Customer centric marketing: The influences of CRM and the Internet in the future of marketing

Table of Contents

ABSTRACT

LIST OF FIGURES

LIST OF TABLES

CHAPTER 1: INTRODUCTION
Historical Perspective
Purpose of this Study

CHAPTER 2: METHODOLOGY
Methodology

CHAPTER 3: REVIEW OF RELATED REFERENCES
Introduction
Literature Review
CRM Literature
eCRM Literature
Web Based Markets and Their Customers
Relationship Marketing
Customer-Centric Marketing
Summary

CHAPTER 4: ANALYSIS
Introduction
Migration to the ‘Old’ Era of Knowing the
Customer
Technology and Customer-Centric Marketing
Customer Data
Summary

Chapter 5 - SUMMARY
Introduction
Conclusions
Summary Benefits
Recommendations

REFERENCES

Abstract

Only a few short generations ago, the global economy was predominated by agricultural and tradesman businesses. Consumers frequented businesses that were close to their physical location, as limited transportation gave them little other feasible choice. Tradesmen provided customizable goods made specifically for their clients needs, on small or individual scales of production. The life cycle of a product, during this era, typically began with a customer order for a product. With the advent of the Industrial Revolution, this quickly changed.

Mass manufacturing and transportation improvements changed the way the world did business. With mass manufacturing, goods were produced on large-scale, in anticipation of consumer purchases. This type of production allowed businesses to profit from economies of scale, reducing costs, lowering prices, and creating a market dominance of mass-produced goods.

Today, the world has changed again. Customer-centric marketing has made a revival thanks to technology. This study will discuss this reversion as well as the implications it holds to both organizations and consumers. In addition, how the Internet will shape the future of marketing will be discussed.

LIST OF FIGURES

Figure 3-1 Relationship Marketing Map

Figure 3-2 Dynamics of Markets, Contracts, and Relationships

Figure 3-3 Services Contract Map

LIST OF TABLES

Table 3-1 Dominant Perspectives on CRM

Table 3-2 Will the presence of your e- CRM system reduce calls to your call center?

Table 3-3 Primary Organizational Goals for eCRM Initiatives

Table 3-4 Challenges for Relationships in a Network Context

Customer centric marketing: The influences of CRM and the Internet in the future of marketing.

CHAPTER 1 INTRODUCTION

Historical Perspective

Only a few short generations ago, the global economy was predominated by agricultural and tradesman businesses. Consumers frequented businesses that were close to their physical location, as limited transportation gave them little other feasible choice. Tradesmen provided customizable goods made specifically for their clients needs, on small or individual scales of production. The life cycle of a product, during this era, typically began with a customer order for a product. With the advent of the Industrial Revolution, this quickly changed.

Mass manufacturing and transportation improvements changed the way the world did business. With mass manufacturing, goods were produced on large-scale, in anticipation of consumer purchases. This type of production allowed businesses to profit from economies of scale, reducing costs, lowering prices, and creating a market dominance of mass-produced goods.

During this period in history, it was believed that the numerous and varied customers of the era were too extensive to be satisfied with a single product or service offering (Smith, 1956 in Dibb, 2001b, p. 193). Therefore market segmentation was developed. Consumers were subdivided into homogenous groups to better service their needs.

Today, a new revolution has emerged, the Internet Revolution. The development of Internet technology has changed the way organizations do business forever. Thanks to technology, geographical, cultural and temporal boundaries have fallen to wayside. What once were enormous barriers to market entry, have been virtually eliminated with a few clicks of the mouse.

The Internet has fueled the growth of a global economy. Globalization today is fast-paced, ever changing and hyper-competitive. This revolutionary technology has impacted both customers and businesses in ways never before imagined. As a result, businesses have responded by developing marketing strategies specifically for the Internet. Product and service marketing has changed. In the Internet era web-based marketing, is becoming ever more important.

Utilizing the Internet to provide information to customers, to communicate with customers, and to conduct business transactions are all facets of web-based marketing. As the Internet has become a part of everyday life in all four corners of the globe, it has become the perfect information platform to allow both internal and external customers an opportunity to reduce their costs. Not only can businesses take advantage of this technology, but customers as well (Sharma & Sheth, 2004, p. 696). It is estimated that Internet revenues will reach $11.1 by 2005 (“Web portals”, n.d., p. x).

Customer relationship management (or CRM) is one of the emerging trends in the Internet era. CRM is defined as the hands-on management of one’s relationships with customers. This is typically through the use of various information technology systems, designed to dictate what the proper course of action is, at any time, to build the customer relationship. The end goal of CRM is to create a relationship that extends past the singular transaction (“Glossary”, n.d., p. 6). Electronic customer relationship management, or eCRM, manages the CRM process utilizing digital technology, most often via the Internet (p. 8).

