expected business results

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were achieved from implementing CRM” (Richard and Jones, 2008, p.120). Therefore, we must learn
from past project failure, in order to understand CRM in a strategic manner (Smith, 2006). In this regard,
researchers in the field of CRM failure studies provide a wide range concerning possible causes for the
implemental failures. Calmeta (2006), for example, names eight reasons for CRM failure: 1) perceives
CRM as a pure technology; 2) lack of management support; 3) lack of customer-centric culture; 4)
lack of readiness process; 5) poor quality data; 6) lack of change management; 7) lack of vision and
strategy; 8) lack of involving the final user in designing CRM solutions. Another study, performed by
Forsyth (2001) on a sample of 700 companies indicates the causes of failure as being: organizational
change (29%), company policies/inertia (22%), little understanding of CRM (20%), and poor CRM skills
(6%). Other research findings claim lack of focus on human/social factor as the main trigger behind the
implemental failure of CRM (Plakoyiannakiet et al., 2008; McCalla et al., 2003; Bohling et al., 2006;
King and Burgess, 2008).
All in all, implementing CRM is a complex, lengthy, costly and time-consuming effort that requires a
careful consideration. According to Krasnikov et al. (2009), improving firm performance should always
be regarded as a critical issue when implementing CRM. In order to have a successful CRM implemen-
tation, organisations must make sure they find the best-fit in both the industry’s best practices and the
capability of adaptation. The CRM implementation model articulated in this paper is based on Payne and
Frow’s model (termed as CRM Strategy and Implementation Model (Payne and Frow, 2005, p.86-87).
As shown in Figure 1, this CRM framework is viewed by Baker and Hart (2008, p.393) as “an iterative
feedback-driven progression aimed at continually enhancing the benefits of CRM”. This framework is
attributed in a cross-functional aspect to identify the significance of the respective business components
in assisting CRM implementation (Baker and Hart, 2008). It is believed that this CRM framework will
be ideally suited to the hotel industry when implementing it in an effective and efficient manner. Given
this, each of the stages is evaluated below to help clarify how these business components interact with
each other, in order to provide guidance for the current researchers and practitioners.

Stage One: Strategy Development

Stage one aims to develop an organisational strategy wherein an analysis of the industry and its com-
petitive environment can be conducted. As shown in Figure 1, this stage can be simply understood as
a combination of both business and customer strategy. According to Crocket and Reed (2003), the or-
ganisations need to understand how CRM fits into the strategic context of the company. In this regard,
hotels should be able to fully understand and develop their vision and mission plans within a competitive
business environment. Whereas Lindgreen et al. (2005. P.61) describe the customer strategy as “one that
formulates the plan of how to attract new customers and how to retain the most valuable customers from
the existing base”. Importantly, failed to develop customer strategy is detrimental to the implementation
of CRM (Lindgreen, 2005). Therefore, a well developed strategy (both business and customer strategy)
is called for to pave the way for the remaining CRM processes that is shown in Figure 1. This identifica-
tion of customer strategy implies that hotels need to endeavour to identify their most profitable and most
valuable customers (guests), and sustain the relationships with them in a long run.

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Figure 6. CRM Strategy and Implementation Model (Adapted from Payne and Frow, 2005, p.86-87)

Stage Two: Value Creation

Based on the preceding strategy development process, the model at this stage aims to transform “the
outputs of the strategy development process into programmes that both extract and deliver and co-
produce (or co-create) value” (Payne and Frow, 2005, p.88). The process of co-creating value has three
key elements: 1) Receiving customer value; 2) Receiving organizational value; 3) Maximizing customer
lifetime (CLV) value with the successful management of this value exchange with the process-oriented
(Baker and Hart, 2008, p.396). To sum up, the principal objective of this stage is to help organisations to
identify the most profitable customers (based on the CLV analysis) and to implement the most suitable
customer retention strategy accordingly (Baker and Hart, 2008).

Stage Three: Multi-Channel Integration

With regard to the channel structure, Payne and Frow (2005, p.171) identifies six main channel categories,
including: organisation’s sales force, various outlets, telephony facilities, direct marketing, e-commerce,
and m-commerce. Owing to the nature of multi-channel integration, a successful CRM implementation
strategy would be to create outstanding customer experiences across all of the channels. In this regard,
hotels should be able to select the most suitable channels to deliver superior value to their profitable
customers.

