An Evaluation of the Application of CRM to E-Commerce

Abstract

The purpose of this research project is to investigate theoretical approaches to define the concept of Customer Relationship Management (CRM) systems and the stages taken for its design and implementation in relation to e-commerce. The customer relationship marketing is often considered as opposite and balancing to traditional forms of marketing (transaction marketing and product marketing). Nevertheless, these two marketing strategies are defined by concepts and approaches used to influence company’s performance and growth of profitability due to changed company’s environment and transformation of the traditional company’s economy into the knowledge-based economy (KBE). CRM (customer resource management) is a strategy for business organization, according to which relationships with company’s customer are of the highest importance, as company’s clients are viewed as its main assets and so the biggest attention is paid to studying customer related issues. The purpose of CRM-strategy is analysis of clients’ database and defining the most “profitable” clients as well as choice of the most effective strategy of work with these clients in order to prevent their “reorientation” to competitors. The task of CRM is increase and optimization of company’s efficiency and profitability by means of attracting new clients and supporting permanent customers.

The research was conducted in order to evaluate the relevance of theoretically proved CRM concepts and methods and to estimate how implementation of CRM computer-based support tools has changed the indicators of selected company’s performance and particularly its e-commerce sector. The study conducted also had purpose to study empirical business models and approaches used by different companies in order to attract new customers and strategies applied to provide permanent support of existing customers. In order to carry out the research it was decided to choose a company which has successfully implemented CRM support computer based tools for its e-commerce department and has successfully applied CRM strategies in its business activities, as well as there was conducted a review of a number of case studies provided in literature about the major trends in implementation of CRM principles.

The research made is limited to evaluation of factors which define success of company’s performance on the example of e-commerce department of FMCG manufacturing UK company (Procter and Gamble). Another limitation of the conducted study is development of recommendations for implementation of CRM systems for e-commerce sector of FMCG companies operating in B2B environment on the base of analysis done on the example of a particular company with specific reference to particular business models. The research includes theoretical findings, findings of related theories and empirical studies , interview carried out among CRM specialists which did not prove to be statistically significant, and results of several surveys with customer relationship managers within companies operating in business to business environment among Fast Moving Consumer Goods production.

Executive Summary

The economy in the globe has become very tight and some markets yield very low or no returns at all where emerging markets are still rather volatile and the purchasing behavior of the customer is yet not clearly studied and thus requires heavy investments in order to predict the demand patterns there. That is why the business strategy lately shifted from product and transaction marketing to relationship marketing where companies view retaining customers as the most important fact for their performance, especially companies operating in tight consumer goods markets and promote sales online, such as FMCG manufacturing companies. The smart CRM strategy yields great returns to the company if developed professionally and monitoring of the implementation is constant and benchmarked to the goals precisely stated in advance. The study through theoretical research and empirical finding proves that CRM strategy must be implemented carefully with full internal company audit before the implementation, and monitoring and assisting the very implementation process all the way through with benchmarking the results of each stage to the set in advance goals. The process must cover all the spheres of the company and must spread to all the workers with translating CRM strategy and practices into making it a corporate culture.

The CRM strategy and process must be adopted to the current company situation and conditions with training the employees of all levels to satisfying the customers and thus achieving high returns for the company. The CRM implementation process must be carefully studied before actual implementation within the company and specialists must be attracted to prepare the company and workers at all the levels for this process, and especially ensuring the devotion of top executives to making customer satisfaction the core of the company activities. Research of the literature available revealed that there are several stages of the client relationship management which must be considered and improvement of each stage within the overall well formed process will lead to greater customer retention rates which is much more profitable to the company comparing to costs of attracting new customers in e-commerce sector. The e-market for fast moving consumer goods products is very competitive and thus the companies must try very hard and innovate much in order to sustain their market share and even try to increase it due to higher customer retention rates.

The empirical findings of the subject research go in line with previous empirical findings based on statistically significant studies of many companies that client relationship management does increase significantly the returns and profits for the company, but the implementation process must be monitored and planned carefully. The contradiction of the findings is the confession of managers of companies in the relative sector to FMCG industry studied that a lot of contracts are done not on the level of customer satisfaction, but on the personal relationships of the key account manager and the purchaser of the distribution chain rather than forming the best economically viable deal. Such tendency is less observed in the e-commerce sector of B2B market of FMCG, which allows saying that e-business models are done on the level of customer satisfaction, rather than personal relationships of managers and distributors. The implementation of new IT projects and changing concept of Procter and Gamble, UK has shown that e-commerce sector of company has contributed to 10% increase in sales in the year of 2005, results which had never been achieved by any other type of traditional marketing initiative of sales managers or their personal contacts with distributors..

The first part includes review of the relevant literature, formulation of the research questions, the further part consists of field work and research, the next part is devoted to presenting research findings and how they can be relevant to the subject company studied within empirical part of the work. Further on, the discussion of the findings and conclusions are made, also, the limitations of the study are presented.

Problem Statement

Introduction

Several years ago the main topic under discussion of all scholars was the approaching globalization and to what extent it will cover the globe and what will bring with it into economy of each country separately, region and world in general. Only several years later the globalization now with the help of the high technologies being accessible to all the companies and simple people is spreading throughout at much higher pace than expected before and the frequency and depth of cooperation between countries at governmental level, business level and personal is much higher than could be expected only some time ago. This has brought many new issues at play that the economy and business models are shifting and changing and companies wishing to survive at the now global market arena must employ much more sophisticated strategies and input more resources than ever to gain and remain customers in this tight marketplace. The use of internet for optimization of business processes, business relations and business communications has only increased the level of globalization penetration to European markets.

Background of Problem

While before the international trade was restricted by some legal and distance issues, nowadays many of them are broken and the manufacturing companies in the developed countries are suffering the most with young market economies brining in millions of their cheap and sometimes also highly intelligent labor to the world division of labor thus making the companies seek their competitive advantages even harder. E-commerce and electronic market places contribute considerably to these processes as they allow to save considerable funds on logistics and marketing strategies and marketing budgets due to universal availability of internet and online means of communication (email and VoIP). Before, the price or quality of the product were the main competitive advantages and now when the assortment of products offered is extremely high but human needs for daily products not accelerating at that high stage, the companies can keep their customers not only due to good prices and quality, but the main in the present market is to develop strong relationships with the managers in other companies, thus build business to business cooperation and through these personal contacts to be able to keep and even grow the market share. This is has lead to the development of Client Relationship Management science development which revealed to the managers all the possible ways to ensure they are satisfying their customers needs and thus be able to remain profitable business operation. Numerous research papers have been written on the topic how to strengthen the relationship with the companies and the best ways to doing it.

After some time, another factor became evident to the managers of the companies, namely, that the relationships with clients and suppliers must not only be managed at technical level to ensure the customer needs are satisfied in the best possible way, but efficiently use and analyze this real information on the customer purchasing trends and preference and to employ it within future strategy formulation when trying to predict the future clients needs and wishes. Thus, the CRM must focus on all the client information knowledge and analyze it in order to be able to switch the company orientation and production together with market swings.

Rationale for the Research

The subject research is aimed at focusing such a challenging industry as e-commerce in United Kingdom in particular and in Europe in general is one of the tightest markets, with rapid growth of online whole sales. On one hand, the competition between companies has increased dramatically due to overall increase in market players; on the other hand, the scope of the UK market has increased with the EU enlargements. Penetration of IT-technologies to traditional markets led to the growth of online sector of sales or e-commerce. Such changes led to considerable changes in business models and business strategies applied to the new forms of businesses. Traditional management approaches and sales strategies are not very successful in e-commerce, both in retail and wholesale sector as the number of customers is greater due to availability of information online. Even recent observations responded by ebay.co.uk (online auction market place) show that a private retail seller can have up to several thousands of costumers, with a possible high number of returning customers. For retail and wholesale companies situation is similar, with a difference that operating i such dynamically developing economy sector they need to apply new strategies working with customers as there is always a risk of losing permanent customers due to a growing competition. Studies have shown that such risk exists both in e-B2C and e-B2B environment. From this point, reasonable implementation of CRM strategies and CRM support systems will optimize work of e-business departments and will reduce order and transaction processing due to more optimal and faster operating information models used for customer support.

