Master's Thesis, 2006, 66 Pages
University of Leicester (Management Center), Grade: B-
University of Leicester
How important is Customer Relationship Management in the
automotive supply industry ?
A case study on Company Y
TABLE OF CONTENTS
Acknowledgement ... 4
About the author ... 5
Abstract ... 6
1. Introduction ... 8
2. Literature review and industrial background ... 12
2.1 Overview of CRM theories ... 12
2.2 Limitation to CRM ... 16
2.3 Theories beyond CRM ... 17
2.4 The automotive industry ... 18
2.5 Company background ... 20
2.6 B-2-b versus b-2-c markets ... 21
2.7 Reflections ... 23
3. Research methods ... 24
3.1 Defining the topic ... 24
3.2 Areas of research ... 24
3.3 Epistemological debate ... 26
3.4 The questionnaire ... 27
3.5 Conjoint-analysis ... 28
3.6 Reflections ... 28
4. Data description and presentation of findings ... 30
4.1 The research population ... 30
4.2 Receiving the responses ... 32
4.3 Presentation of results from the questionnaire ... 33
4.4 Conjoint analysis ... 43
4.4.1 The price issue ... 43
4.4.2 Availability of service staff ... 44
4.4.3 Response time ... 45
4.5 Reflections ... 45
5. Analysis and interpretation of findings ... 46
5.1 Customer Satisfaction ... 46
5.2 Supplier loyalty ... 47
5.3 Response to customers ... 48
5.4 Frequency of contact ... 48
5.5 Product knowledge ... 49
5.6 Ability to solve a problem ... 49
5.7 Professionalism ... 50
5.8 Trade-offs ... 50
6. Conclusions ... 52
6.1 CRM is valid ... 52
6.2 Price matters, but is not everything ... 52
6.3 Loyalty is rare ... 53
6.4 Professionalism still counts for something ... 53
6.5 Lines of communication are important ... 54
7. Limitations ... 55
7.1 Human Error ... 55
7.2 Population limitations ... 55
7.3 Limits of research ... 55
7.4 Limits of literature ... 55
8. Recommendations ... 56
8.1 Development of CRM standards ... 56
8.2 Learn to solve problems ... 56
8.3 Embrace technology ... 56
8.4 Become professionals ... 57
8.5 Monitor satisfaction of customers ... 77
8.6 Play by the rules ... 57
8.7 Closing thought ... 57
9. Bibliography ... 58
Appendix A: Survey covering letter, Questionnaire ... 60
Appendix B: Company Data ... 65
Appendix C: Automotive industry background material ... 69
‘’Customer Relationship Marketing is an old idea practiced by mom and pop stores and salespeople’’
( Philip Kotler, 2002)
The purpose of this dissertation is to investigate the importance of customer relationship management (CRM) in a specific industry for a specific company. More precisely, this work will explore the automotive supplier industry; and within that industry, the company Y will be analysed, discussed and explored. Y is a supplier of aluminium tubes and aluminium profiles to the global automotive industry with production base in Germany. The author has worked in the sales department of Y for 8 years and his professional experience will be inevitably reflected in this work. The research will encompass several key areas in an effort to present a multi-perspective work, including best practices, an overview of CRM, and key factors of success as well as an automotive industry survey that the author administered, documented and integrated into this dissertation to add an element from the real business world to the research.
First, a broad overview of relevant CRM theories and their meaning will be presented in order to set the stage for a discussion of Y as a specific competitor in the automotive supplier industry and to facilitate realistic and effective comparison and contrast between industry trends and the chosen company in particular.
Following the CRM theory overview, differences between business-to-business and business-to-consumer markets will be differentiated for a complete understanding of these two distinct segments of the industry. Success factors within CRM will be presented, together with the limitations and problems associated with the application of CRM. After that supplementing theories beyond CRM will be identified and discussed.
A literature review will be included to add substance and relevance to the research. In the second part of this dissertation, a survey will be presented that the author composed and administered towards Y’s business-to-business automotive customers.
After the survey and methodology is discussed, an analysis of the results of the survey will be discussed and graphically represented, bringing the paper full circle and representing real-world, current and relevant experiences, attitudes and comments. Based upon the results, interpretation will evolve into fact-based conclusions, and recommendations, all within the scope of the limitations that the author also will identify and reveal in order to give the readers of the research an accurate representation of possible limits in the research. In brief, the author aims to blend relevant literature, real-life industry experiences and a survey of current industry attitudes and opinions to provide a full-bodied, comprehensive work of effective research. Moreover, the author hopes to make a meaningful contribution to the body of research on the topic and inspire additional exploration of this fascinating topic.
