Customer Relationship

Management
Individual Assignment
Topic: CRM Measurement
Institute of Management,

Nirma University

Report Submitted by:

Shelly Kankariya
Roll No. 161154
INTRODUCTON:

One of the leading business strategies is Customer relationship management (CRM) in this new
millennium. CRM is managing business interactions with customers. When Customer
Relationship Management software debuted as a set of technologies, business prospered because
it provided more information about customers than business had before. But that information, as
grand and scalable and automated as it was, soon reached its limit in terms of understanding and
usability. The need for more and faster information had to be balanced with the tools to interpret,
flex and act upon the information. Enter customer analytics, the one big hope to mine and tweak
customer information and thus pour pure gold into company coffers. But even analytics are
tricky because sometimes they tell you what you already know, or worse, the wrong information
altogether.

In this day and age when the economy is teetering upward, competition is stiff and customers are
cynical, using the right analytics is absolutely critical for improved decision making. "CRM
analytics needs to be improved upon over time with a shift from more of an 'Art' to more of a
'Science,'" says L. N. Balaji, president of US Operations for ITC Infotech. A lot of CRM
initiatives historically have gone awry or are perceived not to be successful, but when you dig
into them you find out that there is really no way to tell if they were successful or not, because
you find that the projects didn’t have any metrics to find to be able to determine success. Thus, it
is evident that measurement of CRM is very important in day to day business activities.

The effectiveness of CRM can be measured as a satisfaction level achieved by CRM activities. It
is very difficult to evaluate the tangible returns from resources expanded to plan, develop,
implement and operate CRM so it is important to measure the intangible benefits such as
customer loyalty, service quality, value enhancement, effectiveness of process, innovation of
operation, service improvement, competitiveness, trust and efficiency.
MEASURING EFFECTIVENESS OF CRM:

The conventional financial/accounting methods of investment evaluation which consider variants

like net present value (NPV), return on investment (ROI), and internal rate of return (IRR) are
currently used methods for marketing evaluation. Their major drawback of evaluation is that they
focus on the estimation of cash flows and accounting criteria which are not suitable for
evaluating investments that are expected to yield benefits that are primarily intangible, indirect,
or strategic.
Multi criteria methods can be used to evaluate as they account for tangibles as well as for
intangible impacts. These methods include information economics, cost benefit analysis (CBA),
return on management (ROM), value analysis, and investment portfolios. The major drawback of
these methods is that they are necessarily based on substitutive measures of intangible costs and
benefits.
Morgan, Clark, and Gooner (2002) assessed marketing performance based on marketing
productivity and marketing audits. His approach was limited to evaluating the marketing area,
not the technology domain. In the 1990s, Kaplan and Norton (1992) presented the BSC concept
in Harvard Business Review. Their basic idea was that evaluation criteria should include not only
financial measures but also other perspectives such as customer satisfaction, internal business
process, and innovation and learning. Kaplan and Norton (1996) proposed a three layer structure
for the aforementioned four perspectives: mission, objectives, and measures. Different market
situations, product strategies,business units, and competitive environments require different
scorecards to fit their mission, strategy, technology, and culture. The general BSC framework
can be adapted to the more specific needs of monitoring and evaluating the e-business projects.
Grembergen and Amelinckx (2002) proposed a generic e-business scorecard, which consists of
four perspectives: customer orientation, business contribution, operational excellence, and future
orientation.

CONCLUSION:

The BSC can be very effectively used to measure the effectiveness of the CRM. The CRM
evaluation model is the iterative process that assesses the effectiveness of CRM. The iterative
process continues until the current CRM activities turn out to be effective. This evaluation model
is composed of four customer-centric perspectives: customer knowledge, customer interaction,
customer value, and customer satisfaction. These four perspectives were identified by analyzing
cause and- effect relationships of the CRM process.
A study was conducted of the business in Shanghai, China. This study explored the
conceptualization and dimensionality of CRM capabilities and developed a valid measurement
model of CRM capabilities using BSC. It was found that CRM capabilities reflected a firm’s
skills and knowledge to routinely establish, maintain upgrade and re-establish beneficial
relationships with attractive customers, and they were composed of customer interaction
management capability, customer relationship upgrading capability and customer win-back
capability.
The results also showed that VRIN resources were essential for building strong CRM capabilities
as well. It means firms should not only possess valuable CRM resources such as customer
orientation, customer-centric organizational system and CRM technology, but also learn how to
deploy those resources to build strong CRM capabilities, which will then contribute to superior
business performance. The important findings are the CRM capabilities in are improving firm
performance. The CRM capabilities were not only influenced by CRM technology, but also
influenced by cultural and organizational factors, such as customer orientation and customer-
centric organizational system. In order to build strong CRM capabilities, managers had to
acquire such VRIN resources as customer orientation, customer-centric organizational system
and CRM technology, and deploy them well in organizational process.
This study explored and identified the specific CRM capabilities that were imbedded in
organizational processes that firm have to develop to achieve superior performance in CRM. In
particular, the three elements of CRM capabilities were identified, and a precise and actionable
measurement model of CRM capabilities was developed and tested, which can help firms
monitor their CRM processes, diagnose their problems, and identify areas where firms should
give priorities to optimize their customer relationship activities. This study also showed that
CRM capability was a critical success factor for business performance. Firms had to monitor
their CRM processes continuously, enhance their customer orientation, improve their customer-
centric organizational system, and implement CRM technology to build and strengthen their
CRM capabilities.
REFERENCES:
 Yonggui Wang, Hui Feng, (2012) "Customer relationship management capabilities:
Measurement, antecedents and consequences", Management Decision, Vol. 50 Issue: 1,
pp.115-129
 Jonghyeok Kim, Euiho Suh, Hyunseok Hwang (2003) “A Model For Evaluating The
Effectiveness Of Crm Using The Balanced Scorecard”, Journal Of Interactive
Marketing,Volume 17, pp. 5-19
 Werner Reinartz, Manfred Krafft, Wayne D. Hoyer (2004), “The Customer Relationship
Management Process: Its Measurement and Impact on Performance”, Journal of
Marketing Research, Vol. 41, No. 3 (Aug., 2004), pp. 293-305
 Arwa M. Al-Safi, Lilac Al-Safadi, Abdullah Al-Mudimigh (2012), “CRM Scorecard -
CRM Performance Measurement”, International Journal of Networked Computing and
Advanced Information Management (IJNCM), volume2, pp. 8-21
 Wander Trindade Venturini, Óscar González Benito, (2015) "CRM software success: a
proposed performance measurement scale", Journal of Knowledge Management, Vol. 19
Issue: 4, pp.856-875