Research Question and Objectives

Based on current studies and growing importance of CRM systems implementation, my research aims to provide theoretical aspects about implementation of CRM systems from the point of economic theory, as well as it provides recent empiric observations and recommendations made on the base of data provided in interviews of representatives of companies where CRM strategy and CRM systems are successfully used in B2B e-commerce. The research was conducted in such a way that the results of recent publications and reports concerning studying CRM technologies reflect data reported by representatives of companies, who participated in interview. To facilitate achieving the broad objectives as cited above, this study aims to attain following specific operational objectives:

  • To clarify the importance of CRM implementation for sales businesses and sales companies using e-business models
  • To clarify current theoretical approaches to CRM
  • To clarify main stages of CRM system implementation
  • To clarify main problems faced by companies when changing company’s strategy from traditional business model to CRM model.
  • To clarify how theoretical knowledge has correlated with empirical observations
  • To clarify how subject company benefited from implementation of CRM system

Relevant Literature Review

Overview of the Topic

Through increasing globalization which has caused global economies to be developing in different from past ways, much more cooperation between companies and clients being exposed to a greater variety of products, the marketing has changed scholars suggest that the companies are more than ever now focusing on attracting customers and being singled out by clients from many companies, strengthening and developing relationships with these customers in order to increase the range of services and products sold to them and make each order bigger, and trying to retain business (Jackson, 19851; Morgan and Hunt, 19942; Reichheld, 19963). Thus, there has been a shift from traditional transaction marketing(TM) practice of four P (4P): product, price, promotion and place to relationship marketing (RM) based on relationships, networks and interactions as on the internal to company level of staff, as well as on external environment of managing relationship with customers within process of efficiently guiding relationships with internal to company markets, referral markets, supplier, employee/recruitment markets, influence markets4. Nevin5 defines four elements of the Relationship Marketing mix: promotion to targeted clients which can be singled out after careful client database analysis, strengthening relationship and cooperation with individual clients or companies, retaining them after the first deal and the initial sale of the company product or service, and “strategic shift from customer manipulation to customer retention.”

Scope and Limitations of this Review

The detailed literature review made on the base of recent publications in CRM by UK and European authors has shown the there are rather few empirical studies of the different CRM systems implemented within companies and how the outcome was affected by the strategy of implementation. The explanation to this is the rather new nature of the CRM as a software business support system and strategy within a company where analytical CRM has become very important issue within the companies only during the last 3-5 years and empirical findings prove that only 3% of UK companies use it with e-businesses forming the major users.

Organization of the Literature Review

Literature review is organized in the form of critical analysis of the theoretical findings and discussions in the sphere of CRM. It covers works of the most competent scientists and economists in the sphere of CRM about modern approaches to CRM, current findings and innovations in this relatively new sphere of organization management.

Discussion

Brodie6 et al. research proved that the most companies did not completely switch to purely conducting CRM, but implement both TM transaction marketing and CRM. Ahn7 stresses, that CRM has gained so much interest in the recent years as the client relationship development has become viewed as one of company competitive powers, especially for e-commerce sector. Good client management by using data warehousing, mining and so on can be performed more efficiently as the number of clients is increasing, the Internet opens enormous opportunities to process all customer relations such as analyzing purchasing trends, buying behavior, preferences, sales volumes and so on which further boosted development of one-to-one marketing as contrast to mass marketing.

Customer Relationship Management is defined in several ways, for example, it is “comprehensive approach for creating, maintaining and expanding customer relationships”8, or it is “the values and strategies of relationship marketing – with particular emphasis on customer relationships – turned into practical application.9” Gartner10 company identifies CRM in such a way: “a business strategy that maximizes profitability, revenue and customer satisfaction by organizing around customer segments, fostering behavior that satisfies customers and implementing customer-centric processes. To achieve the long-term value of CRM, enterprises must understand that it is a strategy involving the whole business, and thus should be approached at an enterprise level”.

The researchers agree that the architecture of CRM within business has three main layers: operational, analytical and collaborative. Operational CRM in the form of automation of the main business process such as services, marketing and sales. The most popular systems of this class are: SalesExpert, GoldMine, Microsoft CRM, WinPeak, Siebel. Analytical customer relationship management is responsible for analyzing customer behavior and purchasing patters to make the correct short term and strategic business operation decisions, with the most popular software solutions: Data Analyzer, Marketing Analytic, EasyABC Plus, OROS Enterprise. Collaborative CRM which is sometimes referred to as technical CRM in the form of actual contacts with clients by post, in person, telephone or mail, through the Internet and so on. Other researchers, as Turk and Bligh11 stress that the Strategic level of CRM strategy must be singled out in which they refer to customer-centric organizational approaches, improved prospecting and cross-selling, improved visibility into customer profitability, return-based marketing, customer insight and feedback.

It is the theory shift during the recent several years where authors (Campbell12, Rowley13, Minna and Aino14) have started paying more attention to linking the customer knowledge management and relationship marketing as segments of CRM in order to gain the biggest benefits from implementing CRM strategy in the company and thus implementation of the CRM within the company has become more analytical CRM oriented. The process of knowledge management consists of creating and spilling over the knowledge about the clients and their habits, dissemination and using this knowledge, while the relationship marketing process is based on developing loyalty with customers through communication with them, widening the company customer base and providing as many services to the customers as possible and sustaining these deep and growing relationship trough developing mutual trust. The better client relationship management resulting will result in deeper understanding of the needs and behaviors of the clients thus resulting in wider opportunities to use this knowledge to better meet the needs in future cooperation. In the sphere of manufacturing companies, Paiva15 found in his study that manufacturers work much with the information they collect, analyze it and that customer information is type of data updated most frequently within the company and the company employs these specific customers profiles within its’ business operation rather than relying on general market research and trends. Bose and Sugumaran16 found that the information on the customers possessed by the companies is still not always used within strategy development and in general is not optimally managed which further raises the issue of more clearer understanding of all the spheres of successful CRM implementation.

As not all the companies have come a long way and take advantage of the customer knowledge they collect, such scholars as Nevin17, Parvatiyar and Sheth18 stress that CRM has different meanings. Peppers and Rogers19 in their work imply database marketing at tactical CRM level or it is seen as electronic marketing at this level by Blattberg and Deighton20. Also, at strategic stage CRM is suggested by Peppers and Rogers, and Vavra21 to mean “customer retention or customer partnering”.

Three studies were carried out by Sin, L. Y. M., Tse, A. C. B., Yim, Frederick H. K.22 in order to find empirical proof of four customer relationship management dimensions, then factors were estimated and then the presence and use of customer relationship management in different industries. The study revealed that firms striving for long term success must implement CRM and continually monitor the success of this process in the company.

The authors find that the four dimensions of CRM include Key Customer Focus, CRM Organization, Technology-based CRM, Knowledge Management which corresponds slightly to segmenting CRM into operational, analytical and tactical dimension. Key customer focus is implemented through customer-centric marketing whether the company needs to fully understand clients’ needs and financial resources to satisfy them. The most profitable and strategic customers must be paid the biggest attention. Further on, the key customer value must be identified which is equal to “the net of the revenues obtained from that customer over the lifetime of transactions with that customer, minus the cost of attracting, selling and servicing that customer, taking into account the time value of money.23

As quoted by the authors Nykamp, 200124 study suggests, the good organization of the CRM sphere in the company will function beneficially and will ensure “customer acquisition, development, retention, and reactivation” if company resources are allocated optimally to this segment. Another factor within organizing CRM is choosing the best building blocks for this system which are the staff of the company that together with strategy and using best technology will make the most of this system through human resource management. At the very beginning of CRM system more intense stage evolution, the failure rate within this project implementation at firm level was very high and ranged from 55% to 75% in 200125. These failures could be caused by wrong breadth, depth and complexity of the CRM process within company. Nevertheless, by the amount of internal and external organization shift brought by CRM adaptation, some scholars place it third important revolutionary innovation in business organization proceeded by creation of factory in England in the early 18th century and creation of assembly line in the early 20th century.

Empirical results reveal that there is strong positive influence of good quality CRM on marketing performance measured by growing consumer trust and satisfaction which further yield higher financial performance for the company. Quality of CRM system within the company is suggested to be benchmarked to external to company environment by comparing that with competitors within the industry. The study of the financial impact of the CRM strategy implementation within 33 companies26 showed that this initiative can generate for the company an average return on investment of 190% with the payback period of 1.25 years, while the average cost of developing this system in the company amounts to $3.1 millions.

From the CRM angle on the Knowledge management discussed briefly above is creating the customer knowledge, transferring it to all the workers within the company, and applying it to the creating company strategy. Efficient knowledge on customers management can be achieved by applying technology based CRM with taking advantage of “information intensive strategies” and use software in “design-manufacturing, flexible manufacturing, systems, just-in-time production databases, data warehouses, data mining” segments.