Purpose of this Study

Each of these growing trends offers new opportunities and new challenges for the marketing professional. This study will develop a theoretical hypothesis of best practice on how to effectively and efficiently implement these new processes in the development of a long-term relationship between the company and their customer.

Although, technology has advanced beyond what many could even dream about in the pre-Industrial age, it is anticipated that marketing will shift back to precepts utilized in the Agricultural era. Once again, it will become common for businesses to know their customers, turning back to a more ‘customer-centric marketing’ focus. There are interesting implications to this change in focus. Customer-centric marketing is certain to affect customer behavior and switching costs, as well as the competitive advantages that are garnered from first to market strategies.

Of course, the utilization of web-based marketing techniques, CRM and eCRM creates new questions in regards to the use and ownership of customer data. Who will own this valuable information? How will consumer concerns over privacy affect the potential of customer-centric marketing? Will business ethics and consumer worries prevent businesses from selling personal data? As the implications of these issues is not certain, more research on this topic is suggested.

In addition, as customer-centric marketing becomes more important to business strategy, clearly, the role of marketing within the organization will increase. There is little contemporary research on this subject, from a marketing perspective, and as such, more research is suggested.

In the end, this study will seek to answer some of the concerns described above. Specifically, this study will address:

1. How marketing strategy will revert back to pre-Industrial methods of ‘knowing’ their customers and preferences.
2. How customer-centric marketing will be implemented using Internet technology and the implications of this utilization on customer behavior, switching costs and long-term competitive advantages such as first to market.
3. And, challenges facing organizations responsibly utilizing customer data. Who will own this valuable information, and how will consumer privacy concerns affect the effectiveness of customer-centric marketing strategies in the Internet era.

CHAPTER 2 METHODOLOGY

The first consideration in determining which research methodology to utilize was the nature of the research topic at hand. It was determined that a survey approach would not be appropriate. One of the major drawbacks of a survey is that causal relationships are often difficult to extract, even in an analytic survey. Therefore it was determined that the most appropriate methodology, for this study, would be a comprehensive review of both academic and other literature regarding the topic at hand. In addition, a review of relevant case studies was performed.

It was found that a majority of the researchers have utilized a positive paradigm. Paradigm, in its most general terms, refers to the thought processes utilized in scientific disciplines or any other epistemological context. Thomas Kuhn, renowned philosopher, defined scientific paradigm, in his book The Structure of Scientific Revolutions, as: what is observed and scrutinized, the type of questions that should be asked and analyzed for answers, how the questions are put, and how the results of the research should be interpreted by the researchers (“Paradigm”, 2004).

Positivism and phenomenology comprise the two main thrusts of research philosophies. The positivistic approach is utilized in this study. In addition a deductive approach is utilized to build upon the knowledge of previous researchers.

Research Approach:

As mentioned, a deductive approach is utilized in this study to further build the current state of knowledge in regards to the use of CRM systems, customer-centric marketing, the Internet and how it will affect the future of marketing. By analyzing the current theories regarding this subject, this study will be able to anticipate events that should occur in the future. There is one primary failing in the deductive approach. The deductive approach has the tendency to not fully account for the human element in a given situation, as is allowed for in an inductive study.

Hypotheses:

1. Marketing strategy will revert back to pre-Industrial methods of ‘knowing’ their customers and preferences.
2. Customer-centric marketing will be implemented using Internet technology and there will be implications of this utilization on customer behavior, switching costs and long-term competitive advantages such as first to market.
3. And, there will be challenges facing organizations responsibly utilizing customer data. Questions must be answered such as: who will own this valuable information, and how will consumer privacy concerns affect the effectiveness of customer-centric marketing strategies in the Internet era.

CHAPTER 3 REVIEW OF RELATED REFERENCES

Introduction

Identifying needs, developing services and products to meet those needs, the exchange between producers and customers for these items, building a mutually advantageous relationship, encompasses the process of marketing (LaPlaca, 2004, p.463). Marketing management, therefore, is most simply described as how to control the level, timing and character of the customer’s demand for the products and services of the business (Kotler, 1973, p. 42).

Organizations today are facing more intensive competition than ever before in history. Globalization has brought competitors from around the world together to vie for a limited amount of consumers. The world in which businesses operate has been forever changed. As such, marketing strategies are not only more important than ever, but are also evolving to meet these new challenges and take advantage of the emerging opportunities thanks to technology.

Hunter and Timme (1991) noted how technology began to be implemented in industries, such as the commercial banking industry, at a phenomenal rate. Commercial banks invested approximately $30.0 billion in information technology during the period of 1981-1985. This included hardware, systems software, telecommunication, and a variety of other technology. Interestingly, the systems expenses at these same commercial banks rose approximately 17.6%, in comparison to a 10.5% average rise in overall operating expense, during this same period (p. 339). This same trend to quickly implement the latest technology has occurred in many other industries as well.