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Stage Four: Information Management

As it is referred in the preceding section, IT has greatly helped organizations to collect and check through
customer information “from all customer contact points to generate customer insight and appropriate
marketing responses” (Payne and Frow, 2005, p.173). This IT enabled infrastructure, CRM is widely
accepted as an effective approach for collecting, analyzing, and translating valuable customer information
into managerial action (Ernst et al., 2010). In fact, the key element of successful CRM implementation
is information (Nguyen and Mutum, 2012). Jayachandran et al. (2005, p.178) view the information gath-
ering and relational process as a key characteristic of CRM that contribute to the good organisational
performance. In this regard, the focus at this stage is to figure out required information and its associated
benefits for each department. For instance, a step-by-step questionnaire could be used to facilitate the
task of each hotel department representative. Participating in answering this questionnaire could help
them easily understand what information their department will need.

Stage Five: Performance Assessment

The purpose of this stage is established to ensure that the strategic CRM objectives are achievable.
According to Payne and Frow (2005, p.174), it is essential for organisations to employ a suitable CRM
tool to achieve shareholders’ satisfaction and better monitor organisational performance continuously.
Besides, cost reduction is regarded as another concerning issue when assessing performance at this
stage. For instance, hotel companies need to invest extensive efforts on enhancing both shareholder and
stakeholder values. In the meantime, cost reduction should also be considered to demonstrate a better
financial performance, and ensure that both organisations and customers have achieved their objectives.
Jayachandran et al. (2005) further suggest two CRM measurement criteria to assess organisational per-
formance, namely customer retention and customer satisfaction. In this regard, hotel companies need to
speed up their services (e.g., quicker response to customer needs) and increase the degree of customer
satisfaction by strategically manipulating the marketing mix.

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ADDITIONAL READING

Devashish, D. (2011). Tourism Marketing. New Delhi: Dorling Kinderslet.

McCabe, S. (2009). Marketing Communications in Tourism and Hospitality. Oxford: Elsevier.
Shanmugasundaram, S. (2008). CUSTOMER RELATIONSHIP MANAGEMENT: Modern Trends and
Perspectives. New Delhi: PHI Learning Pvt. Ltd.
Parvatiyar, A., & Shainesh, G. (2001). Customer Relationship Management: Emerging Concepts, Tools,
and Applications. New Delhi: Tata McGraw-Hill Education.

KEY TERMS AND DEFINITIONS

Brand Loyalty: Is the biased behavioural response expressed over time, by some decision-making
unit, with respect to one or more alternative brands out of a set of such brands, and is a function of
psychological (decision-making, evaluative) processes.
Consumer Behaviour: Is a decision process and physical activity individuals engage in when evalu-
ating, acquiring, using or disposing of goods and services.

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CRM: Is an enterprise approach to understanding and influencing customer behavior through mean-
ing communications in order to improve customer acquisition, customer retention, customer loyalty, and
customer profitability.
CRM People: Include aspects related to customers and employees.
CRM Processes: Are the activities performed by the organization concerning the management of the
customer relationship and these activities are grouped according to a longitudinal view of the relationship.
CRM Strategy: Is a customer-focused business strategy that aims to increase customer satisfaction
and customer loyalty by offering a more responsive and customized services to each customer.
CRM Technology: Is an enabling technology for organizations to foster closer relationships with
their customers.
Customer Loyalty: Is a deeply held commitment to re-buy or re-patronize a preferred product/
service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing
despite situational influences and marketing efforts having the potential to cause switching behaviour”.
Customer Orientation: Is actions and attempts for customer satisfaction and interactions used by
sellers for their customers.
Loyalty: Is something that consumers may exhibit to brands, services, stores, product categories
(e.g., cigarettes), and activities (e.g., swimming).
Marketing: Is an organisational function and a set of processes for creating, communicating and
delivering value to customers and for managing customer relationships in ways that benefit the organi-
sation and its stakeholders.
Strategy: Is the creation of a unique and valuable position, involving a different set of activities.
Tourism: Is the sum of the phenomena and relationships arising from the interaction of tourists,
business suppliers, host governments and host communities in the process of attracting and hosting these
tourists and other visitors.
TQM: Is an approach to improving the effectiveness and flexibility of business as a whole. It is es-
sentially a way of organizing and involving the whole organization; every department, every activity,
every single person at every level.

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