Yurong Xu27 identifies following CRM characteristics: sales force automation for each individual client or supplier, customer service and support, field service by remote staff to meet any clients expectations and marketing automation based on most recent customer preferences data and thus cross-sell campaigns to present and attraction of new customers can be worked out. The researcher points out the key factors in developing strong relationships with customers for companies operating in Business to Business markets. Firstly, “the company should practice scenario-based thinking in e-B2B CRM planning” and at least every four months the long-term CRM strategy must be reassessed affect of most significant success factors. Another advice is to fund collaborative training to promote growth within channel partner sales and the CRM products must be collaborative with wide frameworks. Lindgreen28 after his case study carried out that the vital factor for successful CRM implementation is not the very thorough implementation process monitoring and working out, but making correct and objective conclusions from customer data obtained within CRM process and adopting CRM strategy flexible for adaptation to these changes and challenges. As stated by Kotorov29, the key factors for successful CRM project within company are not the quality of CRM software employed, but fitting the CRM strategy to overall business needs and thus stretching the strategy into all operational levels goals. Then, it is necessary to determine the depth of the CRM project and which automation will be made at each level to arrive at optimal CRM implementation level and create a cross-department CRM team in charge of organizational structure changes within company.

The major purpose of both B2B and CRM systems is making the services offered broader and the quality deeper as horizontally or vertically integrated servicing systems help both B2B and CRM increase customer loyalty. Both processes require high level technologies as data warehousing and database management to implement the customer demand and needs research. One-to-one marketing is necessary for both CRM and B2B to make products and services perfectly suit clients requirements. They both must be flexible enough to be able serve changing levels of demand and are present in each stage of the business transactions. Integrating the two systems can have benefits of reducing administrative costs, running more efficient promotion campaigns, have higher customer reaction to them and increase the selling time. Aberdeen30 study examined influence of interorganizational information systems on e-business companies’ performance and found 5-10% drop in products and services as better value raw materials and services were found by producers, acquisition and fulfillment time has dramatically decreased up to 50-70% together with general perfection of inventory management processes.

Once the company managers are determined they must further deepen the company relationships with the client and manage them more professionally, the CRM strategy is worked out which usually stipulates several stages of actual implementation. The CRM implementation model was stated by JSP company researchers (Stig Jorgensen & Partners) as follows:

CRM Implementation Model.
Figure 1. CRM Implementation Model.

If the company senior management is fully devoted to making a CRM a company mission on this company stage development as keeping and increasing the company clientele has become vitally important, the desk situation analysis is carried out as to define exact company traits to be adopted and that are most important to bring present CRM system to that invisioned by top management. Further on, customer loyalty research will be conducted at very deep level of surveying each client with possible questions of satisfaction with the product served to them and their future consumption behavior and possible areas of improvement for the product. If the company is operating in B2B environment, there are often managers responsible for relationships with special clients and real data on clients attitude can be gathered rather quickly through electronic contacts.

After the examination, the clients can be separated to new clients, relatively new and regular clients and each group can be quantitatively estimated to outline the bigger. The survey will also reveal how many clients fall within which group at risk of loyalty to company products which will allow the company to roughly estimate the future demand for its’ products and services according to the predicted number of clients to remain and necessity to generate new clients and of what purchasing behavior. The authors suggest the following form of customer segmentation model according to their loyalty level to the company products or services.

Customer Loyalty Matrix.
Figure 2, Customer Loyalty Matrix.

Sweet33 finds that contrast to previously information-knowledge possession being main competitive advantage of the companies and economic agents, presently due to increased interrelationships and connections between companies in all the world, it is the network of knowledge developed through numerous business contacts and qualities of these web actors they bring in together with the knowledge what drives the company performance and market performance in general. It can be claimed that globalization “transformed traditional business models through the advances in information technology, networks, and relationship.34

There has been a shift in the recent past from creating diversified general companies with horizontal integration to creating and strengthening horizontally integrated companies specifying at the core activities in which they possess competitive advantages and outsourcing none-core activities where networks of horizontally connected businesses cooperate with the like. Hamel35 points out that companies form networks when they are sure they will benefit from them and the synergy affect of 2+2 = 5 can be achieved. Jarillo36 mentions that companies within the collaboration will benefit from cooperating and thus will create competitive advantages over their rivals not joined in the partnership. The focus further on for these networks not to gain customers, but there is a shift to retain customers which is possible for such partnerships as they can together provide a bigger range of products at better costs, wider distribution channels and after sale servicing. Reichheld and Sasser37 research has shown that a 5 per cent growth in retaining clients yields in average increase in client lifetime value by 35-95% which proves the net big positive affect of CRM on company profitability. Kandampully and Duddy38 further stress that the companies must strive to sustain not only customers, but best value suppliers, distributors, investors and so on.

Many authors as Grronroos39, Gummesson40, Sheth and Parvatiyar41 find that retaining good relationships with main business partners will contribute to long term company organization survival and market competitive performance. Gartner company carried out a study42 on CRM matters and 47% of companies operating in B2B markets and 47% of companies operating in B2C markets find customer retention as the priority objective for CRM strategy development and implementation. Then, 37% of B2B companies and 26% of B2C firms ranked customer development as biggest importance. Acquisition of customers was given the key role by 16% of B2B companies and 27% of B2C companies.

Kandampully43 finds the main benefits of corporate cooperation rather than relying on advertisements and thus stochastic marketing are reducing and minimizing costs of necessary infrastructure, while maximizing accessibility of every partner to all the other partners in the network, promote and facilitate knowledge, product and services spillover within all the network simultaneously.

As Fast Moving Consumer Goods markets are extremely tight and thus companies are operating at very low margins, manufacturing technology is changing rapidly and new countries enter the market with their lower cost of labor and thus their offering to the international markets cheaper products, the company manufacture of such products operating in B2B model and thus not selling products directly to customers can possess two risks: losing end consumers of the products being produced due to changes in the purchasers preferences and this is the risk that is the same for FMCG companies operating in B2C markets, and the extra risk of losing client as a company, a distributor or purchasing client which will lead to high sales volumes losses and can be very dangerous for the manufacturer. In such case not only contracts, but developing trust and long term stable relationships with economic partners at all the ends of the supply and distribution chain is vitally important.

Works of Wilson44 and Carlo45 outlines more factors influencing cooperation and coordination within B2B model. The more frequent are the transactions between partners are, the more complex the relationship management mechanism of contracts, long-term orientation must be. Product flows if the prices within transactions being volatile and volumes growing bigger implies necessity for sophisticated management mechanism. The larger is the cooperation between companies, the bigger is the flow of information between them which is not always accurate and credible and thus the monitoring mechanism and management scheme should be adopted to these challenges. Authors also mention asset specificity or input by one of the partners into the deal a of human or physical asset that has no competitive worth in other use will be another key factor influencing business to business cooperation.

When companies operating in B2B environment become dependant so heavily on relationships developed with their partners, personal contacts come into the play as the relationships developed best by personal visits and frequent relationship updates which develops trust between partners and can promote fruitful long term cooperation between them, implementing regular face to face contacts can ensure no conflict of interests between partners and more transparent and thus predictable cooperation further translating into sustainable company growth and profitability. Putting all the contacts between all the levels of the cooperating partners, It is especially an issue for FMCG manufacturing company which should operate at lowest profits margins possible due to high competition, and retailers want also their profits and thus developing strong relationships with suppliers offering raw materials at best cost and retailers operating at lowest possible profit margins can win the competitive advantage for the product or service for the end consumer.

There are several barriers within implementation of B2B relationships and especially if they are through Internet, as mentioned by Norman Katz46. In e-B2B relationships the companies must meet occasionally in order to develop trust and further strengthen their relations. It is also possible to discuss strategy of their relationships at such meetings more efficiently rather than over Internet or other forms of communication. Dwyer and Oh47, Hakansson48, Spekman and Johnston 49state that companies can precisely identify for themselves usefulness and profitability of transacting and cooperating with another company only when it is a long-term relationship with several transactions and not a single contract-based interaction thus building such business to business relationship takes time and the initial shift to sign the longer agreement possesses risks. Maynard50 finds that recently even small firms have been very active in forming and participating in business to business partnerships in order to promote innovation and stimulate growth through knowledge spillover and striving for mutual benefit from the partnership.

Important factor within B2B interaction is the so called “balance of powers” where the two companies interacting are both of similar strength, as stated by Corfman and Lehmann51, Hunt and Nevin52, Lusch53, and in case of unequal cooperation within the negotiation process a stronger company may gain a position profitable only for it, while balanced powers will work for mutual satisfaction. This factor gains even more importance for companies shifting the output or input markets or segments within their supply chains.

One of the good examples of mutually profitable for companies and employees B2B cooperation was the case when in 1992 General Motors had manufacturing capacity greater than it could accommodate and proposed some of its’ suppliers to employ the plants and even employees. The capacity was in this way efficiently utilized and workers kept their jobs where suppliers could minimize their fixed costs by using already existing GM plants. Interesting factor is that during that same year when the material costs raised and GM had to implement price cuts, it relinquished some long-term contracts with the suppliers in search for new offering better prices thus changing from long-term to one transaction approach with the suppliers54.