The advances that society in general has made since the dawn of the Industrial Revolution have been nothing short of miraculous. Technologies and inventions that were once seen as little more than the stuff of science fiction stories- space travel, the automobile, computers, telephones and much more- have become integral parts of everyday life and especially the world of business. Innovation and invention has led to intense demand for millions of different products, and modern communication and transportation methods have both made these goods readily available and created a mega marketplace where items from anywhere in the world can be had at the push of a button, or more precisely, the click of a computer mouse. Businesses and individuals can compare prices, availability and quality in Germany as easily as in India.
An industry that has seen tremendous growth in the 20th century, innovation and competition is the automotive industry. Because of the afore mentioned advances in communications and logistics, automobiles can be assembled of components from every corner of the world in one centralized location due to sophisticated purchasing and logistical systems that facilitate rapid purchase and delivery of goods at precisely the moment needed . Ever increasing competition in the automotive industry, combined with the advances in manufacturing techniques has led to a highly volatile market for automotive suppliers. First, the precise nature of car manufacturing requires strict adherence to the specifications for a given supply item, as well as the demand that supplies be in the hands of the customer as quickly as possible. Along with the requirements for perfect quality and rapid delivery, because of the intense pressure that carmakers feel to stay ahead of the competition and make every Euro count, suppliers are subject to tremendous pressure to keep pricing low. The globalisation of automobile manufacturing has compounded this pressure considerably.
Automotive suppliers have additional obstacles to overcome beyond the pressures of pricing, quality and delivery. Due to the dynamic and evolutionary nature of the automotive industry, which is further complicated by globalisation, the products that the suppliers output are held to extremely high standards of continuous quality, virtually immediate delivery, and a short product life style due to the continuous developments in technology and the customers demand for new car models. In the past, many industries operated on the unwritten rule that “people don’t buy products; people buy people”. In other words, business in the past was conducted through interpersonal relationships, business deals on a handshake, and a familiar business atmosphere. In the present day, the international flavour of the automotive industry, the fast pace of the industry that has a great deal of new entries and quick exits, and a great deal of business being conducted online, has removed a lot of the interpersonal elements from the industry, making other criteria more important.
The Internet has changed the way that original equipment manufacturers, or OEMs, in the automobile industry purchase parts and components. Because pricing, availability and product specifications are accessible instantly, it is extremely easier for buyers to change suppliers without having to engage in any direct communication with either the former or the new supplier. Conducting online transactions has also lent itself to the development of a way of doing business that has very little to do with interaction between people. Through the use of the latest computerized technology, borders between languages, cultures and physical geography are vanished with the click of a few computer keys. Therefore, OEMs are not forced to do business strictly with domestic suppliers because of a common language and the ability to deliver product quickly. Logistics and communication advances have made buying from across the globe as easy as buying locally. All of this leads to an erosion of customer loyalty and the ability to seek lower priced options obviously without much consequence for the buyer.
With the removal of customer loyalty, ties to country or a certain supplier from the automotive supply industry, OEMs find themselves in an enviable position. They can choose from a wide variety of suppliers instantaneously, demand low prices, high quality and rapid delivery, and be accommodated, so that the supplier who is fortunate enough to have a given customer could lose that customer in an instant. This applies both to the business-to-business customer as well as the business-to-consumer customer. Individuals, as well as companies, can choose their automotive supplies from a source literally anywhere on earth and eventually find the level of quality and price that they desire to the letter. Business-to-business, the common availability of pricing information for automotive supplies makes it virtually impossible for a given supplier to justify a price that is higher than other suppliers. Again, the element of human relationships is removed from the equation by the impersonal nature of e-commerce, which is the most effective way for dynamic organizations to purchase what is in many cases a high quantity item that does not allow for extensive decision making and vendor evaluation. Therefore, suppliers must find ways to be able to survive long term, such as effective management of customer relationships, giving birth to the concepts of CRM.
Especially because of the new way that OEMs are doing business with suppliers, the concepts, and effective implementation of CRM are relevant and vitally important for the extended success of suppliers. Both in the case of businesses buying from businesses and individual consumers buying from companies, those companies need to come to terms with the fact that the “old way” of doing business is no longer acceptable and is ineffective if any kind of viable strategy is to be developed. In order to do this, best practices can be researched and analysed within CRM for the automotive supply industry, as well as the specific history and actions of an individual company. This is not to say that CRM will be the only customer strategy to be considered or discussed. The important elements of customer service strategy that lie beyond CRM are significant, valuable, and will also be evaluated, discussed and presented as noteworthy and useful business strategy
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