Hymas (2001) notes that there are several factors shaping the marketing environment for organizations, due to technological advancements. Consumers’ expectations are changing. Today, consumers are better educated then ever before, which has led to a desire to control more of the decisions that affect them. Consumers have access to the Internet, 24 hours a day, 7 days a week, giving them access to global data, feeding their self-determination. Due to this self-determination, consumers are less likely then ever before to blindly trust an organization. This self-determination has also reduced the number of hours a consumer has at their disposal, as a result ‘cash rich’ and ‘time poor’ has begun to describe more and more consumers (p. 328).

Consumers today have more power than ever. Thanks to technology, such as the Internet, and increased competitiveness, the power once wielded by business has shifted into the hands of the eager consumer. This is across all markets. Consumer, commercial and business-to-business market customers are taking control. They now have much more knowledge about the products and services they are purchasing. With this has come higher expectations and a shifting idea of what features and benefits are truly valuable to them (“Implementing”, n.d., p.4).

For this reason, there is a great need to better understand the role of emerging technology enabled, customer-focused marketing strategies and how they will affect consumer behavior. This chapter will review the literature related to this matter.

This Chapter is organized into six parts: literature regarding CRM, literature regarding specifically eCRM, web based markets and their customers, relationship marketing, customer-centric marketing, and a summary of the literature review. The objective of this review is to determine what knowledge has been accumulated on these topics, to build from later, furthering the understanding of how customer centric marketing, CRM and eCRM initiatives, and the Internet will influence the future of marketing. It is hoped to build on the work of Sharma & Sheth (2004) and the others in this inductive study, creating theoretical answers.

The Internet has certainly given businesses many powerful tools, but with industrialization, the control of the customer was lost. It is hereby proposed that marketing strategies must evolve, utilizing the plethora of data at its disposable, to re-learn who their customer is and what their needs truly are. CRM initiatives are a powerful facilitator for these strategies success. And, it will be shown that the future of marketing lies in the past use of customer centric strategies.

In addition, the digital age of data collection has allowed organizations to collect large amounts of data regarding their customers. Because of this collection of personal data, security concerns abound both with the organizations and with the consumers. Questions regarding who owns the data and the ethical use of this information are certain to be topics well into the future, but will be expounded upon after investigating the contemporary literature.

This chapter is about analyzing the previous literature to answer the earlier described questions, and closing the gap of knowledge. This literature helps show that new strategies must be developed and implemented in order to take advantage of the Internet based markets that have emerged. If organizations wish to remain competitive in this hyper-competitive environment, the literature points to the reversion to customer centric marketing. Customer centric marketing is the only way businesses can truly know their customers and be effective in today’s globalized economy. Each and every employee, especially those from the front-line, will need to be trained in customer relationship management and customer-centric marketing strategies, in order for these strategies to be successful.

In a world that has opened up and expanded thanks to technology, it is fascinating that it is a time when businesses must become more intimate with their customers. Paradoxically, this same technology that has revolutionized the way business is conducted, has also been the tool necessary to utilize marketing strategies not seen since the pre-Industrial Revolution, customer-centric marketing.

Literature Review

CRM Literature:

Customer Relationship Management, or CRM, involves the hands-on management of customer relations to help formulate appropriate courses of action within an organization. Typically, CRM is facilitated by the use of IT systems to collect and mine customer data. The end goal is to build a long-term relationship that lasts longer than a single transaction (“Glossary”, n.d., p.6). Much of the literature on the topic of CRM has been developed as organizations seek to improve the management of their customer base, or has been developed by the developers of CRM software heralding the use of technology for CRM. Only a small amount of literature provides academic insight on the topic (Hart, Hogg & Banerjee, 2004, p.549).

Yet, the use of CRM has increased by more than 500 percent since 1990. It is through the used of CRM partnerships that customers are actually able to contribute to the development of a product or service in order to fill a need or solve a problem. This develops a win-win-win situation, involving the organization, the cause and the customer (Endacott, 2004, p.183). It is fast becoming the strategy of choice in a rapidly changing world.

Zablah, Bellenger, & Johnston (2004) provided important research on CRM initiatives. They noted that although their had been a fair amount of insightful research performed in the past, the CRM literature was inconsistent and highly fragmented. Their research provided a comprehensive and concise definition of CRM’s domain (p. 475).

As part of this effort, the researchers investigated the five major perspectives on CRM. In addition, they noted the implications for CRM success that becomes relevant when CRM is defined utilizing one of these five perspectives. A discussion of each of the five perspectives was given and how they relate to one another. An illustration of these perspectives and their implications are given in Table 3-1 (Zablah, Bellenger, & Johnston, 2004, p. 476).

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