Dabholkar and Neeley describe cooperation of business by applying “cooperation cube” and depending on the strategy chosen for cooperation the relationships, strength of interdependence between companies, relationship management from both sides and the outcomes will vary. The business can employ four short-term transaction oriented strategies, namely coercive, competitive, cooperative or supportive. It can also choose out of four long term forms of agreements and cooperation, such as command, divergent, Keiretsu, coordinate. The organizational, environmental factors will influence the choice of the companies and mainly the outcome of such cooperation. It is vital for managers of both collaborating businesses to be familiar with outcomes of choosing one or anther strategy for cooperation in order to achieve mutual satisfaction from partnership.

The supply chain within Fast Moving Consumer Goods products companies can be complicated and based on the business culture prevalent in the country can differ also. The supply chain should consist of the three spheres: operations including external environment, the design function which adopts products to changing market demand and the distribution channels of the market, Figure 355.

Components of a Typical Supply Chain.
Figure 3. Components of a Typical Supply Chain.

The company manufacturer of FMCG operating in e-B2B environment will be mainly involved with companies and thus the major clients on the market components will be the distributive logistics companies servicing sales where the direct clients are sales companies. The special features of distributors in Europe reveal that this is still a very fragmented market, as suggested by Battezzati and Magnami. They are strong distributors and also smaller shops that make their products purchases personally, limited commercial area prevented from retail clusters developments thus putting special patterns on purchasing behaviors, scale of economies in retailers are not as large as of those operating in the USA which creates the necessity to adopt the CRM strategy to these factors.

Cagliano56 and his colleagues define two stages within process of manufacturing companies integrating with their partners along the supply chain. The beginning of the process is marked by “mere information exchanges about inventory levels, production plans and deliveries”. At the second stage a more tight collaboration is begun and the decision making in companies is carried out in mutual cooperation. The management process of the relationship will be based on the sage of the relationship development and it is a vital factor to distinguish correctly for which relationship the first stage should transform into another and which collaboration is not fruitful. Gummesson stresses the necessity to measure Return on Relationship for this purpose, which he defines in narrow sense as “the long-term net financial outcome caused by the establishment and maintenance of individual customer relationships”57, the author provides several measures for estimating return on relationship to be discussed further on in this work.

Methodology

Overview

The objective of the research is to draw the theoretical backgrounds from economic theory and empirical research carried out previously by scholars and for the purpose of this paper on the specifications of e-business and how the business model for such a company can differ from that of the other. Further on, the conclusions on recent UK FMCG market trends must be drawn to comprehend the market where the company is operating. Knowing that, economic theories on the process of CRM system implementation, the stages of this process, most important success factors within each step and the possible mistakes to be omitted must be summarized. Special attention must be paid to analysis of customer information to single out the strategically important clients, and how the other clients can be benchmarked to them for a company operating in a business to business electronic environment.

Also, implementing a CRM system is rather costly for a company and the UK FMCG market being a major part of European FMCG markets has a larger share of smaller companies to big producers comparing that with other developed countries as little food and consumer shops have been historically popular in Europe. This market specification shows that it will take some time before the owners of these businesses will comprehend the tightening competition and will start transforming the CRM systems within their businesses. Furthermore, company ability to successfully implement and manage its’ CRM system is a competitive advantage and before CRM becomes a widely known feature managers are reluctant to share their success key with the others and thus increase the number of successful competitors.

These factors show that there is a need in an empirical study based on deep theoretical research to find out the factors considered important by market players operating in Europe and especially in FMCG tight markets. The final results of the study must provide a concise and comprehensive list of the most important factors of successful implementation of CRM system within manufacturing company operating in e-B2B market in the UK.The aim was to gather important information pertaining development of customer relationship management strategy within e-companies and main factors for successful development of the strategy. Also, the study was aimed to estimating whether according to existing literature sources successful customer relationship management system is important for a manufacturing company and why.

Further on, the specifics of a manufacturing company operating in business to business electronic environment was studied and how customer relationship management strategy development must be based on considering specifications of this environment. The supply chain peculiarities for such type of business must be estimated and the levels at which satisfaction of the customers is the most important should be clarified. As a lot of research exists on Internet customer relationship management and ways to bring more customers through using new media resources, the subject of the present study is to single out ways of managing relationships with customers that are not very numerous and retention of them is more important rather than creating attractive promotion strategies for gaining larger market share. For this purpose, the aim is to distinguish differences in analysis of customers for a company operating in business to business environment as opposite to customers for a company operating in business to customer sphere and thus attracting greater number of customers is also vital for them.

The purchasing behavior thus of the customers for a company in business to customer environment will be different from that in the business to business environment and one of the subjects of the present study is to trace the analysis of the company as a customer behavior in making its’ purchasing decisions and choosing the supplier so that the company manufacturer could further on develop its’ customer relationship building strategy having this available knowledge and building customer satisfaction not ad hoc but initially adopting development of the system to requirements that further will be stated by the clients. Knowing the requirements, the company thus must distinguish the right customer relationship strategy and how it can be adopted at each operational level in the company to meet the customer requirements.

Thus, the customer relationship management in this work must focus on distinguishing its’ specifications within strategic, operational and analytical parts and how they must be interlinked into the whole process within the company manufacturing fast moving consumer goods, marketing them to companies by means of e-commerce and having several big and very important customers rather than marketing them directly to the end purchasers, the ways to single out the most important to the manufacturer clients and way to retain them. Thus, the end purpose of the current study is to empirically on the example of one company extensively operating in fast moving consumer goods e-market and dealing in business to business environment, prove that the suggestions in the economic theory on the current issue of customer relationship management in such companies are widely employed by such companies and the ways they are used, benefits of employing such systems and possible difficulties to be omitted in future implementation of the latter.

Research Method and Fieldwork

The first method to be used within implementation of the subject study is the theoretical research and qualitative examination of theories as of CRM implementation and collection of empirical evidence as to the factors considered most important within carrying out this process. In depth research was done on the views on CRM within the segment of e-B2B relationship and why there has been a surge lately to increase the prevalence of CRM systems in this type of business partnership. Thorough theoretical research has been conducted to outline how the operation of a FMCG manufacturing company dealing mainly in e-B2B environment can be from the business organization point of view different from classic business competition strategies.

The survey was designed in such a way that to minimize the time spend by the respondents on the survey in order to stimulate the response level. The survey included only one question which asked participants to rank the factors considered the most important by their companies for CRM successful implementation. First, respondents were given the list of the factors considered most important which was drawn from the relevant literature and second respondents were given choice to both rank the provided factors of influence, and add their personal factors which they consider vital for the business performance. The focus group was selected through Internet where the survey was sent out to CRM managers and employees related to this profession. Also, the survey was sent out to client managers within biggest FMCG producers world wide to their branches in Europe and purely FMCG producers.

The third method used within the study was the qualitative research method as case study of the company actively implementing customer relationship management approach to the clients through its e-B2B and making it the competitive advantage of the company. The precise number of the case studies to be carried out for the conclusions to be considered reliable is not yet decides by the scientists and is advised to amount to number of cases when the “theoretical saturation is reached”58. The choice of the company for the case study was based on the ability of the case study results to answer the research objectives of the subject work. The case chosen cannot be a typical CRM implementation experience case as not all the companies use this system in the same manner. On the other hand, the case chosen cannot be segmented as critical.

The company must be a European manufacturer operating in B2B environment and actively using CRM within its’ business. That is why the company chosen for examination is a UK company (Procter & Gamble, UK) operating as adding value to the FMCG manufacturing companies operating in Europe. The chosen company was previously manufacturing FMCG but has recently switched to outsourcing the production in order to reduce the costs and keep the competitive advantage of adding value to the final products at lowest possible price. The companies partners may be either multinational or purely European, but the subject company cooperates within European borders and is one of the largest international companies offering value added solutions to FMCG manufacturers, thus the company operates mainly in B2B environment with a growing importance of e-B2B share.

Interview was chosen as the best technique within case study qualitative research method as it provides insight into the problem by communicating with the person directly involved in the issue being under examination within the subject study. The interview questions were drawn after the literature review in order to find empirical evidence of the issues raised by different scholars in different literature sources and major research areas were listed as the result of the fieldwork. Personal detailed telephone interview with one of the corporate key account managers was conducted in order to receive the information on the CRM strategy within the company and any advice for the FMCG companies on strategies to CRM implementation. The notes were taken after the interview and as follow up, several questions were mailed to the interviewed person in order to clarify and give more details on some issues.

The interview consisted of the following questions:

  1. What was the reason to implement CRM-technology for your company?
  2. What were the most burning problems which were easily solved with CRM support tools?
  3. What were the criteria for the choice of software CRM support tools? Who defined them?
  4. What other aspects should company’s representative keep in mind while choosing a right CRMS?
  5. How have you planned CRM system integration for the work with other branches of company?
  6. Did you review completely integrated CRM solutions or you have chosen an individual design of CRM system for your company?
  7. What budget did you have for CRM implementation?
  8. Who conducted business analysis from the side of your company?
  9. Why have you chosen this particular CRM system?
  10. What results have you achieved with CRM? What you consider to be the most effective?

(The complete interview is available in appendix)

By 2007 the yearly investment by the companies in CRM technical support can reach up to $2.7 billions59 but the CRM process in the company must be considered in a much wider context than the installation of the necessary software. The CRM must be focused not on providing quality services to the customers promptly but as receiving important data from them which can help the company draw the future vision and the strategy. The CRM system must be implemented throughout the whole enterprise and not only within one or several departments, only then the overall company coverage and devotion to serving the clients and thus remaining profitable can be ensured.

CRM creates benefits for the company using it in three main areas: marketing, sales and customer service and support. From the marketing angle, the system is aimed at facilitating the process of selecting the target customers based on frequency of the transaction, sales volumes and the overall profit brought to the company by the relationship. With this system it is possible to trace the exact affect of the marketing campaign on the number of customer referrals and from their the financial gain of the promotion within each customer segment. Due to real time information spillover between the staff of the company on the clients and potential customers, the overall sales profitability is increased and customer satisfaction level rises as the sales are conducted much faster and any problems occurring with customers and any complaints can be resolved promptly also increasing the profile of the manufacturer. The CRM within marketing part is interconnected with CRM within sales where sales are dependant on the results of the CRM within marketing department. CRM within services is also interlinked to the above two segments and the services include not only perfectly servicing the very transaction, but providing after transaction customer services for the products purchased.

Thus, the fieldwork results will be aimed at presenting theoretically proven to be right for the benefit of the company milestones to be considered when developing the customer relationship management strategy for a company operating in a business to business electronic environment, how the different levels of the customer relationship management implementation process must be interlinked at different levels within the company, the reasons for executive personnel of the company devoting great personal and company sources to creating atmosphere of total devotion to higher customer satisfaction level and the possible mistakes that could be met during the process.

The customer relationship management system development is a long process consisting of five different evolution stages and the success of transforming from one stage in another within the company depends on the top management devotion to this process, clarity of the goals stated to the company which must be clearly linked to the financial and strategic vision of the company and the perfect customer relationship management system to match this vision, clear action plan with set qualitative and quantitative easily measurable goals and deadlines for achieving them. So, the CRM strategy, action plan worked out for each level of the company, continuous training of employees at all levels to single out the most favorable for the company client according to specific and measurable criteria and developing skills to analyze customer preferences, increase their satisfaction through more quality communication and development of relationship with them, devotion of sufficient resources and constant monitoring and updating the plan to changing market conditions are the key factors in successful customer relationship management system implementation within fast moving consumer goods manufacturing companies operating in business to business environment, which are discussed and analyzed in the next part of the work.

Results of the Empirical Investigation

The CRM system for the company’s e-B2B section being studied has simply become a one to one marketing where the company has rather few clients, about 35 large and 40 smaller customers with about five of them contributing to over 50% of the company turnover resulted from online sales. That is why the importance of the relationship with these big customers is vital for the company to survive and is mainly in hand of the Key Account Manager specifically prescribed to each big client.

The subject company (Procter & Gamble) started with using FMCG plants in the parent to the company country and outsourcing some of the production abroad in other European countries when the European Union was not officially proclaimed but the trade between different European countries was intensive. This allowed the subject company from the very beginning to build rather good connections in those countries and focus on brining into the company aimed at cooperating with other countries thus diversifying the products offered at local markets and brining the local products to the external markets. This fact differs the subject companies with those who usually start by operating in a local country and having reach the success stage of the firm development engage in the process of trying to enter foreign markets, while the subject company was from the very beginning built and its’ structure together with organization culture were aimed to satisfy the needs of different global clients and the company was targeted at multinational companies.

The subject company started implementing e-business customer relationship management as early for the other European companies as in 1995 and was one of the leaders during the UK IT boom to use Internet transactions when the company had global business partners. But due to increasing competition within the market the company was performing in and due to competitive advantage in form of knowing foreign markets and gaining knowledge on good customer relationship management importance, the top management of the firm decided to shift the company to developing a strategy of becoming the leading value adding company in European market and winning some top world multinational brands as clients.

The company management has developed a precisely set in qualitative and quantitative terms long term business performance success strategy which was further on broken into several short term strategies with precisely set goals for each department and person within the company. The company shifted away from hiring production sources and has decided it would be more profitable to use production in less costly countries and thus outsource these services and provide them to business customers at lower costs. The management of the company focused on the personal relationships that developed by that time between some of the people within the company and representatives of other business. The company has completely shifted to strengthening these relationships and having this as the main company asset rather than being a company producing a product or service and it being the core of the company business structure. The subject company stated clearly that the business relationships existing are the core of the business and everything else within the company must be developed to strengthen them.

The company interlinked the financial and quality performance strategy to CRM development strategy and it became one. Thus, the firm has objectives of the companies it wishes to serve in the near future, of the transaction volumes it would like to have with the current customers and so on. Thus, the tactical segment of the CRM system is highly efficient within the company with all the employees starting from the top managers being aware of this company most valuable asset. As it was stated by the firm management, the database of the present clients of the company is even more impressive in terms of the brands they cooperate with than they would have ever though 7 or more years ago. In fact, they have seen some of their partners develop also from a rather young company with unstable demand for the products into a well performing world known brand within its’ sphere.

The CRM implementation system was then supported by thorough analysis of the current market conditions, analysis of the performance strategies of the current company customers, industries they operate in which allowed the managers to draw conclusions as to perspectives of the future performance of the customers and their needs. The company invested big resources into analyzing producing potential of the factories within the home country, analysis of the investment worth of purchasing one of the plants as opposite to outsourcing production and so on. Also, analysis of the relationships existing at that point of time between managers of the company and representatives of other businesses was carried out. A simple customer database, with their history, history of cooperating with them, average transaction volumes and purchasing preferences were drawn. Also, the customers were segmented according to what this company values the most: better cost or higher end FMCG targeted at more exclusive end customers.

The management of the company confessed that analytical CRM within the company is devoted to much more resources comparing to operational CRM as being a company dealing within e-B2B environment implies that the former has rather few but very important clients. Also, a very important fact is that when dealing with B2B clients it is necessary for a manufacturer or a representative of a manufacturer as the subject company to understand that decisions within such business are usually not done by the person the Key Account Manager is dealing with, while in direct marketing the decision is made exactly by the buyer. Very often Key account managers develop relationships with the like managers who are numerous within the distribution company and thus will not be the final decision makers and cannot be influenced by key account manager directly. That is why the decision to be made is most likely to be objective as well as biased by personal contacts.

The management of the company after this analysis had to segment the customers as to those worth while keeping relationships with, and to those who should not be made any effort to be retained as cooperation with them did not promise to be profitable. Also, the companies of bigger size usually yield more profits to the subject company and thus are also singled out to be provided accurate attention. The customers are also grouped according to the types of products they on average order from the company and sometimes the profitability of a specific project for the company in terms of developing and further on producing the product can depend on the fact whether the product of the similar functional qualities has been already produced which can decrease the costs of the new product output. Another type of segmentation is the type of the service the customer demands the most, whether it is price, quality, delivery terms and further on.

After that, the key account manager was assigned to each key client based on very careful estimation of the person representing the partner. As it is one to one marketing, personal compatibility is vital and is clearly understood within company managers. The company technical support system includes one program with very detailed information there about all the customers of the company, the key manager of that customer, number of contacts with the partner, when the last contact was carried out and brief summary of the issues that were agreed upon, the time of the next one with reminder set when it should be carried out in case of smaller clients and other information. This database is shared among all the managers within the company excluding servicing workers and workers not directly employed within cooperating with clients. The managers and almost all the staff of the company is constantly train to improve their skills most required for efficient performance of their functions, with key account managers devoting much time to psychology learning in order to create strong one to one relationships with the clients. This knowledge allows them to choose the correct mix of frequency and types of contacts with the customer and feel exactly the customer expectations. The majority of the key account managers state that developing trust worthy relationship is the most important fact and is the driver for great cooperation because partners can trust each other on deeper level and thus cooperation can be worked out to the benefits of the both the company and the client.

Having carried out the internal analysis, the company went to the next stage of developing the products that would suit perfectly the current needs of the clients. The subject firm usually develops specific product for each deal and transaction of the client and this is one of the success factors as the company is very flexible and sees innovation within products and services offered as one of the secrets of great performance. The corporate culture is devoted to brining in new products and generating ideas for the well developed company clients. Sensitivity analysis is carried out on the likeliness of the partner to purchase that or the other product and financial gain from this or that initiative is studied carefully. The results of the financial analysis are then used within financial analysis of the subject company performance in order to draw objective conclusions and state more clearly goals.

Once as the result of deep customer analysis the creative team of the company develops the set of possible products to be offered to the client, the marketing team carries out the marketing research of the product perception by the customers whom the partner company targets. The vision of the company is to treat the products offered to the customers as source of media for them with the end purchases which increases the effectiveness of the product promotion by several times. More than 20 highly qualified designers work for the company in order to create the product matching customer needs perfectly and communicate the message of the product to the customer and final purchaser correctly not only with the help of visual qualities of the good, but by using texture, smell and other characteristics of the product. Thus, when the key account manager presents to the business partner the results of their work and offer, they always produce statistically representative results of the market perception of the product offered. For this purpose the subject company deeply interacts with the client marketing teams and obtains from them market info as to their direct customers and their behaviors, and mixes this data with own research results.

Then, the purchase team further looks for the best production place for the good according to the optimal criteria of cost, quality and timing for it. The purchase team visits all the plants itself in order to obtain fair vision of the supplier abilities. The decision to outsource production was based by striving to decrease risks of the company as it is hard for the manufacturer to switch its’ production capacities to other products shortly. Nevertheless, for every project which can have from 3 months to 2 years life cycle span, the company signs contracts with the manufacturers. Also, the company has developed some strong relationships with some manufacturers and uses them constantly. Such close cooperation provides risk sharing for the manufacturer and the subject company and is mutually beneficial as the subject company can assist to the manufacturer on the trends within the market development and thus adjusting the production capacities to these trends, while the benefits of the subject firm are evident.

The purchase managers of the company agree on the samples to be provided within short span of time and present them also during the presentation thus demonstrating the overall marketing mix to the clients. Thus the subject company through effective CRM system and thus being able to predict the products the company will be focusing on in the near future and themselves creating the demand for own products, the company has reached synergy effect by closely communicating with the suppliers, customers, analysis end customers and thus offering products for much better value than their physical cost. The firm has completely shifted from product or transaction marketing to relationship marketing and targets its’ processes to satisfying the needs of the most profitable to the company customers with the top management of the company stressing the need of increasing customer loyalty to the company through overall corporate level.

Once the optimal place for the product production is found, the team of the project with the financial experts evaluate the worth to the company of the overall exact project while when evaluating the worth of the client the average assumptions based on historic cooperation are taken. If the project is expected to be highly rewarding, the company proceeds and usually the key account manager makes a presentation to the team of the partner on the set of the offers, main ideas and how the team came to such conclusion based on carefully studying company demand and end customers purchasing trends, overall cost of the products to the partners and the benefits from cooperating with the subject company. As the interviewee confessed, though planned CRM has been yielding extremely positive returns to the company, some of the biggest deals which further transformed into long term cooperation were won by pure chance and not by the quality of the product offered to the partner, but to the personal compatibility of the key account manager and the representative of the partner company.

The whole process of every deal development is monitored by the key account manager and is reported on at the weekly meetings to the top management of the company. Such monitoring ensures in time quality services offered to the customers. The firm has also developed a very smart performance appraisal system where the employees at all levels are motivated by monetary and social rewards for brining in customers, retaining them, strengthening relationships as measures by higher customer satisfaction level, higher transaction volumes with greater profits and better team performance. As has been mentioned, the risk of the company is that once the key account manager develops a very strong relationship with the big partner company and thus very profitable contract, the manager can leave together with the relationship he has developed and thus client will be lost. To avoid this, the remuneration of each of the key account managers has been developed very carefully in order to motivate them at the highest level possible according to their personal ambitions and to align them with that of the company.

Customer satisfaction measurement is a very important factor and is sometimes performed not by the key account manager directly cooperating with the client, but by the top management of the company through personal meetings in informal atmosphere. The satisfaction is measured during the whole transaction and deal process to ensure the outcome will meet the expectations. The very production and supply of the products services is monitored also very carefully and the contracts ensure that the quality, time and terms are optimal and provide to the client maximum value for the cost paid. With long lived customers, there are certain discount created for them as they add great value to the company and also reduce the risks of low demand for the products and services produced. Long term relationships allow both the subject firm and the client to optimize the supply chain and thus reduce the costs of the products offered.

During cooperation with the customer by the key account manager the focus is also done on trying to feel the client and be already putting attention to what project can be next after this one for cooperating with this client. The company each quarter monitors not only the satisfaction of the customers and possible business opportunities, but is aimed at adopting the skills of the team and production capacities to meet the requirements in the future. Also, the company provides extensive after deal services for the clients and sometimes the deal includes also servicing the end clients. For this purpose, the firm has opened a number of virtual stores which can facilitate request of the information on the company activities and facilitate cooperation with smaller companies.

Results / Findings

Overview

Based on the relevant literature reviewed and other methods of the fieldwork employed, the strategy of the customer relationship management implementation has definite stages, which are needed to be followed for a successful implementation of CRM system for the support of e-business.

The stages of CRM development within a company or segmentation of companies based on the complexity of CRM they are employing is presented below, Figure 460.

Stages of CRM system development within a company.
Figure 4, Stages of CRM system development within a company.

The first stage of the CRM system development within a company is the defensive marketing stage aimed at providing very limited only necessary customer satisfaction services and the majority of customer surveys and services are supported manually. Some companies prefer to leave the CRM system in this infant stage and do not transfer it to the second stage of higher level which is referred to as customer satisfaction-complaint management. The clients information is on most cases within this stage is also gathered manually, but some form of technological assistance is used to analyze it, group it and draw some conclusions. The company does use Internet to some extent but not as frequently as to devote much company resources to this sphere. The third stage of CRM development is a more sophisticated employment of IT automated CRM packages facilitating generating customers profiles, shopping behaviors and trends monitoring. This stage can be generalized as customer accounts-orders management oriented and the company does use ERP, EDI, may be active in e-commerce. The CRM is employed at the operational level where the purpose of using CRM is to provide promptly and time and cost efficient clients orders and request management.

The fourth stage of the CRM development within the company is the full understanding of the top management advantages of the information they gather about the clients and the necessary final steps to be made to use this data for the company better performance in all the spheres of business organization.

Research results and recommendations

Research Question # 1: At which stage of development does company management consider its’ CRM system to be at? Research Result # 1: The company considered itself to be and based on the theoretical findings at the final top stage of the customer relationship management system development, or customer personalization stage.

The study of the Gartner company found that only 3% of the firms in the UK can be classified as those actively using all segments of the CRM system and are in the leading CRM stage. For any company for which its’ CRM strategy is in any of the first three stages of its’ development, the first step within developing the CRM system implementation strategy is to work out the short to long term strategy for the company including all aspects of its’ operations, then interlink this customer relationship management vision into all spheres of company life, translate them to clear goals for each department of the company and performance with achievement being measured according to the process upon reaching these strategic and short term goals for the company, this process is schematically presented on the graph below, Figure 561.

Linking Firm Operational and CRM strategies.
Figure 5, Linking Firm Operational and CRM strategies.

Research Result # 2: A company devoted to successful CRM, such as the company studied, has a clearly stated CRM strategy broken down into shorter term goals for each department based on deep analysis of the possibilities of the company and the market.

The internal audit within the company at the initial stage of CRM system implementation must clearly identify the following issues in order for the strategy to be customized according to current company position. Very important factor is to determine products and services most attributable to customer profitability and determine that that cause the customers being unprofitable for the company. The customer segmentation for companies operating in e-B2B environment is advised to be done on customer value basis, there will usually be several very big value customers and many those with lower worth to the company. This analysis can by driving away some products or services increase the profitability of the customers and also keep them if the substitutes for the products are offered and the clients needs are still satisfied. Fisher theory suggests that depending on the type of product the company is producing, the supply chain for the company and the optimal customer relationship management system will be different.

Due to increasing competition and changing demands from the end customers and thus varying demands from the business, the sales company in order not only to survive but to remain profitable must be very flexible and responsive to changes in the market. To arrive at this, the sales company must base its’ strategy by viewing itself as an component of a big supply-distribution system, “then flexibility at the acquisition-processing-distribution stages must be achieved to devise the best strategy for obtaining the right and desired output, satisfying the quick design changes, broader product life, fluctuating orders, multiple quality levels, quicker deliveries, and multiple price levels.62” The manufacturer together with the sales partners must smooth and interlink each stage of their cooperation and share information very fast in order to increase the overall supply chain response rate. The advise of the scholars in order to implement successfully CRM within the manufacturing and sales companies is to link the customer management systems with the suppliers management system as the costs of the raw materials to be used by the enterprise within the production will influence greatly the final cost of the product, Figure 663.

Possible Architecture of Integrated CRM and SRM Systems.
Figure 6, Possible Architecture of Integrated CRM and SRM Systems.

The information linked within these processes can look as follows, Figure 7.

Supplier Selection Criteria of the Supplier Rating System.
Figure 7, Supplier Selection Criteria of the Supplier Rating System.

Research Result # 3: Company with successful CRM system as proven by the empirical case study by a successfully implementing CRM company devotes efficient resources to analytical segment of the CRM as basis for tactical and operational CRM with clear segmentation of customers and even suppliers.

Research Result # 4: A company with clear CRM vision pays great attention to CRM process as a system with clear functions of each segment and have active monitoring practices of CRM system implementation.

Critical Analysis and reflection

After processing results which were given by methods chosen to conduct the study of evaluation of application of CRM to e-commerce it was decided to analyze each research approach chosen and evaluate its relevance.

The first research method was analysis of theoretical sources and current publications on the theme of CRM. Analysis of this theory and empirical studies allowed to single out most important issues applicable to implementing CRM system within FMCG products company that operates in e-B2B environment in the United Kingdom. The research revealed that there is lack of knowledge on the CRM segment within implementing this marketing skill within FMCG companies operating in e-B2B environment as the FMCG manufacturing company must manage well relationship with the suppliers due to the functional nature of the goods produce, and implement tactical, analytical and operational CRM with business partners, and also utilize analytical part of the CRM for end consumers of the products who are not direct company clients but are indirect products consumers. The analysis has also shown there is a lack of relevant information in study books and that the most relevant sources appeared to be scientific and applied articles from economics and management journals. There can be find a reasonable explanation to such tendency as the field of CRM is considered to be relatively new and has not been studied in details, as its approaches are used only by 5-6% of total businesses operating in Europe.

The second research method used was interview of top managers of UK companies operating in B2B environment using email. The list of the participants was accumulated through extensive research from numerous sources. Total approximately 100 surveys were circulated. As the CRM system implementation is considered a competitive advantage by the company and generally a very low response level for surveys carried out even with governmental bodies support, the information to be disclosed was expected to be short and the response level to be very low. Out of 100 surveys the response level was only 9% which is extremely low and thus cannot be a representative survey with results being considered statistically significant and provide information based on which conclusions can be drawn. The information provided would be thus very biased and cannot be considered scientifically proven.

The third method used was interview of representative of Procter and Gamble, UK. The results received from the interview are considered to be the most relevant as they provide evidence of successful implementation of CRM system for the e-commerce department of company which has resulted in the sales growth and better performance of sales managers. The limitation to the results received in the interview refer mainly to marketing campaigns and marketing policies which are used by Procter and Gamble, Uk and other companies operating in B2B e-commerce. Relatively fast positive response expressed in sales growth after successful implementation of CRM support system for online sales may be not so obvious for other participants of e-markets in UK. Procter and Gamble is a well known brand, recognized all over the world which made company a great favor in promoting its business on e-markets. CRM system integrated for e-commerce sector of the company just opened an opportunity to attract more customers and allowed smaller companies to purchase products directly, while for other e-commerce companies which are mainly distributors or resellers a new marketing strategy should be applied for a fast result.

Conclusion

The literature research analysis together with the empirical investigation of the company used as a case study (P&G, UK) to support the theoretical results prove that the FMCG products company and thus operating in a very tight market with high competition can achieve very good profitability if it shifts from transaction or product marketing to relationship market with using e-business model and devotes great resources to developing and strengthening relationships with the customers. The CRM system must be integrated and developed together with overall company strategy and only this development will allow CMR system implementation not to fail due to various reasons. According to the interview conducted with representative of Procter and Gamble, UK the amount of sales generated using e-B2B environment has considerably grown after implementation of CRM support system and contributes now to approximately 10% of sales total.

The research has indicated that, system implementation starts at developing clear vision of the company position, market leadership and clients in the long and short term and linking CRM objectives to this vision and strategy, dividing it into short term objectives for each company operation level. Further on, the company must carry out very deep internal audit of the company skills and sources and thus draw conclusions on the skills that are missing according to the expected development of the needs of the main clients of the company or those clients who are the most profitable to the company and thus it should strive to gain more of such clients. This clear vision comes from integrating operational CRM of satisfying the customers at servicing level with analytical CRM which investigates customer needs and tries to predict them. The manufacturing company operating in e-B2B environment will have less difficulties implementing CRM system as the number of clients is less, but the value of each profitable client for the company is thus much greater and managers must be trained very efficiently to psychologically and professionally be able satisfy the customers at the highest possible level compared to the competitors.

The company must clearly understand based on deep customer knowledge attained through personal communication the customer development perspectives and from this how the relationship with this customer must be developed. The company structure, culture and all the technical support must be developed to increase efficiency of the CRM system. Relationships with the suppliers of all the levels and customers must be very flexible and key factor in sustaining success is to become a very flexible manufacturing company in order to be able to shift production very fast following changing demand. The manufacturing company must presently understand that it cannot any longer survive by producing the same products and thus must devote much of the resources to innovations and developing new and new products, by doing so it will be able to remain the customers.

Success of CRM implementation depends on effective monitoring of the process and benchmarking the results of each stage of the process on regular basis, for example, comparing the outcome of the project at each department level with those expected and rewards the employees for having achieved the goals or for having outperformed the expectations. The chief managers of the company must be devoted to this process of monitoring the successful implementation of the system and adopting the future goals to the current outcomes. That is why all the goals must be set precisely and clearly.

Limitations

The limitations of the case study research method include exploratory matter of the analysis and inability to trace the same pattern to all existing in practice cases. That is why the conclusions drawn from examining CRM system implementation success factors within subject UK companies can be set as a guideline for other companies performing in similar industry with the same profitability drivers, but must be adopted according to the specific company situation with the help of CRM specialists. Furthermore, the guidelines must be used for rough guidance purposes only for the companies performing in other industries. In order to avoid these limitations, the conclusions of the research were broadened and the general implications from the case study results were drawn that could be applied to a wider range of companies wishing to implement CRM. The specific case study findings are provided within the fieldwork and case study section, while the discussion of the empirical findings and the implication for the future out of them are provided within discussion section.

Personal reflections

In order to complete the project I have consulted different literature sources about the basic methods of conducting statistically and scientifically relevant researches. The main reason for this was the lack of recent publications and lack of information in text books. That’s why it was decided to analyze current publications in economic journals compare findings of authors with postulates of management and economic theory and check how these findings correlate with empirical results of surveyed companies and findings from the interview of subject company representative, which successfully implemented CRM system for its e-commerce department. I have learnt how to apply methods for marketing and management research for the specific cases, how to evaluate company’s performance after implementation of new business models and how to critically analyze it using theoretical knowledge and previous findings. In order to complete the following research I would recommend to use more recent publications on the theme of CRM, as the ideas and approaches in this field of management are changing quickly and it’s essential to consult several resources in order to get a clear idea about current changes. For a more specific practical study I would recommend to survey several companies (it would be better to take international companies, or companies located not only in the UK but also in other EU countries: Germany, France and Italy, and it’s also important to compare finding results with U.S. company findings).

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Footnotes

  1. Jackson, B. B. 1985, Winning and Keeping Industrial Customers, Lexington Books, Lexington, MA.
  2. Morgan, R. M., Hunt, S. D. 1994, The commitment-trust theory of relationship marketing, Journal of Marketing, Volume 58, No. 3, pp. 20-38.
  3. Reichheld, F. F. 1993, Loyalty-based management, Harvard Business Review, Vol. 71, No. 2, pp. 64-73.
  4. Christopher, M., Payne, A., Ballantyne, D. 1991, Relationship Marketing: Bringing Quality, Customer Service, and Marketing Together, Butterworth-Heinemann, Oxford.
  5. Nevin, J. R. 1995, Relationship marketing and distribution channels: exploring some fundamental issues, Journal of the Academy of Marketing Science, Volume 23, No. 4, pp. 327-334.
  6. Brodie, R. J., Coviello, N. E., Brookes, R. W., Little, V. 1997, Towards a paradigm shift in marketing: an examination of current marketing practices, Journal of Marketing Management, Volume 13, No. 5, pp. 383-406.
  7. Ahn, J. Y. Some aspects on the Web data mining for effecting eCRM from a statistical viewpoint, PhD dissertation, Chonbuk National University, Chonju.
  8. Anderson, K., Kerr, C. 2002, Customer Relationship Management, The McGraw-Hill Companies, Inc.
  9. Gummesson, E. 2002, Total Rlationship Marketing, 2nd Ed, Butterworth-Heinemann/Chartered Institute of Marketing, Oxford.
  10. Scott D.Nelson, 2003“Management Update:The Eight Building Blocks of CRM” Stamford:Gartner.
  11. Turk, D., Bligh, P. 2004, CRM Unplugged: Releasing CRM’s Strategic Value, Wiley & Sons Inc.
  12. Cambell, A. 2003, Creating customer knowledge: managing customer relationship management programs strategically, Industrial Marketing Management, Volume 32, No. 5, pp. 375-383.
  13. Rowley, J. 2004, Partnering paradigms? Knowledge management and relationship marketing, Industrial Management & Data Systems, Volume 104, No. 2, pp. 149-157.
  14. Minna, R., Aino, H. 2005, Customer knowledge management competence: towards a theoretical framework, Proceedings of the 38th Hawaii International Conference on System Sciences, IEEE 0-7695-2268-8/05.
  15. Paiva, E. L., Fensterseifer, J. E. 2002, Focusing information in manufacturing: a knowledge management perspective, Industrial Management & Data Systems, Volume 102, No. 7, pp. 381-389.
  16. Bose, R., Sugumaran, V. 1999 Application of knowledge management technology in customer relationship management, Knowledge & Process Management, Volume 10, No. 1, pp. 3-17.
  17. Nevin, J. R. 1995 Relationship marketing and distribution channels: exploring fundamental issues, Journal of the Academy of Marketing Science, Fall, pp. 327-334.
  18. Parvatiyar, A., Sheth, J. N. , 2001, The domain and conceptual foundations of relationship marketing, in Sheth, J. N., Parvatiyar, A. (Eds), Handbook of Relationship Marketing, Sage Publications, Thousand Oaks, CA, pp. 3-38.
  19. Peppers, D., Rogers, M. 1995, A new marketing paradigm: share of customer, not market share, Planning Review, Volume 23, No. 2, pp. 14-18.
  20. Blattberg, R. C., Deighton, J. 1991, Interactive marketing: exploring the age of addressability, Sloan Management Review, Volume 33, No. 1, pp. 5-14.
  21. Vavra, T. G. 1992, Aftermarketing: How to Keep Customers for Life through Relationship Marketing, Business One-Irwin, Homewood, IL.
  22. Sin, L. Y. M., Tse, A. C. B., Yim, Frederick H. K. 2005, CRM: conceptualization and scale development, European Journal of Marketing, Vol. 39, No. 11/12, pp. 1264-1290.
  23. Jain, D. and Singh, S. S. Customer lifetime value research in marketing a review and future directions”, Journal of Interactive Marketing, Vol. 16, No. 2, pp. 34-46.
  24. Nykamp, M. 2003, The Customer Differential: The Complete Guide to Implementing Customer Relationship Management, AMACOM new York, NY.
  25. Kotorov, R. 2003, Customer relationship management: strategic lessons and future directions, Business Process Management, Volume 9, No. 5, pp. 566-571.
  26. Wardley, M., Blumstein, R., Tiazkun, S., Moser, K. The Financial Impact of CRM.
  27. Yurong Xu, Yen, D., Lin, B., Chou, D. 2002, Adopting customer relationship management technology, Industrial Management & Data Systems, Volume 102/8, pp. 442-452.
  28. Lindgreen, A. 2004, The design, implementation and monitoring of a CRM programme: a case study, Marketing Intelligence & Planning, Volume 22, No. 2, pp. 160-186.
  29. Kotorov, R. 2003, Customer relationship management: strategic lessons and future directions, Business Process Management, Volume 9, No. 5, pp. 566-571.
  30. Aberdeen,Bbusiness 1999, Resource Management: A Proactive Approach to Managing Operations, Aberdeen Group, Boston, MA.
  31. Lindgreen, A. 2004, The design, implementation and monitoring of a CRM programme: a case study, Marketing Intelligence & Planning, Volume 22, No. 2, pp. 160-186.
  32. Lindgreen, A. 2004, The design, implementation and monitoring of a CRM programme: a case study, Marketing Intelligence & Planning, Volume 22, No. 2, pp. 160-186.
  33. Sweet, P. Strategic value configuration logics and the “new” economy: a service economy revolution?, International Journal of Service Industry Management, Volume 12, No. 1, pp. 70-83, 2001.
  34. Kandampully, J.
  35. Hamel, G., Doz, Y., Prahalad, C. K., Collaborate with your competitors – and win, Harvard Business Review, pp. 133-139, 1989.
  36. Jarillo, J. C. On strategic network, Strategic Management Journal, Volume 9, No. 1, pp. 31-41, 1988.
  37. Reichheld, F. F., Sasser, W. E., Zero defections: quality comes to services, Harvard Business Review, pp. 105-111, 1990.
  38. Kandampully, J., Duddy, R. Competitive advantage through anticipation, innovation and relationships, Management Decision, Volume 37, No. 1, pp. 51-56, 1999.
  39. Gronroos, C. Relationship marketing: strategic and tactical implications, Management Decisions, Volume 34, NO. 3, pp. 5-14, 1996.
  40. Gummesson, E. Making relationship marketing operational, International Journal of Service Industry Management, Volume 5, pp. 5-20, 1994.
  41. Sheth, J. N., Parvatiyar, A. Relationship marketing in consumer markets: antecedents and consequences, Journal of the Academy of Marketing Science, Volume 23, No. 4, pp. 255-271.
  42. Developing CRM Strategy, Gartner Company.
  43. Kandampully, J. B2B relationships and networks in the Internet age, Management Decision, Volume 41/5, pp. 443-451, 2003.
  44. Wilson, D. T., An integrated model of buyer-seller relationships, Journal of the Academy of Marketing Science, Volume 23, No. 4, pp. 335-345, 1995.
  45. Claro, D. P., Hagelaar, R., Omta, O. The determinants of relationship governance and performance: how to manage business relationships? Industrial Marketing and Management, Volume 32, No. 8, pp. 703-716, 2003.
  46. Katz, N. Understanding the Barriers to Electronic Business –To-Business Relationships.
  47. Dwyer, R. R., Schurr, P., Oh., S., Developing buyer-seller relationships, Journal of Marketing, Volume 51, April, pp. 11-27, 1987.
  48. Hakansson, H. International Marketing and Purchasing of Industrial Goods, Wiley, New York, NY, 1984.
  49. Spekman, R., E., Johnston, W. J., Relationship management: managing the selling and buying interface, Journal of Business Research, Volume 14, pp. 519-533, 1986.
  50. Maynard, R. Striking the right match, Nation’s Business, Volume 84, pp. 18-28, 1996.
  51. Corfman, K. P., Lehmann, D. R., The importance of other’s welfare in evaluating bargaining outcomes, Journal of Consumer Research, Volume 20, June, pp. 124-137, 1993.
  52. Hunt, S. D., Nevin, J. R., Power in a channel of distribution: sources and consequences, Journal of Marketing Research, Volume 11, May, pp. 186-193, 1974.
  53. Lusch, R. F., Sources of power: the impact on intrachannel conflict, Journal of Marketing Research, Volume 13, pp. 382-390.
  54. Dobholkar, P., Neeley, S. Managing interdependency: a taxonomy for business-to-business relationships, Journal of Business & Industrial Marketing, Volume 13, No. 6, 1998, pp. 439-460.
  55. Volume 30, No. 5, 2000, pp. 413-424.
  56. Cagliano, R., Caniato, F., Spina, G. Reconsidering e-business strategy and the impact on supply chains, International Journal of Operations & Production Management, Volume 25, No. 12, 2005, pp. 1328-1332.
  57. 57 Gummesson, E. Return on relationships (ROR): the value of relationship marketing and CRM in business-to-business contexts, Journal of Business & Industrial Marketing, Volume 19, No. 2, 2004, pp. 136-148.
  58. Lincoln, Y.S. and Guba, E.G. (1985), Naturalistic Inquiry, Sage, London.
  59. Tom Topolinski,“Predicts 2004:The CRM Software Market Is Recovering, ”Stamford:Gartner.
  60. Stefanou, C. J., Sarmaniotis, C. CRM and customer-centric knowledge management: an empirical research, Business Process Management Journal, Volume 9, No. 5, 2003, pp. 617-634.
  61. Developing CRM strategy, Gartner company.
  62. Kara, S., Kayis, B., O”Kane, S., The role of human factors in flexibility management: a survey, Human Factors and Ergonomics in Manufacturing, Volume 12, No. 1, pp. 1-45, 2002.
  63. Choy, K. L., Lee, W. B., Lo, V. Development of a case based intelligent supplier relationship management system – linking supplier rating system and product coding system, Supply Chain Management: An International Journal, Volume 9, No. 1, pp. 86-101, 2004.